UNION PLANTERS CORP, 424B4, 1994-05-06

UNION PLANTERS CORP
424B4, 1994-05-06
NATIONAL COMMERCIAL BANKS

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<PAGE> 1
(LIBERTY BANCSHARES LETTERHEAD)

May 5, 1994

Dear Stockholder:

We invite you to attend the Annual Meeting of Stockholders ("Annual
Meeting") of Liberty Bancshares, Inc. ("LBI") to be held at the Best Western
Motel, Lafayette Room, 1297 East Wood Street, Paris, Tennessee, on Monday,
June 13, 1994 at 10:00 a.m.

The accompanying Notice of Annual Meeting and Proxy
Statement/Prospectus describe the formal business to be transacted at the
meeting, which will include the election of directors and the ratification of
KPMG Peat Marwick as LBI's independent auditors. During the meeting, we will
report on the operations of LBI's subsidiary, Liberty Federal Savings Bank
("Liberty Federal"). Directors and officers of LBI as well as representatives
of KPMG Peat Marwick will be present to respond to any questions the
stockholders may have.

At the meeting, you will also have the opportunity to consider and vote
upon the Agreement and Plan of Reorganization dated as of November 23, 1993
between Union Planters Corporation ("UPC"), LBI Acquisition Company, Inc. (a
newly-organized, wholly-owned subsidiary of UPC), LBI and Liberty Federal,
including the Plan of Merger and a related letter agreement annexed thereto as
Exhibits A and B, respectively (collectively, the "Reorganization Agreement"),
and the acquisition by UPC of sole ownership and control of LBI pursuant
thereto (the "Reorganization"). Upon the consummation of the Reorganization,
each outstanding share of LBI Common Stock not subject to perfected dissenters'
rights would be converted into the right to receive in exchange (i) a number of
whole shares of UPC Common Stock based on the average closing price per share
of UPC Common Stock on the New York Stock Exchange for the 20 trading days
immedately preceding the closing date of the Reorganization ("Current Market
Price") and (ii) a cash payment in settlement of any remaining fractional share
of UPC Common Stock. If the Current Market Price of UPC Common Stock is less
than $22.00, the exchange ratio (i.e., the number of shares of UPC Common Stock
to be received in exchange for each share of LBI Common Stock) will be 2.2727,
provided that if the Current Market Price is less than $20.00 LBI will have the
right not to consummate the Reorganization. If the Current Market Price is
greater than or equal to $22.00 but less than or equal to $28.00, the exchange
ratio will be equal to $50.00 divided by the Current Market Price. If the
Current Market Price is greater than $28.00, the exchange ratio will be 1.7857,
provided that if the Current Market Price is greater than $30.00 and UPC has
not entered into an agreement to be acquired the exchange ratio will be equal
to $53.57 divided by the Current Market Price. If the Reorganization had been
closed on April 27, 1994, the Current Market Price would have been $25.74 per
share, such that the value of the UPC Common Stock entitled to be received in
exchange for each outstanding share of LBI Common Stock would have been
approximately

<PAGE> 2

equal to $50.00. Following the Reorganization, UPC would own all of the
outstanding shares of LBI Common Stock. Consummation of the Reorganization is
conditioned upon, among other things, stockholder approval of the
Reorganization Agreement and the Reorganization.

At the Annual Meeting, the stockholders of LBI also will consider and
vote upon approval of an amendment to LBI's corporate charter to exclude any
transaction, including the Reorganization, approved in advance by a majority of
LBI's Continuing Directors, as defined herein, from LBI's charter prohibition
against acquisitions of more than ten percent of any class of equity security
of LBI. In addition, the stockholders of LBI may be asked to approve the
adjournment of the Annual Meeting in the event there are not sufficient votes
cast in person or by proxy at the Annual Meeting to approve the Reorganization
Agreement and the charter amendment. Your Board of Directors has approved the
Reorganization Agreement and charter amendment and believes that the
Reorganization is in the best interest of LBI and its stockholders.
Accordingly, your Board of Directors unanimously recommends that you VOTE FOR
APPROVAL of the Reorganization Agreement and the Reorganization, the charter
amendment and adjournment of the Annual Meeting.

If any other matters are properly brought before the Annual Meeting,
the persons named in the accompanying Proxy Card will vote the shares
represented by such proxy upon such matters as determined by a majority of
LBI's Board of Directors. You are urged to read the accompanying Proxy
Statement/Prospectus, which provides detailed information concerning the
Reorganization and related matters.

ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD 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 Annual
Meeting.

Sincerely,

(SIGNATURE)

Larry A. Watson
Chairman of the Board

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME

<PAGE> 3
LIBERTY BANCSHARES, INC.
914 EAST WOOD STREET
PARIS, TENNESSEE 38242
(901) 642-3825

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 1994

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
("Annual Meeting") of Liberty Bancshares, Inc. ("LBI") will be held at the Best
Western Motel Lafayette Room, 1297 East Wood Street, Paris, Tennessee, on
Monday, June 13, 1994 at 10:00 a.m. A Proxy Card and a Proxy Statement/
Prospectus accompany this Notice.

The Annual Meeting is for the purpose of considering and acting upon:

1. The election of three directors of LBI;

2. The ratification of the appointment of KPMG Peat
Marwick as the independent auditors of LBI for the
year ending December 31, 1994;

3. The approval of the Agreement and Plan of
Reorganization dated as of November 23, 1993 between
Union Planters Corporation ("UPC"), LBI Acquisition
Company, Inc., LBI and Liberty Federal Savings Bank,
including the Plan of Merger and a related letter
agreement annexed thereto as Exhibits A and B,
respectively (collectively, the "Reorganization
Agreement"), and the acquisition by UPC of sole
ownership and control of LBI pursuant thereto (the
"Reorganization");

4. The approval of the amendment of the corporate
charter of LBI to exclude any transaction, including
the Reorganization, approved in advance by a majority
of LBI's Continuing Directors, as defined therein,
from LBI's charter prohibition against acquisitions
of more than ten percent of any class of equity
security of LBI;

5. The approval of the adjournment of the Annual Meeting
in the event there are not sufficient votes cast in
person or by proxy at the Annual Meeting to approve
the Reorganization Agreement and the charter
amendment; and

6. Such other matters as may properly come before the
Annual Meeting or any adjournments thereof.

The Board of Directors of LBI is not aware of any other business to
come before the Annual Meeting.

Any action may be taken on any one of the foregoing proposals at the
Annual Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned.
Stockholders of record at the close of business on April 29, 1994 are the
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.

Stockholders of LBI are entitled to assert dissenters' rights under
Chapter 23 of Title 48 of the Tennessee Code, a copy of which is attached as
Appendix D to the accompanying Proxy Statement/Prospectus.

You are requested to complete and sign the accompanying Proxy Card
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

(SIGNATURE)

Thomas D. Enoch
Secretary
Paris, Tennessee
May 5, 1994

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE LBI THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED ENVELOPE
ACCOMPANIES THESE MATERIALS FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME

<PAGE> 4
Filed pursuant to Rule 424(b)(4)
Registration number 33-53247

PROXY STATEMENT/PROSPECTUS

LIBERTY BANCSHARES, INC.

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 1994

UNION PLANTERS CORPORATION
PROSPECTUS
UP TO 1,600,000 SHARES OF COMMON STOCK
PAR VALUE $5.00 PER SHARE

This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Liberty Bancshares, Inc.
("LBI") to be used at the Annual Meeting of Stockholders of LBI ("Annual
Meeting") which will be held at the Best Western Motel Lafayette Room, 1297 East
Wood Street, Paris, Tennessee, on Monday, June 13, 1994 at 10:00 a.m. This Proxy
Statement/Prospectus and the accompanying Notice and Proxy Card are being first
mailed to stockholders of LBI on or about May 5, 1994.

At the Annual Meeting, holders of record of LBI Common Stock as of the close
of business on April 29, 1994 (the "voting record date") will consider and vote
upon (i) the election of three directors of LBI; (ii) the ratification of the
appointment of KPMG Peat Marwick as independent auditors of LBI for the year
ending December 31, 1994; (iii) the approval of the Agreement and Plan of
Reorganization dated as of November 23, 1993 between Union Planters Corporation
("UPC"), LBI Acquisition Company, Inc. ("Interim"), LBI and Liberty Federal
Savings Bank ("Liberty Federal"), including the Plan of Merger and related
letter agreement annexed thereto as Exhibits A and B, respectively
(collectively, the "Reorganization Agreement"), and the acquisition by UPC of
sole ownership and control of LBI pursuant thereto (the "Reorganization"); and
(iv) the approval of the amendment of the corporate charter of LBI to exclude
any transaction, including the Reorganization, approved in advance by a majority
of LBI's Continuing Directors, as defined therein, from LBI's charter
prohibition against acquisitions of more than ten percent of any class of equity
security of LBI. In addition, stockholders of LBI may consider and vote upon the
approval of the adjournment of the Annual Meeting, in the event there are not
sufficient votes cast in person or by proxy at the Annual Meeting to approve the
Reorganization Agreement and the charter amendment, and such other matters as
may properly come before the Annual Meeting or any adjournments thereof.

Pursuant to the Reorganization Agreement, upon the consummation of the
Reorganization, each outstanding share of LBI Common Stock not subject to
perfected dissenter's rights would be converted exclusively into the right to
receive in exchange therefor (i) a number of whole shares of UPC Common Stock
based on the average closing price per share of UPC Common Stock on the New York
Stock Exchange for the 20 trading days immediately preceding the closing date of
the Reorganization ("Current Market Price") and (ii) a cash payment in
settlement of any remaining fractional share of UPC Common Stock. If the Current
Market Price of UPC Common Stock is less than $22.00, the exchange ratio (i.e.,
the number of shares of UPC Common Stock to be received in exchange for each
share of LBI Common Stock) will be 2.2727, provided that if the Current Market
Price is less than $20.00 LBI will have the right not to consummate the
Reorganization. If the Current Market Price is greater than or equal to $22.00
but less than or equal to $28.00, the exchange ratio will be equal to $50.00
divided by the Current Market Price. If the Current Market Price is greater than
$28.00, the exchange ratio will be 1.7857, provided that if the Current Market
Price is greater than $30.00 and UPC has not entered into an agreement to be
acquired, the exchange ratio will be equal to $53.57 divided by the Current
Market Price. If the Reorganization had been closed on April 27, 1994, the
Current Market Price would have been $25.74 per share, such that the value of
the UPC Common Stock entitled to be received in exchange for each outstanding
share of LBI Common Stock would have been approximately equal to $50.00.
Following the Reorganization, UPC would own all of the outstanding shares of LBI
Common Stock. Consummation of the Reorganization is conditioned upon, among
other things, stockholder approval of the Reorganization Agreement.

The consideration to be received by LBI's stockholders pursuant to the
Reorganization Agreement was negotiated by your Board of Directors in light of
various factors, including LBI's recent operating results, current financial
condition and perceived future prospects. Trident Financial Corporation
("Trident Financial"), LBI's financial advisor, has advised your Board of
Directors that in its opinion the consideration to be received by LBI's
stockholders in the Reorganization is fair to the stockholders of LBI from a
financial point of view. THE BOARD OF DIRECTORS OF LBI BELIEVES THAT THE
REORGANIZATION IS IN THE BEST INTEREST OF LBI'S STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT LBI'S STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE REORGANIZATION
AGREEMENT AND THE REORGANIZATION AND THE PROPOSED CHARTER AMENDMENT.

UPC has filed a Registration Statement with the Securities and Exchange
Commission ("Commission") with respect to the shares of UPC Common Stock, par
value $5.00 per share, to be issued pursuant to the Reorganization Agreement.
See "Available Information." This Proxy Statement/Prospectus also constitutes a
prospectus of UPC with respect to the issuance of shares of UPC Common Stock
pursuant to the Reorganization Agreement.

Shares of the outstanding UPC Common Stock are now, and the UPC Common Stock
to be issued in connection with the Reorganization will be, listed for trading
on the New York Stock Exchange under the symbol "UPC." The last reported sale
price of UPC Common Stock on the New York Stock Exchange on April 26, 1994, was
$25.63 per share.

LBI's principal executive office is located at 914 East Wood Street, Paris,
Tennessee 38242, and its telephone number is (901) 642-3825. UPC's principal
executive office is located at 7130 Goodlett Farms Parkway, Memphis, Tennessee
38018, and its telephone number is (901) 383-6000.

This Proxy Statement/Prospectus does not cover any resales of the UPC Common
Stock offered hereby to be received by any stockholders deemed to be affiliates
of LBI or UPC upon the consummation of the Reorganization. No person is
authorized to make use of this Proxy Statement/Prospectus in connection with
such resales, although such stock may be traded without the use of this Proxy
Statement/Prospectus by former stockholders of LBI who are not deemed to be
affiliates of LBI or UPC.

All information contained in this Proxy Statement/Prospectus pertaining to
UPC and its subsidiaries had been supplied by UPC, and all information
pertaining to LBI or Liberty Federal has been supplied by LBI.

THE SHARES OF UPC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
SAVINGS ASSOCIATION INSURANCE FUND, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.

THE SHARES OF UPC COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION,
THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 5, 1994.
<PAGE> 5
AVAILABLE INFORMATION

UPC and LBI are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at regional offices of the Commission located at Room 1228, 75
Park Place, New York, New York 10007 and 500 West Madison Street, Chicago,
Illinois 60661-2511. Copies of such material can be obtained by mail from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, such reports, proxy statements
and other information concerning UPC can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. UPC has filed
with the Commission a Registration Statement (No. 33-53247) on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of UPC Common Stock to be issued pursuant to the Reorganization
Agreement. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Certain items were omitted in accordance with the rules and regulations of the
Commission.

For further information regarding UPC and the UPC Common Stock offered
by this Proxy Statement/Prospectus, reference is made to the complete
Registration Statement, including all amendments thereto and the schedules and
exhibits and other documents filed or deemed filed as a part thereof.
Statements contained herein concerning provisions of documents are necessarily
summaries of the documents, and each statement is qualified in its entirety by
reference to any copy of the applicable document filed with the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by UPC with the Commission
(Commission File No. 0-6919) pursuant to the Exchange Act are hereby
incorporated by reference in this Proxy Statement/Prospectus:

1. UPC's Annual Report on Form 10-K for the year ended
December 31, 1993;

2. UPC's Current Report on Form 8-K dated January 19,
1989, filed on February 1, 1989, in connection with
UPC's designation and authorization of its Series A
Preferred Stock;

3. UPC's Current Reports on Form 8-K dated February 8,
1994, April 14, 1994 and April 15, 1994; and

4. The description of UPC Common Stock contained in
UPC's Registration Statement under Section 12(b) of
the Exchange Act, and any amendment or report filed
for the purpose of updating such description.

UPC's Annual Report on Form 10-K for the year ended December 31, 1993
incorporates by reference specific portions of UPC's Annual Report to
Shareholders for that year (the "UPC Annual Report to Shareholders"), but does
not incorporate other portions of the UPC Annual Report to Shareholders. The
portion of the UPC Annual Report to Shareholders captioned "Letter to
Shareholders" and other portions of the UPC Annual Report to Shareholders not
specifically incorporated into UPC's Annual Report on Form 10-K are not
incorporated herein and are not a part of the Registration Statement.

All documents filed by UPC with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement/Prospectus and prior to the termination of the offering of the
shares of UPC Common Stock offered hereby shall be incorporated herein by
reference and shall become a part hereof from and after the time such documents
are filed. Any statement contained herein or in a document incorporated herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently-filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.

ii
<PAGE> 6

ON THE WRITTEN OR ORAL REQUEST OF EACH PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPC WILL PROVIDE, WITHOUT CHARGE, A COPY OF
ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). WRITTEN OR TELEPHONE REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO GARY A. SIMANSON, ASSISTANT SECRETARY AND ASSOCIATE GENERAL
COUNSEL, UNION PLANTERS CORPORATION, P.O. BOX 387, MEMPHIS, TENNESSEE 38147,
(901) 383-6590.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF UPC OR LBI SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Available Information ii
Incorporation of Certain Documents by Reference ii
Summary 1
The Annual Meeting 1
The Reorganization 1
Market Prices of Common Stock; Dividends 5
Selected Consolidated Financial Data 7
Recent Developments Affecting UPC 10
Equivalent and Pro Forma Per Share Data 11
Pro Forma Consolidated Financial Information 13
The Annual Meeting 16
General 16
Voting and Revocability of Proxies 16
Voting Securities and Security Ownership 18
Other Matters 19
Miscellaneous 19
Stockholder Proposals 19
Proposal I -- Election of Directors 20
Directors and Executive Officers of LBI 20
Meetings and Committees of the Board of Directors 21
Executive Compensation 22
Transactions with Management 24
Proposal II -- Ratification of Appointment of Independent Auditors 24
Proposal III -- Approval of the Reorganization 24
Background of the Reorganization 24
Reasons for the Reorganization and Recommendations of the Boards of Directors of LBI and UPC 25
Vote Required 26
Fairness Opinion of Trident Financial 26
Terms of the Reorganization 31
Stockholders' Dissenters' Rights 32
Effective Date and Effective Time of the Reorganization 33
Surrender of Certificates 34
Conditions to Consummation of the Reorganization 34
Regulatory Approvals 36
Conduct of Business Pending the Reorganization 37
Payment of Dividends 38
Waiver and Amendment; Termination 38
Limitation on Negotiations 38
</TABLE>

iii
<PAGE> 7

<TABLE>
<S> <C>
Management after the Reorganization 39
Interests of Certain Persons in the Reorganization 39
Comparison of Stockholder Rights 40
Certain Regulatory Considerations 42
Certain Federal Income Tax Consequences 47
Accounting Treatment 47
Expenses 48
Resales of UPC Common Stock 48
Proposal IV -- Approval of Charter Amendment 48
Proposal V - Adjournment of Annual Meeting 49
Liberty Bancshares, Inc. 49
General 49
Management's Discussion and Analysis of Financial Condition and Results of Operations 50
Business 64
Properties 97
Legal Proceedings 98
Description of UPC Common and Preferred Stock 98
UPC Common Stock 98
Preferred Stock of UPC 99
Certain Provisions That May Have an Anti-Takeover Effect 100
Validity of UPC Common Stock 101
Experts 101
Form 10-K
Index to Appendices
Appendix A--Liberty Bancshares, Inc. and Subsidiary Consolidated Financial Statements A-1
Appendix B--Agreement and Plan of Reorganization, along with the Plan of Merger and related
letter agreement annexed thereto as Exhibits A and B, respectively B-1
Appendix C--Fairness Opinion of Trident Financial Corporation C-1
Appendix D--Chapter 23 of Title 48 of the Tennessee Code D-1
Appendix E--Article XIV of Charter of Liberty Bancshares, Inc. E-1

</TABLE>

iv
<PAGE> 8
SUMMARY

The following summary is not intended to be a complete description of
all material facts regarding UPC, LBI and the matters to be considered at the
Annual Meeting and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Proxy Statement/Prospectus, the
Appendices hereto and the documents referred to herein.

THE ANNUAL MEETING

The Annual Meeting will be held on Monday, June 13, 1994 at 10:00 a.m.
at the Best Western Motel Lafayette Room, 1297 East Wood Street, Paris,
Tennessee. At the Annual Meeting, holders of record of LBI Common Stock as of
the close of business on the voting record date, April 29, 1994, will consider
and vote upon (i) the election of three directors of LBI; (ii) the ratification
of the appointment of KPMG Peat Marwick as independent auditors of LBI for the
year ending December 31, 1994; (iii) the approval of the Reorganization
Agreement and the Reorganization; and (iv) the approval of the amendment of the
corporate charter of LBI to exclude any transaction, including the
Reorganization, approved in advance by a majority of LBI's Continuing
Directors, as defined therein, from LBI's charter prohibition against
acquisitions of more than ten percent of any class of equity security of LBI.
In addition, stockholders of LBI may consider and vote upon the approval of the
adjournment of the Annual Meeting, in the event there are not sufficient votes
cast in person or by proxy at the Annual Meeting to approve the Reorganization
Agreement and the charter amendment, and such other matters as may properly
come before the Annual Meeting or any adjournments thereof. Stockholders of
record at the close of business on the voting record date generally will be
entitled to one vote for each share then so held. The presence, in person or
by proxy, of a majority of the total number of outstanding shares of LBI Common
Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum at the Annual Meeting. For additional information, see "The Annual
Meeting."

THE REORGANIZATION

Parties to the Reorganization. LBI was formed in July 1991 as a
Tennessee corporation at the direction of Liberty Federal for the purpose of
becoming a holding company for Liberty Federal as a part of Liberty Federal's
conversion from mutual to stock form. Liberty Federal, a federally chartered
savings institution founded in 1927, operates through five full service offices
located in the Tennessee communities of Paris, Camden, Huntingdon, McKenzie and
Waverly and one limited service office in Paris.

LBI, through Liberty Federal, is primarily engaged in the business of
accepting deposits from the general public and originating loans secured by
one-to-four-family residential properties located in Liberty Federal's market
area. Liberty Federal also maintains a substantial securities portfolio and
originates significant amounts of consumer loans and commercial loans. In
addition, Liberty Federal has made a limited amount of loans secured by
commercial and multi-family real estate. For additional information regarding
LBI and Liberty Federal, see "Liberty Bancshares, Inc."

Union Planters Corporation ("UPC") is a multi-state bank and savings
and loan holding company headquartered in Memphis, Tennessee. At December 31,
1993, UPC had total consolidated assets of approximately $6.3 billion, deposits
of approximately $5.3 billion and shareholders' equity of approximately $477
million. As of that date, UPC was the third largest independent bank holding
company headquartered in Tennessee as measured by consolidated deposits.
Management's emphasis in recent years has been to improve asset quality and
maintain capital well in excess of regulatory minimums. At December 31, 1993,
UPC's ratio of nonperforming loans to total loans was .76% and nonperforming
assets to loans and foreclosed property was .92%. UPC's allowance for losses on
loans to total loans at such date was 2.74% and UPC's allowance for losses on
loans to nonperforming loans was 363%. Also at such date, UPC's Tier 1
risk-based capital, total risk-based capital and leverage ratios were 14.85%,
18.59% and 7.10%, respectively.

UPC conducts its business activities through its lead bank subsidiary,
Union Planters National Bank ("UPNB"), and through 38 community banks and three
savings and loan subsidiaries (collectively the "Community Banks") located in
Tennessee, Arkansas, Mississippi, Alabama and Kentucky (the "Community Bank
Group"). UPNB was founded in 1869 and operates 90 branches throughout
Tennessee with a presence in each of Memphis,

1
<PAGE> 9

Nashville, Knoxville and Chattanooga, the major metropolitan markets in
Tennessee. At December 31, 1993, UPNB had total consolidated assets of
approximately $3.5 billion. UPNB provides a diversified range of financial
services in the communities in which it operates, including consumer, commercial
and corporate lending, retail banking and mortgage banking. To enhance fee
income, UPNB also is engaged in mortgage servicing, investment management and
trust services, the issuance and servicing of credit and debit cards and the
origination, packaging and securitization of the government-guaranteed portions
of Small Business Administration (SBA) loans.

The Community Bank Group operates 149 branches and had at December 31,
1993, total combined assets of approximately $2.9 billion ($2.0 billion in
Tennessee, $474 million in Mississippi, $468 million in Arkansas, $24 million
in Alabama). All of the Community Banks have been acquired by UPC since 1986,
generally are located in nonmetropolitan towns and communities and provide
banking services and loan products to such communities, with an emphasis on
one-to-four-family residential mortgages and consumer and small commercial
lending. Of the 38 Community Banks, 21 have the largest deposit share and eight
have the second largest deposit share in their respective markets based on June
30, 1993 information, providing UPC with a strong competitive position in those
markets.

UPC believes that the Community Banks provide additional
diversification of the funding and revenue sources for UPC, and UPC intends to
continue expansion of the Community Bank Group. UPC believes that its strategy
of permitting the Community Banks to retain their names and boards of directors
as well as substantial autonomy in their day-to-day operations enables UPC to
be an attractive acquirer of community banking organizations and permits such
institutions to continue to grow within their markets without disruption. UPC
controls risk through centralized loan review and audit functions as well as
close monitoring of the financial performance of each Community Bank. UPC also
implements its asset and liability management strategy on a consolidated basis
and effects all trades for the investment portfolios of the Community Banks.
UPC seeks economies in the Community Bank Group through consolidation of
administrative and operational processes and is currently in the process of
converting all of the Community Banks to a common data processing system. This
system conversion should be completed by year-end 1994 and should permit UPC to
realize significant cost savings upon full implementation.

UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions by UPNB in the major markets of Tennessee
and through the acquisition of Community Banks that have a significant local
market share, primarily in communities located in Tennessee and contiguous
states. Future acquisitions may entail the payment by UPC of consideration in
excess of the book value of the underlying assets being acquired, may result in
the issuance of additional shares of UPC capital stock or the incurrence of
additional indebtedness by UPC, and could have a dilutive effect on the per
share earnings or book value of the UPC Common Stock. For information with
respect to acquisitions that have been consummated recently or that are
currently pending, see "Recent Developments."

UPC's corporate office is located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee 38018, and its telephone number is (901) 383-6000.

Additional information about UPC is included in documents incorporated
by reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference."

LBI Acquisition Company, Inc. ("Interim") was organized by UPC solely
to effectuate the Reorganization. At the Effective Time of the Reorganization
(as defined below), Interim will, pursuant to the terms of the Reorganization
Agreement, merge with and into LBI, with LBI surviving the Reorganization as a
wholly owned subsidiary of UPC and continuing to operate under the name Liberty
Bancshares, Inc.

Reasons for the Reorganization and Recommendation of the Board of
Directors of LBI. The Board of Directors of LBI considered the Reorganization
and the terms of the Reorganization Agreement, including the consideration to
be received by LBI's stockholders in the Reorganization, in light of economic,
financial, legal and market factors and concluded that the Reorganization would
be in the best interests of LBI and its stockholders. The terms of the
Reorganization Agreement are the result of arms' length negotiations between
LBI and UPC, as well as consultations between LBI and its financial advisor and
special legal counsel. Among the factors considered by LBI's Board of
Directors were the historical operating results, current financial condition,
business and management and future financial and other prospects of LBI and UPC
and the advice of Trident Financial as to the

<PAGE> 10

fairness to LBI's stockholders, from a financial point of view, of the
consideration to be received by the stockholders of LBI in the Reorganization.
Also considered were the relative size and geographic market areas of LBI and
UPC. LBI's Board of Directors believes that the Reorganization will afford
LBI's stockholders the benefit of UPC's larger market capitalization and the
more liquid market for UPC Common Stock and will offer enhanced opportunities
for Liberty Federal to meet the needs of banking customers and other members of
the Northwestern Tennessee communities served by Liberty Federal. LBI's Board
of Directors also believes that Liberty Federal will be in an enhanced
competitive position with respect to other financial institutions in its market
area after the Reorganization.

THE BOARD OF DIRECTORS OF LBI UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF LBI COMMON STOCK VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT AND THE
REORGANIZATION.

Vote Required. The affirmative votes of the holders of at least a
majority of the outstanding shares of LBI Common Stock entitled to vote at the
Annual Meeting are required for LBI's stockholders to approve the
Reorganization Agreement and the Reorganization. Each share of LBI Common
Stock outstanding at the close of business on the voting record date and
entitled to vote at the Annual Meeting is entitled to one vote on each matter
to be considered at the Annual Meeting. LBI's directors and executive
officers, and their affiliates, are expected to vote substantially all of the
243,384 shares, or 35.8%, of the outstanding LBI Common Stock beneficially
owned by them as of the voting record date and entitled to vote at the Annual
Meeting for approval of the Reorganization Agreement and the Reorganization.

Fairness Opinion of Trident Financial. LBI has retained Trident
Financial as its financial advisor in connection with the Reorganization and
requested that Trident Financial render its opinion with respect to the
fairness to LBI stockholders of the consideration to be received by them in the
Reorganization. Trident Financial rendered written opinions to LBI's Board of
Directors to the effect that as of November 22, 1993 and April * , 1994 the
consideration to be received by LBI's stockholders in the Reorganization was
fair, from a financial point of view, to such stockholders. The fairness
opinions set forth a description of assumptions made and matters considered by
Trident Financial, and contain certain limitations and qualifications. A copy
of the fairness opinion as of April * , 1994 is attached as Appendix C hereto,
and the description set forth herein is qualified in its entirety by reference
to the opinion.

For additional information, see "Proposal III -- Approval of The
Reorganization -- Fairness Opinion of Trident Financial" herein and the
fairness opinion of Trident Financial attached as Appendix C hereto.

Terms of the Reorganization. Pursuant to the Reorganization
Agreement, upon the consummation of the Reorganization, each outstanding share
of LBI Common Stock not subject to perfected dissenters' rights would be
converted exclusively into the right to receive in exchange therefor (i) a
number of whole shares of UPC Common Stock based on the average closing price
per share of UPC Common Stock on the New York Stock Exchange for the 20 trading
days next preceding the closing date of the Reorganization ("Current Market
Price") and (ii) a cash payment in settlement of any fractional share of UPC
Common Stock remaining after aggregating all of the shares and fractional
shares to which the LBI stockholder is entitled, and each outstanding option to
purchase LBI Common Stock under LBI's stock option plan would continue
outstanding as an option to purchase, in place of each share of LBI Common
Stock, the number of shares (after aggregation, rounded up to the nearest whole
share) of UPC Common Stock that would have been received by the option holder
in connection with the Reorganization assuming the option had been exercised
immediately before the Effective Time of the Reorganization, on the same terms
and conditions except for appropriate pro rata adjustments to the option price
per share, such that the aggregate option price would remain the same. If the
Current Market Price of UPC Common Stock is less than $22.00, the exchange
ratio (i.e., the number of shares of UPC Common Stock to be received in
exchange for each share of LBI Common Stock) will be 2.2727, provided, however,
that if the Current Market Price is less than $20.00 LBI will have the right
not to consummate the Reorganization. If the Current Market Price is greater
than or equal to $22.00 but less than or equal to $28.00, the exchange ratio
will be equal to $50.00 divided by the Current Market Price. If the Current
Market Price is greater than $28.00, the exchange ratio will be 1.7857,
provided, however, that if the Current Market Price is greater than $30.00 and
UPC shall not have entered into an agreement to be acquired, the exchange ratio
will be equal to $53.57 divided by the Current Market Price. If the
Reorganization had been closed on April 27, 1994, the Current Market Price of
UPC Common Stock would have been $25.74 per share, such that the value of the
UPC Common Stock entitled to be received in exchange for each outstanding
share of LBI Common Stock would have been approximately equal to $50.00.

3
<PAGE> 11

Effective Time. The Reorganization will become effective at the time
Articles of Merger along with the executed Plan of Merger are filed with the
Tennessee Secretary of State in accordance with the Tennessee Business
Corporation Act, as amended (the "TBCA"), or on such later date and at such
later time as the Plan of Merger may specify (the "Effective Time of the
Reorganization"). Assuming the timely receipt of all regulatory approvals, the
expiration of all statutory waiting periods and the satisfaction or waiver of
all conditions to closing in the Reorganization Agreement, it is intended by
the parties to the Reorganization Agreement that the Articles of Merger along
with the Plan of Merger will be filed so as to become effective on or about
July 1, 1994. The effective date of the Reorganization will be the day on
which the Effective Time of the Reorganization occurs (the "Effective Date of
the Reorganization"). The parties to the Reorganization Agreement intend to
close the transactions contemplated therein approximately one day prior to the
effectiveness of the Reorganization (the "Closing Date"). Holders of record of
LBI Common Stock immediately prior to the Effective Time of the Reorganization
will be entitled to receive the consideration for the Reorganization pursuant
to the Reorganization Agreement.

Conditions; Regulatory Approvals. Consummation of the Reorganization
is subject to various conditions, including receipt of the approval of LBI's
stockholders, receipt of all necessary regulatory approvals and satisfaction of
customary closing conditions.

The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Reorganization Agreement include the prior
approvals of the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), the Office of Thirft Supervision (the "OTS") and the Tennessee
Department of Financial Institutions (the "Tennessee Department").
Applications for such approvals have been submitted to each of the respective
regulatory agencies, and approvals have been received from the Federal Reserve
and the Tennessee Department as of the date of this Proxy Statement/Prospectus
for the parties to consummate the Reorganization. The application remains
pending with the OTS, and there can be no assurance as to when or if such
approval will be received. See "Proposal III -- Approval of the
Reorganization--Conditions to Consummation of the Reorganization,"
"--Regulatory Approvals" and "--Conduct of Business Pending the Reorganization"
and "Certain Regulatory Considerations."

Management After the Reorganization. At the Effective Time of the
Reorganization, the persons who are serving as directors and officers of LBI
immediately prior thereto shall continue to be the directors and officers of
LBI as the surviving corporation and will hold office as provided in the
charter and bylaws of LBI unless and until their successors shall have been
duly elected or appointed and qualified. See "Proposal III - Approval of the
Reorganization--Management After the Reorganization."

Stockholders' Dissenters' Rights. Under the TBCA, holders of LBI
Common Stock outstanding and entitled to vote at the Annual Meeting who do not
vote "for" approval of the Reorganization Agreement and who comply with certain
notice and other requirements set forth in Sections 48-23-201 through 48-23-209
of the TBCA will have the right to dissent from the Reorganization and to be
paid cash for the value of their shares. (A vote in favor of the
Reorganization will disqualify an LBI stockholder from exercising dissenters'
rights). Tennessee law defines "fair value" to mean the value, determined by
appraisal pursuant to the TBCA, of the shares immediately prior to the
effectuation of the Reorganization, excluding any appreciation or depreciation
in anticipation of the Reorganization. In order for a holder of LBI Common
Stock to perfect dissenters' rights, such holder must not vote his or her
shares of LBI Common Stock for approval of the Reorganization Agreement and
must deliver to LBI, before the vote on the Reorganization is taken, a written
notice of the dissenter's intent to demand payment for his or her shares.
Neither a delivery of a proxy appointment directing a vote against the
Reorganization Agreement nor a failure to vote for the Reorganization Agreement
will constitute such written notice. Certain additional procedures must be
followed in order for an LBI stockholder effectively to exercise dissenters'
rights. Stockholders wishing to dissent from the Reorganization Agreement are
urged to read carefully "Proposal III--Approval of the Reorganization
- --Stockholders' Dissenters' Rights" and Appendix D (setting forth the sections
of the TBCA pertaining to dissenters' rights) attached to this Proxy
Statement/Prospectus and should consult with their own legal advisors.

Certain Federal Income Tax Consequences. It is intended that for
federal income tax purposes the Reorganization will be treated as a
reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended, (the "Internal Revenue Code") and accordingly, for
federal income tax purposes, LBI stockholders will not realize and recognize
gain or loss (if any) upon receipt of UPC Common Stock in the Reorganization in
exchange for their shares of LBI Common Stock. LBI stockholders may recognize
gain or loss by reason of

4
<PAGE> 12

receiving cash in lieu of a fractional share or by the exercise of dissenters'
rights. See "PROPOSAL III--Approval of the Reorganization--Certain Federal
Income Tax Consequences."

Accounting Treatment. The Reorganization is expected to be accounted
for as a "pooling of interests" under generally accepted accounting principles
("GAAP") as described in Accounting Principles Board Opinion No. 16 and the
interpretations thereof.

MARKET PRICES OF COMMON STOCK; DIVIDENDS

UPC Common Stock. The UPC Common Stock is listed and traded on the
New York Stock Exchange (symbol: UPC). The following table sets forth for the
periods indicated the high and low closing sale prices of the UPC Common Stock
on the NYSE and the cash dividends declared per share for the periods
indicated:

<TABLE>
<CAPTION>
Price Range Cash Dividends
---------------------- ------------------
High Low Declared Per Share
------ ------- ------------------
<S> <C> <C> <C>
1994
First Quarter $26.25 $23.13 $.21
Second Quarter through April 26, 1994 $27.00 $24.75 .--
---
Total $.21
===
1993
First Quarter $29.13 $22.50 $.18
Second Quarter 29.25 22.63 .18
Third Quarter 30.00 25.00 .18
Fourth Quarter 28.75 23.63 .18
---
Total $.72
===
1992
First Quarter $15.50 $13.75 $.15
Second Quarter 20.13 14.63 .15
Third Quarter 20.75 17.50 .15
Fourth Quarter 24.75 17.75 .15
---
Total $.60
===
</TABLE>

The last reported sale price of UPC Common Stock on the New York Stock
Exchange as of April 26, 1994, which was the last practicable date prior to the
mailing of this Prospectus, was $25.63 per share.

LBI Common Stock. At the present time, there is no established market
in which shares of LBI Common Stock are regularly traded. LBI Common Stock is
quoted over-the-counter through the National Daily Quotation System "Pink
Sheets" published by the National Quotation Bureau, Inc. Trident Securities,
Inc., Raleigh, North Carolina, has agreed to exercise its best efforts to match
offers to buy and offers to sell shares of LBI Common Stock. There were
approximately 338 stockholders of record at the voting record date. Management
is not aware of any market trades in LBI Common Stock since the announcement of
the Reorganization. The sole known market trade in 1993 was in November at
$22.25 per share. In 1992 there was more trading activity in LBI Common Stock,
and the following table sets forth to management's knowledge the lowest and
highest trading prices per share of LBI Common Stock during each of the
quarters indicated.

<TABLE>
<CAPTION>
Price Range
High Low
<S> <C> <C>
1992
First Quarter $12.00 $10.00
Second Quarter 13.00 11.38
Third Quarter 13.75 13.00
Fourth Quarter 16.00 13.75
</TABLE>

5
<PAGE> 13

During each of 1992 and 1993, LBI paid cash dividends on the LBI
Common Stock totaling $.60 per share. Payment of dividends is subject to
determination and declaration by the Board of Directors of LBI and the
availability of funds therefor. Any dividend policy of LBI depends, however,
upon its debt and equity structure, earnings, need for capital and other
factors, including economic conditions, regulatory restrictions and tax
considerations, and there can be no assurance that such dividends will be paid.
In addition, since LBI has no significant source of income other than dividends
from Liberty Federal and earnings from investment of the cash held by LBI, the
payment of dividends by LBI depends upon the receipt of dividends from Liberty
Federal which is subject to various tax and regulatory restrictions as
described under "Liberty Bancshares, Inc.--Business--Regulation--Dividend
Restrictions" and in Note 15 of the Notes to Consolidated Financial Statements
of LBI attached as Appendix A hereto.

6
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables present for UPC and LBI, on an historical basis,
selected consolidated financial data. The information for LBI has been derived
from the consolidated financial statements of LBI, including the financial
statements of LBI appearing in Appendix A to this Proxy Statement/Prospectus,
and should be read in conjunction therewith and with the notes thereto. See
"Appendix A -- Liberty Bancshares, Inc. and Subsidiary Consolidated Financial
Statements." The information for UPC has been derived from the financial
statements of UPC, including the financial statements of UPC incorporated by
reference in this Proxy Statement/Prospectus, and should be read in conjunction
therewith and with the notes thereto. See "Incorporation of Certain Documents
by Reference." Historical results are not necessarily indicative of results to
be expected for any future period. In the opinion of the managements of UPC
and LBI, all adjustments necessary to arrive at a fair statement of results of
operations of the respective companies have been included.

UPC SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989
--------- -------- ------- -------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net interest income $ 232,667 $189,453 $152,015 $133,018 $ 121,995
Provision for losses on loans 9,689 18,557 24,835 19,166 49,229
Profits and commissions from trading activities 8,720 10,168 14,707 24,268 36,700
Investment securities gains (losses) 4,581 13,246 3,344 (341) (1,294)
Other noninterest income 73,436 61,543 53,099 47,375 43,281
Noninterest expense 224,480 199,218 164,771 160,805 177,833
Earnings (loss) before income taxes,
extraordinary item, and accounting changes 85,235 56,635 33,559 24,349 (26,380)
Applicable income taxes (benefit) 23,967 15,196 6,051 1,639 (4,111)
Earnings (loss) before extraordinary item
and accounting changes 61,268 41,439 27,508 22,710 (22,269)
Extraordinary item-defeasance of debt, net of taxes (3,206) - - - -
Accounting changes, net of taxes 5,001 - - - -
Net earnings (loss) 63,063 41,439 27,508 22,710 (22,269)

Per Common Share Data
Primary
Earnings (loss) before extraordinary
item and accounting changes $ 2.69 $ 2.10 $ 1.59 $ 1.20 $ (1.19)
Extraordinary item-defeasance of debt, net of taxes (0.16) - - - -
Accounting changes, net of taxes 0.25 - - - -
Net earnings (loss) 2.78 2.10 1.59 1.20 (1.19)
Fully diluted
Earnings (loss) before extraordinary
item and accounting changes 2.49 2.02 1.58 1.20 (1.19)
Extraordinary item-defeasance of debt, net of taxes (0.13) - - - -
Accounting changes, net of taxes 0.21 - - - -
Net earnings (loss) 2.57 2.02 1.58 1.20 (1.19)
Cash dividends 0.72 0.60 0.48 0.48 0.48
Book value 18.96 16.34 14.99 13.61 12.46
Book value assuming conversion of
convertible preferred stock 19.06 16.84 14.95 13.60 12.46
</TABLE>

7
<PAGE> 15

Years Ended December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- -------- -------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at period end)
Total assets $6,318,186 $5,262,184 $3,786,839 $4,004,710 $4,002,614
Loans, net of unearned income 2,935,215 2,231,839 1,912,914 2,129,083 1,995,383
Allowance for losses on loans 80,442 64,290 47,934 50,921 46,871
Investment securities 2,617,053 2,198,103 1,147,803 1,155,266 1,019,759
Deposits 5,251,366 4,450,176 3,211,261 3,341,840 3,129,567
Long-term debt
Parent Company 114,729 74,292 38,163 44,662 34,500
Subsidiary Banks 160,501 2,864 3,922 4,103 39,021
Total shareholders' equity 477,300 356,211 269,446 237,035 240,591
Average assets 6,249,339 4,742,832 3,839,744 4,053,820 3,988,348
Average shareholders' equity 446,994 329,492 247,859 243,783 265,233
Average shares outstanding (in thousands)
Primary 19,622 16,765 16,632 18,641 18,761
Fully diluted 23,852 19,609 16,986 18,981 18,761
Profitability and Capital Ratios
Before extraordinary item and accounting changes
Return on average assets 0.98% 0.87% 0.72% 0.56% NM%
Return on average common equity 15.18 13.65 11.18 9.34 NM
Net earnings
Return on average assets 1.01% 0.87% 0.72% 0.56% NM%
Return on average common equity 15.70 13.65 11.18 9.34 NM
Net interest income (taxable-equivalent)
to average earning assets 4.30 4.57 4.59 3.97 3.77
Loans/deposits 55.89 50.15 59.57 63.71 63.76
Common and preferred dividend payout ratio 34.07 38.93 32.71 40.81 NM
Equity/assets (period end) 7.55 6.77 7.12 5.92 6.01
Average shareholders' equity/average total assets 7.15 6.95 6.46 6.01 6.65
Tier 1 capital to risk-weighted assets(3) 14.85 13.81 12.19 9.57 NA
Total capital to risk-weighted assets(3) 18.59 16.33 14.93 12.17 NA
Leverage ratio(3) 7.10 6.85 6.94 5.71 5.76
Asset Quality Ratios
Allowance/period end loans 2.74% 2.88% 2.51% 2.39% 2.35%
Nonperforming loans/total loans(1) 0.76 1.70 1.37 0.98 0.88
Allowance/nonperforming loans 362.83 68.97 182.98 244.77 267.65
Nonperforming assets/loans and foreclosed
property(2) 0.92 1.99 1.90 1.62 1.26
Provision/average loans 0.35 0.86 1.23 0.93 2.50
Net charge-offs/average loans 0.37 0.83 1.38 1.10 2.25
- -----------
</TABLE>
(1) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(2) Nonperforming assets include nonperforming loans and foreclosed properties.
(3) The risk-based capital ratios are based upon capital guidelines prescribed
by federal bank regulatory authorities. Under those guidelines, the required
minimum Tier 1 and total capital to risk-weighted assets ratios are 4% and 8%,
respectively. The required minimum leverage ratio of Tier 1 capital to total
adjusted assets is 3% to 5%.
NA- Not Available NM- Not Meaningful

8
<PAGE> 16
LBI SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
At December 31,
1993 1992 1991 1990 1991
---- ---- ---- ---- ----
Balance Sheet Data: (Dollars in thousands)
Total amount of:
<S> <C> <C> <C> <C> <C>
Assets . . . . . . . . . . . . . . . . . . . $180,727 $170,669 $172,758 $164,661 $163,453
Loans receivable, net . . . . . . . . . . . . 122,099 117,221 122,178 111,487 115,308
Cash and cash equivalents (1) . . . . . . . . 24,361 18,167 14,207 16,656 15,975
Investment securities . . . . . . . . . . . . -- 14,949 19,721 16,884 16,919
Securities available for sale (2) . . . . . . 27,551 7,833 -- -- --
Mortgage-backed securities . . . . . . . . . -- 5,709 11,081 11,107 9,345
Deposits . . . . . . . . . . . . . . . . . . 148,717 151,274 155,213 153,965 153,398
ESOP loan payable . . . . . . . . . . . . . . 369 468 634 -- --
Stockholders' equity . . . . . . . . . . . . 20,343 17,804 15,868 9,478 8,417
Number of:
Real estate loans outstanding . . . . . . . . 2,671 2,772 2,948 2,875 2,948
Savings accounts . . . . . . . . . . . . . . 19,063 19,559 20,414 21,268 22,110
Offices open (3) . . . . . . . . . . . . . . 6 6 6 6 6
</TABLE>
______________
(1) Cash and cash equivalents consists of cash, interest-bearing deposits
in other banks, federal funds sold and certificate of deposit.
(2) Securities available for sale consists of U.S. Government and agency
securities, mortgage-backed securities and FHLMC common stock.
(3) LBI operates five full service offices and one limited service office.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:

Interest income . . . . . . . . . . . $12,495 $13,957 $ 15,789 $ 16,415 $16,335

Interest expense . . . . . . . . . . (6,100) (7,428) (10,492) (11,698) (11,925)

Net interest income . . . . . . . . . 6,395 6,529 5,297 4,717 4,410

Provision for loan losses . . . . . . (259) (174) (201) (229) (352)

Net interest income after
provision for loan losses . . . . . 6,136 6,355 5,096 4,488 4,058

Non-interest income . . . . . . . . . 1,672 1,149 798 752 866

General and administrative
expenses . . . . . . . . . . . . . (4,416) (4,151) (3,849) (3,438) (3,473)

Earnings before income taxes . . . . 3,392 3,353 2,045 1,802 1,451

Income tax expense . . . . . . . . . (1,302) (1,198) (732) (741) (429)

Cumulative effect of change
in accounting principle . . . . . . 127 -- -- -- --
------- ------- -------- -------- --------

Net earnings . . . . . . . . . . . . $ 2,217 $ 2,155 $ 1,313 $ 1,061 $ 1,022
======= ======= ======== ======== ========

Per common share:

Net earnings (4) . . . . . . . . . $ 3.32 $ 3.40 $ .05 N/A N/A

Cash dividends paid . . . . . . . . 0.60 0.60 N/A N/A N/A

Book value at end of year . . . . . 31.81 28.07 25.02 N/A N/A

Common stock outstanding . . . . . . 639,529 634,215 634,215 N/A N/A

Market price at end of year . . . . . 50.00 16.00 10.00 N/A N/A
</TABLE>
____________
(4) Earnings per share for the year ended December 31, 1991 is based upon
the net earnings from the date of conversion from mutual to stock
form, December 17, 1991, to December 31, 1991.

9
<PAGE> 17

<TABLE>
<CAPTION>
As of or For the Year Ended December 31,
--------------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Other Data:
<S> <C> <C> <C> <C> <C>
Return on assets (5) . . . . . . . . 1.27 1.26% .78% .64% .63%

Return on equity (5) . . . . . . . . 11.63 12.70 12.36 11.86 12.93

Average equity-to-assets
ratio (5) . . . . . . . . . . . . . 10.89 9.94 6.32 5.42 4.90

Interest rate spread . . . . . . . . 3.32 3.49 3.02 2.69 2.63

Net yield on interest-earning
assets . . . . . . . . . . . . . . 3.75 3.94 3.30 2.98 2.86

Operating expense-to-assets ratio . . 2.52 2.43 2.29 2.08 0.15

Non-performing assets to total
assets (6) . . . . . . . . . . . . 0.66 0.74 1.11 2.48 0.60

Ratio of allowance for loan
losses to gross loans . . . . . . . 0.99 0.89 0.76 0.76 0.59
</TABLE>
_____________
(5) Ratios are based on average balances which are derived
from month-end balances.
(6) In 1990, Liberty Federal's $2.7 million
interest in a loan secured by a multi-family residential property
became non-performing and was in-substance foreclosed. In June 1991,
the property was sold, the non-performing loan was repaid, and Liberty
Federal made a loan to the purchaser of the property.

RECENT DEVELOPMENTS AFFECTING UPC.

Recently Completed Acquisitions. Since December 31, 1993 UPC has
completed the acquisition of the following institutions (collectively, the
"Recently Completed Acquisitions"):

<TABLE>
<CAPTION>
METHOD OF
INSTITUTION ASSET SIZE CONSIDERATION ACCOUNTING
- ---------------------- ---------- ------------- ----------
(In Millions)
<S> <C> <C> <C>
Mid-South Bancorp, Inc.
and its subsidiaries,
Simpson County Bank,
in Franklin, Kentucky;
Adairville Banking Company,
in Adairville, Kentucky;
First Citizens Bank,
in Franklin, Tennessee;
The Peoples Bank of Elk Valley,
in Fayetteville, Tennessee; and
General Trust Company, 839,542 shares Pooling of
in Nashville, Tennessee $185 UPC Common Stock Interests

First National Bancorp of Shelbyville, Inc.
and its subsidiary, First National Bank 974,886 shares Pooling of
of Shelbyville, in Shelbyville, Tennessee 164 UPC Common Stock Interests

Clin-Ark Bankshares, Inc.
and its subsidiary,
First National Bank,
Clinton, Van Buren 227,768 shares Pooling of
County, Arkansas 48 UPC Common Stock Interests

Anderson County Bank
in Clinton, Anderson Approximately
County, Tennessee 18 $2.0 Million Cash Purchase
----

Total $415
====
</TABLE>

10
<PAGE> 18
Pending Acquisitions. Consistent with UPC's acquisition
strategy, UPC has entered into definitive agreements to acquire the following
financial institutions in addition to LBI (collectively, the "Pending
Acquisitions") which management considers probable and which are expected to be
consummated by the end of the third quarter of 1994:

<TABLE>
<CAPTION>
CONSIDERATION
-------------
INSTITUTION ASSET SIZE VALUE TYPE
- ----------- ---------- ----- ----
(in millions)
<S> <C> <C> <C>
BNF BANCORP, INC.
(formerly BANCFIRST
Corporation) and its
subsidiary BANKFIRST, Federal
Savings Bank
Decatur, Alabama $262 $49 UPC Common Stock (Approximately
2,054,000 shares)
Earle Bancshares, Inc.
and its subsidiary,
First Southern Bank,
Earle, Arkansas 40 9 UPC Common Stock
(Approximately 375,000
shares)
Tennessee Bancorp, Inc.
and its subsidiary,
Tennessee National Bank,
Columbia, Tennessee 92 14 Cash (1.5 times book value at closing)
---- ---

Totals $394 $72
==== ===
</TABLE>

If the Reorganization, the Pending Acquisitions and the Recently Completed
Acquisitions had been consummated at December 31, 1993, UPC's consolidated
total assets would have increased by approximately $1.0 billion to
approximately $7.3 billion, and UPC's consolidated total deposits would have
increased by approximately $800 million to approximately $6.1 billion, based
upon December 31, 1993, pro forma financial information. See "Pro Forma
Condensed Financial Information" and the related pro forma financial
information in UPC's Current Report on Form 8-K dated April 15, 1994, and the
historical financial information included in UPC's 1993 Annual Report on Form
10-K, incorporated by reference. See "Incorporation of Certain Documents by
Reference."

EQUIVALENT AND PRO FORMA PER SHARE DATA

The following table presents selected comparative unaudited per share data
for (i) UPC Common Stock and LBI Common Stock on an historical basis; (ii) UPC
Common Stock on a pro forma basis for the Reorganization only and for the
Reorganization, all Recently Completed Acquisitions and the Pending
Acquisitions; and (iii) LBI Common Stock on an equivalent pro forma basis for
the Reorganization only and for the Reorganization and UPC's Recently Completed
Acquisitions and Pending Acquisitions, for the periods indicated. These data
are not necessarily indicative of the results of the future operations of
either entity or the actual results that would have occurred had the
Reorganization been consummated January 1, 1993. The information is derived
from, and should be read in conjunction with the consolidated historical
financial statements of UPC (including related notes thereto) which are
incorporated by reference, the consolidated historical financial statements of
LBI set forth in Appendix A and the unaudited pro forma consolidated financial
statements and related notes in UPC's Current Report on Form 8-K dated April
15, 1994, incorporated by reference. See "Incorporation of Certain Documents
by Reference."

11
<PAGE> 19
<TABLE>
<CAPTION>
AS OF OR FOR THE TWELVE
MONTHS ENDED
DECEMBER 31,
1993(1)
-------
<S> <C>
BOOK VALUE PER COMMON SHARE
UPC $ 18.96
UPC pro forma (LBI only) 18.74
UPC pro forma (all Recently Completed and Pending Acquisitions) 18.05
LBI 31.81
LBI equivalent pro forma (LBI only) 36.04
LBI equivalent pro forma (all Recently Completed and
Pending Acquisitions)(2) 34.71

CASH DIVIDENDS PER COMMON SHARE
UPC 0.72
UPC pro forma 0.72
LBI 0.60
LBI equivalent pro forma 1.38

EARNINGS BEFORE EXTRAORDINARY ITEMS AND ACCOUNTING CHANGES
UPC
Primary 2.69
Fully diluted 2.49
UPC pro forma (LBI only)
Primary 2.62
Fully diluted 2.45
UPC pro forma (all Recently Completed and Pending Acquisitions)(2)
Primary 2.22
Fully diluted 2.13
LBI
Primary 3.13
Fully diluted 3.13
LBI equivalent pro forma (LBI only)
Primary 5.04
Fully diluted 4.71
LBI equivalent pro forma (all Recently Completed and
Pending Acquisitions)(2)
Primary 4.27
Fully diluted 4.10
</TABLE>

(1) The equivalent pro forma per share data for LBI is computed by
multiplying UPC's pro forma share information by 1.92308.
(2) See also, "Recent Developments Affecting UPC -- Recently Completed
Acquisitions" and " -- Pending Acquisitions."

12
<PAGE> 20

PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following tables contain unaudited, consolidated, pro forma,
consolidated financial information showing a statement of earnings for the
twelve months ended December 31, 1993, and a balance sheet at December 31,
1993, for (i) UPC; (ii) UPC, Recently Completed Acquisitions and the
Reorganization; and (iii) UPC, Recently Completed Acquisitions, the Pending
Acquisitions and the Reorganization. The unaudited pro forma financial
information reflects each transaction using either the pooling of interests or
purchase methods of accounting in accordance with the accounting requirements
applicable to each respective transaction. The unaudited pro forma financial
information should be read in conjunction with the historical financial
statements of UPC and LBI and in conjunction with the information presented in
UPC's 1993 Annual Report on Form 10-K and UPC's Current Report on Form 8-K
dated April 15, 1994. Pro forma results are not necessarily indicative of
future operating results. See "Incorporation of Certain Documents by
Reference" and "Appendix A--Liberty Bancshares, Inc. and Subsidiary
Consolidated Financial Statements".

13
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------------
UPC,
Recently Completed
UPC, Acquisitions,
Recently Completed All Pending
Acquisitions Acquisitions
UPC and LBI and LBI
----------- --------------- -----------------
(Dollars in thousands)
Assets
<S> <C> <C> <C>
Cash and due from banks $ 225,626 $ 244,157 $ 253,762
Interest-bearing deposits at financial
institutions 26,647 27,053 14,416
Federal funds sold and securities purchased under
agreements to resell 53,149 83,428 90,228
Trading account securities, at market 153,482 153,482 153,482
Loans held for resale 56,053 57,774 61,971
Investment securities
Held for sale 595,090 622,641 719,313
Held for investment 2,021,963 2,175,702 2,230,200
Loans, net of unearned income 2,935,215 3,290,725 3,517,213
Less:
Allowance for losses on loans (80,442) (87,904) (90,333)
----------- ----------- -----------
Net loans 2,854,773 3,202,821 3,426,880

Premises and equipment 135,511 145,448 153,796
Accrued interest receivable 49,953 53,068 55,642
Goodwill and other intangibles 40,794 41,535 46,786
Other assets 105,145 115,053 118,779
----------- ----------- -----------
Total assets $ 6,318,186 $ 6,922,162 $ 7,325,255
=========== =========== ===========
Liabilities and shareholders' equity
Deposits
Noninterest-bearing 750,093 $ 797,234 $ 807,653
Other interest-bearing 4,501,273 4,986,975 5,314,994
----------- ----------- -----------
Total deposits 5,251,366 5,784,209 6,122,647
Short-term borrowings 244,995 245,663 245,663
Federal Home Loan Bank advances 157,954 167,861 190,461
Long-term debt 117,276 121,336 121,336
Accrued interest, expenses, and taxes 41,893 42,122 43,004
Other liabilities 27,402 34,900 38,131
----------- ----------- -----------
Total liabilities 5,840,886 6,396,091 6,761,242
----------- ----------- -----------
Shareholders' equity
Preferred stock
Convertible 87,298 87,298 87,298
Nonconvertible 17,250 17,250 17,250
Common stock 98,285 115,109 127,256
Additional paid-in capital 86,385 92,979 95,065
Retained earnings 188,082 213,435 237,144
----------- ----------- -----------
Total shareholders' equity 477,300 526,071 564,013
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 6,318,186 $ 6,922,162 $ 7,325,255
=========== =========== ===========

</TABLE>

14
<PAGE> 22
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars in thousands expect per share data)
<TABLE>
<CAPTION>
Year-to-Date December 31, 1993
-----------------------------------------------------
UPC,
Recently Completed
UPC, Acquisitions,
Recently Completed Subordinated Notes,
Acquisitions, All Pending
Subordinated Notes Acquisitions
UPC and LBI and LBI
--------- ------- -------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $241,072 $275,702 $296,595
Interest on investment securities 140,473 152,250 160,588
Interest on deposits at financial institutions 1,634 1,635 1,337
Interest on federal funds sold and securities
purchased under agreements to resell 4,602 5,576 5,765
Interest on trading account securities 6,194 6,194 6,194
Interest on loans held for resale 3,239 3,239 3,239
--------- -------- --------
Total interest income 397,214 444,596 473,718
--------- -------- --------
Interest expense
Interest on deposits 146,800 168,560 180,519
Interest on short-term borrowings 6,287 6,571 6,571
Interest on Federal Home Loan Bank advances and
long-term debt 11,460 11,578 12,491
--------- -------- --------
Total interest expense 164,547 186,709 199,581
--------- -------- --------
Net interest income 232,667 257,887 274,137
Provision for losses on loans 9,689 14,590 14,862
--------- -------- --------
Net interest income after provision for losses on loans 222,978 243,297 259,275
--------- -------- --------
Noninterest income
Service charges on deposit accounts 28,721 31,324 32,297
Profits and commissions from trading activities 8,720 8,771 8,771
Investment securities gains 4,581 4,619 5,088
Other income 44,715 47,030 47,553
--------- -------- --------
Total noninterest income 86,737 91,744 93,709
--------- -------- --------
Noninterest expense
Salaries and employee benefits 98,920 109,229 113,905
Net occupancy expense 15,909 18,023 19,463
Equipment expense 15,735 16,107 16,504
Other expense 93,916 104,361 108,486
--------- -------- --------
Total noninterest expense 224,480 247,720 258,358
--------- -------- --------
Earnings before income taxes, extraordinary
item, and accounting changes 85,235 87,321 94,626
Applicable income taxes 23,967 25,811 29,014
--------- -------- --------
Earnings before extraordinary item and accounting changes $ 61,268 $ 61,510 $ 65,612
========= ======== ========
Earnings per common share
Primary $ 2.69 2.28 2.22
Fully diluted 2.49 2.16 2.13
Average common shares outstanding (in thousands)
Primary 19,622 23,097 25,526
Fully diluted 23,852 27,595 30,023

</TABLE>

15
<PAGE> 23
THE ANNUAL MEETING

GENERAL

This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of LBI to be used at the
Annual Meeting which will be held at the Best Western Motel Lafayette Room,
1297 East Wood Street, Paris, Tennessee, on Monday, June 13, 1994 at 10:00 a.m.
This Proxy Statement/Prospectus and the accompanying Notice and Proxy Card
are being first mailed to stockholders of LBI on or about April *, 1994.

At the Annual Meeting, holders of record of LBI Common Stock as of the
close of business on April 29, 1994, the voting record date, will consider and
vote upon (i) the election of three directors of LBI; (ii) the ratification of
the appointment of KPMG Peat Marwick as independent auditors of LBI for the
year ending December 31, 1994; (iii) the approval of the Reorganization
Agreement and the Reorganization; and (iv) the approval of the amendment of the
corporate charter of LBI to exclude any transaction, including the
Reorganization, approved in advance by a majority of LBI's Continuing
Directors, as defined therein, from LBI's charter prohibition against
acquisitions of more than ten percent of any class of equity security of LBI.
In addition, stockholders of LBI may consider and vote upon the approval of the
adjournment of the Annual Meeting, in the event there are not sufficient votes
cast in person or by proxy at the Annual Meeting to approve the Reorganization
Agreement and the charter amendment, and such other matters as may properly
come before the Annual Meeting or any adjournments thereof.

Pursuant to the Reorganization Agreement, upon the consummation of the
Reorganization, each outstanding share of LBI Common Stock not subject to
perfected dissenter's rights would be converted exclusively into the right to
receive in exchange therefor (i) a number of whole shares of UPC Common Stock
based on the average closing price per share of UPC Common Stock on the New
York Stock Exchange for the 20 trading days next preceding the closing date of
the Reorganization ("Current Market Price") and (ii) a cash payment in
settlement of any fractional share of UPC Common Stock remaining after
aggregating all shares and fractional shares to which the LBI stockolder is
entitled. If the Current Market Price of UPC Common Stock is less than $22.00,
the exchange ratio (i.e., the number of shares of UPC Common Stock to be
received in exchange for each share of LBI Common Stock) will be 2.2727,
provided, however, that if the Current Market Price is less than $20.00 LBI
will have the right not to consummate the Reorganization. If the Current
Market Price is greater than or equal to $22.00 but less than or equal to
$28.00, the exchange ratio will be equal to $50.00 divided by the Current
Market Price. If the Current Market Price is greater than $28.00, the exchange
ratio will be 1.7857, provided, however, that if the Current Market Price is
greater than $30.00 and UPC shall not have entered into an agreement to be
acquired the exchange ratio will be equal to $53.57 divided by the Current
Market Price. If the Reorganization had been closed on April 27, 1994, the
Current Market Price of UPC Common Stock would have been $25.74 per share, such
that the value of the UPC Common Stock entitled to be received in exchange for
each outstanding share of LBI Common Stock would have been approximately equal
to $50.00. Following the Reorganization, UPC would own all of the outstanding
shares of LBI Common Stock. Consummation of the Reorganization is conditioned
upon, among other things, stockholder approval of the Reorganization Agreement,
the Reorganization and the related charter amendment.

VOTING AND REVOCABILITY OF PROXIES

The presence, in person or by proxy, of at least a majority of the
total number of shares of LBI Common Stock outstanding and entitled to vote
will be necessary to constitute a quorum at the Annual Meeting. Stockholders
of LBI 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 Thomas D. Enoch, Secretary of LBI, 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.

<PAGE> 24

Proxies solicited by the Board of Directors of LBI will be voted in
accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTORS SET FORTH
BELOW, "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK AS AUDITORS
OF LBI FOR THE YEAR ENDING DECEMBER 31, 1994, "FOR" APPROVAL OF THE
REORGANIZATION AGREEMENT AND THE REORGANIZATION, "FOR" APPROVAL OF THE PROPOSED
CHARTER AMENDMENT AND "FOR" APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING
IN THE EVENT THERE ARE NOT SUFFICIENT VOTES CAST AT THE ANNUAL MEETING TO
APPROVE THE REORGANIZATION AGREEMENT AND THE REORGANIZATION AND THE CHARTER
AMENDMENT. The proxy confers discretionary authority on the persons named
therein as proxies, or either of them acting alone, 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 should be 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 of LBI. Proxies marked
as abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
will not be counted as votes cast. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.

17
<PAGE> 25
VOTING SECURITIES AND SECURITY OWNERSHIP

Stockholders of record as of the close of business on the voting record
date, April 29, 1994, generally are entitled to one vote for each share then
held. Under LBI's charter, any shares beneficially owned in excess of ten
percent of the shares outstanding shall not be counted as shares entitled to
vote, shall not be voted or counted as voting shares in connection with any
matter submitted to stockholders for a vote and shall not be counted as
outstanding for purposes of determining a quorum or the affirmative vote
necessary to approve any matter submitted to stockholders for a vote. As of
the voting record date, there were 679,303 shares of LBI Common Stock issued
and outstanding, of which 675,233 shares were entitled to vote at the Annual
Meeting.

Persons and groups owning more than five percent of the LBI Common
Stock are required to file with the Securities and Exchange Commission certain
reports regarding such ownership pursuant to the Exchange Act. Based upon such
reports and other information available to management of LBI, the following
table sets forth information as of the voting record date regarding (i)
persons, including directors of LBI, who were believed by management to be
beneficial owners of more than five percent of the LBI Common Stock and (ii)
the LBI Common Stock beneficially owned by each other director of LBI and by
all directors and executive officers of LBI as a group.

<TABLE>
<CAPTION>
Amount and Percent of
Nature of Shares of
Beneficial Common Stock
Beneficial Owner Ownership Outstanding
---------------- --------- -----------
<S> <C> <C>
Wellington Management Company
75 State Street
Boston, Massachusetts 02109 72,000 (1) 10.6

First Financial Fund, Inc.
One Seaport Plaza - 25th Floor
New York, New York 10292 61,900 (1) 9.1

Liberty Federal Savings Bank
Employee Stock Ownership Plan
914 East Wood Street
Paris, Tennessee 38242 63,216 (2) 9.3

Robert L. Kenworthy
1019 Mineral Wells
Paris, Tennessee 38242 47,334 (3) 7.0

David B. Travis, DDS
715 Morton Street
Paris, Tennessee 38242 51,034 7.5

James L. Adams 30,234 4.5

Thomas D. Enoch 27,200 4.0

William C. Greer 20,635 (3) 3.0

Robert F. Swayne 30,074 (3) 4.4

Larry A. Watson 31,946 (4) 4.7

All directors and
executive officers
as a group (10 persons) 249,244 (3)(5) 36.4
</TABLE>

<PAGE> 26

____________________
(1) Of the 72,000 shares reported beneficially owned as a result
of shared dispositive power by Wellington Management Company,
61,900 shares are also reported beneficially owned as a result
of sole voting power and shared dispositive power by First
Financial Fund, Inc. Under LBI's charter, 67,930 of these
shares are entitled to vote at the Annual Meeting, and 4,070
shares are not entitled to vote.
(2) Directors Robert F. Swayne, William C. Greer and Robert L.
Kenworthy, the ESOP trustees, vote all allocated shares
(28,330) in accordance with the instructions of participating
employees. Unallocated shares (34,886) and shares for which
no instructions have been received are voted by the ESOP
trustees in the same ratio as participating employees direct
the voting of allocated shares, or, in the absence of such
direction, in the ESOP trustees' best judgment. It is
anticipated that approximately 22,200 currently unallocated
shares may be allocated to participating employees as early
as May 1994.
(3) Excludes shares held by the ESOP (see (2) above).
(4) Includes 5,652 shares which Director Larry A. Watson had a
right to purchase within 60 days pursuant to the exercise of
stock options.
(5) Includes 5,860 shares which all directors and executive
officers as a group had a right to purchase within 60 days
pursuant to the exercise of stock options.

OTHER MATTERS

The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described in this Proxy
Statement/Prospectus. 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 the
Board of Directors of LBI.

MISCELLANEOUS

The cost of soliciting proxies will be borne by LBI. LBI will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of LBI Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of LBI may solicit proxies personally
or by telegraph or telephone without additional compensation.

STOCKHOLDER PROPOSALS

If the Reorganization should not be consummated, in order to be
eligible for inclusion in LBI's proxy materials for next year's Annual Meeting
of Stockholders, any stockholder proposal to take action at such meeting must
be received at LBI's main office at 914 East Wood Street, Paris, Tennessee
38242, no later than December 1, 1994. Any such proposal shall be subject to
the requirements of the proxy rules adopted under the Exchange Act.

19
<PAGE> 27
PROPOSAL I -- ELECTION OF DIRECTORS

DIRECTORS AND EXECUTIVE OFFICERS OF LBI

LBI's Board of Directors is composed of seven members. LBI's
corporate charter requires that directors be divided into three classes, as
nearly equal in number as possible, each class to serve for a three-year
period, with approximately one-third of the directors elected each year. The
LBI Board of Directors has nominated James L. Adams, Robert L. Kenworthy and
David B. Travis, all of whom currently are members of the LBI Board of
Directors, to serve as directors of LBI for a three-year period.

If any nominee should be unable to serve, the shares represented by
all valid proxies will be voted for the election of such substitute as LBI's
Board of Directors may recommend. At this time, the LBI Board of Directors
knows of no reason why any nominee would be unavailable to serve.

The following table sets forth the names of LBI's Board of Director's
nominees for election as directors and of those directors who will continue to
serve as such after the Annual Meeting. Also set forth is other information
regarding each person's age, the year he first became a director of Liberty
Federal and the expiration of his term as a director. All directors were
initially appointed as directors of LBI in July 1991 upon the incorporation of
LBI.

<TABLE>
<CAPTION>
Year First
Elected as Current
Age at Director of Term
Name December 31, Liberty Federal to Expire
1993
---- -------- --------------- ---------

BOARD NOMINEES FOR TERMS TO EXPIRE IN 1997
<S> <C> <C> <C>
James L. Adams 57 1991 1994

Robert L. Kenworthy 47 1984 1994

David B. Travis 41 1991 1994

DIRECTORS CONTINUING IN OFFICE

William C. Greer 71 1982 1995

Larry A. Watson 50 1968 1995

Thomas D. Enoch 47 1982 1996

Robert F. Swayne 65 1967 1996
</TABLE>

The principal occupation of each director and executive officer of LBI
for the last five years is set forth below.

JAMES L. ADAMS owns and manages a chain of grocery stores
headquartered in Paris, Tennessee. Mr. Adams is an active member of the Paris
Rotary Club, a member and former president of the Paris-Henry County Chamber of
Commerce and a director of the Henry County Development Corporation. Jim
Adams, Inc. is a Partner in Education with the Henry County Public School
System. Mr. Adams is a former director of a commercial bank.

ROBERT L. KENWORTHY owns and operates McDonald's restaurants in Paris,
Union City, Martin, McKenzie, Camden and Huntingdon, Tennessee and Fulton,
Kentucky. Mr. Kenworthy is a member of the Paris-Henry County Chamber of
Commerce and Paris Elks Lodge.

<PAGE> 28

DAVID B. TRAVIS has been a practicing dentist in Paris, Tennessee
since 1976. Additionally, for the past eight years he has owned Henry County
Monument Works. Dr. Travis is a member and former president of the Paris
Rotary Club, a member and former vice president of the Paris-Henry County
Chamber of Commerce and a former member of the Henry County Board of Education
and the Paris Elks Lodge. Dr. Travis is also a former director of a commercial
bank.

WILLIAM C. GREER is retired. Mr. Greer was the President and Chief
Executive Officer of First Federal Savings and Loan Association of Waverly,
Tennessee, prior to its merger with Liberty Federal in 1982.

LARRY A. WATSON is the Chairman of the Board, President and Chief
Executive Officer of LBI and Liberty Federal. Mr. Watson joined Liberty
Federal in 1967. Mr. Watson is a member of the Paris-Henry County Chamber of
Commerce and the Paris Rotary Club and a former member of the Tri-County
Industrial Committee. He is also a Past President of the West Tennessee
Council of the Boy Scouts of America, the current Memorial Chairman for the
Paris Unit of the American Cancer Society, a former member of the Governor's
Task Force on Housing and a former member of the Lower Mississippi Delta
Commission, and he chaired the Hospital Ad Hoc Committee of the Henry County
Commission.

THOMAS D. ENOCH is a director and the Executive Vice President, Chief
Operating Officer and Secretary of LBI and Liberty Federal. Mr. Enoch joined
Liberty Federal in 1968. Mr. Enoch is an active member and a former President
of the Paris Lions Club and a director and former President and Secretary of
the Henry County Fair Association.

ROBERT F. SWAYNE is retired. Prior to his retirement, Mr. Swayne was
an attorney in Paris, Tennessee.

DANIEL B. NELSON is the Senior Vice President - Branches and Personnel
of Liberty Federal. Mr. Nelson joined Liberty Federal in 1976. He is a member
of the Paris Optimist Club, the Paris-Henry County Chamber of Commerce and the
University of Tennessee National Alumni Association. In addition, Mr. Nelson
is an Assistant Scoutmaster of Boy Scout Troop 28 and is a board member of the
West Tennessee Council of the Boy Scouts of America.

JO ANN STEEDLY is a Vice President and Manager of Savings Operations
of Liberty Federal. Ms. Steedly joined Liberty Federal in 1980. She is a
former board member and a past Secretary of the Community Girls Chorus, past
committee member of Partners in Education and past director of the Tennessee
Savings and Loan League Annual Leadership Conference. She also is a former
member of the Young Careerist Club and former Secretary of the Henry County
Madrigal Parents Association and currently is a member of Quota Club
International.

SUZZETTE STUTZMAN is the Treasurer and Supervisor of the Accounting
Department of LBI and Liberty Federal. Ms. Stutzman joined Liberty Federal in
1982. She is a member of the Alpha Nu chapter of the Beta Sigma Phi sorority,
a committee member of Partners in Education and the President of the
Atkins-Porter School Parent-Teacher Association for the 1993-1994 school year.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of LBI conducts its business through meetings
of the LBI Board of Directors and of its committees. During the year ended
December 31, 1993, the LBI Board of Directors held 12 meetings. No director of
LBI attended fewer than 75% of the total meetings of the LBI Board of Directors
and committee meetings on which such Board member served during this period.

LBI's Board of Directors has appointed an audit committee comprising
Directors Adams, Greer and Travis. This committee meets at least annually to
examine and approve the audit report prepared by the independent auditors of
LBI and its subsidiary. LBI's audit committee met once in 1993.

LBI's Board of Directors does not have a standing compensation
committee. In 1993, a salary committee of Liberty Federal's Board of
Directors, comprising Directors Watson, Swayne, Greer, Kenworthy, Travis and
Adams, met once as a compensation committee for the purpose of evaluating and
recommending to Liberty Federal's Board of Directors the salaries of Liberty
Federal's officers.

21
<PAGE> 29
LBI's Board of Directors does not have a standing nominating
committee. While the LBI Board of Directors will consider nominees recommended
by stockholders, it has not actively solicited recommendations from LBI's
stockholders for nominees nor established any procedures for this purpose. The
LBI Board of Directors met once in its capacity as a nominating committee in
order to make the nominations of directors to be voted on at the Annual
Meeting.

EXECUTIVE COMPENSATION

Compensation Summary. The following table sets forth the cash and
noncash compensation for each of the last two fiscal years awarded to or earned
by (i) LBI's Chief Executive Officer and (ii) the other executive officer of
LBI whose salary and bonus for 1993 exceeded $100,000 for services rendered in
all capacities to LBI and Liberty Federal.

All Other
Compen-
Name and Salary Bonus sation
Principal Position Year ($) ($) ($) (1)
------------------- ------ ------ ----- ---------
<S> <C> <C> <C> <C>
Larry A. Watson 1993 $139,050 $1,000 $19,116
President and Chief 1992 135,000 250 16,811
Executive Officer
Thomas D. Enoch 1993 $102,000 $1,000 $18,191
Executive Vice 1992 99,000 250 16,074
President and Chief
Operating Officer
</TABLE>

(1) Represents for Mr. Watson director's fees of
$14,100 and $13,000, life and health insurance
premiums of $2,155 and $2,047 and personal use of an
institution automobile of $2,861 and $1,764 for 1993
and 1992, respectively. Represents for Mr. Enoch
director's fees of $14,100 and $13,000, life and
health insurance premiums of $2,155 and $2,047 and
personal use of an institution automobile of $1,936
and $2,027 for 1993 and 1992, respectively.

Option Exercises and Year-End Values. The following table sets forth
information regarding the exercises of options by the named executive officers
during 1993 and the values of the options held by such persons at the end of
1993.

<TABLE>
<CAPTION>
Value of
Number of Securities
Securities Underlying
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Acquired Value Year-End Year-End
Name on Exercise Realized (All Exercisable) (All Exercisable)(1)
---------------------- ----------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
Larry A. Watson -- -- 10,652 (2) $426,080 (2)
Thomas D. Enoch -- -- 5,832 (3) $233,280 (3)
</TABLE>

(1) Difference between estimated market value of underlying securities at
year-end ($50.00 per share) and the exercise price ($10.00 per share).
(2) Includes 5,000 shares underlying options subsequently exercised in
January 1994.
(3) All such shares were issued in connection with the exercise of all
such options in April 1994.

<PAGE> 30

Employment Agreements. LBI and Liberty Federal have entered into
employment agreements with several employees, including Larry A. Watson,
Chairman of the Board, President and Chief Executive Officer, and Thomas D.
Enoch, Executive Vice President and Chief Operating Officer. The employment
agreements have terms of three years, with annual base salaries of $139,050 and
$102,000, respectively. Each year, the term of employment is extended for an
additional year upon a determination by the LBI Board of Directors that the
performance of the employee has met the required standards and that such
agreement should be extended. These agreements provide for a salary review by
the LBI Board of Directors not less often than annually, as well as inclusion
in any discretionary bonus plans, retirement and medical plans, customary
fringe benefits and vacation and sick leave. Each employment agreement will be
terminated upon death, and is terminable by Liberty Federal for "just cause" as
defined in the agreement. In the event of termination for just cause, no
severance benefits are available. If Liberty Federal should terminate one of
these employees without just cause, the employee will be entitled to a
continuation of his salary and benefits from the date of termination through
the remaining term of the agreement plus an additional 12-month period, but in
no event in excess of three- years' salary. Each employee is able to
voluntarily terminate his agreement by providing 60 days' written notice to the
LBI Board of Directors, in which case the employee is entitled to receive only
his compensation, vested rights, and benefits up to the date of termination.

The employment agreements contain provisions stating that in the event
of the voluntary or involuntary termination of employment in connection with,
or within one year after, any change in control of Liberty Federal or LBI, the
employee will be paid within 30 days of such termination a sum equal to 2.99
times the average annual compensation he received during the five-year period
immediately prior to the date of change in control. "Control" generally refers
to the acquisition by any person or entity of the ownership or power to vote
more than 25% of Liberty Federal's or LBI's voting stock, or the control of the
election of a majority of the Board of Directors or the exercise of a
controlling influence over the management or policies of Liberty Federal or
LBI. The employment agreements also provide for a similar lump sum payment to
be made to Messrs. Watson and Enoch in the event of his voluntary termination
of employment upon the occurrence, or within 90 days thereafter, of certain
specified events following any change in control, whether approved by the Board
of Directors or otherwise which have been consented to in writing by the
employee including (i) requiring the employee to move his personal residence or
perform his principal executive functions more than 35 miles from Liberty
Federal's current primary office, (ii) requiring the employee to report to a
person or persons other than the Board of Directors or President, respectively,
of Liberty Federal, (iii) the failure to maintain existing employee benefit
plans, including material vacation, fringe benefits, stock option and
retirement plans, (iv) assigning duties and responsibilities to the employee
which are other than those normally associated with his position with Liberty
Federal, (v) a material diminution of his authority and responsibility and (vi)
failure to be re-elected to the LBI Board of Directors. The aggregate payments
that would be made to Messrs. Watson and Enoch assuming the termination of
employment under the foregoing circumstances at December 31, 1993 would have
been approximately $349,262 and $255,944, respectively. Additionally, each
employment agreement provides that for a period of one year following the
involuntary termination of employment absent just cause, or for a period of one
year following the voluntary termination of employment, except for voluntary
termination coincident with a change in control, such employee shall not engage
in any activities, business or enterprise within the communities served by the
main office or a branch office of Liberty Federal at the time of such
termination, nor during such period will employee make use of confidential
information related to Liberty Federal, its operations or its clientele gained
during the course of employment in a subsequent activity, business or
enterprise.

For information regarding the effect of the Reorganization on the
employment agreements, see "Proposal III -- Approval of the Reorganization --
Interests of Certain Persons in the Reorganization."

Directors' Compensation. Members of the Board of Directors and
committees of the Board of Directors of LBI do not receive compensation in
their capacities as such. For 1993, each member of the Board of Directors of
Liberty received a fee of $1,000 for each LBI Board of Directors meeting
attended, and each non-employee director received a fee of $100 for each
executive committee meeting attended.

<PAGE> 31

TRANSACTIONS WITH MANAGEMENT

Under current law, Liberty Federal's loans to directors and executive
officers must be made on substantially the same terms, including interest rates
and collateral, as those prevailing for comparable transactions with
non-affiliates and must not involve more than the normal risk of repayment or
present other unfavorable features. In accordance with prior law, however,
Liberty Federal had a policy of offering mortgage loans to officers, employees
and immediate family members residing at the same address on terms
substantially equivalent to those offered to the public, except that, so long
as the officer or employee remained employed by Liberty Federal, Liberty
Federal reduced the interest rate on single-family owner-occupied fixed
mortgage loans by 3/4% and adjustable-rate mortgages by 1-1/2% below the
rates in comparable loans to members of the public. In no event was the rate
reduced to less than Liberty Federal's cost of funds for the preceding month,
rounded up to the nearest 1/8%. In addition, the officer, employee or family
member was not charged an origination fee or appraisal fee, and other outside
fees were charged at cost. Upon his or her termination of employment, the
interest rate on a former officer's, employee's or immediate family member's
mortgage loan would revert to the prevailing rate as of the date the loan was
made for fixed-rate loans and the termination date for adjustable-rate loans.
Although Liberty Federal did not have a policy regarding loans to directors,
from time to time Liberty Federal offered loans to directors with reduced
interest rates and/or loan origination fees. Liberty Federal's only loan to a
director or executive officer (or his immediate family) whose terms included
reduced interest rates or other preferential terms and balance exceeded $60,000
at any time since January 1, 1993 was a home mortgage loan made to Mr. Watson
in June 1986 for $125,000 at 9.00%, when the prevailing rate was 9.75%. The
highest balance since January 1, 1993 was $90,744, and the loan was repaid in
full on May 25, 1993.

PROPOSAL II -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

LBI's Board of Directors has heretofore arranged with KPMG Peat
Marwick, independent public accountants, to be LBI's independent auditors for
the year ending December 31, 1994, subject to ratification by LBI's
stockholders. A representative of KPMG Peat Marwick is expected to be present
at the Annual Meeting, and he will have the opportunity to make a statement if
he desires to do so and will be available to respond to appropriate questions.

LBI's stockholders are being asked to ratify the appointment of KPMG
Peat Marwick as LBI's independent auditors for the year ending December 31,
1994 while the Reorganization remains pending because LBI's Board of Directors
intends to continue the engagement of KPMG Peat Marwick until the
Reorganization is consummated and in the event the Reorganization is not
consummated. However, if the Reorganization and the Reorganization Agreement
receive all required approvals, including LBI's stockholders' approval at the
Annual Meeting, it is expected that the Reorganization may be consummated on or
about July 1, 1994. Upon the consummation of the Reorganization, it is
anticipated that Price Waterhouse, UPC's independent auditors, would replace
KPMG Peat Marwick as LBI's independent auditor.

The appointment of the auditors must be ratified by a majority of the
votes cast by the stockholders of LBI at the Annual Meeting. The Board of
Directors recommends that stockholders vote "FOR" the ratification of the
appointment of auditors.

PROPOSAL III -- APPROVAL OF THE REORGANIZATION

The following description of the Reorganization is not intended to be
a complete description of all material facts regarding the Reorganization and
is qualified in all respects by reference to the Reorganization Agreement, the
fairness opinion and the Tennessee statutes attached as Appendices B, C and D,
respectively, hereto.

BACKGROUND OF THE REORGANIZATION

Liberty Federal has operated for years as a modestly sized,
community-oriented savings institution primarily serving the personal banking
needs of residents of Henry, Benton, Carroll and Humphreys Counties in
Northwest Tennessee. While Liberty Federal's emphasis on accepting deposits
from the general public and originating permanent loans secured by one-
to-four-family residential properties located in its market area has remained
relatively constant over the years, the financial markets of which Liberty
Federal is a part, and especially the regulatory environment in which Liberty
Federal operates, have become increasingly complex and, in recent years,

<PAGE> 32

have been undergoing fundamental restructuring, particularly as a result of the
passage of the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA").

In December 1992 and January 1993, the Chairman of UPC approached the
Chairman of LBI regarding a possible business combination. Trident Financial
subsequently provided UPC with general information regarding financial terms of
recent business combination transactions involving savings institutions, and in
February 1993 UPC sent a letter to LBI outlining general financial terms of a
possible stock-for-stock acquisition of LBI by UPC. A special meeting of the
Board of Directors of LBI was held in March 1993 for the purpose of considering
the inquiry from UPC. Trident Financial and representatives of LBI's special
legal counsel participated in the meeting. At the meeting, Trident Financial
was directed to prepare an analysis of the value of LBI, and it was determined
that it would be in the best interests of LBI to discuss the terms of the
inquiry with UPC to determine whether it would be in the best interest of the
stockholders to pursue a sale of LBI. LBI then permitted representatives of
UPC to visit LBI's offices and examine various business records in order for
UPC to further evaluate the possibility of acquiring LBI. At a special meeting
of the LBI Board of Directors in April 1993, Trident Financial presented the
results of its valuation analysis, and, following an extended discussion of the
limited opportunities for LBI to grow as an independent institution in its
market area, the LBI Board of Directors determined to expand the discussions
with UPC to include non-financial issues and authorized Trident Financial to
assist in the negotiation of the amount of UPC Common Stock to be issued in
exchange for the outstanding shares of LBI Common Stock and other financial
terms of the transaction. At a special meeting of the LBI Board of Directors
in May 1993 attended by the Chairman and the President of UPC and a
representative from Trident Financial, the possible terms of a business
combination of LBI with UPC, as well as various questions regarding the
business and policies of UPC, were discussed. UPC's President informed the
Board that a draft of an agreement between LBI and UPC was being prepared by
UPC, and the possibility of UPC acquiring LBI prior to the end of 1993 was
discussed. After UPC's Chairman and President left the meeting, Trident
Financial presented an analysis of the financial terms then being discussed,
including various exchange ratios for the exchange of UPC Common Stock for LBI
Common Stock, as a result of which the amount of UPC Common Stock to be issued
to stockholders of LBI would depend on the market price of UPC Common Stock.

Subsequent to LBI's May 1993 special board meeting, there was a broad
downturn in the financial markets, particularly in the market for banking
stocks, and UPC's stock price declined to a such a level that UPC informed LBI
that the amount of UPC Common Stock to be issued in exchange for LBI Common
Stock would be reduced from the amounts then under consideration and UPC would
be required to fix any exchange ratio agreed to by the parties so as not to be
dependent on the market price of UPC Common Stock. At a special meeting of the
Board of Directors of LBI in June 1993, the Board determined that the reduced
amount of UPC Common Stock under discussion would not be adequate, and it was
determined to withdraw from further discussions with UPC.

In September 1993, UPC's stock price had recovered somewhat, and UPC
and LBI resumed negotiations. By November, UPC and LBI had negotiated the
Reorganization Agreement on substantially the same terms as had been under
discussion in May 1993. At a special meeting of the Board of Directors of LBI
held on November 22 and 23, 1993, LBI's Board of Directors approved the
Reorganization and authorized the execution of the Reorganization Agreement.
The Reorganization Agreement was executed as of November 23, 1993.

REASONS FOR THE REORGANIZATION AND RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF
LBI AND UPC

Reasons and Recommendation of Board of Directors of LBI. The Board of
Directors of LBI considered the Reorganization and the terms of the
Reorganization Agreement, including the consideration to be received by LBI's
stockholders in the Reorganization, in light of economic, financial, legal and
market factors and concluded that the Reorganization is in the best interests
of LBI and its stockholders. The terms of the Reorganization Agreement are the
result of arms'-length negotiations between LBI and UPC, as well as
consultations between LBI and its financial advisor and special legal counsel.
Among the factors considered by LBI's Board of Directors were the historical
operating results, current financial condition, business and management and
future financial and other prospects of LBI and UPC and the advice of Trident
Financial as to the fairness to LBI's stockholders, from a financial point of
view, of the consideration to be received by the LBI stockholders in the
Reorganization. Also considered were the relative size and geographic market
areas of LBI and UPC. LBI's Board of Directors believes that the
Reorganization will afford LBI's stockholders the benefit of UPC's larger
market capitalization and the more liquid market for UPC Common Stock and will
offer enhanced opportunities for Liberty Federal to meet the needs

<PAGE> 33

of banking customers and other members of the Northwestern Tennessee
communities served by Liberty Federal. LBI's Board of Directors believes that
Liberty Federal would be in an enhanced competitive position with respect to
other financial institutions in its market area after the Reorganization.

THE BOARD OF DIRECTORS OF LBI UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF LBI COMMON STOCK VOTE" FOR" APPROVAL OF THE REORGANIZATION AGREEMENT AND THE
REORGANIZATION.

UPC Reasons. Management of UPC has recommended to the UPC Board of
Directors (the "UPC Board"), and the UPC Board has approved the Reorganization
and the Reorganization Agreement because (i) LBI has experienced strong and
continued growth, (ii) LBI is located geographically in a county in which UPC
has sought to enter, and (iii) UPC believes that by providing LBI with access
to the UPC capital base, banking products and other banking resources, LBI will
be well positioned to compete in its market in the face of enhanced competition
from other financial institutions.

VOTE REQUIRED

The affirmative votes of the holders of at least a majority of the
outstanding shares of LBI Common Stock entitled to vote at the Annual Meeting
are required for LBI's stockholders to approve the Reorganization Agreement and
the Reorganization. Each share of LBI Common Stock outstanding at the close of
business on the voting record date and entitled to vote at the Annual Meeting,
is entitled to one vote on each matter to be considered at the Annual Meeting.
LBI's directors and executive officers, and their affiliates, are expected to
vote substantially all of the 243,384 shares, or 35.8% of the outstanding LBI
Common Stock beneficially owned by them as of the voting record date and
entitled to vote at the Annual Meeting "FOR" approval of the Reorganization
Agreement and the Reorganization.

FAIRNESS OPINION OF TRIDENT FINANCIAL

In March 1993, LBI retained Trident Financial as its financial advisor
in connection with UPC's indication of interest in acquiring LBI. As part of
its engagement, Trident Financial performed a valuation analysis of LBI based
on an acquisition. Trident Financial presented its valuation report (the
"Initial Report") to LBI's Board of Directors on April 2, 1993. The Initial
Report also presented certain financial information concerning UPC. On May 10,
1993, Trident Financial met with LBI's Board of Directors and presented a
report reviewing the status of negotiations with UPC as well as summarizing its
due diligence examination of UPC (the "Progress Report"), but in June 1993 LBI
ceased discussions with UPC due to deterioration of market conditions since the
discussions had begun.

In September 1993, UPC and LBI renewed discussions as market
conditions had improved, and on November 22, 1993 Trident Financial met with
LBI's Board of Directors to update the Board with respect to current market
conditions for acquisitions of savings institutions, to review the terms of a
proposed reorganization agreement with UPC and to present a report on Trident
Financial's updated due diligence examination of UPC (the "Updated Report").
At that meeting, Trident Financial rendered its written opinion to the LBI
Board of Directors to the effect that, as of that date, the consideration to be
received by the stockholders of LBI in the Reorganization was fair to them from
a financial point of view. In addition, Trident Financial delivered its
updated written opinion to LBI's Board of Directors as of the date of this
Proxy Statement/Prospectus stating that, as of the date hereof, the
consideration to be received by the stockholders of LBI in the Reorganization
was fair to them from a financial point of view. The full text of Trident
Financial's opinion dated as of the date hereof is attached as Appendix C to
this Proxy Statement/Prospectus and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Appendix C. Holders of LBI Common Stock are urged to read the
opinion in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered and limitations
undertaken by Trident Financial.

TRIDENT FINANCIAL'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY LBI'S
STOCKHOLDERS BASED ON CONDITIONS AS THEY EXIST AND CAN BE EVALUATED AS OF THE
DATE OF THE OPINION. TRIDENT FINANCIAL'S OPINION DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY LBI STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT
THE ANNUAL MEETING. TRIDENT FINANCIAL'S OPINION DOES NOT ADDRESS THE

26
<PAGE> 34

UNDERLYING BUSINESS DECISION TO EFFECT THE REORGANIZATION. THIS SUMMARY OF
TRIDENT FINANCIAL'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
TEXT OF SUCH OPINION, WHICH IS ATTACHED AS APPENDIX C TO THIS PROXY
STATEMENT/PROSPECTUS. LBI'S STOCKHOLDERS ARE URGED TO READ TRIDENT FINANCIAL'S
OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE AND MATTERS
CONSIDERED AND THE LIMITS ON THE REVIEW UNDERTAKEN IN RENDERING SUCH OPINION.

In connection with rendering its opinion, Trident Financial reviewed
and analyzed, among other things, the following (i) this Proxy
Statement/Prospectus; (ii) the Reorganization Agreement; (iii) certain publicly
available information concerning LBI and Liberty Federal, including the audited
financial statements of LBI for each of the years in the two-year period ended
December 31, 1993 and of Liberty Federal for each of the years in the
three-year period ended December 31, 1991; (iv) certain publicly available
information concerning UPC, including the audited financial statements of UPC
for each of the years in the five-year period ended December 31, 1993; (v)
certain other internal information, primarily financial in nature, concerning
the business and operations of LBI and UPC furnished to them by LBI and UPC for
purposes of their analysis; (vi) certain information supplied by LBI concerning
the limited trading of, and the limited trading market for, LBI Common Stock;
(vii) information with respect to the trading market for UPC Common Stock;
(viii) certain publicly available information with respect to other companies
that Trident Financial believed to be comparable to LBI and the trading markets
for such other companies' securities; and (ix) certain publicly available
information concerning the nature and terms of other transactions that Trident
Financial considered relevant to its inquiry. Trident Financial also met with
certain officers and employees of LBI and UPC to discuss the foregoing as well
as other matters they believed relevant to their inquiry.

In its review and analysis, and in arriving at its opinion, Trident
Financial assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it by LBI and UPC, or that is
publicly available, and did not independently attempt to verify any such
information. Trident Financial did not conduct a physical inspection of the
properties or facilities of LBI or UPC, nor did it perform or obtain any
independent evaluations or appraisals of any of such properties or facilities.
Trident Financial did not specifically evaluate UPC's loan portfolio or the
adequacy of UPC's reserve for loan losses.

In conducting its analysis and arriving at its opinion as expressed
herein, Trident Financial considered such financial and other factors as it
deemed appropriate under the circumstances, including, among others, the
following: (i) the historical and current financial condition and results of
operations of LBI and Liberty Federal and UPC, including interest income,
interest expense, net interest income, net interest margin, interest
sensitivity, non-interest income and expense, earnings, dividends, book value,
return on assets, return on equity, capitalization, amount and type of
non-performing assets and reserve for loan losses; (ii) the business prospects
of LBI and UPC; (iii) the economies in LBI's and UPC's market areas; (iv) the
historical and current markets for the LBI Common Stock and the UPC Common
Stock and for the equity securities of certain other companies that Trident
Financial believed to be comparable to LBI and UPC; and (v) the nature and
terms of certain other acquisition transactions that it believed to be
relevant. Trident Financial also took into account its assessment of general
economic, market, financial and regulatory conditions and trends, as well as
its knowledge of the savings institution industry, its experience in connection
with similar transactions and its knowledge of securities valuation generally.
Trident Financial's opinion necessarily is based upon conditions as they
existed and that could be evaluated on the date of the opinion. Trident
Financial's opinion is, in any event, limited to the fairness, from a financial
point of view, of the consideration to be received by the holders of LBI Common
Stock in the Reorganization and does not address LBI's underlying business
decision to effect the Reorganization.

The following is a summary of the reports presented by Trident
Financial to LBI's Board of Directors:

Initial Report. Trident Financial's report of April 2, 1993 consisted
of an estimate of LBI's valuation in an acquisition scenario and a financial
analysis of UPC.

Industry Comparative Analysis. Trident Financial compared the
financial performance of LBI to that of the following groups of
SAIF-insured institutions: (i) all United States institutions; (ii)
all Southeastern institutions; (iii) all United States institutions
with less than $250 million of assets; (iv) all Tennessee
institutions; and (v) all Southeastern institutions with less than
$250 million of assets (the "Aggregates"). This analysis compared a
number of LBI's historical financial ratios to those of the
Aggregates, including but not limited to: (i) the balance sheet
composition as a percentage of total assets

27
<PAGE> 35

at September 30, 1992; (ii) the loan portfolio as a percentage
of total assets at September 30, 1992; (iii) the level of cash,
deposits and investment securities as a percentage of total assets at
September 30, 1992; (iv) asset quality as a percentage of total assets
at September 30, 1992; and (v) financial liabilities as a percentage
of total assets at September 30, 1992. Trident Financial also
compared LBI's growth rates between 1989 and September 30, 1992, its
yields on assets and costs of liabilities and its income data for 1991
and 1992 (through September 30, 1992) to those of the Aggregates.

Valuation of LBI. Trident Financial estimated the fair market
value of LBI in a merger scenario. In valuing LBI, Trident Financial
utilized the asset approach, income approach and market approach and
then reconciled the values derived therefrom. The asset approach
considers the net asset value of LBI after marking its assets and
liabilities to market based on current market (rather than
liquidation) values. After determining LBI's net asset value, Trident
Financial added an intangible premium to determine LBI's total value.
Trident Financial made an upward adjustment to the value of LBI's
assets as a result of low market rates of interest relative to the
yields being earned on LBI's assets. Similarly, Trident Financial
made an upward adjustment to the value of LBI's liabilities, as
current interest rates were below those being paid by LBI on its
liabilities. The net asset value of LBI was adjusted downward based
on Trident Financial's estimation of certain reserves which most
acquirors would likely require based on Trident Financial's estimation
of the customary practice in the commercial banking industry. Trident
Financial also reduced LBI's net asset value by an estimate of the
impact of recapturing LBI's bad debt reserve for tax purposes.
Finally, Trident Financial increased LBI's net asset value for the
assumed exercise of options then outstanding to purchase LBI Common
Stock.

Using a form of discounted future earnings analysis under the
income approach, Trident Financial projected LBI's earnings for the
six years ending December 31, 1998, based on certain assumptions,
including two percent annual asset growth, gradually increasing
interest rates with a flattening of the yield curve, 0%, 25% and 35%
reductions of operating expenses as a result of an assumed acquisition
of LBI, a 35% tax rate and a $0.90 annual cash dividend. The above
projections were discounted to the present at rates between 14% and
16%. The discount rates chosen were estimated required rates for
return of holders or prospective holders of shares of a financial
institution similar to LBI, based on a number of factors including
prevailing interest rates, the pricing ratios of publicly traded
financial institutions and the financial condition and operating
results of LBI, as well as Trident Financial's general knowledge of
valuation, the securities markets and acquisition values in other
acquisitions of financial institutions.

In the market approach, Trident Financial analyzed certain
median pricing ratios (e.g., price to book value, price to tangible
book value, price to reported earnings, price to market price and the
premium paid over tangible book value as a percentage of core
deposits) resulting from selected completed savings institution
acquisition transactions, as well as pending transactions. Trident
Financial then performed a comparison of a number of financial ratios
for LBI to those of the target companies and analyzed the results to
determine whether adjustments to LBI's value would be necessary.

Trident Financial then reviewed the results from the three
approaches, and after consideration of all relevant facts, reconciled
the acquisition values generated by each approach. In its
reconciliation, Trident Financial gave greater consideration to the
asset approach over the income and market approaches.

Financial Analysis of UPC. Based upon a review of publicly
available information concerning UPC, Trident Financial presented an
analysis of UPC's strengths and weaknesses. UPC's historical balance
sheets and income statements were presented, along with a variety of
financial ratios that analyzed UPC's financial condition and operating
results through December 31, 1992. UPC's financial condition and
performance were also compared with a variety of industry peer groups
and to a number of individual regional commercial banking companies.
In addition, Trident Financial presented summary financial information
on each of UPC's subsidiary banks (including pending acquisitions by
UPC).

UPC's Stock Pricing and Trading History. Trident Financial
examined the pricing of UPC Common Stock as of March 26, 1993 in
relation to other regional commercial banks, commercial banks of a
similar size and all actively traded commercial banks. Trident
Financial also examined the history of UPC Common Stock's trading
prices and volume for the previous twelve months.

<PAGE> 36

Pro Forma Contribution and Dilution Analysis. Trident
Financial presented a pro forma combined balance sheet as of December
31, 1992 and a pro forma combined income statement for the year ended
December 31, 1992 assuming a transaction in which pooling of interests
accounting treatment is utilized. Trident Financial analyzed the
contribution of LBI and UPC to the pro forma combined company for,
among other things, ownership, equity and earnings. The analysis also
examined the pro forma capitalization and pro forma book value,
earnings and dividends per share dilution resulting from the
Reorganization.

Progress Report. Trident Financial's report of May 10, 1993 to
LBI's Board of Directors reviewed the status of discussions with UPC
and summarized Trident Financial's on-site due diligence examination
of UPC.

Status of Discussions. Trident Financial reviewed the terms
under discussion between LBI and UPC, including the exchange ratio,
the notional per share and aggregate value resulting from the exchange
ratio (based on UPC Common Stock's closing stock price of $26.00 on
March 26, 1993), the impact of stock pricing collars on the value of
the exchange ratio, the form of the consideration, the treatment of
outstanding stock options, the organizational structure following the
acquisition, issues involving employee benefits, management and
directors and other issues, terms and conditions.

Review of Due Diligence Examination of UPC. Trident Financial
next presented a summary of its on-site due diligence examination of
UPC. Discussed by Trident Financial were UPC's strengths and
weaknesses, updated peer group comparisons, asset quality, loan loss
reserve coverage and asset classifications. Also discussed were UPC's
bank analyst reports and other issues. Trident Financial also updated
LBI's Board of Directors on other recent and pending acquisitions by
UPC. As discussed above, Trident Financial relied, without
independent verification, upon the accuracy and completeness of all of
the financial and other information provided by UPC.

UPC's Stock Price and Trading History. Trident Financial
examined the pricing of UPC Common Stock as of May 5, 1993 in relation
to other regional commercial banks, commercial banks of similar size
and all actively traded commercial banks. Trident Financial also
examined the history of UPC Common Stock trading prices and volume for
the previous twelve months.

Update of Market Conditions. Trident Financial presented
updated information concerning the pricing ratios for pending savings
institution acquisition transactions.

Updated Report. In September 1993, LBI and UPC resumed
discussions. On November 22, 1993, Trident Financial met with LBI's
Board of Directors to discuss the terms then under discussion, the
proposed Reorganization Agreement, current market conditions for the
acquisition of savings institutions and Trident Financial's updated
due diligence examination of UPC.

Summary of Proposed Terms. Trident Financial reviewed the
acquisition terms then under discussion, including the exchange ratio,
the notional per share and aggregate value resulting from the exchange
ratio (based on UPC Common Stock's closing stock price of $23 on
November 17, 1993) and the impact of stock pricing collars on the
value of the exchange ratio. This analysis showed that the exchange
ratio had price to book value and price to earnings ratios of 170.9%
and 14.4x, respectively, based on LBI's financial condition and
results through September 30, 1993. The analysis also showed that the
exchange ratio represented a premium of 9.3% over LBI's tangible book
value as a percentage of core deposits.

Pro Forma Contribution and Dilution Analysis. Trident
Financial presented a pro forma combined balance sheet as of September
30, 1993 and a pro forma combined income statement for the four
quarters ended September 30, 1993 using UPC's closing share price of
$23 on November 17, 1993 and assuming a transaction in which pooling
of interests accounting treatment is utilized. Trident Financial
analyzed the contribution of each of LBI and UPC (on a fully diluted
basis) to the pro forma combined company for, among other things,
ownership, equity and earnings. This analysis showed that LBI would
contribute 4.1% and 4.5%, respectively, of the stated and tangible
equity and 3.8% of the net income of the pro forma combined company
and that LBI's stockholders would own 6.8% of the to-be-outstanding
shares of the pro forma combined company (without giving consideration
to those LBI stockholders that might already own shares of UPC). The
analysis also examined the pro forma capitalization, book value and
earnings per

<PAGE> 37

share dilution resulting from the Reorganization. This analysis
showed that LBI's stockholders would experience a pro forma
book value per share increase of 30.0%, a pro forma tangible book
value per share increase of 14.1x and a pro forma earnings per share
increase of 57.4% based on historical data as of September 30, 1993
for the four quarters then ended. However, that analysis did not
account for any of UPC's pending acquisitions.

Comparison to Selected Merger Transactions. Trident Financial
compared the pricing ratios of selected pending and completed savings
institution acquisition transactions with the pricing ratios resulting
from the exchange ratio. The pricing ratios for pending and completed
savings institution acquisitions in Tennessee, Alabama, Kentucky and
Mississippi were specifically analyzed. Trident Financial also
discussed the pricing ratios for all pending savings institution
acquisitions as well as the pricing ratios observed in a variety of
relevant groupings of pending savings institution acquisitions. In
addition, Trident Financial discussed trends in the market for savings
institution acquisitions since the Initial Report. No company or
transaction used in the above analysis as a comparison is identical to
LBI, UPC or the Reorganization. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations
and judgments concerning differences in financial and operating
characteristics and the companies and other factors that could affect
the pricing ratios of the companies being compared. Mathematical
analysis (such as determining the average and median) is not, in
itself, a meaningful method of using comparable company data.

Review of Updated Due Diligence Examination of UPC. Trident
Financial presented a summary of its updated on-site due diligence
examination of UPC. Discussed by Trident Financial were UPC's
strengths and weaknesses, updated peer group comparisons (as of June
30, 1993) and changes in UPC's earnings and financial condition since
the Progress Report. Also discussed were UPC's recent bank analyst
reports and other issues since the Progress Report. Trident Financial
also updated LBI's Board of Directors on other recent and pending
acquisitions by UPC. As discussed above, Trident Financial relied,
without independent verification, upon the accuracy and completeness
of all of the financial and other information provided by UPC.

UPC's Stock Pricing and Trading History. Trident Financial
examined the pricing of UPC Common Stock as of November 17, 1993 in
relation to other regional commercial banks, commercial banks of a
similar size and all actively traded commercial banks. Trident
Financial also examined the history of UPC Common Stock's trading
prices and volume for the previous twelve months.

In connection with their opinion dated as of the date of this Proxy
Statement/Prospectus, Trident Financial performed procedures to update certain
of their analyses and reviewed the assumptions on which such analyses were
based and the factors considered in connection therewith.

The summary of the Trident Financial reports set forth above does not
purport to be a complete description of the presentation by Trident Financial
of the Trident Financial reports to LBI's Board of Directors or of the analyses
performed by Trident Financial. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial or summary
description. Trident Financial believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses, without considering all of the analyses, or all of the above summary,
without considering all factors and analyses, would create an incomplete view
of the processes underlying the analyses set forth in the Trident Financial
reports and opinions. In addition, Trident Financial may have given various
analyses more or less weight than other analyses and may have deemed various
assumptions more or less probable than other assumptions. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given greater weight than any other analyses.
In performing its analyses, Trident Financial made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of LBI or UPC. The
analyses performed by Trident Financial are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely
as part of Trident Financial's analysis of the fairness of the consideration to
be received by LBI's stockholders in the Reorganization and were provided to
LBI's Board of Directors in connection with the delivery of Trident Financial's
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which a company might actually be sold or the prices at which any securities
may trade at the present time or at any time in the future.

<PAGE> 38

Trident Financial, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings and
valuations for corporate and other purposes. Trident Financial has extensive
experience with the valuation of financial institutions. Trident Financial
served as LBI's appraiser in its mutual-to-stock conversion in December 1991.
LBI's Board of Directors selected Trident Financial as its financial advisor
because of LBI's previous experience with Trident Financial, because of
Trident's substantial experience in transactions similar to the Reorganization
and because Trident Financial is a nationally recognized investment banking
firm specializing in financial institutions. Trident Financial is not
affiliated with either LBI or UPC.

For its services as financial advisor, Trident Financial received from
LBI a retainer of $15,000 and a fee of $50,000 upon execution of the
Reorganization Agreement. An additional fee equal to 1% of the aggregate value
of the Reorganization, less the $65,000 already paid, will be payable to
Trident Financial upon the consummation of the Reorganization. LBI has agreed
to reimburse Trident Financial for its reasonable out-of-pocket expenses and to
indemnify Trident Financial against certain liabilities, including certain
liabilities under federal securities laws.

TERMS OF THE REORGANIZATION

At the Effective Time of the Reorganization, Interim (which was formed
for the specific purpose of effecting the Reorganization) will merge with and
into LBI with LBI surviving the Reorganization and continuing after the
Effective Time of the Reorganization to operate under the name Liberty
Bancshares, Inc. The surviving corporation will become a wholly owned
subsidiary of UPC. In the Reorganization, each share of LBI Common Stock
outstanding immediately prior to the Effective Time of the Reorganization,
other than those shares with respect to which dissenters' rights shall have
been perfected as described below, will be converted exclusively into the right
to receive shares of UPC Common Stock as provided in the Reorganization
Agreement.

The number of shares of UPC Common Stock to be received by those
persons who are the record holders of LBI Common Stock (the "LBI record
holders") immediately prior to the Effective Time of the Reorganization (other
than dissenting stockholders, who will receive cash only in the Reorganization)
will be determined pursuant to a conversion formula described in Section 3.1(e)
of the Reorganization Agreement which is based on the Current Market Price Per
Share of the UPC Common Stock. Pursuant to the Reorganization Agreement, upon
the consummation of the Reorganization, each outstanding share of LBI Common
Stock not subject to perfected dissenter's rights would be converted into the
right to receive in exchange (i) a number of whole shares of UPC Common Stock
based on the average closing price per share of the UPC Common Stock on the New
York Stock Exchange for the 20 trading days next preceding the Closing Date of
the Reorganization ("Current Market Price") and, after aggregating all whole
and fractional shares to which the LBI record holder is entitled; (ii) a cash
payment in settlement of any remaining fractional share of UPC Common Stock,
and each outstanding option to purchase LBI Common Stock under LBI's stock
option plan would continue outstanding as an option to purchase, in place of
each share of LBI Common Stock, the number of shares (after aggregation,
rounded up to the nearest whole share) of UPC Common Stock that would have been
received by the option holder in connection with the Reorganization assuming
that the option had been exercised immediately before the Effective Time of the
Reorganization, on the same terms and conditions except for appropriate pro
rata adjustments to the option price per share so the aggregate option price
would remain the same. If the Current Market Price of the UPC Common Stock is
less than $22.00, the exchange ratio (i.e., the number of shares of UPC Common
Stock to be received in exchange for each share of LBI Common Stock) will be
2.2727, provided, however, that if the Current Market Price is less than
$20.00, LBI will have the right not to consummate the Reorganization. If the
Current Market Price is greater than or equal to $22.00 but less than or equal
to $28.00, the exchange ratio will be equal to $50.00 divided by the Current
Market Price. If the Current Market Price is greater than $28.00, the exchange
ratio will be 1.7857, provided, however, that if the Current Market Price is
greater than $30.00 and UPC shall not have entered into an agreement to be
acquired, the exchange ratio will be equal to $53.57 divided by the Current
Market Price. If the Reorganization had been closed on April 27, 1994, the
Current Market Price of UPC Common Stock would have been $25.74 per share, such
that the value of the UPC Common Stock entitled to be received in exchange for
each outstanding share of LBI Common Stock would have been approximately equal
to $50.00. No fractional shares of UPC Common Stock will be issued in respect
to LBI Common Stock, and, after aggregation of the shares (and fractional
shares) of UPC Common Stock to which an LBI Record Holder is entitled, cash
will be paid by UPC in lieu of any remaining fractional share.

<PAGE> 39

For information regarding arrangements for the benefit of the
directors, officers and employees of LBI in the Reorganization, see "Interests
of Certain Persons in the Reorganization."

STOCKHOLDERS' DISSENTERS' RIGHTS

Under Section 3.1(k) of the Reorganization Agreement, any stockholder
of LBI has the right to receive payment of the fair value of his or her shares
of LBI Common Stock upon compliance with Sections 48-23-202 and 48-23-204 of
the TBCA, a copy of which is included in Appendix D to this Proxy
Statement/Prospectus. A stockholder may not dissent as to less than all of the
shares that he or she holds at the close of business on the record date. A
nominee or fiduciary may not dissent on behalf of a beneficial owner as to less
than all of the shares of such beneficial owner held of record by such nominee
or fiduciary. A beneficial owner asserting dissenters' rights to shares held
on his or her behalf must notify LBI in writing of the name and address of the
record holder of the shares, if known to him or her.

Any LBI stockholder intending to enforce his or her dissenters' rights
may not vote in favor of the Reorganization Agreement (either personally or by
proxy) and must deliver to the Corporate Secretary before the time of the vote
a written notice of intent to demand payment for his or her shares (the
"Objection Notice"). The Objection Notice must state that the stockholder
intends to demand payment for his or her shares of LBI Common Stock if the
Reorganization should be effected. A vote against approval of the
Reorganization Agreement will not, in and of itself, constitute an Objection
Notice satisfying the requirements of Section 48-23-202 of the TBCA.

If the Reorganization Agreement is approved by LBI's stockholders at
the Annual Meeting, each LBI stockholder who has filed an Objection Notice will
be notified by LBI of such approval no later than ten days after the LBI Annual
Meeting (the "Dissenter's Notice"). The Dissenter's Notice will (i) state
where the payment demand must be sent and where and when certificates for
certificated shares of LBI Common Stock (the "Certificates") must be deposited,
(ii) inform holders of uncertificated shares (if any) to what extent transfer
of the shares will be restricted after the payment demand is received, (iii)
supply a form for demanding payment that includes the date of the first
announcement to news media or to stockholders of the principal terms of the
proposed corporate action and requires that the person asserting the
dissenters' rights certify whether or not he acquired beneficial ownership of
the shares before that date, (iv) set a date by which LBI must receive the
payment demand, which date may not be less than one nor more than two months
after the date the Dissenter's Notice was delivered, and (v) be accompanied by
a copy of Chapter 23 of Title 48 of the TBCA. Within the time prescribed in
the Dissenter's Notice, an LBI stockholder electing to dissent must make a
demand for payment (the "Payment Demand"), certify whether he (or the
beneficial stockholder on whose behalf he is asserting dissenters' rights)
acquired beneficial ownership of the shares of LBI Common Stock before November
23, 1993 (the date of the first public announcement of the terms of the
Reorganization Agreement), and deposit all Certificates in accordance with the
terms of the Dissenter's Notice. Upon delivering the Payment Demand and
depositing the Certificates in accordance with the Dissenter's Notice, the LBI
stockholder will retain all other rights of an LBI stockholder until these
rights are cancelled or modified by consummation of the Reorganization. FAILURE
TO COMPLY SUBSTANTIALLY WITH THESE PROCEDURES WILL CAUSE THE LBI STOCKHOLDER TO
LOSE HIS OR HER DISSENTERS' RIGHTS TO PAYMENT FOR THE SHARES. CONSEQUENTLY, ANY
LBI STOCKHOLDER WHO DESIRES TO EXERCISE HIS OR HER RIGHTS TO PAYMENT FOR HIS OR
HER SHARES IS URGED TO CONSULT HIS OR HER LEGAL ADVISER BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.

As soon as the Reorganization is consummated, or upon later receipt of
a timely Payment Demand, LBI shall, pursuant to Section 48-23-206 of the TBCA,
pay to each dissenting stockholder who has complied with the requirements of
Section 48-23-204 of the TBCA the amount which LBI estimates to be the fair
value of the shares of LBI Common Stock, plus accrued interest. Such payment
must be accompanied by (i) certain of LBI's financial statements, (ii) a
statement of LBI's estimate of the fair value of the shares, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Section 48-23-209 of the TBCA, and
(v) a copy of Sections 48-23-101 through 48-23-302 of the TBCA if not
previously furnished. As authorized by Section 48-23-208 of the TBCA, LBI
intends to delay any payments with respect to any shares (the "after-acquired
shares") held by a dissenting stockholder which were not held by such
stockholder on November 23, 1993, the date of the first public announcement of
the terms of the Reorganization Agreement. To the extent LBI should elect to
withhold payment, after effecting the Reorganization, LBI as the surviving
corporation in the Reorganization must estimate the fair value of the shares,
plus accrued interest, and pay such amount to each dissenter who agrees to
accept it in full satisfaction of this demand. LBI shall send with such
payment a statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated and a statement of

<PAGE> 40

the dissenter's right to demand additional payment under Section 48-23-209
of the TBCA.

If (i) a dissenter believes that the amount paid with respect to his
or her shares or offered under Section 48-23-208 of the TBCA is less than the
fair value of his or her shares or that the interest due is incorrectly
calculated, (ii) LBI fails to make payment under Section 48-23-206 within two
months after the date set for demanding payment, or (iii) LBI, having failed to
effect the Reorganization, does not return the deposited Certificates or
release the transfer restrictions imposed on uncertificated shares within two
months after the date set for demanding payment, the dissenter may notify LBI
(or its successor in the Reorganization) in writing (which notice is invalid if
not delivered to LBI within one month after LBI made or offered payment for
such stockholder's shares) of his or her own estimate of the fair value of the
shares and the amount of interest due and may demand payment of the difference
between his or her estimate of the fair value and the amount of any payment in
respect to such shares already received by the stockholder, or, in the
alternative, if no payment has yet been made by LBI, reject LBI's offer under
Section 48-23-208 of the TBCA and demand payment of the fair value of his or
her shares and interest due.

If LBI (as the surviving corporation) cannot agree with such dissenter
on a fair value within two months after LBI receives the Payment Demand, LBI
will institute judicial proceedings in either the Chancery or Circuit Court of
Henry County, Tennessee (the "Court"), naming all dissenters (whether or not
Tennessee residents) whose demands remain unsettled as parties to the
proceeding and serving such parties with a copy of the petition. The Court
will then undertake to establish the fair value of the shares immediately
before the consummation of the Reorganization, excluding any appreciation or
depreciation in anticipation of the Reorganization, and will determine the
interest owing on the disputed amount. The fair value of a dissenter's shares
of LBI Common Stock may be more than, less than or the same as the
consideration provided in the Reorganization Agreement. The Court may, in its
discretion, appoint one or more persons as appraisers to receive evidence and
render a decision on the question of fair value. Each dissenter made a party
to the proceeding is entitled to judgment for the amount (if any) by which the
court finds the fair value of his or her shares, plus accrued interest, exceeds
the amount paid by LBI or the fair value, plus accrued interest, of his or her
after-acquired shares for which LBI elected to withhold payment under Section
48-23-208 of the TBCA.

The Court shall assess costs and expenses of such proceeding (including
reasonable compensation for and expenses of the appraiser but excluding fees
and expenses of counsel and experts) against LBI (or its successor in the
Reorganization), except that the court may assess such costs and expenses as it
deems appropriate against any or all of the dissenting stockholders if it finds
that their demand for additional payment was arbitrary, vexatious or not in
good faith. The Court may award fees and expenses of counsel and experts in
amounts the Court finds equitable: (i) against LBI, if the Court finds that LBI
did not comply substantially with the relevant requirements of the TBCA or (ii)
against LBI or any dissenting stockholder, if the Court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith.

The foregoing summary of the applicable provisions of Chapter 23 of
Title 48 of the TBCA is not intended to be a complete statement of such
provisions, and is qualified in its entirety by reference to such Chapter, a
copy of which is attached hereto as Appendix D.

For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see "The Reorganization--Certain
Federal Income Tax Consequences."

EFFECTIVE DATE AND EFFECTIVE TIME OF THE REORGANIZATION

Articles of Merger along with the executed Plan of Merger will be
filed as soon as practicable after all conditions precedent contained in the
Reorganization Agreement have been satisfied or lawfully waived, including
receipt of all regulatory approvals and expiration of all statutory waiting
periods, or on such later date as may be agreed to by UPC and LBI. The
Effective Time of the Reorganization will be at the time the Articles of Merger
along with the Plan of Merger are filed in the Office of the Tennessee
Secretary of State pursuant to the TBCA or at such later time as the parties
may agree and specify in the Plan of Merger. The Effective Date of the
Reorganization will be the day on which the Effective Time of the
Reorganization occurs. It is presently expected that the Articles of Merger
will be filed on June 30, 1994, but will specify, by agreement of the parties,
an Effective Time of the Reorganization of 12:01 a.m. CDT, on July 1, 1994.
There can be no assurance that such expectation will be achieved.

<PAGE> 41

SURRENDER OF CERTIFICATES

As promptly as practicable after the Effective Time of the
Reorganization, Union Planters National Bank, acting in the capacity of
exchange agent (the "Exchange Agent"), will mail to each person who was a
holder of record of LBI Common Stock immediately prior to the Effective Time of
the Reorganization a form letter of transmittal, together with instructions and
a return envelope (collectively, the "Exchange Materials") to facilitate the
exchange of such holder's certificates, formerly representing shares of LBI
Common Stock, for certificates representing shares of UPC Common Stock and a
cash payment in lieu of any remaining fractional share.

HOLDERS OF LBI COMMON STOCK WHO DO NOT INTEND TO EXERCISE DISSENTERS'
RIGHTS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE THE EXCHANGE
MATERIALS FROM THE EXCHANGE AGENT.

Upon receipt of the Exchange Materials, LBI Record Holders should
complete the letter of transmittal in accordance with the instructions provided
and deliver the letter of transmittal, together with all stock certificates
formerly representing shares of LBI Common Stock to the Exchange Agent in the
return envelope provided. Provided the Exchange Agent shall have received the
certificates and related documentation completed in proper form, as soon as
practicable after the Effective Time of the Reorganization, UPC will issue, and
the Exchange Agent will mail, to the LBI Record Holder a certificate
representing the whole number of shares of UPC Common Stock to which such
holder is entitled pursuant to the Reorganization Agreement and a check in the
amount of the cash consideration with respect to any remaining fractional share
to which the holder is entitled. No consideration will be delivered to an LBI
Record Holder unless and until such holder shall have delivered to the Exchange
Agent all certificates formerly representing the shares of LBI Common Stock
held by him and in respect of which he claims payment is due, or such
documentation, if applicable, and security in respect of lost or stolen
certificates as required by the Reorganization Agreement.

No dividend or other distribution with respect to the UPC Common Stock
will be paid or delivered to the holder of any unsurrendered LBI certificate
until the holder surrenders such certificate(s) in accordance with the Exchange
Materials, at which time the holder will be entitled to receive all previously
withheld dividends and distributions, without interest.

After the Effective Time of the Reorganization, there will be no
further transfers on LBI's stock transfer books of shares of LBI Common Stock
issued and outstanding immediately prior to the Effective Time of the
Reorganization. If certificates representing shares of LBI Common Stock should
be presented for transfer after the Effective Time of the Reorganization, they
will be returned to the presenter together with a form of letter of transmittal
and exchange instructions.

Neither UPC, the Exchange Agent, LBI nor any other person will be
liable to any former holder of LBI Common Stock for any amount properly
delivered to a public official pursuant to applicable unclaimed property,
escheat or similar laws.

If a certificate formerly representing LBI Common Stock has been lost,
stolen or destroyed, the Exchange Agent will deliver the consideration properly
payable with respect to such certificate in accordance with the Reorganization
Agreement upon receipt of appropriate evidence as to such loss, theft or
destruction; appropriate evidence as to ownership of such certificate by the
claimant; and a lost instrument bond in form satisfactory to UPC and the
Exchange Agent as required by the Exchange Materials.

CONDITIONS TO CONSUMMATION OF THE REORGANIZATION

The respective obligations of UPC and LBI to effect the Reorganization
are subject to the satisfaction of the following conditions prior to the
Closing Date: (i) approval of the Reorganization Agreement and the transactions
contemplated thereby by the affirmative votes of the holders of a majority of
the LBI Common Stock outstanding on the voting record date and entitled to vote
at the Annual Meeting; (ii) exercise of dissenters' rights by the holders of
not more than seven percent of the shares of LBI Common Stock outstanding
immediately before the consummation of the Reorganization; (iii) approval of the
Reorganization Agreement and the transactions contemplated thereby by the
Federal Reserve, the OTS and the Tennessee Department, and the expiration of
any statutory waiting periods; (iv) receipt of all other regulatory and
contractual consents necessary to consummate the

<PAGE> 42

transactions contemplated by the Reorganization Agreement; (v) the satisfaction
of all other requirements prescribed by law as conditions precedent to the
consummation of the transactions contemplated by the Reorganization Agreement;
(vi) none of UPC, Interim, LBI or Liberty Federal will be subject to any order,
decree or injunction of a court or agency which presents a substantial risk of
the restraint or prohibition of the consummation of the Reorganization or the
obtaining of material damages or other relief in connection therewith; and (vii)
the Registration Statement of which this Proxy Statement/Prospectus forms a
part shall have become effective, no stop order suspending the effectiveness of
the Registration Statement shall have have been issued and no proceedings for
that purpose shall have been initiated or threatened by the Commission.

The obligations of UPC and Interim to effect the Reorganization are
further subject to the satisfaction or waiver by UPC of, among others, the
following conditions: (i) each of the material acts and undertakings of LBI
and/or Liberty Federal to be performed at or before the Closing pursuant to the
Reorganization Agreement shall have been duly performed, except for breaches of
acts and undertakings which would not have, or would not be reasonably expected
to have, any material adverse effect on the business or operations of LBI
and/or Liberty Federal taken as a whole; (ii) the representations and
warranties of LBI and/or Liberty Federal contained in Article 5 of the
Reorganization Agreement shall be true and correct, in all material respects,
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date except for any such representations and warranties made as of
a specified date, which shall be true and correct in all material respects as
of such date, and for breaches of representations and warranties which would
not have, or would not reasonably be expected to have, a material adverse
effect on the business or operations of LBI and Liberty Federal taken as a
whole; (iii) UPC shall have received a certificate signed by the Secretary or
Assistant Secretary of LBI and Liberty Federal certifying that LBI's and
Liberty Federal's respective Boards of Directors have duly adopted resolutions
approving the substantive terms of the Reorganization Agreement and authorizing
the consummation of the transactions contemplated by the Reorganization
Agreement, that each person that executed the Reorganization Agreement on
behalf of LBI and Liberty Federal are who they claim to be, and that LBI and
Liberty Federal are in good standing under their respective corporate charters;
(iv) between November 23, 1993 and the Closing Date, there shall have been no
damage to or destruction of real property, improvements or personal property
of LBI or Liberty Federal which materially reduces the market value of such
property, and no zoning or other order, limitation or restriction imposed
against the same that might have in either case a material adverse impact upon
the operations, business or prospects of LBI or Liberty Federal; (v) LBI and
Liberty Federal shall have afforded UPC and its authorized agents reasonable
access to the properties, operations, books, records, contracts, documents,
loan files and other information of or relating to LBI and Liberty Federal:
(vi) no material adverse change in the business, property, assets, liabilities,
prospects, operations,liquidity, income, or condition, or net worth of LBI or
Liberty Federal taken as a whole shall have occurred since November 23, 1993;
(vii) UPC shall have received a legal opinion, dated the date of Closing, from
counsel to LBI and Liberty Federal as to the good standing of LBI and Liberty
Federal, the enforceability and due authorization of the Reorganization
Agreement and the receipt of all required approvals (subject to limitations as
permitted in the Reorganization Agreement); (viii) neither LBI nor Liberty
Federal shall have entered into any agreement, letter of intent, understanding
or other arrangement pursuant to which LBI or Liberty Federal would merge,
consolidate with, effect a business combination with, sell any substantial part
of their assets, acquire a significant part of the shares or assets of
any other person or entity, adopt any "poison pill" or other type of
anti-takeover arrangement, any stockholder rights provision, or any "golden
parachute" or similar program which would have the effect of materially
decreasing the value of LBI or Liberty Federal or the benefits of acquiring the
LBI Common Stock; (ix) satisfaction by LBI and Liberty Federal of all of the
covenants in Section 8.2(i) of the Reorganization Agreement; (x) each member of
the Board of Directors of LBI shall have entered into a non-compete agreement
with UPC and/or Interim; (xi) UPC shall have received from Price Waterhouse a
letter within five business days prior to the Closing Date stating the
accountants' opinion that the Reorganization should be accounted for by UPC as
a "pooling of interests" for financial statement purposes and that nothing has
come to their attention that would cause them to believe that LBI has taken, or
failed to take, any actions that would cause the Reorganization not to qualify
for "pooling of interest" accounting treatment insofar as they relate to
accounting matters; (xii) UPC shall have received a written opinion from
counsel to the effect that the transactions contemplated by the Reorganization
Agreement and the Plan of Merger will constitute one or more tax-free
reorganizations under Section 368 of the Internal Revenue Code and that LBI
record holders will not recognize any gain or loss to the extent that such LBI
record holders exchange shares of LBI Common Stock for shares of UPC Common
Stock as contemplated by the Reorganization Agreement and the Plan of Merger
assuming that the shares of LBI Common Stock so exchanged are held by them as
capital assets at the time of such exchange; (xiii) UPC shall have received a
written commitment from each LBI record holder who would be deemed an
"affiliate" of LBI at the time of Closing and who accepts shares of UPC Common
Stock, committing to UPC that such LBI record holder shall not

<PAGE> 43

pledge, assign, sell, transfer, devise, otherwise alienate or take any
action which would eliminate or diminish the risk of owning or holding the
shares of UPC Common Stock to be received by such LBI record holder upon
consummation of the Reorganization, nor enter into any formal or informal
agreement to pledge, assign, sell or transfer, devise or otherwise alienate his
or her right, title and interests in any of the shares of UPC Common Stock to
be delivered by UPC pursuant to the terms and conditions of the Reorganization
Agreement until such time as UPC shall have publicly released a statement of
UPC's consolidated earnings reflecting the combined financial results of
operations of UPC and LBI for a period of not less than 30 days subsequent to
the Effective Time of the Reorganization.

The obligations of LBI and Liberty Federal to effect the
Reorganization are further subject to the satisfaction or waiver by LBI of,
among other things, the following conditions: (i) each of the material acts
and undertakings of UPC and/or Interim to be performed at or prior to the
Closing Date pursuant to the Reorganization Agreement shall have been duly
performed, except for breaches of acts and undertakings which would not have,
or would not reasonably be expected to have, any material adverse effect on the
business or operations of UPC and the UPC subsidiaries taken as a whole; (ii)
the representations and warranties of UPC and Interim contained in Article 4 of
the Reorganization Agreement shall be true and complete, in all material
respects, on and as of the Effective Time of the Reorganization, except for any
such representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date, and for breaches of
representations and warranties which would not have, or would not reasonably be
expected to have, a material adverse effect on the business or operations of
UPC and the UPC subsidiaries taken as a whole; (iii) LBI shall have received a
certificate signed by the Secretary or Assistant Secretary of UPC and Interim
dated as of the Closing Date certifying that UPC's and Interim's respective
Boards of Directors have duly adopted resolutions approving the substantive
terms of the Reorganization Agreement and authorizing the transactions
contemplated by the Reorganization Agreement, that each person that executed
the Reorganization Agreement on behalf of UPC and Interim is who he or she
claims to be, and that UPC and Interim are in good standing under their
respective corporate charters; (iv) LBI shall have received a certificate
executed by an authorized officer of the Exchange Agent to the effect that the
Exchange Agent has received and holds in its possession certificates evidencing
and representing that number of shares of UPC Common Stock and cash funds
sufficient to meet the obligations of UPC to the LBI record holders to deliver
the consideration under the Reorganization Agreement; (v) LBI shall have been
furnished an opinion of counsel to UPC and Interim as of the Closing Date to
the effect that UPC and Interim are in good standing, that the Reorganization
Agreement has been duly and validly authorized, executed and delivered by UPC
and Interim, that neither the execution nor delivery by UPC or Interim of the
Reorganization Agreement violates or conflicts with either of their corporate
charters or bylaws, that all governmental approvals have been received, and
that the shares of UPC Common Stock to be issued in the names of the LBI record
holders and delivered in exchange for their shares of LBI Common Stock will be
duly authorized, validly issued, fully paid and non-assessable; (vi) LBI shall
have received a "fairness opinion" letter from Trident Financial to the effect
that, in the opinion of Trident Financial, the consideration to be received by
the LBI Record Holders is fair to them from a financial point of view; and
(vii) LBI shall have received a written opinion from counsel to the effect that
the transactions contemplated by the Reorganization Agreement and the Plan of
Merger will constitute one or more tax-free reorganizations under Section 368
of the Internal Revenue Code and that the LBI record holders will not recognize
any gain or loss to the extent that such LBI record Holders exchange such
shares of LBI Common Stock for shares of UPC Common Stock as contemplated by
the Reorganization Agreement and assuming that the shares of LBI Common Stock
so exchanged are held by them as capital assets at the time of such exchange.

No assurance can be provided as to whether all of the conditions
precedent to the Reorganization will be satisfied or waived by the party
lawfully permitted to do so.

REGULATORY APPROVALS

The Reorganization is subject to prior approval by (i) the Tennessee
Department under the Tennessee Reciprocal Banking Act; (ii) the OTS under the
Home Owners Loan Act ("HOLA"); and (iii) the Federal Reserve under Section 3 of
the Bank Holding Company Act of 1956, as amended (the "BHCA"). The BHCA and
HOLA require that the Federal Reserve and the OTS take into consideration,
among other factors, the financial and managerial resources and future
prospects of the institutions and the convenience and needs of the communities
to be served. Applications for such approvals have been filed with the Federal
Reserve, the OTS and the Tennessee Department. The BHCA and HOLA prohibit the
Federal Reserve and the OTS from approving the Reorganization if to do so would
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or to

<PAGE> 44
attempt to monopolize the business of banking in any part of the United
States, or if its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the Federal Reserve and the OTS should
find that the anticompetitive effects of the Reorganization are clearly
outweighed by the public interest and the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. The Federal
Reserve and the OTS have the authority to deny an application if they conclude
that the combined organization would have an inadequate capital position or
that the acquiring organization does not meet the requirements of the Community
Reinvestment Act of 1977.

Under the BHCA, the Reorganization may not be consummated until the
30th day following the date of Federal Reserve approval, during which time the
United States Department of Justice may challenge the Reorganization on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the Federal Reserve's approval unless a court specifically
orders otherwise. There can be no assurance that the Department of Justice
will not challenge the Reorganization, or if such challenge is made, as to the
result thereof.

The Reorganization may not lawfully proceed in the absence of the
requisite regulatory approvals. As of the date of this Proxy
Statement/Prospectus, both the Federal Reserve and the Tennessee Department
have given their approvals of the Reorganization. The Federal Reserve
authorized the consummation of the Reorganization on March 25, 1994. Approval
from the Tennessee Department was received on April 20, 1994. The application
is still pending with the OTS. See "--Conditions to Consummation of the
Reorganization" and "--Waiver and Amendment; Termination."

CONDUCT OF BUSINESS PENDING THE REORGANIZATION

The Reorganization Agreement contains certain restrictions upon the
conduct of LBI's and Liberty Federal's business pending consummation of the
Reorganization. In particular, the Reorganization Agreement provides, in part,
that, except as otherwise provided in the Reorganization Agreement and/or
without the written consent of UPC, LBI and Liberty Federal, respectively, may
not, among other things, (i) amend its charter or bylaws; (ii) permit any lien
to exist in respect to any share of stock held by LBI or any subsidiary; (iii)
repurchase or redeem any of its capital stock, split or otherwise subdivide its
capital stock, recapitalize in any way or declare a stock dividend in respect
to the LBI Common Stock, or pay any cash dividends except permitted cash
dividends (See, "- Payment of Dividends"); (iv) issue or sell any LBI Common
Stock or sell or otherwise dispose of a substantial part of LBI's or Liberty
Federal's assets or earnings power; (v) dispose of, discontinue or acquire any
material assets or businesses other than in the ordinary course of business;
(vi) incur any additional debt in excess of $50,000 except in the ordinary
course of business; (vii) increase compensation, pay bonuses or enter into
severance arrangements except in accordance with past practices; (viii) amend
any existing employment contract with any person having a salary in excess of
$30,000 per year or enter into any new employment contract providing for an
annual salary exceeding $30,000 per year unless LBI or its subsidiaries may
terminate same at will without liability; (ix) adopt any new benefit plan; (x)
enter into any new service contracts, purchase or sale agreements or lease
agreements that are material to it; (xi) make any capital expenditures except
in the ordinary course of business; (xii) extend credit (or commit to extend
credit) to any officer, director or holder of 2% or more of LBI Common Stock if
such extension of credit, together with any other outstanding extension of
credit to such person, would exceed 2% of the capital of LBI or Liberty
Federal, or amend the terms of any such credit; or (xiii) acquire direct or
indirect control over any person or entity except in the ordinary course of
business or in connection with internal reorganizations and acquisitions in
LBI's or Liberty Federal's fiduciary capacity. Moreover, LBI and Liberty
Federal, respectively, shall, among other things, operate in the usual, regular
and ordinary course, preserve its organization and assets and maintain its
rights and franchises, use its best efforts to retain its customer base and
assist UPC in procuring all applicable regulatory approvals.

<PAGE> 45

PAYMENT OF DIVIDENDS

LBI is permitted under the Reorganization Agreement to declare and pay
the greater of either a customary and ordinary semi-annual cash dividend with
respect to the LBI Common Stock of up to $.30 per share of LBI Common Stock per
semi-annual period or a cash dividend based upon the dividend payout ratio of
UPC on shares of UPC Common Stock adjusted by the exchange ratio.
Notwithstanding the foregoing, the Reorganization Agreement prohibits LBI from
paying a dividend if such payment would disqualify the Reorganization from
being accounted for by UPC under the pooling of interests method of accounting.
See "UPC Common Stock and Preferred Stock -- UPC Common Stock--Dividends."

WAIVER AND AMENDMENT; TERMINATION

Prior to the Effective Date of the Reorganization, any condition of
the Reorganization Agreement may (to the extent allowed by law) be waived by
the party benefitted by the provision or may be amended or modified (including
the structure of the transaction) by an agreement in writing approved by the
Boards of Directors of UPC and LBI; provided, however, that no such amendment
may be effected after stockholder approval of the Reorganization Agreement
without approval of the LBI stockholders if the effect of such amendment would
be to change the amount or the type of consideration to be paid in the
Reorganization to the LBI Record Holders.

The Reorganization Agreement may be terminated at any time prior to
the Effective Date of the Reorganization, either before or after approval by
the LBI stockholders, as follows: (i) by the mutual consent of the parties;
(ii) by UPC or Interim if LBI or any subsidiary of LBI, respectively, should
violate any affirmative or negative covenant under Article 7 of the
Reorganization Agreement in respect to the operation of its business; (iii) by
UPC, Interim or LBI if the Closing shall not have occurred by September 30,
1994, unless the failure is due to the failure of the party seeking to
terminate; (iv) by UPC, Interim or LBI if any governmental or regulatory
approval is denied (or conditioned upon a substantial deviation from the
transaction contemplated) and not successfully appealed within certain time
limits; (v) by either party if the other party's conditions have not been
satisfied or waived as of the Closing Date; (vi) by UPC or Interim if LBI or
any subsidiary of LBI should enter into a formal capital plan requiring LBI or
Liberty Federal to raise capital or sell substantial assets in cooperation with
applicable banking regulators; (vii) by UPC or Interim in the event that the
holders of more than seven percent of the LBI Common Stock should duly perfect
and maintain in perfected status their dissenters' rights; or (viii) by LBI or
Liberty Federal in the event the Current Market Price Per Share of UPC Common
Stock should be less than $20.00 per share.

In the event of the valid termination of the Reorganization Agreement
by either UPC, Interim or LBI, the Reorganization Agreement shall become void,
and there will be no liability on the part of either party or their officers or
directors except for liability for breach of the Reorganization Agreement or
for any misstatement or misrepresentation made prior to such termination.

LIMITATION ON NEGOTIATIONS

The Reorganization Agreement provides that LBI and Liberty Federal
will not (and will use their best efforts to ensure that their directors,
officers, employees and advisors do not) institute, solicit or knowingly
encourage any inquiry, discussion or proposal, or participate in any
discussions or negotiations with, provide any confidential or non-public
information to, any entity or group concerning any "Acquisition Proposal" (as
defined, generally, any agreement or proposal pursuant to which any entity
other than UPC would acquire LBI, ownership or the right to vote 10% of the
outstanding LBI Common Stock or a significant portion of the assets or earning
power of LBI), except for actions reasonably considered based on the advice of
counsel to be required to fullfill the fiduciary obligations of LBI's Board of
Directors. LBI must notify UPC immediately following receipt of any
Acquisition Proposal. In the event LBI were to enter into a letter of intent
or agreement with respect to an Acquisition Proposal, or in the event such
Acquisition Proposal were the result of a hostile takeover of LBI, LBI or the
acquiror would be required to pay liquidated damages in the amount of
$1,920,000 to UPC, which amount represents the sum of the agreed expenses
incurred by UPC in connection with the Reorganization and the agreed loss to
UPC in the event the Reorganization is not consummated. The limitation on
negotiations and liquidated damages will remain in effect until September 30,
1994, unless before that date either the Reorganization is consummated or the
Reorganization Agreement is terminated, or the Reorganization is otherwise not
consummated,

<PAGE> 46

under specified circumstances. These provisions may have the effect of
discouraging competing offers to acquire or merge with LBI.

MANAGEMENT AFTER THE REORGANIZATION

Directors and Officers of UPC. The directors and officers of UPC will
not be affected by the Reorganization.

Directors and Officers of LBI. The Reorganization Agreement provides
that after the Effective Time of the Reorganization, the surviving corporation
will be managed by a board of directors consisting of the members of the Board
of Directors of LBI serving in such capacity immediately prior to the Effective
Time of the Reorganization and by officers consisting of the officers of LBI
serving in such capacity immediately prior to the Effective Time of the
Reorganization. All directors of LBI serve three-year terms but may be
re-elected or reappointed, as the case may be. For information regarding LBI's
executive officers and directors, see "Proposal I -- Election of Directors."

INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION

The directors and executive officers of LBI beneficially own
approximately 36.4% of the shares of LBI Common Stock, including unexercised
employee stock options, and will receive in the Reorganization the
consideration described above. All directors and executive officers of LBI
also are likely to retain their positions as directors and executive officers
of LBI.

In connection with the execution of the Agreement and Plan of
Reorganization between LBI and UPC, the companies also entered into a related
letter agreement which provides as described below with respect to the effects
of the Reorganization on directors, executive officers and employees of LBI and
Liberty Federal. For additional information, see the copy of the letter
agreement included in the Reorganization Agreement attached as Appendix A
hereto.

Following the Reorganization and for at least three years thereafter,
Liberty Federal will be operated and maintained as a separate subsidiary
financial institution of UPC and will not be combined into or with any other
financial institution and all offices of Liberty Federal will continue as such.
Liberty Federal's Board of Directors following the Reorganization will consist
of those persons serving as directors immediately prior to the Reorganization,
and, unless replaced for cause, each such person will be entitled to continue
to serve as a director for the remainder of the term for which he was elected.
In addition, each such director will be reelected as a director of Liberty
Federal for at least one additional three-year term regardless of any otherwise
applicable age-related requirement, as long as he continues to qualify to serve
as a director, he is not permanently incapacitated and unable to serve as a
director, he continues adequately to perform his services as a director and
UPC shall not have determined that Liberty Federal has failed to meet the
general performance standards of other UPC banking subsidiaries. Fees paid to
directors of Liberty Federal will be at least equivalent to their fees before
the Reorganization.

The officers and employees of Liberty Federal following the
Reorganization will continue to hold their employment positions and titles held
immediately prior to the Reorganization, and will receive compensation at least
equivalent to their compensation before the Reorganization. Long term medical
and health insurance will be provided to all of LBI's and Liberty Federal's
employees through the health insurance plan provided by UPC to its employees,
with any pre-existing individual condition that was insured under Liberty
Federal's medical plan to continue to be insured under UPC's plan.

Following the Reorganization, the existing employment agreements of
LBI and Liberty Federal with Larry A. Watson, the Chairman of the Board,
President and Chief Executive Officer of LBI; Thomas D. Enoch, a director and
the Executive Vice President, Chief Operating Officer and Secretary of LBI; and
Daniel B. Nelson, the Senior Vice President-Branches and Personnel of Liberty
Federal, will continue in place, except that the term of each will be amended
to be three years from the Effective Date of the Reorganization and the salary
for each will be such person's 1994 base salary plus, for Messrs. Watson and
Enoch, $1,000 per month (in lieu of Board fees). For information regarding
certain circumstances under which Messrs. Watson and Enoch could be entitled
under their

<PAGE> 47

employment agreements to receive a payment from LBI and Liberty Federal
following the Reorganization, see "Proposal I -- Election of Directors
- -- Executive Compensation -- Employment Agreements."

Larry A. Watson, the Chairman of the Board, President and Chief
Executive Officer of LBI, will participate in UPC's cash bonus plan, and Mr.
Watson, together with another person to be selected by LBI, will also
participate in UPC's Stock Option Plan, with Mr. Watson to be eligible to
receive options to acquire between 1,500 and 3,000 shares of UPC Common Stock
annually and the other person selected to be eligible to receive between 500
and 1,000 such options annually.

UPC has agreed, from and after the Reorganization, to indemnify, defend
and hold harmless each person who was at any time prior to the Reorganization
an officer, director or employee of LBI or Liberty Federal against all losses,
claims, damages, costs, expenses (including attorneys' fees), liabilities,
judgments or amounts that are paid in settlement of, or in connection with, any
claim, action, suit, proceeding or investigation in which a party is, or is
threatened to be made, a party or witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director, officer or employee of LBI or Liberty Federal if such claim pertains
to any matter or fact arising, existing or occurring prior to the
Reorganization to the full extent permitted under applicable state or federal
laws or LBI's or Liberty Federal's corporate documents. Indemnification rights
will continue for a period of not less than six years from the Reorganization.
Following the Reorganization, the directors, officers and employees of LBI or
Liberty Federal who become directors, officers or employees of UPC or any of
its subsidiaries will have additional indemnification rights as a result
thereof having prospective application only and will be covered on a
prospective basis at least equal to the coverage provided to persons in similar
positions at UPC and its subsidiaries.

After the Reorganization, it is anticipated that LBI's ESOP will be
continued, or its assets will be otherwise administered, for the sole benefit
of current and future employees of Liberty Federal.

COMPARISON OF STOCKHOLDER RIGHTS

Introduction. Upon consummation of the Reorganization, holders of
LBI's common stock, whose rights are presently governed by Tennessee corporate
law and LBI's Charter and Bylaws, and indirectly by applicable OTS regulations
and Liberty Federal's Charter and Bylaws, will become stockholders of UPC, a
Tennessee corporation. Accordingly, their rights will be governed by Tennessee
corporate law and the Charter and Bylaws of UPC, and indirectly by the
regulations of the Federal Reserve and other federal banking regulatory
agencies. Certain differences arise from differences between the Charter and
Bylaws of LBI and UPC. The following discussion is not intended to be a
complete statement of all differences affecting the rights of stockholders, but
summarizes material differences and is qualified in its entirety by reference
to the Charter and Bylaws of UPC and LBI. See "Available Information."

Issuance of Capital Stock. The Charter of LBI authorizes the issuance
of 4,000,000 shares of common stock, par value $1.00 per share, and 1,000,000
shares of preferred stock, par value $1.00 per share. The Charter of UPC
authorizes the issuance of 50,000,000 shares of common stock, par value $5.00
per share, and 10,000,000 shares of serial preferred stock, no par value. At
April 29, 1994, 679,303 and 21,767,202 shares of common stock of LBI and UPC,
respectively, were issued and outstanding. For information regarding the
number of shares of UPC's common stock that would have been issued on a pro
forma basis upon the consummation of the Reorganization as of that date, see
"Summary -- Pro Forma Consolidated Financial Information." Under LBI's and
UPC's Charter, LBI and UPC are authorized to issue additional shares of capital
stock up to the amount authorized without stockholder approval.

Payment of Dividends. The ability of LBI and UPC to pay dividends on
their common stock is governed by Tennessee corporate law. Under Tennessee
corporate law, dividends may be paid so long as the corporation would be able
to pay its debts as they become due in the ordinary course of business and the
corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to
those receiving the distribution.

<PAGE> 48

The ability of LBI and UPC to pay dividends on their common stock also
is affected by regulatory considerations and restrictions upon their receipt of
dividends from their respective subsidiaries. See "Summary -- Market Prices of
Common Stock; Dividends" for additional information regarding restrictions on
dividends.

Special Meetings of Stockholders. Special meetings of the holders of
LBI Common Stock may be called at any time, but only by the LBI Board of
Directors or a committee of the LBI Board of Directors that has been duly
designated by the LBI Board of Directors. UPC's Bylaws provide that special
meetings of shareholders of UPC may be called for any purpose or purposes
whatsoever at any time by the Chairman of the Board, the President, the
Secretary or the holders of not less than one-tenth (1/10) of the shares
entitled to vote at such meeting.

Number and Term of Directors. LBI's Charter provides that the number
of LBI's Board of Directors may consist of between five and eleven individuals
(exclusive of directors, if any, to be elected by holders of preferred stock of
LBI, voting separately as a class), as is provided for in the Bylaws. No
action can be taken to increase or decrease the number of directors unless at
least two-thirds of the directors then in office concur in such a decrease or
increase. UPC's Charter provides that the number of directors may consist of
between seven and twenty-five individuals, as provided for from time to time in
the Bylaws, provided that no amendment to the Bylaws decreasing the number of
directors will have the effect of shortening the term of any incumbent
director, and provided further that no action may be taken by directors
(whether through amendment of the Bylaws or otherwise) to increase the number
of directors as provided in the Bylaws from time to time unless at least
two-thirds of the directors then in office shall concur in said action.

Advance Notice Requirements for Nominations of Directors and
Presentation of New Business at Annual Meetings of Stockholders. LBI's Charter
provides that nominations for the election of directors and proposals for any
new business to be taken up at any annual or special meetings of stockholders
may be made by the LBI Board of Directors or by any stockholder entitled to
vote generally in the election of directors. In order for a stockholder of LBI
to make any such nomination and/or proposal, he or she must give notice in
writing to the Secretary of LBI not fewer than 30 days nor more than 60 days
prior to any such meeting; provided, however, that if notice or public
disclosure of the meeting is effected fewer than 40 days before the meeting,
such written notice must be delivered or mailed to the Secretary of LBI not
later than the close of business on the 10th day following the day on which
notice of the meeting was mailed to stockholders. UPC's Bylaws generally
provide that any proposal of a shareholder which is to be presented at any
annual meeting of shareholders must be sent so as to be received by UPC at its
principal offices not less than 120 days in advance of the date of UPC's proxy
statement issued in connection with the previous year's annual meeting of
shareholders.

Limitations on Acquisition of Capital Stock. LBI's Charter generally
provides for a period of five years from the effective date of the completion
of the conversion of Liberty Federal from mutual to stock form (December 17,
1991), no person may directly or indirectly offer to acquire or acquire the
beneficial ownership of more than ten percent of any class of equity security
of LBI. In addition, if at any time during this period, where any person
directly or indirectly acquires beneficial ownership of more than ten percent
of any class of equity security in violation of its Charter, those securities
beneficially owned in excess of ten percent will not be counted as shares
entitled to vote, will not be voted by any person or counted as voting shares
in connection with any matter submitted to the stockholders for a vote, and
will not be counted as outstanding for purposes of determining a quorum. If,
at any time after five years from the effective date of the completion of the
conversion, any person should acquire beneficial ownership of more than ten
percent of any class of equity security of LBI without the prior approval of
two-thirds vote of the continuing directors, then, with respect to each vote in
excess of ten percent of the voting power of the outstanding shares of voting
stock of LBI which such record holders would otherwise be entitled to cast,
such record holders shall be entitled to cast only one-hundredth of a vote.

The Charter of UPC does not have any provision relating to the
limitation on acquisition of the capital stock of UPC. However, shareholders
of UPC holding more than 10% of the shares of UPC Common stock are subject to
certain restrictions in acquiring control as set forth below, and UPC and LBI
would be, if they should so elect, subject to the Control Share Acquisition Act
under Tennessee law.

Approval of Mergers, Consolidations, Sale of Substantially All Assets
and Dissolution. LBI's and UPC's Charters set forth stockholder-approval
requirements for mergers and other similarly important corporate transactions
involving substantial stockholders. LBI's Charter generally prohibits any
merger, share exchange or consolidation with a Related Person (as defined in
the Charter); any sale, lease, exchange, transfer or other disposition of all
or

<PAGE> 49

any substantial part of the assets of LBI; the issuance of any securities of
LBI to a related person or any reclassification of the common stock of LBI,
without the affirmative votes of the holders of at least 80% of the outstanding
shares entitled to vote thereon and a majority of the outstanding shares
entitled to vote thereon not including shares deemed beneficially owned by a
related person, unless the merger or similar important corporate transaction
has been approved by at least two-thirds of the continuing directors at a
meeting at which a quorum is present. In the case of such director approval,
the affirmative vote of stockholders is as required by any other provision of
the Charter and applicable law. UPC's Charter provides that the affirmative
votes of the holders of two-thirds or more of the outstanding capital stock of
UPC are required to approve any merger, sale, lease, exchange or other
disposition of all or substantially all of the assets of UPC to or with any
other corporation if such other corporation is the beneficial owner of 10% or
more of the outstanding capital stock of UPC.

Amendment of Charter and Bylaws. LBI's Charter and Bylaws provide
that, to the extent permitted by the TBCA, the Board of Directors of LBI is
expressly authorized to repeal, alter, amend or rescind the Bylaws of LBI by a
vote of a majority of the LBI Board of Directors. The Bylaws of LBI can only
be repealed, altered, amended, or rescinded by the stockholders of LBI by a
vote of at least 80% of the outstanding shares of LBI entitled to vote
generally in the election of directors cast at a meeting of the stockholders
called for that purpose. Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI,
XVII, XX and XXI of the Charter of LBI may not be repealed, altered, amended or
rescinded in any respect unless it is approved by the affirmative votes of the
holders of at least 80% of the outstanding shares of capital stock of LBI cast
at a meeting called for that purpose, except that such repeal, alteration,
amendment or rescission may be made by the affirmative votes of the holders of
a majority of the outstanding shares if the same is first approved by a
majority of the continuing directors. The UPC Charter provides that UPC
reserves the right to amend, alter, change or repeal any provision made in the
Charter in the manner prescribed by the laws of the State of Tennessee. UPC's
Bylaws provide that they may be amended or repealed, in whole or in part, or
new Bylaws may be adopted, by the Board of Directors of UPC at any UPC Board of
Directors meeting by a vote of a majority of the entire UPC Board. The Bylaws
may also be amended or repealed, or new Bylaws may be adopted by vote of the
shareholders of UPC, at any annual or special meeting of shareholders.

Removal of Directors. LBI's Charter provides that no director of LBI
may be removed at any time unless for cause and upon the affirmative votes of
the holders of at least 80% of the outstanding shares of capital stock of LBI
entitled to vote generally in the election of directors. UPC's Charter
provides that the affirmative votes of the holders of at least two-thirds of
the outstanding capital stock of UPC entitled to vote generally in the election
of directors is required to remove from office any director of UPC, whether
with or without cause.

CERTAIN REGULATORY CONSIDERATIONS

General. As a bank holding company, UPC is subject to the regulation
and supervision of the Federal Reserve. In addition, as a savings and loan
holding company, UPC is registered with the Office of Thrift Supervision (the
"OTS") and is subject to OTS regulations, supervision and reporting
requirements. UPC's bank subsidiaries that are national banking associations,
including UPNB, are subject to supervision and examination by the Office of the
Comptroller of the Currency (the "Comptroller") and the Federal Deposit
Insurance Corporation (the "FDIC"). State bank subsidiaries of UPC which are
members of the Federal Reserve System are subject to supervision and
examination by the Federal Reserve and the state banking authorities of the
states in which they are located. State bank subsidiaries which are not members
of the Federal Reserve System are subject to supervision and examination by the
FDIC and the state banking authorities of the states in which they are located.
UPC's savings bank subsidiaries are subject to supervision and examination by
the OTS. UPC's banking subsidiaries are subject to various requirements and
restrictions, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted and the
interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the banks.
In addition to the impact of regulation, the subsidiary banks are affected
significantly by the actions of the Federal Reserve as it attempts to control
the money supply and credit availability in order to influence the economy.

The BHCA generally requires the prior approval of the Federal Reserve
where a bank holding company proposes to acquire direct or indirect ownership
or control of more than 5% of the voting shares of any bank or otherwise to
acquire control of a bank or to merge or consolidate with any other bank
holding company. The BHCA generally prohibits the Federal Reserve from
approving an application by a bank holding company to acquire a bank

<PAGE> 50

located in another state, unless such an acquisition is specifically authorized
by statute of the state in which the bank to be acquired is located. Tennessee
has adopted reciprocal interstate banking legislation permitting
Tennessee-based bank holding companies to acquire banks and bank holding
companies in certain other states and allowing bank holding companies located
in certain states other than Tennessee, to acquire banks and bank holding
companies in Tennessee.

A bank holding company is generally prohibited under the BHCA from
acquiring voting shares of any company which is not a bank, and from engaging
in any activities other than those of banking or of managing or controlling
banks or furnishing services to, or performing services for its subsidiaries.
An exception to these prohibitions permits a bank holding company to engage in,
or to acquire an interest in a company, such as a thrift institution, which
engages in activities that the Federal Reserve has determined are so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.

Capital Adequacy. The Federal Reserve has adopted risk-based capital
guidelines for bank holding companies. The minimum guideline for the ratio of
total capital ("Total capital") to risk-weighted assets (including certain
off-balance-sheet activities such as standby letters of credit) is 8%. At least
half of the Total capital must be composed of "Tier 1 capital" which consists
of common shareholders' equity, minority interests in the equity accounts of
consolidated subsidiaries, non-cumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1
capital"). The remainder, which is Tier 2 capital, may consist of subordinated
debt (or certain other qualifying debt issued prior to March 12, 1988), other
preferred stock and a limited amount of loan loss reserves.

In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 capital to average total assets, less goodwill (the "Leverage
ratio") of 3% for bank holding companies that meet certain specified criteria,
including those having the highest regulatory rating. All other bank holding
companies generally are required to maintain a Leverage ratio of at least 3%
plus an additional cushion of 100 to 200 basis points. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions are expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities. The Federal Reserve has not advised UPC of any specific minimum
Leverage ratio applicable to UPC.

Failure to meet capital requirements can subject an institution to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC and a prohibition on the taking of
brokered deposits. As described below, under the "Prompt Corrective Action"
regulations, substantial additional restrictions can be imposed upon
FDIC-insured institutions that fail to meet applicable capital requirements.
See "-- Prompt Corrective Action."

At December 31, 1993, UPC's Total risk based capital ratio was 18.59%,
Tier 1 capital ratio was 14.85% and Leverage ratio was 7.10%. In addition, each
of UPC's banking subsidiaries satisfied the minimum capital requirements
applicable to it and had the requisite capital levels to qualify as a
"well-capitalized" institution under the prompt corrective action provisions
discussed below.

Prompt Corrective Action. FDICIA, enacted in December 1991 requires
the federal banking regulators to take prompt corrective action in respect of
depository institutions that do not meet their minimum capital requirements.
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." Under capital regulations, a bank is defined to
be well capitalized if it maintains a Leverage ratio of at least 5%, a Tier 1
capital ratio of at least 6% and a Total capital ratio of at least 10% and is
not otherwise in a "troubled condition" as specified by its appropriate federal
regulatory agency. A bank is defined to be adequately capitalized if it meets
all of its minimum capital requirements as described above under "--Capital
Adequacy." In addition, a bank will be considered undercapitalized if it fails
to meet any minimum required measure, significantly undercapitalized if it is
significantly below such measure and critically undercapitalized if it fails to
maintain a level of tangible equity equal to not less than 2% of total assets.
A bank may be deemed to be in a capitalization category that is lower than is
indicated by its actual capital position if it receives an unsatisfactory
examination rating.

<PAGE> 51

All institutions, regardless of their capital levels, are restricted
from making any capital distribution or paying any management fees that would
cause the institution to fail to satisfy the minimum levels to be considered
adequately capitalized. An undercapitalized institution is: (i) subject to
increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of business. The capital
restoration plan must include a guarantee by the institution's holding company
that the institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters. Pursuant to the
guarantee, the institution's holding company would be liable up to the lesser
of 5% of the institution's total assets or the amount necessary to bring the
institution into capital compliance as of the date it failed to comply with its
capital restoration plan. If the controlling bank holding company should fail
to fulfill its obligations under the guarantee and files (or should have filed
against it) a petition under the federal Bankruptcy Code, the appropriate
federal banking regulator could have a claim as a general creditor of the bank
holding company, and, if the guarantee were deemed to be a commitment to
maintain capital under the federal Bankruptcy Code, the claim would be entitled
to a priority in such bankruptcy proceeding over third-party creditors of the
bank holding company.

The regulatory agencies have discretionary authority to reclassify well
capitalized institutions as adequately capitalized or to impose on adequately
capitalized institutions requirements or actions specified for undercapitalized
institutions if the agency determines after notice and an opportunity for
hearing that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice, which can consist of the receipt of
an unsatisfactory examination rating if the deficiencies cited are not
corrected. A significantly undercapitalized institution, as well as any
undercapitalized institution that did not submit an acceptable capital
restoration plan, may be subject to regulatory demands for recapitalization,
broader application of restrictions on transactions with affiliates,
limitations on interest rates paid on deposits, asset growth and other
activities, possible replacement of directors and officers and restrictions on
capital distributions by any bank holding company controlling the institution.
Any company controlling the institution could also be required to divest the
institution or the institution could be required to divest subsidiaries. The
senior executive officers of a significantly undercapitalized institution may
not receive bonuses or increases in compensation without prior approval and the
institution is prohibited from making payments of principal or interest on its
subordinated debt. If an institution becomes critically undercapitalized, the
institution will be subject to conservatorship or receivership within 90 days
unless periodic determinations are made that forbearance from such action would
better protect the deposit insurance fund. Unless appropriate findings and
certifications are made by the appropriate federal bank regulatory agencies, a
critically undercapitalized institution must be placed in receivership if it
remains critically undercapitalized on average during the calendar quarter
beginning 270 days after the date it became critically undercapitalized.

Dividend Restrictions. UPC is a legal entity separate and distinct
from UPNB, the Community Banks and its nonbank subsidiaries. UPC's revenues (on
a parent company only basis) result, in significant part, from dividends paid
to UPC by its subsidiaries. The right of UPC, and consequently the right of
creditors and stockholders of UPC, to participate in any distribution of the
assets or earnings of any subsidiary through the payment of such dividends or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary (including depositors, in the case of banking subsidiaries), except
to the extent that claims of UPC in its capacity as a creditor may be
recognized.

There are statutory and regulatory requirements applicable to the
payment of dividends by UPNB and the Community Banks to UPC. Each national
banking association subsidiary of UPC, including UPNB, is required by federal
law to obtain the prior approval of the Comptroller for the payment of
dividends if the total of all dividends declared by the board of directors of
such bank in any year will exceed the total of (i) such bank's net profits (as
defined and interpreted by regulation) for that year plus (ii) the retained net
profits (as defined and interpreted by regulation) for the preceding two years,
less any required transfers to surplus. In addition, national banks may only
pay dividends to the extent that their retained net profits (including the
portion transferred to surplus) exceed statutory bad debts (as defined by
regulation). The state-chartered Community Banks are subject to similar
restrictions on the payment of dividends by the respective state laws under
which they are organized. Furthermore, as described further under "-- Prompt
Corrective Action," all depository institutions are prohibited from paying any
dividends, making other distributions or paying any management fees if, after
such payment, the depository institution would fail to satisfy its minimum
capital requirements. In accordance with the specified calculations, at January
1, 1994, UPNB and the Community Banks had approximately $74.3 million available
for distribution to UPC without obtaining regulatory approval excluding the
Mid-South Bancorp, Inc. acquisition. The actual amount of dividends paid will
be limited to a lesser amount by the management of UPC in order to maintain
compliance

<PAGE> 52

with UPC's internal capital guidelines and to maintain strong capital positions
in each of the subsidiary banks of UPC. Future dividends will depend upon the
level of earnings of the subsidiary banks of UPC.

It is the policy of the Federal Reserve that bank holding companies
should pay dividends only out of current earnings. Federal banking regulators
also have the authority to prohibit banks and bank holding companies from
paying a dividend if they should deem such payment to be an unsafe or unsound
practice. In addition, it is the position of the Federal Reserve Board that as
a bank holding company, UPC is expected to act as a source of financial
strength to each of its subsidiary banks. See "-- Support of Subsidiary Banks."

Support of Subsidiary Banks. Under Federal Reserve policy, UPC is
expected to act as a source of financial strength to UPNB and the Community
Banks and, where required, to commit resources to support each of such
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, UPC may not be inclined to provide it. Moreover, if one of its
subsidiary banks should become undercapitalized, under FDICIA, UPC would be
required to guarantee the subsidiary bank's compliance with its capital plan in
order for such plan to be accepted by the federal regulatory authority. See "--
Prompt Corrective Action."

Under the "cross guarantee" provisions of the Federal Deposit
Insurance Act, any FDIC-insured subsidiary of UPC may be held liable for any
loss incurred by, or reasonably expected to be incurred by the FDIC in
connection with (i) the "default" of any other commonly controlled FDIC-insured
subsidiary or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured subsidiary "in danger of default." "Default" is defined
generally as the appointment of a conservator or receiver and "in danger of
default" is defined generally as the existence of certain conditions indicating
that a default is likely to occur in the absence of regulatory assistance.

Because it is a bank holding company, any capital loans made by UPC to
UPNB or any of the Community Banks are subordinate in right of payment to
deposits and to certain other indebtedness of such subsidiary bank. In the
event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of
a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment over certain other creditors of the bank holding company.

Transactions with Affiliates. Provisions of the Federal Reserve Act
impose restrictions on the type, quantity and quality of transactions between
affiliates of an insured bank and the insured bank (including its bank holding
company and its nonbank subsidiaries). The purpose of these restrictions is to
prevent misuse of the resources of the insured institution by its uninsured
affiliates. An exception to most of these restrictions is provided for
transactions between two insured banks that are within the same holding company
where the holding company owns 80% or more of each of these banks (the "sister
bank" exception). The restrictions also do not apply to transactions between an
insured bank and its wholly owned subsidiaries. These restrictions include
limitations on the purchase and sale of assets and extensions of credit by the
insured bank to its holding company or its nonbank subsidiaries. An insured
bank and its subsidiaries are limited in engaging in "covered transactions"
with their nonbank or nonsavings bank affiliates to the following amounts: (i)
in the case of any one such affiliate, the aggregate amount of covered
transactions of the insured bank and its subsidiaries may not exceed 10% of the
capital stock and surplus of the insured bank, and (ii) in the case of all
affiliates, the aggregate amount of covered transactions of the insured bank
and its subsidiaries may not exceed 20% of the capital stock and surplus of the
bank. "Covered transactions" are defined by statute to include a loan or
extension of credit, as well as a purchase of securities issued by an
affiliate, a purchase of assets (unless otherwise exempted by the Federal
Reserve), the acceptance of securities issued by the affiliate as collateral
for a loan and the issuance of a guarantee, acceptance or letter of credit
issued on behalf of an affiliate. Further, provisions of the Bank Holding
Company Act of 1956, as amended, prohibit a bank holding company and its
subsidiaries from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments. The subsidiary banks of UPC are subject
to FDIC deposit insurance assessments. The FDIC has adopted a risk-based
premium schedule which has increased the assessment rates for most FDIC-insured
depository institutions. Under the new schedule, the annual premiums initially
range from $.23 to $.31 for every $100 of deposits. Each financial institution
is assigned to one of three capital groups--well capitalized, adequately
capitalized or undercapitalized--and further assigned to one of three subgroups
within a capital group, on the basis of supervisory evaluations by the
institution's primary federal and, if applicable, state supervisors and on the
basis of other information relevant to the institution's financial condition
and the risk posed

<PAGE> 53

to the applicable insurance fund. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.

Recent Banking Legislation. In addition to the matters noted above,
FDICIA made other significant changes to the federal banking laws. FDICIA
institutes certain changes to the supervisory process, including provisions
that mandate certain regulatory agency actions against undercapitalized
institutions within specified time limits.

Standards for Safety and Soundness. FDICIA requires the
federal bank regulatory agencies to prescribe, by regulation,
standards for all insured depository institutions and
depository-institution holding companies relating to: (i) internal
controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest-rate risk
exposure; (v) asset growth; and (vi) compensation, fees and benefits.
The compensation standards must prohibit employment contracts,
compensation or benefit arrangements, stock option plans, fee
arrangements or other compensatory arrangements that would provide
excessive compensation, fees or benefits or could lead to material
financial loss, but (subject to certain exceptions) may not prescribe
specific compensation levels or ranges for directors, officers or
employees. In addition, the federal banking regulatory agencies would
be required to prescribe by regulation standards specifying: (i)
maximum classified assets to capital ratios; (ii) minimum earnings
sufficient to absorb losses without impairing capital; and (iii) to
the extent feasible, a minimum ratio of market value to book value for
publicly traded shares of depository institutions and depository
institution holding companies.

Brokered Deposits. The FDIC has adopted regulations governing
the receipt of brokered deposits. Under the regulations, a bank may
not lawfully accept, roll over or renew brokered deposits unless (i)
it is well capitalized or (ii) it is adequately capitalized and
receives a waiver from the FDIC. A bank that may not receive brokered
deposits also may not offer "pass-through" insurance on certain
employee benefit accounts. Whether or not it has obtained such a
waiver, an adequately capitalized bank may not pay an interest rate on
any deposits in excess of 75 basis points over certain prevailing
market rates specified by regulation. There are no such restrictions
on a bank that is well capitalized. Because UPNB and all of the
Community Banks had at December 31,1993, the requisite capital levels
to qualify as well capitalized institutions, UPC believes the brokered
deposits regulation will have no material affect on the funding or
liquidity of UPNB or any of the Community Banks.

Consumer Protection Provisions. FDICIA seeks to encourage
enforcement of existing consumer protection laws and enacted new
consumer-oriented provisions including a requirement of notice to
regulators and customers of any proposed branch closing and provisions
intended to encourage the offering of "lifeline" banking accounts and
lending in distressed communities. FDICIA also requires depository
institutions to make additional disclosures to depositors with respect
to the rate of interest and the terms of their deposit accounts.

Miscellaneous. FDICIA also made extensive changes in the
applicable rules regarding audit, examinations and accounting. FDICIA
generally requires annual, on-site full-scope examinations by each
bank's primary federal regulator. FDICIA also imposes new
responsibilities on management, the independent audit committee and
outside accountants to develop, approve or attest to reports regarding
the effectiveness of internal controls, legal compliance and
off-balance-sheet liabilities and assets.

FDICIA also required the Federal Reserve to prescribe
standards which limit the risks posed by an insured institution's
"exposure" to any other depository institution to limit the risks that
the failure of a large depository institution would pose to an insured
depository institution. FDICIA broadly defines "exposure" to include
extensions of credit to the other institution; purchases of, or
investments in, securities issued by the other institution; securities
issued by the other institution and accepted as collateral for an
extension of credit to any person; and all similar transactions which
the Federal Reserve defines by regulation to be exposure. The Federal
Reserve has proposed procedures and "benchmark" standards to limit an
insured depository institution's credit and settlement exposure to
each of its correspondent banks. The final rules were effective on
December 19, 1992, but provide for a two-year transition period.

Depositor Preference. Legislation recently enacted by Congress
establishes a nationwide depositor preference rule in the event of a bank
failure. Under this arrangement, all deposits and certain other claims against
a bank, including the claim of the FDIC as subrogee of insured depositors,
would receive payment in full before

<PAGE> 54

any general creditor of the bank would be entitled to any payment in the event
of an insolvency or liquidation of the bank.

Regulation of LBI and Liberty Federal. For information regarding
regulations governing LBI and Liberty Federal, see "Liberty Bancshares, Inc. --
Business -- Regulation."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The federal income tax discussion set forth below is abbreviated in
nature and is included for general information only. LBI stockholders are
urged to consult their own tax advisers as to the specific tax consequences to
them of the Reorganization, including the applicability and effect of federal,
state and local and other tax laws.

General. It is intended that for federal income tax purposes the
Reorganization will be treated as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and that, accordingly, (i) no gain
or loss will be recognized by either UPC or LBI as a result of the
Reorganization, (ii) no gain or loss will be recognized by an LBI stockholder
upon receipt of UPC Common Stock in the Reorganization in exchange for such
stockholder's shares of LBI Common Stock (except as discussed below with
respect to cash received in lieu of the issuance of fractional shares of UPC
Common Stock; (iii) the tax basis of UPC Common Stock (including any fractional
share interest) to be received by the LBI stockholders in connection with the
Reorganization will be the same as the basis in the LBI Common Stock
surrendered in exchange therefor; and (iv) the holding period of the UPC Common
Stock (including any fractional share interest) to be received by the LBI
stockholders in connection with the Reorganization will include the holding
period of the LBI Common Stock surrendered in exchange therefor, provided that
the LBI Common Stock is held as a capital asset at the Effective Time of the
Reorganization.

Consequences of Receipt of Cash in Lieu of Fractional Shares. An LBI
stockholder who is entitled to receive cash in lieu of a fractional share of
UPC Common Stock in connection with the Reorganization will recognize as of the
Effective Date of the Reorganization gain (or loss) equal to the difference
between such cash amount and the stockholder's adjusted basis in the fractional
share interest, subject to the conditions and limitations of Section 302 of the
Internal Revenue Code. Any gain or loss recognized will be capital gain (or
loss) if the LBI Common Stock is held by such stockholder as a capital asset at
the Effective Date of the Reorganization.

Cash Received by Holders of LBI Common Stock Who Dissent. A
stockholder of LBI who perfects his dissenters' rights under the laws of
Tennessee and who receives a cash payment from LBI of the value of his shares
of LBI Common Stock will be treated as having received such payment in
redemption of such stock. Such redemption will be subject to the conditions
and limitations of Section 302 of the Internal Revenue Code, including the
attribution rules of Section 318. In general, if the shares of LBI Common
Stock are held by the holder as a capital asset at the Effective Time of the
Reorganization, such holder will recognize capital gain or loss measured by the
difference between the amount of cash received by such holder and the adjusted
basis of such shares. Each holder of LBI Common Stock who contemplates
exercising his dissenters' rights should consult his own tax advisor as to the
possibility that any payment to him will be treated as dividend income.

ACCOUNTING TREATMENT

The Reorganization is intended to be treated by UPC and LBI as a
"pooling of interests" for accounting purposes. Accordingly, under generally
accepted accounting principles as described in Accounting Principles Board
Opinion No. 16 for business combinations, the assets and liabilities of LBI and
UPC will be carried on the books of UPC immediately subsequent to the Effective
Time of the Reorganization at the amounts recorded on the respective books of
each corporation immediately prior to the Effective Time of the Reorganization.
Net income of UPC subsequent to the Reorganization becoming effective will
include the net income of LBI and UPC for the entire fiscal period in which the
Reorganization occurs, which is expected by UPC and LBI to be fiscal year 1994.
Subsequent to the Reorganization becoming effective, the reported income of LBI
and UPC will be combined and restated as income of UPC. The unaudited pro
forma financial information contained in this Proxy Statement/Prospectus has
been prepared using the pooling of interests method of accounting where
applicable.

<PAGE> 55

EXPENSES

The Reorganization Agreement provides, in general, that UPC and LBI
will each pay their own expenses in connection with the Reorganization
Agreement and the transactions contemplated thereby, including fees and
expenses of their own accountants and counsel.

RESALES OF UPC COMMON STOCK

The shares of UPC Common Stock issued pursuant to the Reorganization
Agreement will be freely transferable under the Securities Act except for
shares issued to any shareholder who may be deemed to be an "affiliate" of LBI
and therefore an "underwriter" in respect to UPC Common Stock for purposes of
Rule 145 under the Securities Act as of the date of the Effective Time of the
Reorganization. Affiliates may not sell their shares of UPC Common Stock
acquired in connection with the Reorganization except pursuant to an effective
registration statement (other than on Form S-4) under the Securities Act
covering such shares or in compliance with Rule 145 promulgated under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Persons who may be deemed to be affiliates
of LBI generally include individuals or entities that control, are controlled
by or are under common control with LBI and will include members of the
management group in their roles as either executive officers or directors of
LBI. UPC will place restrictive legends on certificates representing UPC
Common Stock issued to all persons who are deemed "underwriters" under Rule
145. The shares of the UPC Common Stock to be delivered pursuant to the
Reorganization to any LBI stockholder deemed an "affiliate" of LBI under the
Securities Act are subject to the additional restriction on resale imposed by
provisions in the Reorganization Agreement requiring all affiliates to retain
all shares of UPC Common Stock received by them in connection with the
Reorganization until such time as UPC shall have publicly released a statement
of UPC's consolidated earnings reflecting the combined financial results of UPC
and LBI for a period of not less than 30 days subsequent to the Effective Date
of the Reorganization. Shares of UPC Common Stock delivered to any LBI
stockholders deemed affiliates will bear a legend to that effect. See
"Description of UPC Common and Preferred Stock--UPC Common Stock--Dividends."

PROPOSAL IV -- APPROVAL OF CHARTER AMENDMENT

The following description of the charter amendment is not intended to
be a complete description of all material facts regarding the charter amendment
and is qualified in all respects by reference to Article XIV attached as
Appendix E hereto.

Article XIV of LBI's charter generally provides, among other things,
that for a period of five years from the effective date of the completion of
the conversion of Liberty Federal from mutual to stock form, no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
more than ten percent of any class of equity security of LBI. Liberty Federal
converted to stock form on December 17, 1991. Therefore, Article XIV generally
would prohibit any person from acquiring more than ten percent of the common
stock of LBI before December 18, 1996.

In connection with the consummation of the Reorganization, UPC would
acquire beneficial ownership of all of the LBI Common Stock. Consequently, in
order to permit and facilitate the consummation of the Reorganization, Article
XIV of LBI's charter must be amended to make the restrictions contained in
Article XIV not applicable to the Reorganization. The proposed amendment would
exclude any transactions, including the Reorganization, approved in advance by
a majority of LBI's Continuing Directors, as defined therein, from such
restrictions. In order to amend Article XIV, the proposed charter amendment
must first be adopted by a majority vote of the Board of Directors of LBI and
then approved by a majority of the total votes eligible to be cast at the
Annual Meeting.

On November 23, 1993, the Board of Directors of LBI unanimously
adopted the proposed charter amendment and directed that the amendment be
submitted to a vote of stockholders. A copy of Article XIV of LBI's charter,
incorporating the proposed charter amendment, is attached as Appendix E to this
Proxy Statement/Prospectus. As amended, Article XIV would not prohibit UPC
from acquiring all of the LBI Common Stock but would continue to restrict
others from acquiring or offering to acquire beneficial ownership of more than
10% of any equity security of LBI except in connection with a transaction
approved in advance by a majority of LBI's Continuing Directors.

<PAGE> 56

Approval of the proposed charter amendment by LBI's stockholders is a
condition to consummation of the Reorganization, and failure to approve the
charter amendment would prevent consummation of the Reorganization regardless
of whether the Reorganization Agreement receives stockholder approval. THE
BOARD OF DIRECTORS RECOMMENDS THAT LBI'S STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE PROPOSED CHARTER AMENDMENT.

If the charter amendment should be approved by LBI's stockholders, it
is expected to become effective immediately prior to consummation of the
Reorganization. In the event the Reorganization Agreement should not be
approved by LBI's stockholders or the Reorganization should not be consummated
for any other reason, the charter amendment would not become effective, and
Article XIV would continue in effect as it currently exists.

PROPOSAL V -- ADJOURNMENT OF ANNUAL MEETING

Stockholder approval of the Reorganization and the Reorganization
Agreement requires the affirmative votes of the holders of at least a majority
of the outstanding shares of LBI Common Stock entitled to vote at the Annual
Meeting. In the event there is an insufficient number of votes cast in person
or by proxy at the Annual Meeting to approve the Reorganization and the
Reorganization Agreement, LBI's Board of Directors intends to adjourn the
Annual Meeting to a later date. The place and date to which the Annual Meeting
would be adjourned would be announced at the Annual Meeting, but would in no
event be 30 days or more after the date of the Annual Meeting.

The effect of any such adjournment would be to permit LBI to solicit
additional proxies for approval of the Reorganization and the Reorganization
Agreement. While such an adjournment would not invalidate any proxies
previously filed, including those filed by stockholders voting against the
Reorganization and the Reorganization Agreement, it would give LBI the
opportunity to solicit additional proxies in favor of the Reorganization and
the Reorganization Agreement.

Approval of the adjournment of the Annual Meeting requires the
affirmative vote of the holders of at least a majority of the votes cast in
person or by proxy at the Annual Meeting.

LBI'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT LBI'S
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING UNDER
THE CIRCUMSTANCES DESCRIBED HEREIN.

LIBERTY BANCSHARES, INC.

GENERAL

Liberty Bancshares, Inc. LBI was incorporated under the laws of the
State of Tennessee in July 1991. Effective December 17, 1991, Liberty Federal
converted from mutual to stock form and reorganized into the holding company
form of ownership as a wholly owned subsidiary of LBI. As a result of the
conversion and reorganization, LBI issued 634,215 shares of its common stock to
the public and registered its common stock with the Commission under the
Exchange Act.

LBI is classified as a unitary savings institution holding company
subject to regulation by the OTS. Prior to its acquisition of Liberty Federal,
LBI had no assets and no liabilities and engaged in no business activities.
Since the acquisition, LBI has not engaged in any significant activity other
than holding the stock of Liberty Federal and operating the business of a
savings institution through Liberty Federal. Accordingly, the information
regarding LBI set forth herein, including the consolidated financial statements
and related data, relates primarily to Liberty Federal and its subsidiary.

LBI's main office and telephone number are the same as Liberty
Federal's (see below). At December 31, 1993, LBI had total assets of $180.7
million and stockholders' equity of $20.3 million.

Liberty Federal Savings Bank. Liberty Federal was incorporated in
1927 as a Tennessee-chartered building and loan association. Liberty Federal
converted to a federally chartered savings institution in 1935 and to a
federally chartered mutual savings bank, adopting its current name, in 1985.

<PAGE> 57

Liberty Federal is principally engaged in the business of accepting
deposits from the general public and originating permanent loans which are
secured by one-to-four-family residential properties located in its market
area. Liberty Federal also maintains a substantial securities portfolio and
originates significant amounts of consumer loans and commercial loans. In
addition, Liberty Federal holds a limited amount of loans secured by commercial
and multi-family real estate.

As a federally chartered savings institution, Liberty Federal is
subject to extensive regulation and examination by the OTS and the FDIC, as the
administrator of the SAIF, which insures Liberty Federal's deposits up to
applicable limits. Liberty Federal is a member of the FHLB of Cincinnati,
which is one of the 12 district banks constituting the FHLB System.

The executive offices of Liberty Federal are located at 914 East Wood
Street, Paris, Tennessee 38242, and the telephone number is (901) 642-3825.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General. On December 17, 1991, Liberty Federal completed its
reorganization into the holding company form of ownership and became a wholly
owned subsidiary of LBI. LBI presently has no operations other than those of
Liberty Federal and its subsidiary. Management's discussion and analysis of
earnings and related financial data are presented to assist the reader in
understanding the financial condition and results of operations of LBI's
subsidiary, Liberty Federal, for the years 1993, 1992 and 1991.

On November 23, 1993, LBI entered into an Agreement and Plan of
Reorganization with UPC, subject to various terms and conditions, pursuant to
which LBI will merge into UPC. Consummation of the merger is contingent upon,
among other things, stockholder and regulatory approvals.

The principal business of Liberty Federal consists of accepting
deposits from the general public and investing these funds in loans, secured by
one-to-four-family residential properties located in Liberty Federal's market
area. Liberty Federal also maintains a substantial securities portfolio and
originates significant amounts of consumer loans and commercial loans. In
addition, Liberty Federal has made a limited amount of loans secured by
commercial and multi-family real estate in Tennessee.

Liberty Federal's results of operations are primarily dependent on its
net interest income, which is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
Interest income is a function of the balances of interest-earning assets
outstanding during the period and yields earned on such assets. Interest
expense is a function of the amount of interest-bearing liabilities outstanding
during the period and the rates paid on such liabilities. Liberty Federal also
generates non-interest income, such as service charges on transaction accounts
and other fees. Net income is further affected by the level of operating
expenses, such as compensation and benefit expenses, occupancy and equipment
expenses and federal deposit insurance premiums.

The operations of Liberty Federal are significantly influenced by
general economic conditions and the monetary and fiscal policies of
governmental regulatory agencies. Deposit flows and cost of funds are
influenced by interest rates on competing investments and prevailing market
interest rates. Lending activities are affected by the demand for financing
real estate and other types of loans, which in turn is affected by the interest
rates at which such financing may be offered and other factors affecting loan
demand and the availability of funds. Just as Liberty Federal's operations
are influenced by regulatory authorities, so are its liquidity levels and
capital resources.

LBI's financial condition may be analyzed based on its ability to
manage its sources and uses of funds, insure adequate liquidity and control the
degree of credit and interest rate risk. It is management's goal to balance
these components of liquidity and risk to enable LBI to meet the needs of its
customers and provide a good return to LBI's investors. Each of these
components will be examined in the following discussion.

Asset/Liability Management and Interest Rate Sensitivity Analysis.
Asset/liability management is the process by which Liberty Federal manages the
mix, maturity and pricing of assets and liabilities in an attempt to reduce the
possibility of a materially adverse impact on earnings resulting from the
direction and volatility of market interest

<PAGE> 58

rates. In order to facilitate asset/liability management, Liberty Federal's
Board of Directors has adopted an interest rate risk management policy. This
policy establishes guidelines regarding the interest rate sensitivity of
Liberty Federal's interest-earning assets and interest-bearing liabilities, and
therefore, the effects on Liberty Federal's net interest income of changes in
prevailing interest rates. Pursuant to the policy, management reports Liberty
Federal's asset/liability position to the Board of Directors of LBI on a
quarterly basis.

In accordance with Liberty Federal's interest-rate-risk management
policy, management deemphasized the origination of long- term, fixed-rate
mortgage loans in the early 1980s. In 1993 and 1992, LBI experienced an
increase in loan demand, particularly for long-term, fixed-rate mortgage loans.
In order to effectively manage the interest rate risk associated with such
loans, management sold approximately $29.8 million of these loans in 1993. In
addition, Liberty Federal maintains a substantial portfolio of short- term
securities. Most importantly, management has developed and implemented
strategies for the origination of short-term and/or adjustable rate loans such
as adjustable rate mortgage loans, automobile loans and commercial non-mortgage
loans. The relatively short terms and adjustable interest rates of these loans
mitigates the interest-rate-risk of Liberty Federal's 30-year, fixed-rate
mortgage loans. As a result of Liberty Federal's interest rate risk management
policy and management's strategies emphasizing the origination of short-term
and/or adjustable-rate loans for Liberty Federal's portfolio, Liberty Federal's
excess of interest-earning assets over interest-bearing liabilities maturing or
repricing within one year at December 31, 1993 was 14.2%. As a result of
Liberty Federal's positive one-year gap, Liberty Federal's net interest income
would be adversely affected by decreases in prevailing rates. Generally,
during a period of rising interest rates, a negative gap would adversely affect
net interest income while a positive gap would result in an increase in net
interest income, while conversely, during a period of falling interest rates a
negative gap would result in an increase in net interest income and a positive
gap would negatively affect net interest income. During most of 1993, Liberty
Federal had a positive gap and as interest rates declined, LBI experienced a
decrease in its net interest margin. Although no formal target gap values have
been established by Liberty Federal, management considers Liberty Federal's
current one year gap to represent an acceptable balance between minimizing
Liberty Federal's interest rate risk and maximizing Liberty Federal's interest
rate spread.

51
<PAGE> 59
The following table sets forth the repricing attributes of the
interest-earning assets and interest-bearing liabilities at December 31, 1993.
Assumptions used are consistent with those used by the OTS.

<TABLE>
<CAPTION>
Over Ten
Over One Over Five Through
One Year Through Through Twenty Over Twenty
or Less Five Years Ten Years Years Years
------- ---------- --------- -------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities (1) . . . . . . . . . . . . $ 40,675 $ -- $ -- $ -- $ 64
Fixed-rate one-to-four family
residences (2) . . . . . . . . . . . 13,356 25,170 8,163 1,922 33
Adjustable-rate one-to-four
family residences . . . . . . . . . . 37,508 3,337 222 -- --
Other . . . . . . . . . . . . . . . . . 29,965 11,530 383 60 --
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . . 121,504 40,037 8,768 1,982 97

Interest-bearing liabilities:

Statement savings . . . . . . . . . . . 2,438 6,447 3,212 2,255 640
Certificate savings . . . . . . . . . . 79,845 28,779 -- -- --
NOW accounts . . . . . . . . . . . . . 4,998 6,740 1,907 1,047 193
MMDAs . . . . . . . . . . . . . . . . . 5,074 2,266 560 101 3
Other . . . . . . . . . . . . . . . . . 2,061 6,309 1,900 6 --
Non-interest-bearing deposits . . . . . 1,446 1,107 302 64 --
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . . 95,862 51,648 7,881 3,473 836

Interest sensitivity gap . . . . . . . . $ 25,642 $(11,611) $ 887 $ (1,491) $ (739)
======= ======= ======= ======= =======
Cumulative interest sensitivity gap . . . $ 25,642 $ 14,031 $ 14,918 $ 13,427 $ 12,688
======= ======= ======= ======= =======
Ratio of interest-earning assets
to interest-bearing liabilities . . . . 126.7% 77.5% 111.3% 57.1% 11.6%
======= ======= ======= ======= =======
Ratio of cumulative gap to total
assets . . . . . . . . . . . . . . . . 14.2% 7.8% 8.3% 7.4% 7.0%
======= ======= ======= ======= =======
</TABLE>
____________
(1) Includes securities, except for mortgaged-backed securities,
interest-bearing deposits in other banks and federal funds sold.
(2) Includes loans and mortgage-backed securities.

52
<PAGE> 60
Average Balances, Interest and Average Yields. The following table
sets forth certain information relating to Liberty Federal's average
interest-earning assets and interest-bearing liabilities and reflects the
average yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing income or expense by
the average monthly balance of assets or liabilities, respectively, for the
periods presented. Average balances are derived from month-end balances.
During the periods indicated, non-accrual loans are included in the net loan
category.

Year Ended December 31,
--------------------------------------------------------------------
1993 1992
----------------------------- ---------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loan portfolio, net of unearned
discounts and deferred fees . . . $124,600 $10,488 $123,339 $11,391 9.24%

8.42%
Securities (1) . . . . . . . . . . 19,881 887 4.46 20,469 1,230 6.01
Mortgage-backed securities (1) . . 7,390 592 8.01 10,564 922 8.73
Short-term investment and other
interest-earning assets . . . . . 18,608 529 2.84 11,194 414 3.70
------- ------- ------ -------- ------- ------
Total interest-earning assets . . 170,479 12,496 7.33 165,566 13,957 8.43
Non-interest-earning assets . . . . . 4,596 5,217
------- --------

Total assets . . . . . . . . . . $175,075 $170,783
======== ========

Interest-bearing liabilities:
Statement savings . . . . . . . . . $ 13,443 388 2.89 $ 10,808 367 3.40
Certificate savings . . . . . . . . 113,085 5,040 4.46 117,405 6,364 5.42
NOW accounts . . . . . . . . . . . 13,804 301 2.18 12,063 327 2.71
MMDAs . . . . . . . . . . . . . . . 8,893 254 2.86 9,699 336 3.46
ESOP loan payable . . . . . . . . . 412 25 6.07 522 34 6.51
FHLB advances . . . . . . . . . . . 2,505 93 3.71 -- -- --
------- ------- ------ -------- ------- ------
Total interest-bearing
liabilities . . . . . . . . . . 152,142 6,101 4.01 150,497 7,428 4.94
Non-interest-bearing liabilities . . 3,872 3,318
------- --------
Total liabilities . . . . . . . . 156,014 153,815
Stockholders' equity . . . . . . . . 19,061 16,968
------- --------

Total liabilities and
stockholders' equity . . . . . . $175,075 $170,783
======== ========
Net interest income . . . . . . . . . $ 6,395 $ 6,529
======= =======
Interest rate spread . . . . . . . . 3.32% 3.49%
====== ======
Net yield on interest-earning
assets . . . . . . . . . . . . . . 3.75% 3.94%
====== ======
Ratio of interest-earning assets
to interest-bearing liabilities . .

112.05% 110.01%

<CAPTION>
1991
------------------------------------
Average
Average Yield/
Balance Interest Cost
------- -------- ---------

<S> <C> <C> <C>
Interest-earning assets:
Loan portfolio, net of unearned
discounts and deferred fees . . . $117,627 $12,354 10.50%

Securities (1) . . . . . . . . . . 20,790 1,586 7.63
Mortgage-backed securities (1) . . 11,095 1,124 10.13
Short-term investment and other
interest-earning assets . . . . . 11,245 725 6.45
-------- ------- ------
Total interest-earning assets . . 160,757 15,789 9.82
Non-interest-earning assets . . . . . 7,381
--------

Total assets . . . . . . . . . . $168,138
========

Interest-bearing liabilities:
Statement savings . . . . . . . . . $ 9,370 475 5.07
Certificate savings . . . . . . . . 127,347 9,215 7.24
NOW accounts . . . . . . . . . . . 9,502 374 3.94
MMDAs . . . . . . . . . . . . . . . 7,936 428 5.39
ESOP loan payable . . . . . . . . . 53 -- --
FHLB advances . . . . . . . . . . . -- -- --
-------- ------- -----
Total interest-bearing
liabilities . . . . . . . . . . 154,208 10,492 6.80
Non-interest-bearing liabilities . . 3,311
--------
Total liabilities . . . . . . . . 157,519
Stockholders' equity . . . . . . . . 10,619
--------

Total liabilities and
stockholders' equity . . . . . . $168,138
========
Net interest income . . . . . . . . . $ 5,297
=======
Interest rate spread . . . . . . . . 3.02%
======
Net yield on interest-earning
assets . . . . . . . . . . . . . . 3.30%
======
Ratio of interest-earning assets
to interest-bearing liabilities . . 104.25%
=======

</TABLE>

(1) Includes securities available for sale in 1993 and 1992.

<PAGE> 61
Rate/Volume Analysis. The table below sets forth certain information
regarding changes in interest income and interest expense of Liberty Federal
for the periods indicated. For each category of interest-earning asset and
interest-bearing liability, information is provided on changes attributable to
(i) changes in volume (changes in volume multiplied by old rate); (ii) changes
in rate (changes in rate multiplied by old volume); and (iii) changes in
rate-volume (changes in rate multiplied by changes in volume). Average
balances are derived from month-end balances.

<TABLE>
<CAPTION>
For Years Ended December 31,
---------------------------------------------------------------
1993 vs. 1992 1992 vs. 1991
------------------------------ -----------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------------------------------ -----------------------------
Rate/ Rate/
Volume Rate Volume Volume Rate Volume
------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loan portfolio . . . . . . . . . . . $ 116 $(1,010) $(10) $ 600 $(1,492) $ (72)
Mortgage-backed securities . . . . . (276) (76) 23 (54) (155) 7
Securities . . . . . . . . . . . . . (35) (316) 9 (24) (337) 5
Other interest-earning assets . . . . 274 (96) (64) (3) (308) 1
----- ------- ---- ----- ------- -----
Total interest-earning assets . . . $ 79 $(1,498) $(42) $ 519 $(2,292) $ (59)
===== ======= ==== ===== ======= =====

Interest expense:
Statement savings . . . . . . . . . . $ 90 $ (56) $(13) $ 73 $ (156) $ (24)
Certificate savings . . . . . . . . . (235) (1,129) 41 (720) (2,312) 181
NOW accounts . . . . . . . . . . . . 47 (65) (9) 101 (117) (32)
MMDAs . . . . . . . . . . . . . . . . (28) (59) 5 95 (153) (34)
Borrowed funds . . . . . . . . . . . (7) (2) -- 34 -- --
FHLB advances . . . . . . . . . . . . 93 -- -- -- -- --
----- ------- ---- ----- ------- -----

Total interest-bearing
liabilities . . . . . . . . . . (40) (1,311) 24 (417) (2,738) 91
----- ------- ---- ----- ------- -----
Change in net interest income . . . . . $ 119 $ (187) $(66) $ 936 $ 446 $(150)
===== ======= ==== ===== ======= =====

Net change in net interest income . . . $ (134) $ 1,232
======= =======

</TABLE>

54
<PAGE> 62
Comparison of Financial Condition at December 31, 1993 and 1992. As
of December 31, 1993, LBI's total assets had increased approximately $10.1
million from $170.7 million at December 31, 1992 to $180.7 million at December
31, 1993. This represented a 5.9% increase during 1993. Stockholders' equity
increased from $17.8 million to $20.3 million at December 31, 1993. This
increase was primarily due to LBI's net earnings for 1993 less dividends paid
to stockholders.

Cash and cash equivalents increased approximately $6.2 million from
December 31, 1992 to December 31, 1993. This was due mainly to the investment
in federal funds of excess funds received as a result of sales of certain
fixed-rate mortgage loans originated in 1993 and proceeds from $10.0 million in
FHLB advances obtained by Liberty Federal in October, 1993. The purpose of the
advances was to off-set the interest rate risk associated with $10.0 million of
fixed-rate mortgage loans that Liberty Federal originated in 1993 and
determined to hold in its portfolio.

LBI adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities" as of
December 31, 1993. This statement requires investment in equity securities
which have a readily determinable fair value and investments in debt securities
to be classified into one of the following three categories: held to maturity
debt securities, trading securities and securities available for sale.
Securities held to maturity are stated at amortized cost unless there is a
permanent decline in market value, while securities available for sale are
reported at market value with unrealized gains and losses excluded from
earnings and reported, net of tax, as a separate component of stockholders'
equity. In conjunction with the adoption of SFAS No. 115, LBI reclassified
approximately $21.0 million of securities to the available for sale category
from the held to maturity category. At December 31, 1993, the net unrealized
gain on total securities available for sale was $888,000 which resulted in an
increase in stockholders' equity of $550,500, net of taxes. LBI has no
securities classified as trading securities and at December 31, 1993, all of
LBI's securities were classified as available for sale. These securities are a
part of LBI's asset/liability management strategy and may be sold in response
to changes in liquidity needs, interest rates, prepayment risk or other
factors.

Total securities decreased approximately $940,000 from December 31,
1992 to December 31, 1993. During 1993, LBI purchased securities totaling $28.6
million while $25.5 million matured and $1.7 million were sold. All sales were
at par with the exception of one sale on which LBI recognized a gain of $625.
Also, primarily as a result of the prevailing interest rate environment,
approximately $3.2 million in principal was repaid on mortgage-backed
securities. Substantially all securities purchased during the year were U.S.
Government and agency securities with maturities of five years or less.

LBI's loans receivable and loans available for sale totaled $123.8
million at December 31, 1993, up 4.1% from December 31, 1992. As a result of
the continued decline in interest rates during 1993, Liberty Federal has
experienced considerable demand to refinance its existing mortgage loans as
well as to originate new mortgage loans. In order to manage interest rate
risk, it has been Liberty Federal's policy to sell certain long-term,
fixed-rate mortgage loans shortly after origination. In 1993, Liberty Federal
originated $29.0 million of such loans and sold loans to the Federal Home Loan
Mortgage Corporation during the year of approximately $29.8 million. The
proceeds of these sales were used to fund additional loans and any excess was
invested in federal funds sold. During 1993, $10.0 million of one-to-four
family, fixed-rate mortgage loans were originated and held in Liberty Federal's
portfolio. These loans have maturities between ten and fifteen years. In
order to offset the interest rate risk associated with these loans, Liberty
Federal obtained $10.0 million in Federal Home Loan Bank advances from the FHLB
in Cincinnati. The advances were $5.0 million with a five year maturity and
$5.0 million with a ten year maturity. Liberty Federal also purchased $1.7
million of mortgage loans during the period in order to increase yield over
that currently being earned on federal funds. At December 31, 1993, LBI had
approximately $1.7 million in fixed-rate loans held for sale and substantially
all these loans were sold in January, 1994 at a gain.

In August, 1993 Liberty Federal began a consumer loan program which
featured competitive interest rates on loans. The proceeds of such loans were
used for the purchases of cars, trucks and boats. Partially as a result of
this program, Liberty Federal's consumer loan portfolio increased approximately
$5.2 million from December 31, 1992 to December 31, 1993.

The estimated fair value of LBI's total loans at December 31, 1993 was
$125,056,000 while the carrying value of net loans receivable was $122,099,000.
For most loans, fair value was determined by discounting estimated cash flows
using current interest rates at which similar loans would be made to borrowers
with similar credit risk

<PAGE> 63
and for similar remaining maturities. Changes in the assumptions used in
calculating the fair value could significantly affect the estimates.

Real estate owned increased approximately $210,000 during 1993. In
May, 1993, Liberty Federal foreclosed on a shopping center in McKenzie,
Tennessee which has a carrying value of $340,000 as of December 31, 1993.
Liberty Federal had a pending contract of sale at December 31, 1993 with an
investment company to purchase the McKenzie Plaza; however, on April 5, 1994,
the contract was withdrawn by the prospective buyer. Liberty Federal plans to
continue to market the shopping center. The shopping center has approximately
163,400 square feet. Liberty Federal believes that the center can be sold,
however, it may be necessary for the Bank to expend funds to revitalize the
center. Necessary funds are estimated to be approximately $75,000 to $100,000.

At December 31, 1993 LBI reported a net deferred tax liability of
$145,000 as opposed to a net deferred tax asset of $109,000 at December 31,
1992. Effective January 1, 1993, LBI prospectively adopted SFAS No. 109
"Accounting for Income Taxes". Adoption of this statement required LBI to
change its method of accounting for income taxes from the deferred method to
the asset and liability method. The cumulative effect of the adoption of SFAS
No. 109 was a $127,150 benefit which increased LBI's net earnings for 1993.
LBI also recorded a deferred tax liability relating to the adoption of SFAS
No. 115,"Accounting for Certain Investment in Debt and Equity Securities".
In accordance with SFAS No. 115, net unrealized gains on securities available
for sale of $888,000 were credited to stockholders' equity with a corresponding
deferred tax liability of $337,000.

Deposits decreased $2.6 million in 1993 when compared with December
31, 1992. Liberty Federal offers a variety of savings instruments including
statement savings, NOW accounts, demand deposit accounts, money market
accounts, certificates of deposit and individual retirement accounts. Despite
the wide variety of products offered, LBI has been experiencing an outflow of
deposits as a result of the lower interest rate environment. This is the case
for many financial institutions. Depositors are seeking higher rates and
alternative investment opportunities such as mutual funds, annuities, etc.
Management feels that this is the main reason for the decline in deposits as
LBI strived to offer competitive interest rates during 1993.

The estimated fair value of LBI's deposits at December 31, 1993 was
$149,752,000 which exceeds the carrying value of deposits by $1,035,000. The
fair value of certificates of deposit and other fixed maturity time deposits
was estimated using the rates currently offered for deposits of similar
remaining maturities. The fair value of deposits with no stated maturity, such
as demand deposits, NOW accounts, money market accounts and regular savings is
equal to the amount payable on demand at December 31, 1993.

In October, 1993, Liberty Federal obtained $10.0 million in advances
from the Federal Home Loan Bank of Cincinnati in order to offset the interest
rate risk associated with $10.0 million of fixed-rate loans that Liberty
Federal maintained in its loan portfolio. The advances were $5.0 million for
five years at 4.40% and $5.0 million for 10 years at 5.20% and amortize
monthly. Liberty Federal had no such borrowing as of December 31, 1992.

In conjunction with the stock conversion in 1991, LBI established an
Employee Stock Ownership Plan (ESOP), under which LBI makes annual
contributions to a trust for the benefit of eligible employees. Initially, the
ESOP acquired 63,429 shares of LBI's common stock financed by $634,290 in
borrowings by the ESOP. The loan is payable in quarterly installments and
matures December 17, 2001. Interest accrues at the base rate charged by the
lender. Dividends received on shares held by the ESOP are used to service a
portion of the principal and interest payments on the borrowing. During 1993,
the principal on the loan was reduced by approximately $100,000.

Stockholders' equity increased approximately $2.5 million from
December 31, 1992 to December 31, 1993. This increase was the net result of
LBI's earnings for the period, principal reduction of the ESOP loan, payment of
cash dividends, stock options exercised during 1993 and the adjustment for net
unrealized gains on securities available for sale.

In conjunction with the stock conversion, LBI established a stock
option plan under which a total of 63,421 common shares were reserved for
options. At December 31, 1993, options to purchase a total of 45,426 shares at
$10.00 per share were outstanding under the stock option plan. During the year
ended December 31, 1993, 5,314 options were exercised at $10 per share which
contributed $53,140 to stockholders' equity.

<PAGE> 64
As a result of LBI's earnings, the Board of Directors paid cash
dividends of $0.60 per share to stockholders in 1993. This dividend
distribution decreased stockholders' equity by approximately $382,000. In
conjunction with the adoption of SFAS No. 115, stockholders' equity was
increased by approximately $551,000, which represented the net unrealized
gains, net of deferred taxes, on securities available for sale.

Comparison of Operating Results for the Years Ended December 31, 1992
and 1993.

General. LBI's net earnings for the year ended December 31, 1993 were
$2,217,000 compared with $2,155,000 for 1992. This represented a 2.9% increase
from 1992 to 1993. Net interest income decreased $219,000 in 1993 while the
provision for loan losses increased $85,000 or 48.7% from $174,000 in 1992 to
$259,000 in 1993. Total non-interest income increased $523,000 or 45.5% while
general and administrative expenses increased $266,000 or 6.4% in 1993. Income
tax expense increased $103,000 or 8.6% during the same time period.

Net Interest Income. Net interest income, the difference between
total interest income and total interest expense, is LBI's principal source of
earnings. Net interest income is determined by the average volume of
interest-earning assets, the rates earned on those interest-earning assets, and
the cost of deposits and other borrowings. The difference between rates earned
on interest-earning assets and the cost of funds is measured by the net
interest margin.

Net interest income decreased 2.05% or $134,000 in 1993 and LBI's
interest rate spread decreased from 3.49% in 1992 to 3.32% in 1993. This
decrease was due mostly to lower yields on interest-earning assets as the
volume of such average assets has increased during the year. Interest income
on interest-earning assets decreased approximately $1.5 million from December
31, 1992 to December 31, 1993. This decrease was partially offset by a
decrease in interest expense during the period of approximately $1.3 million.
The volume of average interest-bearing deposits had a net decrease of
approximately $750,000 from 1992 to 1993 with the most significant decrease in
certificates of deposit which also have the greatest average cost. While
certificates of deposit decreased, the volume of statement savings and NOW
accounts increased, further reducing LBI's cost of funds due to the lower
average cost of such products.

Interest Income. Interest income decreased approximately $1.5
million or 10.5% during 1993. This decrease was due to a decline in interest
rates during the period, as average interest-earning assets increased
approximately $4.9 million during the year. The average yield on
interest-earning assets fell from 8.43% in 1992 to 7.33% in 1993. Interest
income was adversely affected by approximately $1.5 million as a result of rate
changes during the year while the changes in volume contributed approximately
$79,000 to interest income. Decreases in interest rates closely paralleled
changes in prevailing market interest rates.

The average balance of LBI's loan portfolio increased slightly in 1993
from $123.3 million at December 31, 1992 to $124.6 million at December 31,
1993. While the average balance of the portfolio increased during the year,
interest income associated with the loan portfolio decreased approximately
$903,000. In 1993, the demand for refinances of one-to-four family mortgage
loans was strong and thus, many of LBI's loans were refinanced at lower rates.
LBI also has a significant amount of adjustable-rate mortgage loans, most of
which repriced to lower rates during the year.

During 1993, LBI continued its practice of selling new originations of
long-term, fixed-rate mortgage loans in the secondary market and as of
year-end, had sold approximately $29.8 million of such loans to the Federal
Home Loan Mortgage Corporation. Liberty Federal did, however, retain $10.0
million of such loans in its portfolio and offset the interest rate risk of
these loans with $10.0 million in FHLB advances.

In the summer of 1993, LBI began a consumer loan program which offered
competitive interest rates on loans for cars, trucks and boats. This program
continued throughout the remainder of 1993 and into 1994. Partly as a result
of this program, the balance of the consumer loan portfolio increased
approximately $4.9 million which contributed to the overall increase in the
average balance of LBI's loan portfolio.

<PAGE> 65
Interest income on mortgage-backed securities decreased approximately
$330,000 in 1993. This decrease was due mostly to the decline in volume of
such securities during the period. The average balance of mortgage-backed
securities decreased from $10.6 million in 1992 to $7.4 million in 1993 mainly
as a result of the principal repayments of approximately $3.2 million received
on the securities during 1993. The average yield on these securities dropped
from 8.73% in 1992 to 8.01% in 1993 primarily as a result of the principal
repayments received on the higher-yield securities in LBI's portfolio.

Interest income on other securities decreased $343,000, or 27.9%, for
1993 compared with 1992. This decrease was mainly due to falling interest
rates during 1993. A significant portion of the securities portfolio has
adjustable rates, several of which adjust on a weekly basis. The average yield
on other securities declined from 6.01% in 1992 to 4.46% in 1993 while the
average balance of such securities decreased from $20.5 million to $19.9
million. Interest income on the securities portfolio was adversely affected in
1993 by volume and rate decreases of approximately $35,000 and $316,000,
respectively.

Interest earned on deposits with other banks and federal funds sold
increased $115,000, or 27.8%, in 1993. This increase is due to the increase in
volume of such funds as the average yield on these investments declined from
3.70% in 1992 to 2.84% in 1993. Interest income on other interest-earning
assets was adversely affected by approximately $96,000 due to rate changes
during the year and it was increased by approximately $274,000 as a result of
the increase in volume.

Interest Expense. Total interest expense decreased 17.9% or
approximately $1.3 million in 1993 when compared with 1992. Interest expense
for 1993 was favorably affected by volume and rate decreases of $40,000 and
$1,311,000, respectively. In the fall of 1993, Liberty Federal borrowed $10.0
million in Federal Home Loan Bank advances and incurred interest expense on
these advances of approximately $93,000 in 1993. There was no such expense in
1992. The average balance of interest-bearing liabilities increased from
$150.5 million in 1992 to $152.1 million in 1993, mainly as a result of the
FHLB advances. The average balance of interest-bearing deposits fell from
$149.9 million in 1992 to $149.2 million in 1993 and the average balance of the
ESOP loan decreased approximately $110,000. While the average balance of
interest-bearing liabilities increased during the year, the average rate on
these liabilities decreased from 4.94% at December 31, 1992 to 4.01% at
December 31, 1993. The lower cost of interest-bearing liabilities reflected
the prevailing interest rate environment during 1993. As a result of the
decline in interest rates during 1993, LBI saw an outflow of deposits as
depositors sought alternative investments such as mutual funds and annuities.

Provision for Loan Losses. Provisions for loan losses are charged to
earnings to provide for loan losses based on prior loss experience, volume and
type of lending conducted by Liberty Federal, industry standards and past due
loans in Liberty Federal's portfolio. Also considered are general economic
conditions and other factors related to the collectibility of Liberty Federal's
loan portfolio.

For 1993 and 1992, LBI provided $259,000 and $174,000, respectively,
for loan losses. The loss provisions were based on management's analysis of
the factors which affect the loan portfolio. The analyses include
management's consideration of such factors as economic conditions, loan
portfolio characteristics, prior loan loss experience and results of reviews of
the loan portfolio.

There can be no assurance that in the future Liberty Federal's
regulators or its loan portfolio will not require further increases in the
allowance. During 1993, LBI had net charge-offs of $82,000 compared with
$22,000 in 1992. During the second quarter of 1993, LBI charged off $55,000
on a loan for a shopping center in McKenzie, Tennessee. The property was
subsequently foreclosed and is classified as real estate owned at December 31,
1993.

At December 31, 1992, the allowance represented 103.70% of total
non-accrual loans and loans past due more than 90 days. At December 31, 1993,
the allowance for loan losses represented 149.91% of the total loans past due
90 days or more and non-accrual loans.

Non-Interest Income. Non-interest income increased approximately
45.5% in 1993 when compared with 1992. This was primarily the result of
increases in net gains on sales of interest-earning assets of $400,000, loan
servicing fees of $38,000 and service charges of $59,000.

<PAGE> 66
Gain on sales of interest-earning assets increased approximately
$400,000 in 1993. LBI sold fixed-rate mortgage loans totaling approximately
$29.8 million during 1993 versus $23.4 million sold in 1992. The loans were
sold in order to manage interest rate risk. Net gains recognized on these
sales totaled $697,000 in 1993 as compared with $306,000 in 1992. Also, in
1992, LBI recognized a loss of $8,750 on the sale of a U.S. Treasury note
while in 1993, a gain of $625 was recognized on the sale of a security
classified as available for sale.

Loan servicing fees were $137,000 in 1993 as compared with $99,000 in
1992. This is due to the greater number of loans serviced for others by
Liberty Federal as a result of the loan sales during 1993. Service charge
income on transaction accounts increased $59,000 in 1993 due to the increased
number of transaction accounts. Other operating income increased approximately
$25,000 in 1993 mainly as a result of the rental income received on real estate
owned during the second half of the year.

General and Administrative Expenses. General and administrative
expenses increased $266,000 or 6.4% in 1993 as compared to 1992.

Compensation and benefits expenses, the largest overhead expense,
increased approximately $118,000 in 1993. This was primarily the result of
salary increases and the costs associated with the hiring of additional
personnel to handle increased business volume in the loan production and teller
areas. Also in 1993, LBI incurred pension expense of approximately $40,000.
There was no pension expense in 1992.

There was no provision for losses on real estate owned in 1993,
however in 1992, provisions totaled $87,000. Such expense is recorded when, in
the opinion of management and based on current appraisals, Liberty Federal may
sustain a loss on the disposition of real estate owned. The majority of this
expense in 1992 was attributable to the decline in value of several condominium
units which were subsequently sold in 1992.

Federal deposit insurance premiums decreased approximately $37,000 in
1993 as a result of a one-time credit received in the first half of 1993.
Data processing fees and stationery and supplies increased $11,000 and $25,000
respectively, during 1993. This increase is attributable to increases in
monthly fees and to increased prices of supplies purchased by Liberty Federal.

Other operating expenses increased approximately $235,000 or 22.4%
during 1993 when compared to 1992. Director's fees increased $31,000 during
1993. The Board of Directors met more often in 1993 mainly as a result of
LBI's pending merger with UPC. Advertising expense increased approximately
$17,000 or 17.8% in 1993 when compared to 1992 as a result of Liberty Federal's
effort to market its products and services.

As a result of the pending merger with UPC, LBI incurred additional
expenses of approximately $151,000 in 1993. The expenses included legal fees,
accounting fees and consulting fees.

Income Taxes. Income tax expense from continuing operations
increased $103,000 in 1993 compared with 1992. Income tax expense represented
38.4% of pretax income for 1993 and 35.7% of pretax income in 1992.

For income tax purposes, LBI is allowed a deduction from income equal
to the greater of a special bad debt deduction, limited to 8% of otherwise
taxable income and subject to certain limitations based upon aggregate loans
and savings account balances at the end of the year, or specific charge-offs
incurred during the year.

In the first quarter of 1993, LBI adopted SFAS No. 109, "Accounting
for Income Taxes". This new accounting standard required LBI to change its
method of accounting for income taxes from the deferred method to the asset and
liability method. The cumulative effect of the change in this principle had a
favorable effect on LBI's earnings for 1993 of approximately $127,000, or $0.19
per share.

<PAGE> 67
Earnings Per Share. Earnings per share for the year ended December
31,1993 were based on the weighted average number of shares and common share
equivalents outstanding during the period, 666,976, and the earnings for 1993.
In 1992, the weighted average number of shares outstanding was 634,215. As a
result of the increased number of shares and common share equivalents in 1993,
earnings per share in 1993 decreased even though net earnings increased.

Comparison of Operating Results for the Years Ended December 31, 1991 and 1992.

General. LBI's net earnings for the year ended December 31,
1992 were $2,155,000 compared with $1,313,000 for 1991. This
represented a 64.1% increase from 1991 to 1992. LBI's return on
assets ("ROA") increased from .78% in 1991 to 1.26% in 1992. The
primary causes of the increase in earnings were LBI's increased net
interest margin and an increase in non-interest income.

Net Interest Income. Net interest income, the difference
between total interest income and total interest expense, is LBI's
principal source of earnings. The amount of net interest income is
determined by the volume of interest-earning assets, the rates earned
on those interest-earning assets, and the cost of deposits and other
borrowings. The difference between rates earned on interest-earning
assets and the cost of funds is measured by the net interest margin.

Net interest income increased 23.3% or $1,232,000 in 1992.
This increase was due to higher volumes of interest-earning assets as
well as an improvement in the net interest margin. The improvement in
net interest margin was achieved primarily by a widening of spreads
within the market between rates earned on loans and rates paid on
deposits. LBI's interest rate spread increased from 3.02% in 1991 to
3.49% in 1992.

Interest Income. Interest income decreased approximately
$1.8 million or 11.6% during 1992. This decrease was due to a decline
in interest rates during the period and is the net difference of
volume and rate changes affecting interest-earning assets during 1992.
Interest income was adversely affected by approximately $2.3 million
as a result of rate changes during the year while the changes in
volume contributed approximately $500,000 to interest income. The
average yield on interest-earnings assets fell from 9.82% in 1991 to
8.43% in 1992 while average interest-earning assets increased $4.8
million during the period. Decreases in interest rates closely
paralleled changes in prevailing market interest rates.

The average balance of LBI's loan portfolio increased 4.9%
during 1992 while the average yield decreased from 10.50% in 1991 to
9.24% in 1992. Additionally, interest income on the loan portfolio
decreased approximately $963,000 or 7.8% during the period. In 1992,
the demand for refinances of one-to-four family mortgage loans was
particularly strong. As a result, a significant number of LBI's
seasoned loans were refinanced at lower rates. Also, during 1992, the
majority of LBI's portfolio of adjustable-rate mortgage loans repriced
at lower rates. These factors, together with the prevailing interest
rate environment, caused the average yield on the loan portfolio to
decline.

A large portion of new mortgage loan originations in 1992 were
long-term, fixed-rate mortgage loans and LBI sold approximately $23.4
million of such loans in the secondary market shortly after
origination. Over half of these sales occurred in the third and fourth
quarters of 1992. Management sold these loans in an effort to manage
interest rate risk. The proceeds of the sales were reinvested in both
loans and federal funds.

In 1992, LBI initiated a consumer loan program that featured
consumer installment loans at attractive interest rates. The proceeds
of such loans were to be used for purchases in and near LBI's market
area to help stimulate the local economy. As a result of this program,
the consumer loan portfolio increased approximately $3.7 million in
1992 which caused an increase in the average balance of the loan
portfolio.

Interest income on investment securities decreased $356,000,
or 22.4%, for 1992 compared with 1991. This decrease was mostly the
result of falling interest rates during 1992. Several high-yielding
investment securities matured in 1992, and the proceeds were
reinvested at much lower yields, thus causing the average yield to
decline from 7.63% in 1991 to 6.01% in 1992. A significant portion of
the investment securities portfolio has adjustable rates, several of
which adjust on a weekly basis. Interest income on the

<PAGE> 68
investment securities portfolio was adversely affected in 1992 by
volume and rate decreases of approximately $24,000 and $337,000,
respectively.

Interest income on mortgage-backed securities decreased
approximately $202,000 in 1992. Approximately half of this decrease
is due to the difference in amortization of discounts on the purchase
of these securities. The discount is amortized using the interest
method over the remaining period to maturity, adjusted for anticipated
prepayments. The discount amortization for 1991 was $177,000 compared
with $62,000 for 1992. Interest income is also affected by principal
repayments received on the securities. As principal is repaid, the
security decreases as does interest income on that balance. During
1992, LBI received $2,864,000 in principal repayments on mortgage-
backed securities.

Interest earned on deposits with other banks and federal funds
sold decreased $311,000, or 42.9%, in 1992. This decrease is due to
the declining interest rate environment as the average balance of such
deposits decreased only $51,000 from 1991 to 1992. During the same
period, the average yield decreased from 6.45% to 3.70%.

Interest Expense. Total interest expense decreased
approximately $3.1 million, or 29.2%, in 1992 when compared with 1991.
Interest expense for 1992 was favorably affected by volume and rate
decreases of $417,000 and $2,738,000, respectively. Interest expense
of $34,000 on long-term borrowed funds resulted from interest incurred
on the ESOP loan and there was no such expense in 1991. The average
rate on interest-bearing liabilities fell from 6.80% in 1991 to 4.94%
in 1992 while the average balance of such liabilities decreased from
$154.2 million in 1991 to $150.5 million in 1992. The lower cost of
interest-bearing liabilities reflected the prevailing interest rate
environment during 1992. The lower cost was also affected by the
decrease in the average balance of interest-bearing liabilities. As
a result of the decline in interest rates during 1992, LBI saw an
outflow of deposits as depositors sought alternative investments such
as mutual funds and annuities.

Provision for Loan Losses. Provisions for loan losses are
charged to earnings to provide for loan losses based on prior loss
experience, volume and type of lending conducted by Liberty Federal,
industry standards and past due loans in Liberty Federal's portfolio.
Also considered are general economic conditions and other factors
related to the collectibility of Liberty Federal's loan portfolio.

For 1992 and 1991, LBI provided $174,000 and $201,000,
respectively, for loan losses. The loss provisions were based on
management's analysis of the factors which affect the loan portfolio.
In 1991, LBI provided for specific valuation allowances of
approximately $69,000 for loans to a commercial customer. The loans
consisted of a boat floor plan as well as a second mortgage on the
Debtor's residence. In the last quarter of 1991, approximately
$40,000 was charged off as a result of the floor plan loan. As a
result of the increase in LBI's consumer loan portfolio in 1992,
management increased LBI's general loan loss allowances. Therefore,
most of the provision for loan losses in 1992 were additions to the
general loan loss allowances.

There can be no assurance that in the future Liberty Federal's
regulators or its loan portfolio will not require further increases in
the allowance. During 1992, LBI had net charge-offs of $22,000
compared with $118,000 in 1991. At December 31, 1991, the allowance
represented 72.19% of total non-accrual loans and loans past due more
than 90 days. At December 31, 1992, the allowance for loan losses
represented 103.70% of the total loans past due 90 days or more and
non-accrual loans.

Non-Interest Income. Non-interest income increased $351,000
or 44% in 1992 when compared with 1991. This increase in income was
primarily due to an increase in net gains on sales of interest-earning
assets of $292,000 and an increase in other loan fees.

In 1992, net gains on sales of interest-earning assets totaled
$298,000 compared with $5,000 for 1991. LBI sold 531 fixed-rate
mortgage loans totaling approximately $23.4 million during 1992 to
effectively manage interest rate risk. Net gains recognized on these
sales totaled $306,000 as compared with $4,000 recognized in 1991 on
the sale of three mortgage loans. Also, in 1991, LBI recognized a
gain of $1,000 on the sale of a U.S. Treasury note while in 1992, a
loss of $8,750 was recognized on the sale of a security classified as
held for sale.

<PAGE> 69
Loan servicing fees increased approximately $9,000 in 1992
over 1991. This is due to the greater number of loans serviced for
others by Liberty Federal as a result of the loan sales during 1992.
Income from other loan fees, consisting primarily of appraisal fees
and late charges, also increased in 1992 by approximately $42,000.
This increase is primarily the result of the increased loan demand
experienced by LBI during 1992 in both mortgage and consumer lending.
Service charge income on transaction accounts increased approximately
$26,000 in 1992 due to the increased number of transaction accounts
and the increase in fees charged by Liberty Federal on such accounts.

General and Administrative Expenses. General and
administrative expenses increased $302,000 or 7.8% in 1992 as compared
to 1991. The increase is mainly due to increases in compensation and
benefits, provisions for losses on real estate owned and other
operating expenses during 1992.

Compensation and benefits expenses, the largest overhead
expense, increased approximately $150,000 for 1992. This was
primarily the result of salary increases and the costs associated with
the hiring of additional personnel to handle increased business volume
in the loan production area.

Provisions for losses on real estate owned were $87,000 in
1992 compared with $11,000 in 1991. Such expense is recorded, when in
the opinion of management and based on current appraisals, Liberty
Federal may sustain a loss on the disposition of real estate owned.
The majority of this expense for 1992 was attributable to the decline
in value of several condominium units which were subsequently sold in
1992.

During 1992, other operating expenses increased approximately
$74,000 or 7.5% over the level of expenses in 1991. In 1992, LBI paid
special dues of approximately $32,000 to the local Chamber of
Commerce. The purpose of the dues was to aid the Chamber in its
efforts to induce existing industry to expand jobs by growing and
relocating other plant facilities to this area. Professional fees
such as accounting fees and consulting fees increased in 1992 by
approximately $75,000 as a result of being a public company. State
franchise tax increased in 1992 by approximately $36,000 which was due
to LBI's increased capital.

Partially offsetting the increases in the aforementioned
expenses were decreases in legal expenses and in expenses associated
with real estate owned in 1992. In 1991, Liberty Federal was party to
a lawsuit filed by a former commercial depositor. The suit was
settled out-of-court in January, 1992 for $67,000 which had been
accrued as of December 31, 1991. Liberty Federal filed a claim with
the underwriter of its Financial Institution Bond and in July, 1992,
received $30,000 from the underwriter as full settlement of Liberty
Federal's claim. This settlement is reflected in other operating
expenses for 1992. Thus legal expense decreased in 1992 by
approximately $40,000. Expenses associated with real estate owned,
other than provisions for loss on disposition, decreased in 1992 by
71.9%. In 1991, the volume of real estate owned was higher than in
1992 and Liberty Federal incurred significant expense in the repairs
and maintenance of real estate owned during 1991.

Income Taxes. Income tax expense increased $466,000 in 1992
compared with 1991 as a result of LBI's increased earnings in 1992.
Income tax expense represented 35.7% of pretax income for 1992 and
35.8% of pretax income in 1991.

For income tax purposes, LBI is allowed a deduction from
income equal to the greater of a special bad debt deduction, limited
to 8% of otherwise taxable income and subject to certain limitations
based upon aggregate loans and savings account balances at the end of
the year, or specific charge-offs incurred during the year.

Liquidity and Capital Resources. LBI has had no business other than
that of Liberty Federal and its subsidiary. The $169,111 of cash held by LBI on
an unconsolidated basis at December 31, 1993 together with dividends that may
be paid from Liberty Federal to LBI, may provide funds for its operations.
Payment of dividends is subject to certain restrictions as described in Note 15
of the Notes to the Consolidated Financial Statements. Since Liberty Federal
substantially exceeds its fully phased-in regulatory capital requirements, it
is expected that Liberty Federal could pay the maximum dividends permitted by
OTS regulations, however, there can be no assurance that Liberty Federal's
sources of funds will be sufficient to satisfy liquidity needs of LBI in the
future.

<PAGE> 70
Liberty Federal's principal sources of funds for operations are
deposits from its primary market area, principal and interest payments on loans
and mortgage-backed securities, proceeds from maturing securities and FHLB
advances and other borrowings.

Liberty Federal is required by OTS regulations to maintain minimum
levels of specified assets which are currently equal to 5% of deposits and
short-term borrowings. Such investments serve as a source of liquid funds
which Liberty Federal may use to meet deposit withdrawals and other short-term
needs. Liberty Federal's most liquid assets are cash and cash equivalents,
which are short-term, highly liquid investments with original maturities of
less than six months that are readily convertible to known amounts of cash.
The levels of such assets are dependent upon Liberty Federal's operating,
financing and investment activities at any given time. In recent years Liberty
Federal has maintained higher levels of liquid assets than required by
regulation. Management believes that the liquidity levels maintained are fully
adequate to meet potential deposit outflows, loan demand and normal operations.
Liberty Federal's average daily liquidity ratio for the month of December, 1993
was 27.97%, and its average short-term liquidity for such period was 25.72%.

During the year ended December 31, 1993, $2,395,000 of cash and cash
equivalents were provided by cash flows from operating activities. This net
increase in cash and cash equivalents was primarily due to LBI's earnings in
1993 and the difference between cash used to originate $29.0 million in loans
available for sale and the cash received on the sales of such loans of
approximately $29.8 million. Net cash used by investing activities during 1993
totaled $3,208,000 which mainly consisted of a net increase in loans of
approximately $3.5 million. Net cash provided by financing activities for the
period totaled approximately $7.0 million which was mostly due to the proceeds
from FHLB advances of $10.0 million. This was partially offset by a net
decrease in deposits of $2.6 million during 1993. Cash totaling $382,000 was
used in 1993 for payment of dividends to stockholders.

At December 31, 1993, Liberty Federal had outstanding commitments to
originate loans totaling approximately $2.2 million and $2.7 million in
approved but unused home equity lines of credit. There were commitments to
sell loans at December 31, 1993 of $329,000. The commitments to originate
loans consisted of variable rate loans of $281,000 and fixed-rate loans of
$1,878,000. Liberty Federal also had outstanding letters of credit at December
31, 1993 of $91,000. Management believes that Liberty Federal's sources of
funds are sufficient to fund all of its outstanding commitments.

As of December 31, 1993, Liberty Federal exceeded all its current
regulatory capital requirements. The following is a reconciliation of capital
amounts for Liberty Federal at December 31, 1993, to the regulatory capital
requirements of Liberty Federal.

<TABLE>
<CAPTION>
Tangible Percent Core Percent Risk-based Percent
Capital of Assets Capital of Assets Capital of Assets
-------- --------- ------- --------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
GAAP capital - Liberty
Federal Savings Bank . . . . . $20,174 11.2 $20,174 11.2 $20,174 20.7
Investments in and
advances to subsidiary . . . . (21) -- (21) -- (21) --

General valuation allowances -- -- -- -- 1,169 1.2
----- ---- ----- ---- ------- -----

Regulatory capital - computed . . 20,153 11.2 20,153 11.2 21,322 21.9
Regulatory capital requirements . 2,708 1.5 5,416 3.0 7,787 8.0
------ ---- ------- ---- -------- -----

Regulatory capital - excess . . . $17,445 9.7 $14,737 8.2 $13,535 13.9
======= ==== ======= ==== ======= =====
</TABLE>

Impact of Inflation and Changing Prices. The consolidated financial
statements, and notes thereto, presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without consideration of the

<PAGE> 71
changes in the relative purchasing power of money over time due to inflation.
The impact is reflected in the increased cost of Liberty Federal's operations.
Unlike most industrial companies, nearly all the assets and liabilities of
Liberty Federal are monetary. As a result, interest rates have a greater
impact on Liberty Federal's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or
to the same extent as the price of good and services. As a result of Liberty
Federal's interest-earning assets over interest-bearing liabilities maturing or
repricing within one year, Liberty Federal's net interest income would be
adversely affected by decreases in prevailing rates.

Impact of New Accounting Standards. The Financial Accounting
Standards Board ("FASB") issued SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," in May 1993. This statement is applicable
to all creditors and to most loans, uncollaterallized as well as
collateralized. It also applies to all troubled debt restructurings
involving a modification of terms. It requires that impaired loans
that are within the scope of the statement be measured based on the
present value of expected future cash flows discounted at the loans'
effective interest rate or at the loans' observable market price or
the fair value of the collateral if the loans are
collateral-dependent. LBI will be required to adopt SFAS No. 114 in
1995. At this time, LBI is evaluating the possible financial impact
of SFAS No. 114 on LBI's consolidated financial statements.

BUSINESS

Market Area. Liberty Federal's offices are located in Henry, Benton,
Carroll and Humphreys Counties in Northwest Tennessee on both sides of the
Tennessee River. Liberty Federal has five full service offices in the
Tennessee communities of Paris, Camden, Huntingdon, McKenzie and Waverly and
one limited service office in Paris. Liberty Federal considers its market area
to comprise the Tennessee counties of Henry, Benton, Carroll and Humphreys and,
primarily, the communities immediately surrounding each of Liberty Federal's
offices. Liberty Federal's market area primarily consists of rural communities
with a significant segment of the work force employed in unskilled and
semi-skilled jobs. Employment in these communities is primarily reliant on
local manufacturing industries, with significant employment also coming from
services, retail sales and the transportation, utility and construction
industries. In addition, there are some agricultural businesses in these
communities, particularly in Henry County.

The primary manufacturers located in Liberty Federal's market area are
the Plumley Companies, Emerson Electric and Dupont. Much of the
non-manufacturing related economic activity in the area is related to the
area's proximity to facilities developed by the Tennessee Valley Authority on
Tennessee River, including Kentucky Lake -- one of the largest man-made lakes
in the world -- and "Land Between the Lakes" -- a 170,000-acre recreation area
between Kentucky Lake and the Cumberland River. These facilities are located
within 20 miles of Paris, and they attract tourists and retirees and support a
wide variety of construction, transportation and service industries.

Liberty Federal's market area as a whole has experienced moderate
growth in population and median household incomes in recent years. Management
believes that overall economic growth in its market area is likely to be modest
and that, in order to grow, Liberty Federal must capture market share within
its current market area and expand either its market area as a whole or the
particular areas within its market area where Liberty Federal has concentrated
its activities as part of its business plan. Management has been expanding
Liberty Federal's loan marketing activities in the Tennessee and Kentucky
counties adjacent to Liberty Federal's market area where Liberty Federal had
not previously concentrated its efforts. It is expected that Liberty Federal
will conduct its expanded marketing activities through its existing branch
network and that minimal additional expenses will be incurred in connection
with such activities. Liberty Federal's liquid assets are expected to meet
Liberty Federal's loan funding needs in connection with these expanded
marketing activities. For information with respect to other financial
institutions in Liberty Federal's market area, see "Competition," below.

Lending Activities.

General. Liberty Federal originates loans through its home office in
Paris, Tennessee and its branch offices in Camden, Huntingdon, McKenzie and
Waverly, Tennessee (subject to the approval of the home office of all
non-consumer mortgage loans). The principal lending activity of Liberty
Federal is the origination of conventional mortgage loans for the purpose of
purchasing or refinancing owner-occupied, one- to four-family residential
properties in its primary market area. Liberty Federal also actively
originates consumer loans, both directly and indirectly, and commercial loans.
Liberty Federal has originated limited

<PAGE> 72
amounts of loans insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). Occasionally, Liberty
Federal makes conventional mortgage loans for the purpose of constructing
one- to four-family residences and loans secured by commercial and multi-family
real estate.

Prior to the 1980s, Liberty Federal's lending activities consisted
largely of originating long-term, fixed-rate mortgage loans for retention in
the loan portfolio. As a result of fundamental changes in the regulation of
savings institutions and economic conditions which significantly increased both
the level and volatility of Liberty Federal's cost of funds, since the early
1980s Liberty Federal has emphasized the origination of adjustable-rate loans
and short-term loans in order to increase the interest rate sensitivity of its
loan portfolio. Liberty Federal also continues to offer long-term, fixed-rate
conventional mortgage loans. Such loans are underwritten in accordance with
Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") standards so the loans qualify for sale to the FNMA and
the FHLMC in the secondary market. In 1993, Liberty Federal sold $29.8 million
of such loans in order to effectively manage interest rate risk, and it is
expected that so long as market interest rates remain at current levels Liberty
Federal may continue to sell significant amounts of its long-term, fixed-rate
loan originations. In recent years, Liberty Federal has experienced the
greatest demand for long-term, fixed-rate loans during periods of relatively
low market interest rates. At December 31, 1993, $46.9 million, or 36.2% of
Liberty Federal's gross loan portfolio had rates scheduled to adjust within one
year or less, and an additional $13.3 million, or 10.3%, had fixed rates but
terms to maturity of one year or less. However, at that date $45.7 million, or
35.2%, of Liberty Federal's gross loan portfolio had fixed-rates and terms to
maturity of more than five years.

65
<PAGE> 73
Set forth below is selected data relating to the composition of
Liberty Federal's loan portfolio by type of loan on the dates indicated. As of
December 31, 1993, Liberty Federal had no concentrations of loans exceeding 10%
of total loans other than as disclosed below.

<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------
1993 1992 1991
------------------ ------------------ --------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Conventional real estate loans:
Loans on existing property (1)(2) . . . . . . . . . . . $ 51,525 39.7 $ 54,254 43.6 $ 58,939 46.8
Loans refinanced (1)(3) . . . . . . . . . . . . . . . . 38,378 29.6 35,336 28.4 38,748 30.7
Interim construction loans . . . . . . . . . . . . . . 1,732 1.3 2,044 1.6 474 0.4
Insured or guaranteed real estate loans . . . . . . . . . 5,849 4.5 5,842 4.7 4,914 3.9
-------- ----- -------- ----- -------- -----
97,484 75.1 97,476 78.3 103,075 81.8
-------- ----- -------- ----- -------- -----

Consumer loans:
Automobiles . . . . . . . . . . . . . . . . . . . . . . 10,460 8.1 8,737 7.0 6,489 5.2
Home equity loans . . . . . . . . . . . . . . . . . . . 3,044 2.3 2,704 2.2 2,397 1.9
Home equity line of credit . . . . . . . . . . . . . . 3,857 3.0 3,767 3.0 2,974 2.4
Savings account loans . . . . . . . . . . . . . . . . . 2,616 2.0 2,518 2.0 2,700 2.1
Home improvement loans . . . . . . . . . . . . . . . . 1,409 1.1 1,084 0.9 826 0.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . 6,711 5.2 4,229 3.4 3,197 2.5
Commercial loans . . . . . . . . . . . . . . . . . . . . 4,120 3.2 3,976 3.2 4,327 3.4
-------- ----- -------- ----- -------- -----
32,217 24.9 27,015 21.7 22,910 18.2
-------- ----- -------- ----- --------
Total loans . . . . . . . . . . . . . . . . . . . . . 129,701 100.0 124,491 100.0 125,985 100.0
===== ===== =====

Less:
Loans in process . . . . . . . . . . . . . . . . . . . (2,069) (1,974) (622)
Discounts and other . . . . . . . . . . . . . . . . . . (2,525) (2,424) (2,227)
Loan loss reserve . . . . . . . . . . . . . . . . . . . (1,287) (1,110) (958)
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $123,820 $118,983 $122,178
======== ======== ========
</TABLE>

_________________
(1) Includes loans available for sale at December 31, 1993 totaling
$1,721,000.
(2) Includes permanent loans on single family residences under
construction.
(3) Represents loans made to refinance prior loans to the same borrower
and secured by the same property.

66
<PAGE> 74
The following table sets forth certain information as of December 31,
1993 regarding the dollar amount of loans maturing in Liberty Federal's
portfolio, including scheduled repayments of principal, based on contractual
terms to maturity. Demand loans, loans having no schedule of repayments and
no stated maturity, and overdrafts are reported as due in one year or less.
The table below does not include any estimate of prepayments which
significantly shorten the average life of all loans and may cause Liberty
Federal's actual repayment experience to differ from that shown below.

<TABLE>
<CAPTION>
Due after Due after Due after
3 through 5 through 10 through Due after 15
Due during the year ending 5 years after 10 years after 15 years after years after
December 31, December 31, December 31, December 31, December 31,
----------------------------
1994 1995 1996 1993 1993 1993 1993
------ ------ ------ ------------- -------------- -------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Mortgage (1)(2) . . . $ 7,215 $ 64 $3,042 $ 3,990 $15,010 $33,070 $37,297
Interim construction . 1,653 -- -- -- -- -- --
Consumer . . . . . . . 8,592 2,721 3,398 7,648 924 784 173
Commercial . . . . . . 1,962 90 297 1,032 466 273 --
------- ------ ------ ------- ------- ------- -------
Total . . . . . . . $19,422 $2,875 $6,737 $12,670 $16,400 $34,127 $37,470
======= ====== ====== ======= ======= ======= =======
</TABLE>
_______________
(1) Includes permanent loans on single family residences under
construction.
(2) Includes loans available for sale at December 31, 1993 totaling
$1,721,000.

The following table sets forth as of December 31, 1993 the dollar
amount of the loans due or repricing subsequent to the year ending December 31,
1994 between those with predetermined interest rates and those with adjustable
interest rates.

<TABLE>
<CAPTION>
Floating or
Predetermined Rates Adjustable Rates
------------------- ----------------
(In thousands)
<S> <C> <C>
Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . $ 86,798 $5,675
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,648 --
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733 425
-------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,179 $6,100
======== ======
</TABLE>

67
<PAGE> 75
One-to-Four-Family Real Estate Lending. The primary emphasis in
Liberty Federal's lending activity is the origination of conventional loans
secured by owner-occupied, one- to four-family residential properties. To a
lesser extent, Liberty Federal originates FHA-insured and VA-guaranteed loans
secured by such properties. The purchase price for most such properties has
been between $35,000 and $85,000. Management believes that price range
includes the majority of the single family properties in Liberty Federal's
market area. At December 31, 1993, approximately $82.5 million, or 63.6%, of
Liberty Federal's gross loan portfolio consisted of loans secured by one-to
four-family residential real properties which were primarily owner-occupied,
single-family residences located in Liberty Federal's primary market area.

Liberty Federal's conventional mortgage loan originations are
generally for terms of 10 to 30 years, amortized on a monthly basis, with
principal and interest due each month. Residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms. Borrowers may refinance or prepay loans at their option without
penalty. Conventional residential mortgage loans granted by Liberty Federal
customarily contain "due-on-sale" clauses which permit Liberty Federal to
accelerate the indebtedness of the loan upon transfer of ownership of the
mortgaged property. Additionally, loans insured by the FHA after December 1989
or guaranteed by the VA after March 1988 contain due-on-sale clauses.
Due-on-sale clauses are an important means of imposing assumption fees and
increasing the rate on existing mortgage loans during periods of rising
interest rates and increasing the turnover of mortgage loans in Liberty
Federal's portfolio.

Liberty Federal's lending policies generally limit the maximum
loan-to-value ratio on mortgage loans secured by owner-occupied properties to
95% of the lesser of the appraised value or purchase price, with the condition
that private mortgage insurance is required on loans with loan-to-value ratios
in excess of 80%. The maximum loan-to-value ratios on mortgage loans secured
by non-owner-occupied properties and/or used for refinancing purposes range
between 70% and 80%.

Liberty Federal began originating conventional adjustable-rate
residential mortgage loans in the early 1980s and principally offers one-year
adjustable-rate mortgage loans with rate adjustments indexed to the weekly
average rate of U.S. Treasury securities adjusted to a constant one-year
maturity (the "One-Year Treasury Index"). The rates at which interest accrues
on these mortgages are adjustable once a year with limitations on adjustments
of 2% per adjustment period and 6% over the life of the loan. Loans originated
after February 1991 are convertible at the end of the first year to a fixed
rate equal to the FHLMC required net yield for fixed-rate mortgages covered by
10-day mandatory delivery commitments in effect as of the conversion date plus
3/8% (rounded to nearest 1/8%) upon the payment of a $500 conversion fee.
Liberty Federal's loan portfolio also includes a limited amount of loans with
variable rates tied to other indexes. Liberty Federal originated $4.7 million
of adjustable-rate one- to four- family mortgage loans during the year ended
December 31, 1993, and such loans amounted to $41.2 million of Liberty
Federal's gross loan portfolio at December 31, 1993.

The retention of adjustable-rate mortgage loans in Liberty Federal's
loan portfolio helps reduce Liberty Federal's exposure to changes in interest
rates. However, there are unquantifiable credit risks resulting from potential
increased costs to the borrower as a result of repricing of adjustable-rate
mortgage loans. It is possible that during periods of rising interest rates,
the risk of default on adjustable-rate mortgage loans may increase due to the
upward adjustment of interest cost to the borrower. Further, the
adjustable-rate mortgages originated by Liberty Federal generally provide for
initial rates of interest below the rates which would prevail were the index
used for pricing applied initially. These loans are subject to increased risk
of delinquency or default as the higher, fully-indexed rate of interest
subsequently comes into effect, replacing the lower initial rate. Further,
although adjustable-rate mortgage loans allow Liberty Federal to increase the
sensitivity of its asset base to changes in interest rates, the extent of this
interest sensitivity is limited by the periodic and lifetime interest rate
adjustment limitations. Accordingly, there can be no assurance that yields on
Liberty Federal's adjustable-rate mortgages will adjust sufficiently to
compensate for increases in Liberty Federal's cost of funds.

Liberty Federal also originates conventional fixed-rate mortgage loans
on one- to four-family residential properties. All fixed-rate loans are
underwritten according to FHLMC and FNMA guidelines, so the loans qualify for
sale in the secondary mortgage market, or pursuant to FHA or VA requirements,
so the loans are insured by the FHA or partially guaranteed by the VA. Liberty
Federal originates and

<PAGE> 76
holds certain fixed-rate mortgage loans in its portfolio as long-term
investments. Liberty Federal originated $40.9 million in fixed-rate one- to
four-family mortgage loans during the year ended December 31, 1993, and such
loans amounted to $41.1 million of Liberty Federal's loan portfolio at
December 31, 1993. All of such loans were held as long-term investments,
except $1.7 million of such loans were held for sale, including $329,000 of
such loans committed to be sold.

Liberty Federal engages in a limited amount of construction lending,
involving loans to qualified borrowers for construction of one- to four-family
residential properties. These properties are primarily located in Liberty
Federal's market area and, to a limited extent, other areas in Tennessee. At
December 31, 1993, Liberty Federal's loan portfolio included $1,732,000 of
loans secured by one- to four-family residential properties under construction,
$82,000 of which were construction/permanent loans structured to become
permanent loans upon the completion of construction and $1,650,000 of which
were interim construction loans structured to be repaid in full upon completion
of construction and receipt of permanent financing. All construction loans are
secured by a first lien on the property under construction. Loan proceeds are
disbursed in increments as construction progresses and as inspections warrant.
Construction/permanent loans generally have adjustable interest rates and are
underwritten in accordance with the same terms and requirements as Liberty
Federal's permanent mortgages, except the loans generally provide for
disbursement in stages during a construction period of up to six months, during
which period the borrower is required to make monthly payments of accrued
interest on the outstanding loan balance. Interim construction loans generally
have fixed interest rates, terms of up to six months and a maximum
loan-to-value ratio of 80%. Borrowers must satisfy all credit requirements
which would apply to Liberty Federal's permanent mortgage loan financing for
the subject property.

Loans involving construction financing present a greater level of risk
than loans for the purchase of existing homes since collateral value and
construction costs can only be estimated at the time the loan is approved.
Liberty Federal has sought to minimize this risk by limiting construction
lending to qualified borrowers in Liberty Federal's market area and by limiting
the number of construction loans outstanding.

Consumer Lending. Consumer lending is an important part of Liberty
Federal's business. Consumer loans generally have shorter terms to maturity or
repricing and higher interest rates than the long-term, fixed-rate mortgage
loans that constitute a substantial part of Liberty Federal's loan portfolio.
Liberty Federal's consumer loans primarily consist of automobile loans, home
equity lines of credit, home equity loans and other consumer loans secured by
mortgages on residences, and savings account loans. Liberty Federal also makes
a limited amount of unsecured loans. At December 31, 1993, Liberty Federal's
consumer loans totaled $28.1 million, or 21.7% of Liberty Federal's gross loan
portfolio. Management expects to continue to aggressively promote consumer
loans as part of its strategy to provide a wide range of personal financial
services to its customers and as a means to enhance the interest rate
sensitivity of Liberty Federal's interest-earning assets and the spread between
its average loan yield and its cost of funds.

Liberty Federal makes both direct and indirect automobile loans.
Direct loans are made directly to the borrower. Indirect loans are made by an
automobile dealer for resale to Liberty Federal. Liberty Federal engages in
indirect lending with three local automobile dealers with whom Liberty Federal
has conducted business for several years. Indirect loans are purchased with
recourse to the dealer. Direct automobile loans secured by new cars generally
are limited to 75% of the "sticker price" and terms of 60 months. Automobile
loans secured by used cars generally are limited to their loan value as
published by the National Automobile Dealers Association and terms of 18 - 48
months, depending on the age of the automobile. Liberty Federal does not make
loans secured by automobiles more than five years old. Collision insurance
policies are required on all automobile loans. At December 31, 1993, Liberty
Federal had $10.5 million of automobile loans, including $3.9 million of
indirect automobile loans.

Liberty Federal began offering home equity lines of credit in 1987.
Liberty Federal's home equity loans and lines of credit generally are made on
the security of residences on which either Liberty Federal or a third party has
a first mortgage. Consumer mortgage loans may not exceed 80% of the appraised
value of the residence (less the outstanding principal of the first mortgage).
Home equity loans have terms of up to 15 years; loans for five or fewer years
have fixed interest rates, and loans for more than five years have annually
adjustable interest rates indexed to the One-Year Treasury Index (the maximum
interest rate is 16%). Home equity lines of credit have terms of 15 years (the
draw period is limited to the first five

<PAGE> 77
years) and have monthly adjustable interest rates indexed to the prime rate
published in the Wall Street Journal (the maximum interest rate is 16%). At
December 31, 1993, Liberty Federal had $6.9 million of consumer loans secured
by mortgages, $3.9 million of which were disbursed under home equity lines of
credit and $3.0 million of which were home equity loans, and Liberty Federal
had an additional $2.7 million of authorized but undrawn home equity lines of
credit.

Liberty Federal makes savings account loans secured by the balance of
a depositor's savings account balance, including certificates of deposit. The
interest rate is 2% above the rate on the savings account, and the account must
be pledged as collateral to secure the loan. Savings account loans are payable
on demand. Interest is billed on a quarterly basis. If the loan balance rises
to the balance of the savings account, Liberty Federal sends a letter to the
customer requesting payment of the accrued interest, and if payment is not made
Liberty Federal may demand payment of the full loan amount.

Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not
warrant further substantial collection efforts against the borrower. In
addition, consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans.
Such loans may also give rise to claims and defenses by a consumer loan
borrower against an assignee of such loans such as Liberty Federal, and a
borrower may be able to assert against such assignee claims and defenses which
it has against the seller of the underlying collateral. Despite these risks,
Liberty Federal's level of consumer loan delinquencies generally has been low.
For example, at December 31, 1993, only .79% of the consumer loan portfolio was
past due 90 days or more. No assurance can be given, however, that Liberty
Federal's delinquency rate on consumer loans will continue to remain this low
in the future.

Commercial Lending. As a federally chartered savings institution,
Liberty Federal is authorized to invest up to 10% of its assets in commercial
loans not secured by real property. Liberty Federal offers a variety of
business loans, including floor plan loans, farm loans, equipment loans and
inventory loans, and Liberty Federal occasionally issues letters of credit.
Liberty Federal's primary commercial lending has involved floor plan loans for
automobile and boat dealerships in Liberty Federal's market area. Liberty
Federal's floor plan loans provide for payments upon the sale of each
automobile or boat securing the loan, with additional interim payments required
for accrued interest and after the automobiles or boats have been in inventory
for stated periods. At December 31, 1993, Liberty Federal had $4.1 million of
commercial loans outstanding, $682,000 of which consisted of floor plan loans.
At that date, Liberty Federal's largest commercial loans consisted of a
$400,000 automobile floor plan loan and a $154,000 marine floor plan loan. All
of these loans are to borrowers in Liberty Federal's market area. At December
31, 1993, Liberty Federal did not have any other commercial loans over
$150,000.

Floor plan and inventory loans present greater risks than other types
of commercial loans because of the relatively large outstanding balances
involved, the depreciable nature of the collateral for such loans and the
inherent difficulties in administering and monitoring "floating" security
interests on collateral that is both moveable and turns over frequently. Also,
a borrower's reduction of principal on outstanding floor plan loans (scheduled
at regular increments based upon the period of time that a given automobile or
boat has been in inventory, and known in the trade as a "curtailment") is, as a
practical matter, subject to the borrower's ability to sell the collateral to a
third-party buyer. From time to time, certain of Liberty Federal's floor plan
borrowers have been unable to make regular curtailment payments on floor plan
loans. In these situations, Liberty Federal attempts to work with these
borrowers to bring the curtailment current.

Commercial and Multi-Family Real Estate Lending. Liberty Federal has
historically engaged in a limited amount of commercial and multi-family
lending. These types of lending can involve substantial risk, and Liberty
Federal has experienced credit problems with certain of its commercial and
multi-family loans and participations. For additional information regarding
Liberty Federal's problem loans, see "Non-Performing Loans and Other Problem
Assets." Except in unusual circumstances, Liberty Federal generally

<PAGE> 78
makes commercial and multi-family real estate loans available on properties in
its market area, with terms of 20 years or less, loan-to-value ratios of 75% or
less and adjustable rates of interest indexed to the prime rate published in
the Wall Street Journal. Management is not actively seeking commercial or
multi-family real estate lending opportunities and is applying conservative
underwriting criteria to those applications which it does consider.

At December 31, 1993, the commercial and multi-family real estate
loans in Liberty Federal's portfolio amounted to $8.7 million and $4.5 million,
or 6.7% and 3.5%, respectively, of Liberty Federal's gross loan portfolio.
These loans were secured by various forms of collateral, including residential
real estate development projects, an automobile dealership, a restaurant, a
truck stop, small shopping centers and apartment and rental condominium
buildings.

Liberty Federal's largest multi-family real estate loan at December 31,
1993 was a $2.6 million, or 64.6%, participation interest in a loan secured by
a 226-unit condominium complex being rented as apartments in Knoxville,
Tennessee. This loan was made in June 1991. Prior to making this loan,
Liberty Federal had a participation interest in a loan to the former owner of
the property, but that loan had been delinquent since November 1990, had been
in-substance foreclosed and was classified as real estate owned. The property
was appraised in January 1991 for $5.0 million. In June 1991, the property was
sold by the former borrower and the former loan was repaid in full, including a
portion of the delinquent interest. In addition, the new borrower paid a total
of approximately $800,000 in cash toward the acquisition of the property. The
payments on this loan are based on a fixed interest rate of 10% and a 30-year
term, but the full balance will be due in five years. The current loan would
exceed Liberty Federal's current maximum loan to one borrower limit if the loan
were not made in order to facilitate the sale of the property. At December 31,
1993, this loan was performing in accordance with its terms. For additional
information, see "Non-Performing Loans and Other Problem Assets" and
"Regulation -- Limits on Loans to One Borrower."

Liberty Federal's largest commercial real estate loans at December 31,
1993 consisted of a $446,000, or 50% participation interest in a loan secured
by a single-family residential real estate project, a $1,393,000 loan secured
by a boat dealership and several other properties, a $1,000,000 loan secured by
a motel, a $725,000 loan participation (66.7%) secured by a shopping center, a
$474,000 loan secured by a truck stop, a $472,000 loan secured by undeveloped
land and farmland and a $214,000 loan secured by an industrial park. The
properties securing all of these loans are in Tennessee. At December 31, 1993,
these loans were fully performing in accordance with their terms, and Liberty
Federal did not have any other commercial or multi-family real estate loans
over $200,000.

Loans secured by commercial and multi-family real estate generally are
larger and involve greater risks than one- to four-family residential mortgage
loans. Because payments on loans secured by such properties are often
dependent on successful operation or management of the properties, repayment of
such loans may be subject to a greater extent to adverse conditions in the real
estate market or the economy. Liberty Federal seeks to minimize these risks in
a variety of ways, including limiting the size of such loans and strictly
scrutinizing the financial condition of the borrower, the quality of the
collateral and the management of the property securing the loan. Substantially
all of the properties securing Liberty Federal's commercial and multi-family
real estate loans are inspected by Liberty Federal's lending personnel before
the loan is made. Liberty Federal also obtains appraisals on each property in
accordance with applicable regulations.

The aggregate amount of loans which a federally chartered savings
institution may make on the security of liens on non-residential real property
generally may not exceed 400% of the institution's capital as determined under
the regulatory capital standards. This restriction has not had a material
impact on Liberty Federal's business.

Loan Solicitation and Processing. Loan originations are derived from
a number of sources. Residential mortgage loan originations primarily come
from walk-in customers and referrals by realtors, depositors and borrowers.
Consumer and other loan originations emanate from many of the same sources as
for residential real estate loan originations as well as from consumer goods
dealers. Real estate loans are originated by Liberty Federal's staff of
salaried loan officers working in five of Liberty Federal's offices. Loan
applications are processed in each of Liberty Federal's offices and then
submitted to the appropriate

<PAGE> 79
authority for approval. All mortgage loans are evaluated for approval at
Liberty Federal's main office. Applications for fixed-rate one- to four-family
real estate loans are underwritten and closed based on FHLMC and FNMA
standards, and other loan applications are underwritten and closed based on
Liberty Federal's own loan guidelines.

Upon receipt of a loan application from a prospective borrower, a
credit report and verifications are ordered to verify specific information
relating to the loan applicant's employment, income and credit standing. An
appraisal of the real estate intended to secure the proposed loan is undertaken
by either Liberty Federal's staff appraiser or a fee appraiser approved by
Liberty Federal.

The Board of Directors of Liberty Federal has the responsibility and
authority for general supervision over the loan policies of Liberty Federal.
The Board has established written lending policies for Liberty Federal and has
delegated only to its Executive Committee the authority to approve mortgage
loans over $300,000. Any two members of Liberty Federal's Loan Committee,
which consists of the Executive Vice President and Senior Vice President and a
Vice President, are authorized to approve mortgage loans up to $125,000. For
loan applications in excess of $125,000 up to $203,150, committee member Thomas
D. Enoch or Larry A Watson must approve the loan. For applications of $203,150
to $300,000, the approval of Larry A. Watson is required. Loan applications in
excess of $300,000 must be approved by the Executive Committee. With respect
to consumer loans, loan officers and branch managers may approve loans up to
$25,000 if secured and $10,000 if unsecured, and the Executive Vice President
and the President may approve secured or unsecured loans up to $150,000 and
$50,000 each ($100,000 in combination), respectively. All floor plan loans
must be approved by the Board of Directors. When loans in the aggregate to one
borrower exceed 3% of capital, approval for additional loans must be presented
and approved by the Executive Committee.

Loan applicants are promptly notified of the decision of Liberty
Federal. Interest rates are subject to change if the loan is not funded within
45 days after the date of application. If an approved loan is not funded
within the 45 days, management contacts the applicant to determine the loan's
status. It has been management's experience that substantially all approved
loans are funded.

All appraisals performed in connection with federally related
transactions must be performed by state-certified or state-licensed appraisers
after December 31, 1993. Federally related transactions are defined to include
real estate-related financial transactions which the OTS regulates and would
include mortgages made by Liberty Federal. Appraisals by state-certified
appraisers are required for all such transactions having a value of $1.0
million or more. The OTS has adopted regulations requiring that all real
estate-related financial transactions engaged in by savings institutions having
a transaction value of $250,000 or more, other than those involving appraisals
of one- to four-family residential properties, shall require an appraisal
performed by a state- certified appraiser. One- to four-family residential
property financing may require an appraisal by a state-certified appraiser if
the amount involved exceeds $1.0 million or the financing involves a "complex"
one- to four-family property appraisal. Exceptions are made for financings in
which the transaction value is $50,000 or less or when the lien is not
necessary security. Tennessee has a program for certifying appraisers pursuant
to which Liberty Federal's in-house appraiser has been certified. Management
of Liberty Federal does not anticipate that these regulations will have a
material effect on its lending activities.

Loan Originations, Purchases and Sales. The following table sets
forth certain information with respect to the loan origination and sale
activity of Liberty Federal during the periods indicated. Management
attributes the substantial amounts of refinancings during 1993, 1992 and 1991
to corresponding reductions in market interest rates during the years. Liberty
Federal's loan sales have generally been sales of long-term, fixed-rate
mortgage loans in order to reduce Liberty Federal's interest rate risk.

<PAGE> 80
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1993 1992 1991
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Loans originated:
Conventional real estate loans:
Loans on existing property . . . . . . . . . . . . . . . $ 12,355 $ 9,644 $ 8,101
Loans refinanced . . . . . . . . . . . . . . . . . . . . 28,578 24,563 13,079
Construction loans . . . . . . . . . . . . . . . . . . . 2,634 2,553 595
Insured and guaranteed loans . . . . . . . . . . . . . . . 1,739 1,764 717
Consumer loans . . . . . . . . . . . . . . . . . . . . . . 16,048 13,740 8,374
Commercial loans . . . . . . . . . . . . . . . . . . . . . 4,268 3,567 1,981
-------- -------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,622 $ 55,831 $32,847
======== ======== =======

Participation loans purchased . . . . . . . . . . . . . . . . $ 1,697 $ 846 $ --
======== ======== =======
Loans Sold . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,462 $ 23,446 $ 165
======== ======== =======
</TABLE>

Interest Rates and Loan Fees. Interest rates charged by Liberty
Federal on mortgage loans are primarily determined by competitive loan rates
offered in its market area. Mortgage loan rates reflect factors such as
general interest rate levels, the supply of money available to the savings
industry and the demand for such loans. These factors are in turn affected by
general economic conditions, the monetary policies of the Federal government,
including the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the general supply of money in the economy, tax policies and
governmental budget matters.

In addition to interest earned on loans, Liberty Federal receives fees
for servicing loans for others. Loan servicing fees usually are charged as a
percentage (between 1/4% and 1/2%) of the balance of the loans being serviced.
During the year ended December 31, 1993, Liberty Federal reported loan
servicing fee income of $137,000, and at December 31, 1993 Liberty Federal was
servicing $55.7 million of loans for others. In addition to loan servicing
fees, Liberty Federal receives fees in connection with loan commitments and
originations, loan modifications, late payments, changes of property ownership
and for miscellaneous services related to its loans. Income from these
activities varies from period to period with the volume and type of loans
originated, sold and purchased, which in turn is dependent on prevailing
mortgage interest rates and their effect on the demand for loans in the markets
served by Liberty Federal.

To the extent that loans are originated or acquired for the portfolio,
SFAS No. 91 limits immediate recognition of loan origination or acquisition
fees as revenues and requires that such income (net of certain loan origination
or acquisition costs) be recognized over the estimated life of such loans. The
statement reduces the amount of revenue recognized by Liberty Federal at the
time such loans are originated or acquired. At December 31, 1993, Liberty
Federal had received $696,000 of loan fees that had been deferred and were
being recognized as income over the estimated lives of the related loans.

Asset Classification and Allowance for Loan Losses. Federal
regulations require savings institutions to review their assets on a regular
basis and to classify them as "substandard," "doubtful" or "loss," if
warranted. Assets classified as substandard or doubtful require the
institution to establish general allowances for loan losses. If an asset or
portion thereof is classified loss, the insured institution must either
establish specified allowances for loan losses in the amount of 100% of the
portion of the asset classified loss, or charge off such amount. An asset
which does not currently warrant classification but which possesses weaknesses
or deficiencies deserving close attention is required to be designated as
"special mention." Currently, general loss allowances established to cover
possible losses related to assets classified substandard or doubtful may be
included in determining an institution's regulatory capital, while specific
valuation allowances for loan losses do not qualify as regulatory capital. See
"Regulation -- Regulatory Capital Requirements." OTS examiners may disagree
with the insured institution's classifications and amounts reserved. If an
institution does not agree with an examiner's classification of an asset, it
may appeal this determination to the OTS. Liberty Federal has determined that
at December 31, 1993 it had $1,421,000 of assets classified as substandard, no
assets classified as doubtful and $112,000 of assets classified as loss. At
that date, Liberty Federal had $721,000 of assets designated as special
mention. For

<PAGE> 81
additional information, see "Non-Performing Loans and Other Problem Assets,"
below.

In originating loans, Liberty Federal recognizes that credit losses
will be experienced and that the risk of loss will vary with, among other
things, the type of loan being made, the creditworthiness of the borrower over
the term of the loan, general economic conditions and, in the case of a secured
loan, the quality of the security for the loan. It is management's policy to
maintain an adequate allowance for loan losses based on, among other things,
Liberty Federal's and the industry's historical loan loss experience,
evaluation of economic conditions and regular reviews of delinquencies and loan
portfolio quality. Liberty Federal increases its allowance for loan losses by
charging provisions for possible loan losses against Liberty Federal's income.

General allowances are made pursuant to management's assessment of
risk in Liberty Federal's loan portfolio as a whole. Specific allowances are
provided for individual loans when ultimate collection is considered
questionable by management after reviewing the current status of loans which
are contractually past due and considering the net realizable value of the
security for the loan. Management continues to actively monitor Liberty
Federal's asset quality and to charge off loans against the allowance for loan
losses when appropriate or to provide specific loss reserves when necessary.
Although management believes it uses the best information available to make
determinations with respect to the allowance for loan losses, future
adjustments may be necessary if economic conditions differ substantially from
the economic conditions in the assumptions used in making the initial
determinations.

Numerous financial institutions throughout the United States in recent
years have incurred losses due to significant increases in loan loss provisions
and charge-offs resulting largely from higher levels of loan delinquencies and
foreclosures. Depressed real estate market conditions have adversely affected
the economies of various regions and have had a severe impact on the financial
condition and businesses of many of the financial institutions doing business
in these areas. Considerable uncertainty exists as to the future improvement
or deterioration of the real estate markets in these regions, or of its
ultimate impact on these financial institutions.

As a result of the declines in regional real estate market values and
the significant losses experienced by many financial institutions, there has
been a greater level of scrutiny by regulatory authorities of the loan
portfolios of financial institutions undertaken as part of the examination of
the institution by the FDIC, OTS or other federal or state regulators. These
regulators have applied more conservative criteria in evaluating real estate
market values, requiring significantly increased provisions for potential loan
losses. While Liberty Federal believes it has established its existing
allowances for loan losses in accordance with generally accepted accounting
principles, there can be no assurance that regulators, in reviewing Liberty
Federal's loan portfolio, will not request Liberty Federal to significantly
increase its allowance for loan losses, thereby negatively affecting Liberty
Federal's financial condition and earnings.

Management believes that Liberty Federal's market area has not
experienced the significant overbuilding and resultant slump in prices that has
occurred in other areas of the country in recent years. Both new development
and sales of existing homes appear to have increased in Liberty Federal's
market area.

74
<PAGE> 82
The following table sets forth an analysis of Liberty Federal's
allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1993 1992 1991
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . . . . . $1,110 $ 958 $876

Loans charged-off:
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . (77) -- (11)
Commercial and multi-
family real estate . . . . . . . . . . . . . . . . . . . . -- -- --
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . (10) (30) (39)
Commercial . . . . . . . . . . . . . . . . . . . . . . . . -- (1) (96)
------ ------ ----
Total charge-offs . . . . . . . . . . . . . . . . . . . . . . (87) (31) (146)
------ ------ ----

Recoveries:
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . -- 1 14
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 1 -- 14
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . 4 8 --
------ ------ ----
Total recoveries . . . . . . . . . . . . . . . . . . . . 5 9 28
------ ------ ----

Net loans charged-off . . . . . . . . . . . . . . . . . . . . (82) (22) (118)
------ ------ ----

Provision for possible loan losses . . . . . . . . . . . . . 259 174 200
------ ------ ----

Balance at end of period . . . . . . . . . . . . . . . . . . $1,287 $1,110 $958
====== ====== ====

Ratio of allowance for loan losses
to gross loans . . . . . . . . . . . . . . . . . . . . . . .99% .89% .76%
====== ====== ====

Ratio of net charge-offs to average
loans outstanding during the period . . . . . . . . . . . . .06% .02% .10%
====== ====== ====

</TABLE>

75
<PAGE> 83
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses
in any category.

<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------------
1993 1992 1991
---------------------------------- ---------------------------------- ------------
% of % of % of
Loans Loans Loans
in Each % of in Each % of in Each
Category Allowance Category Allowance Category
to Total To Total to Total To Total to Total
Amount Loans Loans Amount Loans Loans Amount Loans
------ -------- --------- ------ -------- --------- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Residential . . . . . . . . . . . . $ 312 65.0 .24 $ 235 70.6 0.19 $265 73.7 0.21
Commercial and multi-family . . . . 208 10.2 .16 170 10.7 0.14 136 8.1 0.11
Consumer . . . . . . . . . . . . . . 616 21.7 .47 543 15.5 0.43 382 14.8 0.30
Commercial . . . . . . . . . . . . . 151 3.1 .12 162 3.2 0.13 175 3.4 0.14
------ ----- ----- ------ ----- ----- ---- --- -----
Total allowance for
loan losses . . . . . . . . . . $1,287 100.0 .99 $1,110 100.0 0.89 $958 100.0 0.76
====== ===== ===== ====== ===== ===== ==== ===== =====
</TABLE>

76
<PAGE> 84
Non-Performing Loans and Other Problem Assets. Management reviews
Liberty Federal's loans on a regular basis. After residential mortgage loans
become past due more than 90 days, Liberty Federal generally establishes an
allowance for uncollectible interest for the amount by which the principal
balance and uncollected interest exceeds 90% of the appraised value of the
property. Commercial and multi-family real estate loans generally are placed
on non-accrual status if the borrower is placed in bankruptcy proceedings, if
the loan becomes past due more than 90 days, or management concludes that
payment in full is not likely. Consumer and commercial loans generally are
charged off, or any expected loss is reserved for, after they become more than
90 days past due. Liberty Federal accrues interest on delinquent loans past
due more than 90 days without establishing a reserve when management concludes
such action is warranted, such as in the event the loan is exceptionally well
collateralized or the borrower establishes the temporary nature of the
delinquency. Loans are charged off when management concludes that they are
uncollectible. See also Note 1(d) of the Notes to Consolidated Financial
Statements attached as Appendix A hereto.

Liberty Federal's collection procedures provide that when a loan
becomes past due 30 days, the borrower is contacted in person or by telephone
or mail, and payment is requested. If payment is not promptly received, the
borrower is contacted again, and efforts are made to formulate an affirmative
plan to cure the delinquency. After a loan becomes past due 90 days Liberty
Federal generally initiates legal proceedings.

Real estate acquired by Liberty Federal as a result of foreclosure is
classified as real estate owned until such time as it is sold. When such
property is acquired, it is recorded at the lower of the unpaid principal
balance or its fair market value. Any required write-down of the loan to its
fair market value upon foreclosure is charged against the allowance for loan
losses.

The following table sets forth information with respect to Liberty
Federal's non-performing loans and other problem assets at the dates indicated.
No loans were recorded as restructured loans within the meaning of SFAS No. 15,
at the dates indicated.

<TABLE>
<CAPTION>
At December 31,
-----------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Loans accounted for on a (Dollars in thousands)
non-accrual basis: (1)
Real estate:
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 251 $ 223 $ 176
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 239 264
------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 462 440
------ ------ ------

Accruing loans contractually past due
90 days or more:
Real estate: (1)
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . 365 376 682
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 132 31
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 100 174
------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 608 887
------ ------ ------

Total of nonaccrual and 90 days
past due loans . . . . . . . . . . . . . . . . . . . . . . . . . . $ 859 $1,070 $1,327
====== ====== ======

Other non-performing assets (2) . . . . . . . . . . . . . . . . . . $ 340 $ 130 $ 587
====== ====== ======

Percentage of total loans .7% .9% 1.1%
====== ====== ======
</TABLE>

<PAGE> 85
_____________
(1) Liberty Federal has established an allowance for uncollectible interest,
which is netted with the accrued interest receivable, for those mortgage
loans that are 90 days past due in which the total of the principal
balance outstanding, and any accrued interest related thereto, is greater
than 90% of the appraised value of the underlying collateral. The
allowance for uncollectible interest is established in an amount equal to
all interest previously accrued. The allowance for uncollectible interest
on past due loans amounted to $8,086, $26,612 and $12,793 at December 31,
1993, 1992 and 1991, respectively.

(2) Other non-performing assets represents property acquired by Liberty
Federal through foreclosure or repossession, in-substance foreclosure, and
other repossessed collateral. This property is carried at the lower of
its fair market value or the principal balance of the related loan.

During the year ended December 31, 1993, gross interest income of
approximately $20,000 would have been recorded on loans accounted for on a
non-accrual basis at December 31, 1993, if the loans had been current
throughout the period. Interest on such non-accrual loans included in income
during the year ended December 31, 1993 amounted to approximately $12,000.

At December 31, 1993, there were 39 consumer loans that were
non-performing, one of which had a balance greater than $15,000. The loan had
a balance of $33,704 and was secured by a second mortgage on real estate. The
first mortgage, held by a local bank, has a balance of approximately $31,000.
The value of the collateral at December 31, 1993 was estimated by management to
be approximately $70,000. Management does not expect Liberty Federal to
recognize a loss on this loan.

At December 31, 1993, Liberty Federal had one non-performing
commercial and multi-family real estate loan. The loan had a balance of
$19,121 at December 31, 1993 with an appraised value of $30,400. Liberty
Federal does not expect to incur a loss as a result of this loan.

Liberty Federal had 25 non-performing residential real estate loans at
December 31, 1993, all of which were secured by single family residences and
only two of which had a balance over $45,000. The largest non-performing loan
had a balance of $102,974 at December 31, 1993. This loan was restructured in
1993 and as of December 31, 1993, Liberty Federal had reserved $35,000 for
probable loss associated with this loan.

The next largest loan had a balance of $48,341 at December 31, 1993.
The loan is three months delinquent and the debtor is in bankruptcy. The most
recent appraisal on the property was $57,000. Liberty Federal does not expect
to incur loss as a result of this loan.

Loans which were not classified as non-accrual, past due 90 days or
more or restructured but where known information about possible credit problems
of borrowers caused management to have serious doubts as to the ability of the
borrowers to comply with present loan repayment terms and may result in
disclosure as non-accrual, 90 days past due or restructured amounted to
$212,000 at December 31, 1993. These loans consisted primarily of single
family residential mortgage loans which were in bankruptcy or had been
chronically delinquent over the prior several months. The loans are reviewed
on a monthly basis.

Securities Activities. Liberty Federal is required under federal
regulations to maintain a minimum amount of liquid assets, which can be
invested in specified short-term securities, and is also permitted to make
certain other investments. See "Regulation." It has generally been Liberty
Federal's policy to maintain a liquidity portfolio in excess of the amount
required to satisfy regulatory requirements. Liquidity levels may be increased
or decreased depending upon the yields on investment alternatives, management's
judgment as to the attractiveness of the yields then available in relation to
other opportunities, its expectations of the level of yield that will be
available in the future and its projections as to the short-term demand for
funds to be used in Liberty Federal's loan origination and other activities.

The general objectives of Liberty Federal's investment policy are to
(i) maintain liquidity levels sufficient to meet the operating needs of
Liberty Federal and applicable regulatory requirements, (ii) minimize interest
rate risk by managing the repricing characteristics of Liberty Federal's assets
and liabilities, (iii) reduce credit risk by maintaining a balance of high
quality, diverse investments, (iv) absorb excess liquidity when loan demand is
low and/or deposit growth is high, (v) maximize returns without compromising
liquidity or creating undue credit or interest rate risk and (vi) provide
collateral for pledging requirements. Liberty Federal's investment activities
are

<PAGE> 86
conducted by senior management and supervised by the Board of Directors.
Investments are governed by an investment policy adopted by the Board, which
currently provides for maintenance of an investment portfolio for the purposes
of providing earnings, ensuring a minimum liquidity reserve and facilitating
Liberty Federal's asset/liability management objectives (e.g., limiting the
weighted average terms to maturity or repricing of Liberty Federal's
interest-earning assets). In accordance with the policy, management has
primarily invested in government and agency securities backed by the full faith
and credit of the United States, mortgage-backed securities and participation
certificates issued by the FHLMC, FNMA or GNMA, federal funds sold and, to a
lesser extent, federally insured interest-bearing deposits in other banks.

Effective December 31, 1993, LBI adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." This statement requires
investments in equity securities that have a readily determinable fair value
and investments in debt securities to be classified into one of three
categories, as follows: held to maturity debt securities, trading securities
and secutities avaliable for sale. LBI does not have any securities designated
as trading securities. Securities classified as held to maturity are reported
at amortized cost, while those classified as available for sale are reported at
market value with unrealized gains and losses reported as a separate component
of stockholders' equity, net of tax. At December 31, 1993, all of Liberty
Federal's securities were available for sale, including debt securities of
$26.7 million at market value. Such securities included U. S. government and
agency securities of $20.5 million and mortgaged-backed securities of $6.2
million which are carried at market value in accordance with SFAS No. 115. At
that date, Liberty Federal also had 16,304 shares of FHLMC common stock which
was available for sale with a carrying value of $813,000.

The following table sets forth the carrying value of Liberty Federal's
securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
At December 31,
-------------------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Securities portfolio:
Securities held to maturity(1): $ -- $20,658 $30,802
Securities available for sale (2):
Debt securities 26,738 7,769 --
FHLMC stock 813 64 --
------- ------- -------

Total securities . . . . . . . . . . . . . . . . . . . . . . . 27,551 28,491 30,802

Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . 19,100 12,925 10,125
Interest-bearing deposits 1,025 1,664 961
FHLB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282 1,226 1,173
------- -------- -------

Total investments . . . . . . . . . . . . . . . . . . . . . . . $ 48,958 $ 44,306 $43,061
======= ======== =======
</TABLE>
_____________
(1) Securities held to maturity consist of U.S. government and agency debt
securities and mortgaged-backed securities carried
at amortized cost.
(2) Securities available for sale consist of U.S. government and agency
debt securities, mortgaged-backed securities and FHLMC
common stock, carried at market value at December 31, 1993 and at
lower of cost or market value at December 31, 1992.

For additional information, see Notes 1(c) and 2 of the Notes to
Consolidated Financial Statements attached as Appendix A hereto.

<PAGE> 87
Pursuant to LBI's adoption of SFAS No. 115, at December 31,1993, all
debt and equity securities were classified as available for sale and reported
at market value. The following table sets forth the scheduled maturities,
amortized costs, carrying values and average yield of Liberty Federal's
portfolio at December 31, 1993.

<TABLE>
<CAPTION>
At December 31, 1993
---------------------------------------------------------------------------
One Year One to Five Five to Ten
or Less Years Years
----------------------- --------------------- ---------------------
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- ------- --------- ------- --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency
debt securities $15,517 3.37% $ 5,049 3.62% $ -- -- %
Mortgage-backed securities -- -- 2,530 7.77 -- --
FHLMC stock . . . . . . . . . . . . . -- -- -- -- -- --
Federal funds sold . . . . . . . . . . 19,100 3.07 -- -- -- --
Interest-bearing deposits . . . . . . . 1,025 4.50 -- -- -- --
FHLB stock . . . . . . . . . . . . . . -- -- -- -- -- --

Total . . . . . . . . . . . . . . . . . $35,642 3.21% $ 7,579 5.01% $ -- -- %
======= ==== ======= ==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
At December 31, 1993
--------------------------------------------------------------------------------
More than
Ten Years Total Securities
------------------------------ ------------------------------------------
Amortized Average Amortized Carrying Average
Cost Yield Cost Value Yield
------------ ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency
debt securities $ -- --% $20,566 $20,494 3.43%
Mortgage-backed securities 3,503 8.53 6,033 6,244 8.21
FHLMC stock . . . . . . . . . . . . . 64 22.46 64 813 22.46
Federal funds sold . . . . . . . . . . -- -- 19,100 19,100 3.07
Interest-bearing deposits . . . . . . . -- -- 1,025 1,025 3.28
FHLB stock . . . . . . . . . . . . . . 1,282 4.50 1,282 1,282 4.50
------- ----- -------- ------- ----

Total . . . . . . . . . . . . . . . . . $ 4,849 7.65% $48,070 $48,958 3.94%
======= ===== ======= ======= ====
</TABLE>

80
<PAGE> 88
Deposit Activity and Other Sources of Funds.

General. Deposits are a significant source of Liberty Federal's funds
for lending and other investment purposes. In addition to deposits, Liberty
Federal derives funds from loan principal repayments and interest payments and
maturing investment securities. Loan repayments and interest payments are a
relatively stable source of funds, while deposit inflows and outflows are
significantly influenced by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in
the availability of funds from other sources, or on a longer term basis for
general business purposes, but Liberty Federal has not borrowed any funds in
recent years.

Deposits. Deposits are attracted principally from within Liberty
Federal's primary market area through the offering of a variety of deposit
instruments, including passbook and statement accounts and certificates of
deposit ranging in term from 31 days to eight years. Deposit account terms
vary, principally on the basis of the minimum balance required, the time
periods the funds must remain on deposit and the interest rate. Liberty
Federal also offers individual retirement accounts ("IRAs").

Liberty Federal's policies are designed primarily to attract deposits
from local residents through its branch network rather than to solicit deposits
from areas outside its primary market. Liberty Federal does not accept
deposits from brokers due to the volatility and rate sensitivity of such
deposits. Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by Liberty Federal on a periodic basis. Determination
of rates and terms are predicated upon funds acquisition and liquidity
requirements, rates paid by competitors, growth goals and federal regulations.

In connection with Liberty Federal's acquisition of its McKenzie,
Tennessee branch in 1985, Liberty Federal paid a premium for approximately
$14.7 million of deposits at the branch. That premium was fully amortized by
March 31, 1993. Amortization expense for 1993 was $45,000.

Deposits in Liberty Federal as of December 31, 1993 were represented
by the various types of savings programs described below (balances are in
thousands).

<TABLE>
<CAPTION>
Weighted
Average Percentage
Interest Minimum Minimum of Total
Rate Term Category Balance Balance Deposits
- -------- ---- -------- ------- ------- --------

<S> <C> <C> <C> <C> <C>
1.98% None NOW Accounts $ 100 $ 14,805 10.0
2.75% None Passbook Statement Accounts 100 14,994 10.1
2.51% None Money Market Deposit Accounts 2,500 8,003 5.4
0.00% None Commercial Accounts 100 2291 1.5

Certificates of Deposit
-----------------------

2.99% 7 months Fixed-Term, Fixed-Rate 5,000 878 0.6
6.00% 2-5 years Fixed-Term, Fixed-Rate 1,000 31,032 20.9
3.52% 12 months Fixed-Term, Fixed-Rate 1,000 27,986 18.8
4.65% 30 months Fixed-Term, Fixed-Rate 1,000 3,836 2.6
7.50% 48 months Fixed-Term, Fixed-Rate 1,000 2 --
7.75% 72 months Fixed-Term, Fixed-Rate 1,000 34 0.1
8.00% 96 months Fixed-Term, Fixed-Rate 1,000 2 --
3.45% 18 months 18-Month IRA Accounts 100 5,428 3.6
3.71% 13 months Fixed-Term, Fixed-Rate 10,000 1,497 1.0
3.05% 182 days 6-Month Money Market 1,000 22,650 15.2
2.73% 91 days 3-Month Money Market 1,000 2,745 1.8
2.60% 7 days Fixed-Term, Fixed-Rate 1,000 241 0.2
2.61% 31 days Fixed-Term, Fixed-Rate 1,000 841 0.6
3.95% 18 months Fixed-Term, Fixed-Rate 1,000 2,607 1.7
4.22% 31 days Negotiated Jumbo 100,000 8,845 5.9
-------- -----
Total deposits $148,717 100.0
======== =====
</TABLE>

Liberty Federal began offering commercial deposit accounts in 1983, in
order to attract local businesses to Liberty Federal. Commercial account
customers are encouraged to use Liberty Federal for all of their banking
activities. It is anticipated that management will actively pursue attracting
additional commercial accounts in Liberty Federal's market area.

<PAGE> 89
The following table sets forth the change in dollar amount of deposits
in the various types of accounts offered by Liberty Federal between the dates
indicated.

<TABLE>
<CAPTION>
Balance at Balance at
December % Increase December
31, 1993 Deposits (Decrease) 31, 1992
-------- -------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
NOW and Super NOW checking accounts $ 14,805 10.0 $ 1,168 $ 13,637
Jumbo certificates . . . . . . . . . . . . . . . . . 8,845 5.9 175 8,670
Non-interest-bearing demand
deposits . . . . . . . . . . . . . . . . . . . . . 2,291 1.5 561 1,730
Passbook and regular savings . . . . . . . . . . . . 14,994 10.1 3,311 11,683
Money market deposit accounts . . . . . . . . . . . . 8,003 5.4 (1,652) 9,655
Six month money market certificates . . . . . . . . . 22,644 15.2 (3,365) 26,009
One-year certificates . . . . . . . . . . . . . . . . 26,889 18.1 (5,910) 32,799
2 1/2 year certificates . . . . . . . . . . . . . . . 3,525 2.4 (736) 4,261
3-year certificates . . . . . . . . . . . . . . . . . 10,118 6.8 3,532 6,586
IRA accounts . . . . . . . . . . . . . . . . . . . . 13,145 8.8 154 12,991
All other certificates . . . . . . . . . . . . . . . 23,458 15.8 160 23,298
-------- ----- ------- --------
148,717 100.0 (2,602) 151,319
-------- ====== ------- --------

Less premium paid on deposits . . . . . . . . . . . . -- (45)
-------- --------
Net deposits . . . . . . . . . . . . . . . . . . . $148,717 $ 151,274
======== ========

<CAPTION>
Balance at
% Increase December %
Deposits (Decrease) 31, 1991 Deposits
-------- ---------- -------------- --------
<S> <C> <C> <C> <C>
NOW and Super NOW checking account 9.0 $ 3,190 $ 10,447 6.7
Jumbo certificates . . . . . . . . . . . . . . . . . 5.7 (874) 9,544 6.1
Non-interest-bearing demand
deposits . . . . . . . . . . . . . . . . . . . . . 1.1 283 1,447 0.9
Passbook and regular savings . . . . . . . . . . . . 7.7 1,520 10,163 6.5
Money market deposit accounts . . . . . . . . . . . . 6.4 620 9,035 5.8
Six month money market certificates . . . . . . . . . 17.2 (2,959) 28,968 18.6
One-year certificates . . . . . . . . . . . . . . . . 21.7 (6,300) 39,099 25.2
2 1/2 year certificates . . . . . . . . . . . . . . . 2.8 (2,851) 7,112 4.6
3-year certificates . . . . . . . . . . . . . . . . . 4.4 (2,321) 8,907 5.7
IRA accounts . . . . . . . . . . . . . . . . . . . . 8.6 (53) 13,044 8.4
All other certificates . . . . . . . . . . . . . . . 15.4 5,627 17,671 11.5
----- ------- ------ -----
100.0 (4,118) 155,437 100.0
===== ------- ------- =====

Less premium paid on deposits . . . . . . . . . . . . (224)
-------
Net deposits . . . . . . . . . . . . . . . . . . . $ 155,213
=========

</TABLE>

<PAGE> 90
The following tables set forth the average balances and interest rates
based on month-end balances for interest-bearing demand deposits and time
deposits as of the dates indicated. Average balances do not include the
effects of the premium paid on deposits.

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------
1993 1992 1991
------------------------- --------------------- ---------------------
Interest- Interest- Interest-
Bearing Time Bearing Time Bearing Time
Deposits Deposits Deposits Deposits Deposits Deposits
-------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Average Balance . . . . . . . . . . . . . . . . $36,140 $113,085 $32,570 $117,532 $26,808 $127,654

Average Rate . . . . . . . . . . . . . . . . . 2.61% 4.46% 3.16% 5.26% 4.76% 7.09%
</TABLE>

The following table sets forth the time deposits in Liberty Federal
classified by rates as of the dates indicated.

<TABLE>
<CAPTION>
At December 31,
----------------------------------------------
1993 1992 1991
------ ------ ------
(In thousands)
<S> <C> <C> <C>
4.00 and under . . . . . . . . . . . . . . . $ 68,827 $ 57,109 $ 2,189
4.01 - 6.00% . . . . . . . . . . . . . . . . 27,650 38,013 59,769
6.01 - 8.00% . . . . . . . . . . . . . . . 8,184 12,089 49,597
8.01 and over . . . . . . . . . . . . . . . 3,963 7,404 12,790
-------- -------- --------
$108,624 $114,615 $124,345
======== ======== ========
</TABLE>

The following table sets forth the amount and maturities of time
deposits in specified weighted average interest rate categories at December 31,
1993.

<TABLE>
<CAPTION>
Amount Due
---------------------------------------------------------------------------
One Year After
Rate or Less 1-2 Years 2-3 Years 3 Years Total
-------- -------- --------- --------- ------- ---------
(In thousands)

<S> <C> <C> <C> <C> <C>
4.00 and under . . . . . . . . . . . . . $64,544 $ 3,813 $ 470 $ -- $ 68,827
4.01 - 6.00% . . . . . . . . . . . . . . 6,346 4,437 5,986 10,881 27,650
6.01 - 8.00% . . . . . . . . . . . . . 4,992 287 931 1,974 8,184
8.01 and over . . . . . . . . . . . . . 3,963 -- -- -- 3,963
------- ------- ------ ------- --------
$79,845 $ 8,537 $7,387 $12,855 $108,624
======= ======= ====== ======= ========
</TABLE>

The following table indicates the amount of Liberty Federal's
certificates of deposit of $100,000 or more by time remaining until maturity as
of December 31, 1993. Most of Liberty Federal's jumbo deposits come from
individual depositors in Liberty Federal's market area. Liberty Federal
accepts some jumbo deposits from nearby municipalities.

<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposit
--------------- --------------
(In thousands)

<S> <C>
Three months or less . . . . . . . . . . . . . . . . . . . . . $ 2,742
Three through six months . . . . . . . . . . . . . . . . . . . 2,060
Six through twelve months . . . . . . . . . . . . . . . . . . 1,235
Over twelve months . . . . . . . . . . . . . . . . . . . . . . 2,808
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 8,845
=======
</TABLE>

<PAGE> 91
The following table sets forth Liberty Federal's deposit activities for
the periods indicated.

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1993 1992 1991
--------- -------- --------
(In thousands)

<S> <C> <C> <C>
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 322,311 $ 293,615 $ 250,972
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . (328,707) (302,412) (256,297)
--------- --------- ---------
Net decrease before interest credited . . . . . . . . . . . (6,396) (8,797) (5,325)

Interest credited . . . . . . . . . . . . . . . . . . . . . . 3,794 4,679 6,393
Net increase in savings deposits . . . . . . . . . . . . . $ (2,602) $ (4,118) $ 1,068
======== ========== ==========
</TABLE>

Management attributes the net decreases in deposits before interest
credited primarily to management's conservative deposit pricing strategies,
especially with respect to higher rate certificates of deposit.

Borrowings. Savings deposits historically have been the primary
source of funds for Liberty Federal's lending and investment activities and for
its general business activities. Liberty Federal is authorized, however, to
use advances from the FHLB of Cincinnati to supplement its supply of lendable
funds and to meet deposit withdrawal requirements. Advances from the FHLB
typically would be secured by Liberty Federal's stock in the FHLB and a portion
of Liberty Federal's mortgage loans. In October 1993, Liberty Federal obtained
$10 million in mortgage-matched advances from the Federal Home Loan Bank of
Cincinnati to offset the interest rate risk associated with $10 million of
certain fixed rate loans that Liberty Federal has in its portfolio. These
loans have maturities of between 10 and 15 years.

The FHLB of Cincinnati functions as a central reserve bank providing
credit for savings institutions and certain other member financial
institutions. As a member, Liberty Federal is required to own capital stock in
the FHLB and is authorized to apply for advances on the security of such stock
and certain of its home mortgages and other assets (principally, securities
which are obligations of, or guaranteed by, the United States) provided certain
standards related to creditworthiness have been met.

Subsidiary Activities. As a federally chartered savings bank, Liberty
Federal is permitted to invest an amount equal to 2% of its assets in
subsidiaries with an additional investment of 1% of assets where such
investment serves primarily community, inner-city, and community development
purposes. Under such limitations, as of December 31, 1993 Liberty Federal was
authorized to invest up to approximately $5.4 million in the stock of or loans
to subsidiaries including the additional 1% investment for community inner-city
and community development purposes. Institutions meeting regulatory capital
requirements, which Liberty Federal currently does, may invest up to 50% of
their regulatory capital in conforming first mortgage loans to subsidiaries in
which they own 10% or more of the capital stock.

The activities of Liberty Federal's wholly owned subsidiary, Northwest
Tennessee Service Corporation (the Service Corporation), currently are not
significant. In late 1987, the Service Corporation began offering annuities
and single premium life insurance policies as an agent for an insurance
company. The Service Corporation no longer actively offers such products, but
it still receives nominal amounts of income from existing annuities and
policies, and occasionally it sells a new annuity or policy upon the request of
a customer of Liberty Federal. Currently, the Service Corporation holds shares
of stock in the Savings and Loan Data Corporation, the company that performs
Liberty Federal's data processing. In April 1992, the Service Corporation sold
a residence that had been purchased and renovated for resale using volunteer
labor as part of Liberty Federal's continuing efforts to help provide
affordable housing to low income families in Liberty Federal's community.
Liberty Federal worked with the purchaser to secure financing for the house
from the Tennessee Housing Development Agency.

SAIF-insured savings institutions are required to give the FDIC and
the Director of the OTS 30 days' prior notice before establishing or acquiring
a new subsidiary, or commencing any new activity through an existing
subsidiary. Both the FDIC and the Director of the OTS have authority to order
termination of subsidiary activities determined to pose a risk to the safety or
soundness of the institution. In addition, regulatory capital requirements
require savings institutions to deduct the amount of their investments in and
extensions of credit to subsidiaries

<PAGE> 92
engaged in activities not permissible to national banks from capital in
determining regulatory capital compliance. Although the Service Corporation's
activities are not permissible to national banks, Liberty Federal's investment
in the subsidiary has been minimal, and the deduction of this investment from
Liberty Federal's capital has not had a material impact on Liberty Federal's
capital position. See "Regulation -- Regulatory Capital Requirements."

Competition. Liberty Federal experiences substantial competition both
in attracting and retaining savings deposits and in the making of mortgage and
other loans.

Direct competition for savings deposits comes from other savings
institutions, credit unions, regional bank holding companies and commercial
banks located in its primary market area. Significant competition for Liberty
Federal's other deposit products and services comes from money market mutual
funds, brokerage firms, insurance companies and retail stores. The primary
factors in competing for loans are interest rates and loan origination fees and
the range of services offered by various financial institutions. Competition
for origination of real estate loans normally comes from other savings
institutions, commercial banks, mortgage bankers, mortgage brokers and
insurance companies.

Liberty Federal's primary competition comprises the commercial banks
near each of Liberty Federal's branch offices. In Henry County, where Liberty
Federal's main office and a branch office are located in Paris, Liberty
Federal's primary competition consists of three local banks and one branch
office of a metropolitan bank. In Benton County, where a branch office of
Liberty Federal is located in Camden, Liberty Federal's primary competition
consists of one local bank and three branch offices of other banks. In Carroll
County, where branch offices of Liberty Federal are located in Huntingdon and
McKenzie, Liberty Federal's primary competition consists of four local banks.
In Humphreys County, where a branch office of Liberty Federal is located in
Waverly, Liberty Federal's primary competition consists of two branch offices
of metropolitan banks.

Liberty Federal is able to compete effectively in its primary market
area by offering competitive interest rates and loan fees, and a wide variety
of deposit products, and by emphasizing personal customer service and
cultivating relationships with local businesses. Management believes that, as
a result of Liberty Federal's commitment to competitive pricing, varied
products and personal service, Liberty Federal has developed a solid base of
core deposits and Liberty Federal's loan origination quality and volume are
among the leaders in Liberty Federal's market area.

Regulation.

General. As a federally chartered savings institution, Liberty
Federal is subject to extensive regulation by the OTS. The lending activities
and other investments of Liberty Federal must comply with various federal
regulatory requirements. The OTS periodically examines Liberty Federal for
compliance with various regulatory requirements. The FDIC also has the
authority to conduct special examinations of Liberty Federal because its
deposits are insured by the SAIF. Liberty Federal must file reports with OTS
describing its activities and financial condition. Liberty Federal is also
subject to certain reserve requirements promulgated by the Federal Reserve
Board. This supervision and regulation is intended primarily for the
protection of depositors. As a savings institution holding company, LBI is
subject to OTS regulation, examination, supervision and reporting requirements.
Certain of these regulatory requirements are referred to below or appear
elsewhere herein.

Regulatory Capital Requirements. Under OTS regulations, savings
institutions must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" capital equal to 3% of adjusted total assets and "total" capital
(a combination of core and "supplementary" capital) equal to 8% of
risk-weighted assets. Regulatory tangible, core and total capital are not
calculated in accordance with generally accepted accounting principles. The
OTS regulation defines core capital as common stockholders' equity (including
retained earnings), noncumulative perpetual preferred stock and related
surplus, minority interests in the equity accounts of fully consolidated
subsidiaries, certain nonwithdrawable accounts and pledged deposits and
"qualifying supervisory goodwill," less intangible assets other than certain
qualifying supervisory goodwill and certain purchased mortgage servicing rights
("PMSRs"). At December 31, 1993, Liberty Federal had no qualifying supervisory
goodwill or purchased mortgage servicing rights. Tangible capital is the same
as core capital, except it excludes qualifying supervisory goodwill and other
intangible assets other than certain PMSRs.

<PAGE> 93
The OTS capital rule requires that core and tangible capital be further
reduced by an amount equal to a savings institution's debt and equity
investments in any subsidiary engaged in activities not permissible for
national banks, other than a subsidiary engaged in activities undertaken as
agent for customers or in mortgage banking activities and certain subsidiary
depository institutions or their holding companies ("nonincludable
subsidiary"). Investments in and extensions of credit to a nonincludable
subsidiary as of April 12, 1989, to the extent still outstanding, however, are
deducted from core and tangible capital in increasing percentages from July 1,
1990 to June 30, 1994. The required percentage deduction from capital is 40%
from November 1, 1992, through June 30, 1993, 60% from July 1, 1993 through
June 30, 1994, and 100% thereafter. Savings institutions must reduce their
capital by 100% of investments in and extensions of credit to any nonincludable
subsidiary made subsequent to April 12, 1989. At December 31, 1993, Liberty
Federal had $16,000 of investments in or extensions of credit to subsidiaries
engaged in activities not permissible for national banks.

Adjusted total assets are a savings institution's total assets as
determined under generally accepted accounting principles increased by certain
goodwill amounts and by a pro rated portion of the assets of subsidiaries in
which the savings institution holds a minority interest and which are not
engaged in activities for which the capital rules require deduction of its debt
and equity investments as well as a pro rated portion of the assets of other
subsidiaries for which deduction is not fully required under phase-in rules.
Adjusted total assets are reduced by the amount of assets that have been
deducted from capital, the portion of the savings institution's investments in
subsidiaries that must be deducted from capital under the capital rules and,
for purposes of the core capital requirement, qualifying supervisory goodwill.
At December 31, 1993, Liberty Federal's adjusted total assets for purposes of
the core and tangible capital requirements were $180.5 million.

In determining compliance with the risk-based capital requirement, a
savings institution is allowed to use both core capital and supplementary
capital provided the amount of supplementary capital used does not exceed the
savings institution's core capital. Supplementary capital is defined to
include certain preferred stock issues, nonwithdrawable accounts and pledged
deposits that do not qualify as core capital, certain approved subordinated
debt, certain other capital instruments and a portion of the savings
institution's general loss allowances. Total core and supplementary capital
are reduced by the amount of capital instruments held by other depository
institutions pursuant to reciprocal arrangements and by an increasing
percentage of the savings institution's high loan-to-value ratio land loans and
non-residential construction loans and equity investments other than those
deducted from core and tangible capital. As of December 31, 1993, Liberty
Federal had no high ratio land or non-residential construction loans and no
equity investments for which OTS regulations require a phased deduction from
total capital.

The risk-based capital requirement is measured against risk-weighted
assets, which equal the sum of each on-balance-sheet asset and the
credit-equivalent amount of each off-balance-sheet item after being multiplied
by an assigned risk weight. Under the OTS risk-weighting system, cash and
securities backed by the full faith and credit of the U.S. government are given
a 0% risk weight. Mortgage-backed securities that qualify under the Secondary
Mortgage Enhancement Act, including those issued, or fully guaranteed as to
principal and interest, by the FNMA or FHLMC are assigned a 20% risk weight.
Single-family first mortgages not more than 90 days past due with loan-to-value
ratios under 80%, multi-family mortgages (maximum 36 dwelling units) with
loan-to-value ratios under 80% and average annual occupancy rates over 80%,
and certain qualifying loans for the construction of one- to four-family
residences pre-sold to home purchasers are assigned a risk weight of 50%.
Consumer loans, non-qualifying residential construction loans and commercial
real estate loans, repossessed assets and assets more than 90 days past due, as
well as all other assets not specifically categorized, are assigned a risk
weight of 100%. The portion of equity investments not deducted from core or
supplementary capital is assigned a 100% risk-weight. OTS capital regulations
require savings institutions to maintain minimum total capital, consisting of
core capital plus supplemental capital, equal to 8.0% of risk-weighted assets.

86
<PAGE> 94
The table below presents Liberty Federal's capital position relative
to its various regulatory capital requirements at December 31, 1993.

<TABLE>
<CAPTION>
Percent of
Amount Assets (1)
------ ----------
(Dollars in thousands)

<S> <C> <C>
Tangible Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,153 11.2
Tangible Capital Requirement . . . . . . . . . . . . . . . . . . . . . . . 2,711 1.5
------- ----
Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,442 9.7
======= ====

Tier 1/Core Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,153 11.2
Tier 1/Core Capital Requirement . . . . . . . . . . . . . . . . . . . . . . 7,221 4.0 (2)
------- ----
Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,923 7.2
======= ====

Tier 1 Risk-Based Capital . . . . . . . . . . . . . . . . . . . . . . . . . $20,153 20.7
Tier 1 Risk-Based Capital Requirement . . . . . . . . . . . . . . . . . . . 3,894 4.0
------- ----
Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,259 16.7
======= ====

Total Capital (i.e., Core and Supplementary Capital) . . . . . . . . . . . $21,322 21.9
Risk-Based Capital Requirement . . . . . . . . . . . . . . . . . . . . . . 7,787 8.0
------- ----
Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,535 13.9
======= ====

</TABLE>
_____________
(1) Based upon adjusted total assets for purposes of the tangible capital
and core capital requirements, and risk-weighted
assets for purposes of the risk-based capital requirements.
(2) Based upon the minimum core capital ratio of 3.00% plus an additional
100 basis points as required by the capital
requirements.

The capital standards applicable to savings institutions are required
to be no less stringent than those applicable to national banks. Effective
December 31, 1990, the Office of the Comptroller of the Currency ("OCC")
adopted regulations implementing more stringent core capital requirements for
national banks. The OCC regulations establish a new minimum core capital ratio
of 3% for the most highly rated banks, with at least an additional 100 to 200
basis point "cushion" amount of additional capital required on a case-by-case
basis, considering the quality of risk management systems and the overall risk
in individual banks. The OTS has proposed an amendment to its capital
regulations establishing a minimum core capital ratio of 3.00% for savings
institutions rated composite 1 under the OTS MACRO rating system. For all
other savings institutions, the minimum core capital ratio will be 3.00% plus
at least an additional 100 to 200 basis points. In determining the amount of
additional core capital, the OTS will assess both the quality of risk
management systems and the level of overall risk in each individual savings
institution through the supervisory process on a case-by-case basis. As of
December 31, 1993, the OTS had not determined the additional core capital
required for Liberty Federal.

The OTS has adopted an amendment to its risk-based capital
requirements that will, effective July 1, 1994, require savings institutions
with more than a "normal" level of interest rate risk to maintain additional
total capital. A savings institution's interest rate risk will be measured in
terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A
savings institution will be considered to have a "normal" level of interest
rate risk exposure if the decline in its net portfolio value after an immediate
200 basis point increase or decrease in market interest rates (whichever
results in the greater decline) is less than two percent of the current
estimated economic value of its assets. A savings institution with a greater
than normal interest rate risk will be required to deduct from total capital,
for purposes of calculating its risk-based capital requirement, an amount (the
"interest rate risk component") equal to one-half the difference between the
institution's measured interest rate risk and the normal level of interest rate
risk, multiplied by the economic value of its total assets.

<PAGE> 95
The OTS will calculate the sensitivity of a savings institution's net
portfolio value based on data submitted by the institution in a schedule to its
quarterly Thrift Financial Report and using the interest rate risk measurement
model adopted by the OTS. The amount of the interest rate risk component, if
any, to be deducted from a savings institution's total capital will be based on
the institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk
schedule with their Thrift Financial Reports. However, the OTS will require
any exempt savings institution that it determines may have a high level of
interest rate risk exposure to file such schedule on a quarterly basis.
Liberty Federal has not determined whether, on the basis of current financial
data, it would be deemed to have more than normal level of interest rate risk
under the new rule.

The Director of OTS is authorized to establish the minimum level of
capital for a savings institution at such amount or at such ratio of
capital-to-assets as the Director determines to be necessary or appropriate for
such institution in light of the particular circumstances of the institution.
The Director of OTS may treat the failure of any savings institution to
maintain capital at or above such level as an unsafe or unsound practice and
may issue a directive requiring any savings institution which fails to maintain
capital at or above the minimum level required by the Director to submit and
adhere to a plan for increasing capital. Such an order may be enforced in the
same manner as a cease and desist order.

Liquidity Requirements. Liberty Federal is required to maintain
average daily balances of liquid assets (cash, deposits maintained pursuant to
Federal Reserve Board requirements, time and savings deposits in certain
institutions, obligations of the United States, states and political
subdivisions thereof, shares in mutual funds with certain restricted investment
policies, highly rated corporate debt and mortgage loans and mortgage-related
securities with less than one year to maturity or subject to purchase within
one year) equal to the monthly average of not less than a specified percentage
(currently 5%) of its net withdrawable savings deposits plus short-term
borrowings. Liberty Federal is also required to maintain average daily
balances of short-term liquid assets at a specified percentage (currently 1%)
of the total of its net withdrawable savings accounts and borrowings payable in
one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. The average daily and short-term liquidity ratios of
Liberty Federal for the month of December 1993 were 27.97% and 25.72%,
respectively. A substantial sustained decline in savings deposits would
adversely affect Liberty Federal's liquidity which may result in restricted
operations and additional borrowings from the FHLB.

Qualified Thrift Lender Test. Liberty Federal is subject to OTS
regulations which use the concept of a Qualified Thrift Lender to determine
eligibility for FHLB advances and for certain other purposes. To qualify as a
Qualified Thrift Lender, a savings institution must maintain at least 65% of
its "portfolio" assets in Qualified Thrift Investments. Portfolio assets are
defined to include total assets less intangibles, property used by a savings
institution in its business and liquidity investments in an amount not
exceeding 20% of assets. Qualified Thrift Investments consist of (i) loans,
equity positions or securities related to domestic, residential real estate or
manufactured housing, (ii) 50% of the dollar amount of residential mortgage
loans subject to sale under certain conditions and (iii) stock in an FHLB or
the FHLMC. In addition, subject to a 20% of portfolio assets limit, savings
institutions are able to treat as Qualified Thrift Investments 200% of their
investments in loans to finance "starter homes" and loans for construction,
development or improvement of housing and community service facilities or for
financing small businesses in "credit-needy" areas. To be qualified as a
Qualified Thrift Lender, a savings institution must maintain its status as a
Qualified Thrift Lender for nine out of every 12 months. Failure to qualify as
a Qualified Thrift Lender results in a number of sanctions, including the
imposition of certain operating restrictions imposed on national banks and a
restriction on obtaining additional advances from the FHLB System. Upon
failure to qualify as a Qualified Thrift Lender for two years, a savings
association must convert to a commercial bank.

At December 31, 1993, approximately 83.38% of Liberty Federal's assets
were invested in Qualified Thrift Investments, substantially in excess of the
percentage required to qualify Liberty Federal as a Qualified Thrift Lender.

Prompt Corrective Regulatory Action. Under the Federal Deposit
Insurance Corporation Improvement Act ("FDICIA"), the federal banking
regulators are required to take prompt corrective action

<PAGE> 96
if an insured depository institution fails to satisfy certain minimum capital
requirements. All institutions, regardless of their capital levels, are
restricted from making any capital distribution or paying any management
fees if the institution would thereafter fail to satisfy the minimum levels for
any of its capital requirements. An institution that fails to meet the minimum
level for any relevant capital measure (an "undercapitalized" institution) may
be: (i) subject to increased monitoring by the appropriate federal banking
regulator; (ii) required to submit an acceptable capital restoration plan
within 45 days; (iii) subject to asset growth limits; and (iv) required to
obtain prior regulatory approval for acquisitions, branching and new lines of
businesses. The capital restoration plan must include a guarantee by the
institution's holding company that the institution will comply with the plan
until it has been adequately capitalized on average for four consecutive
quarters, under which the holding company would be liable up to the lesser of
5% of the institution's total assets or the amount necessary to bring the
institution into capital compliance as of the date it failed to comply with its
capital restoration plan. A "significantly undercapitalized" institution, as
well as any undercapitalized institution that did not submit an acceptable
capital restoration plan, may be subject to regulatory demands for
recapitalization, broader application of restrictions on transactions with
affiliates, limitations on interest rates paid on deposits, asset growth and
other activities, possible replacement of directors and officers, and
restrictions on capital distributions by any bank holding company controlling
the institution. Any company controlling the institution could also be
required to divest the institution or the institution could be required to
divest subsidiaries. The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or increases in
compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total
assets falls below a "critical capital level," the institution will be subject
to conservatorship or receivership within 90 days unless periodic
determinations are made that forbearance from such action would better protect
the deposit insurance fund. Unless appropriate findings and certifications are
made by the appropriate federal bank regulatory agencies, a critically
undercapitalized institution must be placed in receivership if it remains
critically undercapitalized on average during the calendar quarter beginning
270 days after the date it became critically undercapitalized. If a savings
institution is in compliance with an approved capital plan on the date of
enactment of FDICIA, however, it will not be required to submit a capital
restoration plan if it is undercapitalized or become subject to the statutory
prompt corrective action provisions applicable to significantly and critically
undercapitalized institutions prior to July 1, 1994.

Effective December 19, 1992, the federal banking regulators, including
the OTS, adopted regulations implementing the prompt corrective action
provisions of FDICIA. Under such regulations, the federal banking regulators
will measure a depository institution's capital adequacy on the basis of the
institution's total risk-based capital ratio (the ratio of its total capital to
risk-weighted assets), Tier 1 risk-based capital ratio (the ratio of its core
capital to risk-weighted assets) and leverage ratio (the ratio of its core
capital to adjusted total assets). Under the regulations, a savings
institution that is not subject to an order or written directive to meet or
maintain a specific capital level will be deemed "well capitalized" if it also
has: (i) a total risk-based capital ratio of 10% or greater; (ii) a Tier 1
risk-based capital ratio of 6.0% or greater; and (iii) a leverage ratio of 5.0%
or greater. An "adequately capitalized" savings institution is an institution
that does not meet the definition of well capitalized and has: (i) a total
risk-based capital ratio of 8.0% or greater; (ii) a Tier 1 capital risk-based
ratio of 4.0% or greater; and (iii) a leverage ratio of 4.0% or greater (or
3.0% or greater if the institution has a composite 1 MACRO rating). An
"undercapitalized" savings institution is an institution that has (i) a total
risk-based capital ratio less than 8.0%; or (ii) a Tier 1 risk-based capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0% (or 3.0%
if the institution has a composite 1 MACRO rating). A "significantly
undercapitalized" savings institution is defined as an institution that has:
(i) a total risk-based capital ratio of less than 6.0%; or (ii) a Tier 1
risk-based capital ratio of less than 3.0%; or (iii) a leverage ratio of less
than 3.0%. A "critically undercapitalized" savings institution is defined as
an institution that has a ratio of core capital to total assets of less than
2.0%. The OTS may reclassify a well capitalized savings institution as
adequately capitalized and may require an adequately capitalized or
undercapitalized institution to comply with the supervisory actions applicable
to institutions in the next lower capital category if the OTS determines, after
notice and an opportunity for a hearing, that the institution is in an unsafe
or unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any MACRO rating category. Liberty Federal
is classified as well capitalized under the new regulations.

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Standards for Safety and Soundness. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating
to: (i) internal controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest rate risk exposure; (v)
asset growth; and (vi) compensation, fees and benefits. The compensation
standards would prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide excessive compensation, fees or benefits or
could lead to material financial loss. In addition, the federal banking
regulatory agencies would be required to prescribe by regulation standards
specifying: (i) maximum classified assets to capital ratios; (ii) minimum
earnings sufficient to absorb losses without impairing capital; and (iii) to
the extent feasible, a minimum ratio of market value to book value for publicly
traded shares of depository institutions and depository institution holding
companies. The federal banking agencies, including the OTS, have published an
advance notice of proposed rulemaking in which it was stated that the banking
agencies do not intend to prescribe inflexible standards specifying how
depository institutions must be managed. Commenters have been requested to
recommend specific language for implementation of the new standards.

Dividend Restrictions. Liberty Federal is not permitted to pay
dividends on its capital stock if its regulatory capital would thereby be
reduced below the amount then required for the liquidation account established
for the benefit of certain depositors of Liberty Federal at the time of its
conversion to stock form. In addition, savings institution subsidiaries of
savings institution holding companies are required to give the OTS 30 days'
prior notice of any proposed declaration of dividends to the holding company.

Federal regulations impose additional limitations on the payment of
dividends and other capital distributions (including stock repurchases and cash
mergers) by Liberty Federal. Under these regulations, a savings institution
that, immediately prior to, and on a pro forma basis after giving effect to, a
proposed capital distribution, has total capital (as defined by OTS regulation)
that is equal to or greater than the amount of its fully phased-in capital
requirements (a "Tier 1 Institution") is generally permitted without OTS
approval to make capital distributions during a calendar year in the amount of
up to the greater of (i) 100% of its net income to date during the calendar
year plus an amount that would reduce by one-half the amount by which its total
capital exceeded its fully phased-in risk-based capital requirement at the
beginning of the calendar year or (ii) 75% of its net income for the previous
four quarters. A savings institution with total capital in excess of current
minimum capital requirements but not in excess of the fully phased-in
requirements (a "Tier 2 Institution") is permitted to make capital
distributions without OTS approval of between 50% and 75% of its net income for
the previous four quarters, less dividends already paid for such period,
depending on the savings institution's level of risk-based capital. A savings
institution that fails to meet current minimum capital requirements (a "Tier 3
Institution") is prohibited from making any capital distributions without the
prior approval of the OTS. Tier 1 Institutions that have been notified by the
OTS that they are in need of more than normal supervision will be treated as
either a Tier 2 or Tier 3 Institution. Liberty Federal expects to continue to
meet its fully phased-in capital requirements. Unless the OTS determines that
Liberty Federal is an institution requiring more than normal supervision,
Liberty Federal expects to be authorized to pay dividends in accordance with
the provisions of the OTS regulations discussed above as a Tier 1 Institution.
Despite the above authority, the OTS may prohibit any savings institution from
making a capital distribution that would otherwise be permitted by the
regulation, if the OTS determines that the distribution would constitute an
unsafe or unsound practice. Furthermore, under the OTS prompt corrective
action regulations, which took effect on December 19, 1992, Liberty Federal
would be prohibited from making any capital distributions if, after making the
distribution, Liberty Federal would have: (i) a total risk- based capital ratio
of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0% or
(iii) a leverage ratio of less than 4.0%.

In addition to the foregoing, earnings of Liberty Federal appropriated
to bad debt reserves and deducted for federal income tax purposes are not
available for payment of cash dividends or other distributions to LBI without
payment of taxes at the then current tax rate by Liberty Federal on the amount
of earnings removed from the reserves for such distributions. See "Taxation."
LBI intends to make full use of this favorable tax treatment afforded to
Liberty Federal and LBI and does not contemplate use of any earnings of Liberty
Federal in a manner which would limit Liberty Federal's bad debt deduction or
create federal tax liabilities.

<PAGE> 98
Limits on Loans to One Borrower. The loans-to-one-borrower limits
applicable to national banks currently apply to savings institutions in the
same manner and to the same extent. Previously, Liberty Federal was generally
authorized to make loans to one borrower, including related entities, in an
amount equal to the lesser of 10% of deposits or 100% of regulatory capital.
Under the current limits, with certain limited exceptions, loans and extensions
of credit to a person outstanding at one time shall not exceed 15% of the
unimpaired capital and surplus of the savings institution. Loans and
extensions of credit fully secured by readily marketable collateral may
comprise an additional 10% of unimpaired capital and surplus. Savings
institutions also are authorized to make loans to one borrower, for any
purpose, in an amount not to exceed $500,000 or, by order of the Director of
the OTS, in an amount not to exceed the lesser of $30 million or 30% of
unimpaired capital and surplus to develop residential housing, provided (i) the
purchase price of each single-family dwelling in the development does not
exceed $500,000, (ii) the savings institution is in compliance with the fully
phased-in capital standards, (iii) the loans comply with applicable
loan-to-value requirements, and (iv) the aggregate amount of loans made under
this authority does not exceed 150% of unimpaired capital and surplus. Under a
transition rule adopted by the OTS, savings institutions that met their fully
phased-in capital requirements and had not been identified as needing more than
normal supervision were permitted to make loans for certain purposes to one
borrower in an amount not to exceed 30% of unimpaired capital and surplus from
January 1, 1991 through December 31, 1993. The OTS has taken the position that
the new loans-to-one-borrower limits do not apply to loans and legally binding
commitments outstanding as of August 9, 1989. However, the aggregate principal
balance of loans which exceeded the permissible limits on the effective date
cannot be increased and the institution must use its best efforts to reduce its
interest therein in order to bring such loans into compliance with the new
standard. Loans to one borrower to finance the sale of real property acquired
in satisfaction of debts previously contracted for in good faith generally
do not include purchase money mortgage notes taken from the purchaser if no new
funds are advanced to the borrower and the savings institution is not placed in
a more detrimental position as a result of the sale. It is management's
opinion that the loans-to-one- borrower limits will not have a significant
impact on the operations of Liberty Federal. Liberty Federal has no lending
relationships in excess of applicable loans-to-one-borrower limits.

Deposit Insurance. Liberty Federal is charged an annual premium for
insurance of its accounts by the SAIF. The FDIC may establish an assessment
rate for deposit insurance premiums which protects the insurance fund and
considers the fund's operating expenses, case resolution expenditures, income
and effect of the assessment rate on the earnings and capital of SAIF members.

The FDIC adopted a transitional risk-based deposit insurance
assessment system for 1993 and established a permanent risk- based assessment
system for insured depository institutions effective January 1, 1994. Under
the both systems, the assessment rate for an insured depository institution
depends on the assessment risk classification assigned to the institution based
on the institution's capital level and a supervisory evaluation by the FDIC.
Institutions are assigned to one of three capital groups, well capitalized,
adequately capitalized or under-capitalized, based on the data reported to
regulators for the date closest to the last day of the seventh month preceding
the semi-annual assessment period. Within each capital group, institutions
will be assigned to one of three subgroups on the basis of supervisory
evaluations by the institution's primary supervisory authority and such other
information as the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance fund. Subgroup
A will consist of financially sound institutions with only a few minor
weaknesses. Subgroup B consists of institutions that demonstrate weaknesses
which, if not corrected, could result in significant deterioration of the
institution and increased risk of loss to the deposit insurance fund. Subgroup
C consists of institutions that pose a substantial probability of loss to the
deposit insurance fund unless effective corrective action is taken. The
assessment rate will range from 0.23% of deposits for well capitalized
institutions in Subgroup A to 0.31% of deposits for undercapitalized
institutions in Subgroup C. Liberty Federal's deposit insurance premium is
.23% (annualized) of deposits during the January through June semi-annual
period of 1994.

The FDIC is authorized to raise insurance premiums for SAIF-member
institutions in certain circumstances. If the FDIC determines to increase the
assessment rate for all SAIF-member institutions, institutions in all risk
categories could be affected. While an increase in premiums for Liberty
Federal could have an adverse effect on Liberty Federal's earnings, a decrease
in premiums could have a positive impact on the earnings of Liberty Federal.

<PAGE> 99
SAIF members generally are prohibited from converting to the status of
members of the Bank Insurance Fund ("BIF") administered by the FDIC or merging
with or transferring assets to a BIF member before August 9, 1994. The FDIC,
however, may approve such a transaction in the case of a SAIF member in default
or if the transaction involves an insubstantial portion of the deposits of each
participant. Each depository institution participating in a SAIF to BIF
conversion transaction is required to pay an exit fee to the SAIF and an
entrance fee to the BIF. FIRREA does not prohibit a savings institution from
adopting a commercial bank or savings bank charter prior to August 9, 1994 if
the resulting bank remains a SAIF member. Savings institution subsidiaries of
bank holding companies are permitted to be merged into bank subsidiaries of the
holding company subject to certain limitations. See "Savings Institution
Holding Company Regulation," below.

The FDIC has adopted a regulation which provides that any insured
depository institution with a ratio of Tier 1 capital to total assets of less
than 2% will be deemed to be operating in an unsafe or unsound condition, which
would constitute grounds for the initiation of termination of deposit insurance
proceedings. The FDIC, however, will not initiate termination of insurance
proceedings if the depository institution has entered into and is in compliance
with a written agreement with its primary regulator, and the FDIC is a party to
the agreement, to increase its Tier 1 capital to such level as the FDIC deems
appropriate. Tier 1 capital is defined as the sum of common stockholders'
equity, noncumulative perpetual preferred stock (including any related surplus)
and minority interests in consolidated subsidiaries, minus all intangible
assets other than mortgage servicing rights and qualifying supervisory goodwill
eligible for inclusion in core capital under OTS regulations and minus
identified losses and investments in certain securities subsidiaries. Insured
depository institutions with Tier 1 capital equal to or greater than 2% of
total assets may also be deemed to be operating in an unsafe or unsound
condition notwithstanding such capital level. The regulation further provides
that in considering applications that must be submitted to it by savings
institutions, the FDIC will take into account whether the savings institution
is meeting the Tier 1 capital requirement for state non-member banks of 4% of
total assets for all but the most highly rated state non-member banks.

Federal Home Loan Bank System. Liberty Federal is a member of the FHLB
System, which consists of 12 district Federal Home Loan Banks subject to
supervision and regulation by the Federal Housing Finance Board ("FHFB"). The
Federal Home Loan Banks provide a central credit facility primarily for member
institutions. As a member of the FHLB of Cincinnati, Liberty Federal is
required to acquire and hold shares of capital stock in the FHLB of Cincinnati
in an amount at least equal to 1% of the aggregate unpaid principal of its home
mortgage loans, home purchase contracts, and similar obligations at the
beginning of each year, or 1/20 of its advances (borrowings) from the FHLB of
Cincinnati, whichever is greater. Liberty Federal was in compliance with this
requirement with investment in FHLB of Cincinnati stock at December 31, 1993,
of $1.3 million. The FHLB of Cincinnati serves as a reserve or central bank
for its member institutions within its assigned district. It is funded
primarily from proceeds derived from the sale of consolidated obligations of
the FHLB System. It offers advances to members in accordance with policies and
procedures established by the FHFB and the Board of Directors of the FHLB of
Cincinnati. Long-term advances may be made only for the purpose of providing
funds for residential housing finance.

Federal Reserve System. Pursuant to regulations of the Federal
Reserve Board, a savings institution must maintain average daily reserves equal
to 3% on the first $51.9 million of transaction accounts, plus 10% on the
remainder. This percentage is subject to adjustment by the Federal Reserve
Board. Because required reserves must be maintained in the form of vault cash
or in a non-interest bearing account at a Federal Reserve Bank, the effect of
the reserve requirement is to reduce the amount of the institution's
interest-earning assets. As of December 31, 1993, Liberty Federal met its
reserve requirements.

Savings Institution Holding Company Regulation. LBI is a savings
institution holding company within the meaning of the Home Owners' Loan Act.
As such, LBI is registered with the OTS and is subject to OTS regulations,
examinations, supervision and reporting requirements. As a subsidiary of a
savings institution holding company, Liberty Federal is subject to certain
restrictions in its dealings with LBI and affiliates thereof.

<PAGE> 100
The Home Owners' Loan Act generally prohibits a savings institution
holding company from acquiring, without prior approval of the Director of OTS,
(i) control of any other savings institution or savings institution holding
company or substantially all the assets thereof or (ii) more than 5% of the
voting shares of a savings institution or holding company thereof which is not
a subsidiary. Under certain circumstances, a registered savings institution
holding company is permitted to acquire, with the approval of the Director of
OTS, up to 15% of the voting shares of an under-capitalized savings institution
pursuant to a "qualified stock issuance" without that savings institution being
deemed controlled by the holding company. In order for the shares acquired to
constitute a "qualified stock issuance," the shares must consist of previously
unissued stock or treasury shares, the shares must be acquired for cash, the
savings institution holding company's other subsidiaries must have tangible
capital of at least 6-1/2% of total assets, there must not be more than one
common director or officer between the savings institution holding company and
the issuing savings institution and transactions between the savings
institution and the savings institution holding company and any of its
affiliates must conform to Sections 23A and 23B of the Federal Reserve Act.
Except with the prior approval of the Director of OTS, no director or officer
of a savings institution holding company or person owning or controlling by
proxy or otherwise more than 25% of such company's stock, may also acquire
control of any savings institution, other than a subsidiary savings
institution, or of any other savings institution holding company.

The Federal Reserve Board is authorized to approve an application by a
bank holding company to acquire control of any savings institution. Pursuant
to rules promulgated by the Federal Reserve Board, owning, controlling or
operating a savings institution is a permissible activity for bank holding
companies, if the savings institution engages only in deposit-taking activities
and lending and other activities that are permissible for bank holding
companies. In approving such an application, the Federal Reserve Board may not
impose any restriction on transactions between the savings institution and its
holding company affiliates except as required by Sections 23A and 23B of the
Federal Reserve Act.

A bank holding company that controls a savings institution may merge
or consolidate the assets and liabilities of the savings institution with, or
transfer assets and liabilities to, any subsidiary bank which is a member of
the BIF with the approval of the appropriate federal banking agency and the
Federal Reserve Board. The resulting bank will be required to continue to pay
assessments to the SAIF at the rates prescribed for SAIF members on the
deposits attributable to the merged savings institution plus an annual growth
increment.

Transactions between savings institutions and any affiliate are
governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a
savings institution is any company or entity which controls, is controlled by,
or is under common control with the savings institution. In a holding company
context, the parent holding company of a savings institution (such as LBI) and
any companies (including other savings institutions) which are controlled
by such parent holding company are affiliates of the savings institution.
Generally, Sections 23A and 23B (i) limit the extent to which the savings
institution or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such institution's capital stock and
surplus, and contain an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar other types of
transactions. In addition to the restrictions imposed by Sections 23A and 23B,
no savings institution may (i) loan or otherwise extend credit to an affiliate,
except for any affiliate which engages only in activities which are permissible
for bank holding companies, or (ii) purchase or invest in any stocks, bonds,
debentures, notes or similar obligations of any affiliate, except for
affiliates which are subsidiaries of the savings institution.

Loans by savings institutions to executive officers, directors and
principal stockholders are subject to the restrictions set forth in Section
22(h) of the Federal Reserve Act and the Federal Reserve Board's Regulation O
thereunder. Under Section 22(h), loans to an executive officer and to a
greater than 10% stockholder of a savings institution (18% in the case of
institutions located in an area with less than 30,000 in population), and
certain affiliated entities of either, may not exceed (together with all other
outstanding loans to such person and affiliated entities) the institution's
loan to one borrower limit (generally equal to 15% of the institution's
unimpaired capital and surplus and an additional 10% of such capital and
surplus

<PAGE> 101
for loans fully secured by certain readily marketable collateral). Section
22(h) also prohibits loans, above amounts prescribed by the appropriate
federal banking agency, to directors, executive officers and greater than 10%
stockholders of a savings institution, and their respective affiliates, unless
such loan is approved in advance by a majority of the Board of Directors of the
institution with any "interested" director not participating in the voting. The
Federal Reserve Board has prescribed the loan amount (which includes all other
outstanding loans to such person), as to which such prior board of director
approval if required, as being the greater of $25,000 or 5% of capital and
surplus (up to $500,000). Further, Section 22(h) and Regulation O require that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
non- affiliated persons.

Savings institutions are also subject to the requirements and
restrictions of Section 22(g) of the Federal Reserve Act on loans to executive
officers (as implemented by the Federal Reserve Board's Regulation O) and the
restrictions of 12 U.S.C. Section 1972 on certain tying arrangements and
extensions of credit by correspondent banks. Section 22(g) of the Federal
Reserve Act requires approval by the board of directors of a depository
institution for extension of credit to executive officers of the institution,
and imposes reporting requirements for and additional restrictions on the type,
amount and terms of credits to such officers. Section 1972 prohibits a
depository institution from extending credit to or offering any other services,
or fixing or varying the consideration for such extension of credit or service,
on the condition that the customer obtain some additional service from the
institution or certain of its affiliates or not obtain services of a competitor
of the institution, subject to certain exceptions. Section 1972 also prohibits
extensions of credit to executive officers, directors, and greater than 10%
stockholders of a depository institution by any other institution which has a
correspondent banking relationship with the institution, unless such extension
of credit is on substantially the same terms as those prevailing at the time
for comparable transactions with other persons and does not involve more than
the normal risk of repayment or present other unfavorable features.

The Board of Directors of LBI presently intends to operate LBI as a
unitary savings institution holding company. There are generally no
restrictions on the business activities of a unitary savings institution
holding company or those of the holding company's non-insured subsidiaries.
However, if the director of OTS determines that there is reasonable cause to
believe that the continuation by a savings institution holding company of an
activity constitutes a serious risk to the financial safety, soundness, or
stability of its subsidiary savings institution, the Director of OTS may impose
such restrictions as deemed necessary to address such risk and limiting (i)
payment of dividends by the savings institution, (ii) transactions between the
savings institution and its affiliates, and (iii) any activities of the savings
institution that might create a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings institution.

Notwithstanding the above rules as to permissible business activities
of unitary savings and loan holding companies, if the savings institution
subsidiary of such a holding company fails to meet the Qualified Thrift Lender
test, then such unitary holding company shall also presently become subject to
the activities restrictions applicable to multiple holding companies.

If LBI were to acquire control of another savings institution, other
than through merger or other business combination with Liberty Federal, LBI
would thereupon become a multiple savings institution holding company. Except
where such acquisition is pursuant to the authority to approve emergency
acquisitions and where each subsidiary savings institution meets the Qualified
Thrift Lender test, the activities of LBI and any of its subsidiaries (other
than Liberty Federal or other subsidiary savings institutions) would thereafter
be subject to further restrictions. The Home Owners' Loan Act limits the
business activities of multiple savings institution holding companies and their
non-savings institution subsidiaries to (i) furnishing or performing management
services for a subsidiary savings institution, (ii) conducting an insurance
agency or escrow business, (iii) holding, managing, or liquidating assets owned
by or acquired from a subsidiary savings institution, (iv) holding or managing
properties used or occupied by a subsidiary savings institution, (v) acting as
trustee under deeds of trust, (vi) those activities previously directly
authorized by the FSLIC by regulation as of March 5, 1987 to be engaged in by
multiple holding companies or (vii) those activities authorized by the Federal
Reserve Board as permissible for bank holding companies, unless the Director of
OTS by regulation prohibits or limits such activities for savings and loan
holding companies. Those activities described in (vii) above must also be
approved by the Director of OTS prior to being engaged in by a multiple holding
company.

<PAGE> 102
The Director of OTS may also approve acquisitions resulting in the
formation of a multiple savings institution holding company which controls
savings institutions in more than one state, if the multiple savings
institution holding company involved controls a savings institution which
operated a home or branch office in the state of the institution to be acquired
as of March 5, 1987, or if the laws of the state in which the institution to be
acquired is located specifically permit institutions to be acquired by
state-chartered institutions or savings and loan holding companies located in
the state where the acquiring entity is located (or by a holding company that
controls such state-chartered savings institutions). As under prior law, the
Director of OTS may approve an acquisition resulting in a multiple savings
institution holding company controlling savings institutions in more than one
state in the case of certain emergency acquisitions.

Federal Securities Law. LBI has filed with the Commission certain
registration statements under the Securities Act, for the registration of its
outstanding shares of common stock. The common stock is also registered with
the Commission under the Exchange Act and generally may not be deregistered for
at least three years from December 17, 1991, the effective date of Liberty
Federal's conversion to stock form. LBI is subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the
Exchange Act.

The registration under the Securities Act of the outstanding shares of
LBI's common stock does not cover the resale of such shares. Shares purchased
by persons who are not affiliates of LBI may be resold without registration or
exemption from registration. Shares purchased by an affiliate of LBI would be
subject to the resale restrictions under the Securities Act. So long as LBI
meets the current public information requirements of Rule 144, each affiliate
of LBI who complies with the other conditions of Rule 144 (including those that
require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i)
1% of the outstanding shares of LBI or (ii) the average weekly volume of
trading in such shares during the preceding four calendar weeks. Provisions
may be made in the future by LBI to permit affiliates to have their shares
registered for sale under the Securities Act under certain circumstances.
There currently are no demand registration rights outstanding. However, in the
event LBI at some future time determines to issue additional shares from its
authorized but unissued shares, LBI might offer registration rights to certain
of its affiliates who want to sell their shares.

Taxation.

General. LBI and its subsidiaries file a consolidated federal income
tax return on a calendar year basis. Consolidated returns have the effect of
eliminating intercompany distributions, including dividends, from the
computation of consolidated taxable income for the taxable year in which the
distributions occur.

Federal Income Taxation. Savings institutions are subject to the
provisions of the Internal Revenue Code of 1986, as amended (the "Code") in the
same general manner as other corporations. However, institutions such as
Liberty Federal which meet certain definitional tests and other conditions
prescribed by the Code may benefit from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. For purposes of the bad debt reserve deduction, loans are separated
into "qualifying real property loans," which generally are loans secured by
interests in certain real property, and nonqualifying loans, which are all
other loans. The bad debt reserve deduction with respect to nonqualifying
loans must be based on actual loss experience. The amount of the bad debt
reserve deduction with respect to qualifying real property loans may be based
upon actual loss experience (the "experience method") or a percentage of
taxable income determined without regard to such

<PAGE> 103
deduction (the "percentage of taxable income method").

Liberty Federal has generally elected to use the method which has
resulted in the greatest deductions for federal income tax purposes. Under the
experience method, the bad debt deduction for an addition to the reserve for
qualifying real property loans is an amount determined under a formula based
generally on the bad debts actually sustained by a savings institution over a
period of years. Under the percentage of taxable income method, the bad debt
reserve deduction for qualifying real property loans is computed as a
percentage, which Congress has reduced from as much as 60% in prior years to 8%
of taxable income, with certain adjustments, effective for taxable years
beginning after 1986. The allowable deduction under the percentage of taxable
income method (the "percentage bad debt deduction") for taxable years beginning
before 1987 was scaled downward in the event that less than 82% of the total
dollar amount of the assets of an institution were within certain designated
categories. When the percentage method bad debt deduction was lowered to 8%,
the 82% qualifying assets requirement was lowered to 60%. For all taxable
years, there is no deduction in the event that less than 60% of the total
dollar amount of the assets of an institution falls within such categories.
Moreover, in such case, Liberty Federal could be required to recapture,
generally over a period of up to four years, its existing bad debt reserve. As
of December 31, 1993, more than the required amount of Liberty Federal's total
assets fell within such category.

The bad debt deduction under the percentage of taxable income method
is subject to certain limitations. First, the amount added to the reserve for
losses on qualifying real property loans may not exceed the amount necessary to
increase the balance of such reserve at the close of the taxable year to 6% of
such loans outstanding at the end of the taxable year. Further, the addition to
the reserve for losses on qualifying real property loans cannot exceed the
amount which, when added to that year's addition to the bad debt reserve for
losses on nonqualifying loans, equals the amount by which 12% of total deposits
or withdrawable accounts of depositors at year-end exceeds the sum of surplus,
undivided profits and reserves at the beginning of the year. Finally, the
percentage bad debt deduction under the percentage of taxable income method is
reduced by the deduction for losses on nonqualifying loans.

Earnings appropriated to Liberty Federal's bad debt reserve and
claimed as a tax deduction are not available for the payment of cash dividends
or for distribution to stockholders (including distributions made on
dissolution or liquidation), unless Liberty Federal includes the amount in
taxable income, along with the amount deemed necessary to pay the resulting
federal income tax.

The Code imposes an alternative minimum tax at a rate of 20%. The
alternative minimum tax generally applies to a base of regular taxable income
plus certain tax preferences ("alternative minimum taxable income" or "AMTI")
and is payable to the extent such AMTI exceeds an exemption amount. The Code
provides that an item of tax preference is the excess of the bad debt deduction
allowable for a taxable year pursuant to the percentage of taxable income
method over the amount allowable under the experience method. The other items
of tax preference that constitute AMTI include (a) tax-exempt interest on
private activity bonds other than certain qualified bonds and (b) 75% of the
excess (if any) of (i) adjusted current earnings as defined in the Code, over
(ii) AMTI (determined without regard to this preference and prior to reduction
by net operating losses). Net operating losses can offset no more than 90% of
AMTI. Certain payments of alternative minimum taxes may be used as credits
against regular tax liabilities in future years.

Liberty Federal's federal income tax returns for the last five years
have not been audited. For further information regarding federal income taxes
see Note 11 of the Notes to Consolidated Financial Statements attached as
Appendix A hereto.

State Taxation. The State of Tennessee imposes an excise tax on
savings institutions at the rate of 6% of net taxable income, which is computed
based on federal taxable income subject to certain adjustments. The State of
Tennessee also imposes franchise and privilege taxes on savings institutions
which, in the case of Liberty Federal, have not constituted significant expense
items.

<PAGE> 104
Employees. As of December 31, 1993, Liberty Federal and its
subsidiary had 79 full-time and 8 part-time employees, none of whom was
represented by a collective bargaining unit. Liberty Federal believes that it
enjoys excellent relations with its personnel.

PROPERTIES

The following table sets forth the location and certain additional
information regarding Liberty Federal's offices at December 31, 1993. Liberty
Federal owns all of its offices.

<TABLE>
<CAPTION>
Year Square
Opened Footage Deposits (1)
------ ------- ------------
<S> <C> <C> <C>
Main Office: (In thousands)
914 East Wood Street
Paris, Tennessee 1975 13,000 $69,045

Branch Offices:
101 East Wood Street
Paris, Tennessee 1959 (1) 1,500

120 Forest Avenue
Camden, Tennessee 1967 (3) 2,500 18,498

320 East Main Street
Huntingdon, Tennessee 1972 4,200 16,134

505 Highland Drive North
McKenzie, Tennessee 1973 (2) 4,000 14,413

317 Main Street
Waverly Plaza
Waverly, Tennessee 1962 (3) 4,650 30,627

</TABLE>
____________
(1) All deposits of the Paris branch office are included in the deposits
of the main office.

(2) Acquired by Liberty Federal in 1985 when Liberty Federal acquired the
assets and liabilities of the McKenzie, Tennessee branch of
Metropolitan Federal Savings and Loan Association, headquartered in
Nashville, Tennessee. The present office was opened in 1990.

(3) Acquired in 1982 when Liberty Federal merged with First Federal
Savings and Loan Association of Waverly, Tennessee.

Liberty Federal also owns two parcels of land. One parcel, which has
a house on it, is across the street from Liberty Federal's main office and is
used for storage. In the future, Liberty Federal plans to use this parcel for
employee parking. The other parcel consists of approximately four acres and is
located on Mineral Wells Avenue in Paris. Liberty Federal is not currently
using the Mineral Wells Avenue parcel and has not decided what to do with it.
In the future, Liberty Federal could sell the Mineral Wells Avenue parcel or
use it for expansion or even subdivide and develop it.

Savings and Loan Data Corporation, Cincinnati, Ohio, performs data
processing and record keeping for Liberty Federal. Liberty Federal's fixtures
and equipment include a network of teller terminals, several personal
computers, a mainframe computer, satellite communications equipment and a check
processing machine.

At December 31, 1993, the net book value of Liberty Federal's
premises, furniture, fixtures and equipment was $2.2 million. See Note 8 of
the Notes to Consolidated Financial Statements attached as Appendix A hereto.
There were no encumbrances attached to the premises, furniture, fixtures and
equipment at December 31, 1993.

<PAGE> 105
LEGAL PROCEEDINGS

From time to time, Liberty Federal is a party to various legal
proceedings incident to its business. At December 31, 1993, there were no
material legal proceedings to which LBI, Liberty Federal or its subsidiary is a
party or to which any of their property is subject.

DESCRIPTION OF UPC COMMON AND PREFERRED STOCK

UPC's Charter of Incorporation (the "Charter") currently authorizes
the issuance of 50,000,000 shares of common stock, par value $5.00 per share,
and 10,000,000 shares of preferred stock having no par value (the "UPC
Preferred Stock"). As of March 31, 1994, 21,522,749 shares of UPC Common Stock
were issued and outstanding, and approximately 690,000 shares were subject to
acquisition through the exercise of options granted pursuant to UPC's 1992 and
1983 Stock Option Plans and other employee, officer and director benefit plans;
approximately 1,300,000 shares were authorized for issuance pursuant to said
plans but not yet subject to option grants or otherwise issued; and
approximately 4,478,000 shares were authorized for issuance and reserved for
conversion of certain shares of UPC Preferred Stock. Additionally, as of March
31, 1994; 4,095,577 shares of UPC Preferred Stock were issued and outstanding,
consisting of 44,000 shares of UPC's $8.00 Nonredeemable, Cumulative,
Convertible Preferred Stock, Series B (the "Series B Preferred Stock"); 690,000
shares of UPC's 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred
Stock, Series C (the "Series C Preferred Stock"); 253,655 shares of UPC's 9.5%
Redeemable, Cumulative Convertible Preferred Stock, Series D (the "Series D
Preferred Stock"); and 3,107,922 shares of UPC's 8% Cumulative, Convertible
Preferred Stock, Series E (the "Series E Preferred Stock"). As of March 31,
1994, none of UPC's 250,000 authorized shares of Series A Preferred Stock were
issued and outstanding. The capital stock of UPC does not represent or
constitute a deposit account and is not insured by the FDIC, the Bank Insurance
Fund, the Savings Association Insurance Fund or any governmental agency.

UPC COMMON STOCK

General. Shares of UPC Common Stock may be issued at such time or
times and for such consideration (not less than the par value thereof) as the
UPC Board of Directors may deem advisable, subject to such limitations as may
be set forth in the laws of the State of Tennessee or UPC's charter or bylaws.
UPNB is the Registrar, Transfer Agent and Dividend Disbursing Agent for shares
of UPC Common Stock.

Dividends. Subject to the preferential dividend rights, if any,
applicable to shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement or sinking funds for UPC Preferred Stock, the holders of UPC Common
Stock are entitled to receive, to the extent permitted by law, such dividends
as may be declared from time to time by the UPC Board of Directors.

UPC has the right to, and may from time to time enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock. As of the date of this Prospectus, no
such restrictions under any such borrowing arrangements or outstanding debt
instruments are in effect.

Liquidation Rights. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of UPC, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of the UPC Preferred Stock, holders of UPC Common Stock will be
entitled to receive all of the remaining assets of UPC of whatever kind
available for distribution to shareholders ratably in proportion to the number
of shares of UPC Common Stock held. The UPC Board of Directors may distribute
in kind to the holders of UPC Common Stock such remaining assets of UPC or may
sell, transfer or otherwise dispose of all or any part of such remaining assets
to any other person or entity and receive payment therefor in cash, stock or
obligations of such other person or entity, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to holders
of UPC Common Stock. Neither the merger or consolidation of UPC into or with
any other corporation, nor the merger of any other corporation into UPC, nor
any purchase or redemption of shares of stock of UPC of any class, shall be
deemed to be a dissolution, liquidation or winding-up of UPC for purposes of
this paragraph.

Because UPC is a holding company, its right and the rights of its
creditors and shareholders, including the holders of UPC Common Stock, to
participate in the distribution of assets of a subsidiary on its liquidation or

<PAGE> 106
recapitalization may be subject to prior claims of such subsidiary's creditors
except to the extent that UPC itself may be a creditor having recognized claims
against such subsidiary.

PREFERRED STOCK OF UPC

Series A Preferred Stock. UPC's Charter provides for the issuance of
up to 250,000 shares (subject to adjustment by action of the UPC Board) of
Series A Preferred Stock under certain circumstances involving a potential
change in control of UPC. None of such shares are outstanding and management
is aware of no facts suggesting that issuance of such shares may be imminent.
The Series A Preferred Stock is described in more detail in UPC's Current
Report on Form 8-K dated January 19, 1989, incorporated by reference herein.

Series B Preferred Stock. In November 1989, UPC issued to two
holders, in a private offering incidental to an acquisition, 44,000 shares of
its Series B Preferred Stock all of which are outstanding as of the date
hereof. Such shares bear a dividend rate of $8.00 per share per annum;
dividends are cumulative. After November 30, 1994 (and in limited
circumstances prior thereto), each share of Series B Preferred Stock is
convertible at the option of the holder into 7.722 shares of UPC Common Stock,
with the maximum number of shares of UPC Common Stock into which such shares
may be converted being 339,768. The Series B Preferred Stock is not subject to
any sinking fund provisions and has no preemptive rights. Such shares provide
for a liquidation preference of $100.00 per share plus unpaid dividends accrued
thereon and are not subject to redemption by UPC. Holders of Series B
Preferred Stock have no voting rights except as required by law and certain
other limited circumstances.

Series C Preferred Stock. In August 1991, UPC issued in a public
offering 690,000 shares of its Series C Preferred Stock all of which are
outstanding as of the date hereof. Such shares have a stated value of $25.00
per share. Dividends are payable at the rates of approximately $.65 per
quarter, increasing to $.68 on November 1, 1994, to $.71 on November 1, 1995
and to $.74 on November 1, 1996; dividends are cumulative. The Series C
Preferred Stock is not convertible, is not subject to any sinking fund
provisions and has no preemptive rights. Such shares provide for a liquidation
preference of $25.00 per share plus unpaid dividends accrued thereon and, with
the prior approval of the Federal Reserve, are subject to redemption by UPC at
$25.00 per share at any time on or after October 31, 1994. Holders of Series C
Preferred Stock have no voting rights except as required by law and in certain
other limited circumstances.

Series D Preferred Stock. In connection with the July, 1992
acquisition of Southeastern Bancshares, Inc., UPC issued in a private offering
253,655 shares of Series D Preferred Stock. Such shares have a stated value of
$20.50 per share on which dividends accrue at a rate of 9.5% per annum;
dividends are cumulative. At any time prior to redemption, each share of the
Series D Preferred Stock is convertible at the option of the holder into one
share of UPC Common Stock. The Series D Preferred Stock is not subject to any
sinking fund provisions and has no preemptive rights. Such shares have a
liquidation preference of $20.50 per share plus unpaid dividends accrued
thereon and, at UPC's option, with the prior approval of the Federal Reserve,
are subject to redemption by UPC at any time and from time to time on or after
July 1, 1995. Holders of Series D Preferred Stock have no voting rights except
as required by law and in certain other limited circumstances.

Series E Preferred Stock. In February, 1992, UPC issued in a public
offering 2,200,000 shares of Series E Preferred Stock, all of which (except for
600 previously converted shares) are outstanding as of the date hereof. In the
first two quarters of 1993, UPC issued 908,522 shares of Series E Preferred
Stock in connection with UPC's acquisition of the remaining equity interest in
Bank of East Tennessee and UPC's acquisition of Erin Bank & Trust Company in
Erin, Tennessee, all of which are outstanding as of the date hereof. All
shares of Series E Preferred Stock have a stated value of $25.00 per share.
Dividends are payable at the rate of $.50 per share per quarter and are
cumulative. The Series E Preferred Stock is convertible at the rate of 1.25
shares of UPC Common Stock for each share of Series E Preferred Stock. The
Series E Preferred Stock is not subject to any sinking fund provisions and has
no preemptive rights. Such shares have a liquidation preference of $25 per
share plus unpaid dividends accrued thereon and, at UPC's option and with the
prior approval of the Federal Reserve, are subject to redemption by UPC at any
time or from time to time after March 31, 1997. Holders of Series E Preferred
Stock have no voting rights except as required by law and in certain other
limited circumstances.

<PAGE> 107
CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

Certain provisions of UPC's Charter and Bylaws, and certain provisions
of Tennessee law, may have an anti-takeover effect in that they could prevent,
discourage or delay a change in control of UPC. The following summary briefly
describes certain of those provisions. The summary is not intended to be
complete and is qualified in its entirety by reference to UPC's Charter and
Bylaws and to the Tennessee Code.

Charter and Bylaw Provisions. Pursuant to UPC's Charter, the
directors of UPC are elected for three-year terms of office, and approximately
one-third of the members of the UPC Board are up for election each year. The
Charter also restricts the removal of directors by the shareholders.

The Charter requires the affirmative votes of the holders of 66 2/3%
of the outstanding stock for approval of a merger, consolidation or a sale or
lease of all or substantially all of the assets of UPC if the other party to
the transaction is a beneficial owner of 10% or more of the outstanding shares
of UPC. The Charter also requires the affirmative votes of the holders of 66
2/3% of the outstanding stock to amend the Bylaws of UPC and the provisions of
the Charter applicable to UPC's capital stock; to change the number, election
and classification of directors; to give approval of certain transactions as
described above; and to amend certain provisions of the Charter.

Share Purchase Rights Plan. In 1989, the UPC Board adopted a Share
Purchase Rights Plan and distributed a dividend of one Preferred Share Unit
Purchase Right ("Right") for each outstanding share of UPC Common Stock.
Moreover, one Right shall be, automatically and without further action by UPC,
distributed in respect to each share of UPC Common Stock issued thereafter.
The Rights are generally designed to deter coercive takeover tactics and to
encourage all persons interested in potentially acquiring control of UPC to
treat each shareholder on a fair and equal basis. Each Right trades in tandem
with the share of UPC Common Stock to which it relates until the occurrence of
certain events indicating a potential change in control of UPC. Upon the
occurrence of such an event, the Rights would separate from UPC Common Stock
and each holder of a Right (other than the potential acquirer) would be
entitled to purchase certain equity securities at prices below their market
value. UPC has authorized 250,000 shares of Series A Preferred Stock for
issuance under the Share Purchase Rights Plan, but no shares have been issued
as of the date of this Prospectus. Until a Right is exercised, the holder
thereof, as such, will have no rights as a shareholder of UPC, including the
right to vote or to receive dividends.

Provisions of the Tennessee Code. As a Tennessee corporation, UPC is
or could be subject to various legislative acts set forth in Chapter 35 of
Title 48 of the Tennessee Code, which imposes certain restrictions on business
combinations, including, but not limited to, combinations with interested
shareholders similar to those described above.

The Tennessee Business Combination Act (the "Tennessee BCA") generally
prohibits a "business combination" (generally defined to include mergers, share
exchanges, sales and leases of assets, issuances of securities, and similar
transactions) by UPC or a subsidiary with an "Interested shareholder"
(generally defined as any person or entity which beneficially owns 10% or more
of the voting power of any class or series of UPC's stock then outstanding)
within five years after the person or entity becomes an interested shareholder
unless the business combination or the transaction pursuant to which the
interested shareholder became such was approved by the UPC Board of Directors
before the interested shareholder became such, and the business combination
satisfies any other applicable requirements imposed by law or by UPC's Charter
or Bylaws. The Tennessee BCA also severely limits the extent to which UPC or
any of its officers or directors could be held liable for resisting any
business combination.

The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
restricts the voting powers of shares acquired by a party once a specific level
of control is acquired, unless certain conditions are met. Specifically, the
Tennessee CSAA provides that "Control Shares" will not have the voting rights
to which they normally would be entitled unless approved by the other
shareholders at an annual or special meeting. "Control shares" are shares
that, in the absence of the Tennessee CSAA, would give the acquirer voting
power within any of the following ranges of all of the voting power of UPC: (i)
one-fifth or more but less than one-third; (ii) one-third or more but less than
a majority; or (iii) a majority or more.

In addition, the Tennessee Investor Protection Act places limitations
on certain takeover offers by persons owning 5% or more of any class of equity
securities of UPC.

100

<PAGE> 108
The provisions described above might be deemed to make UPC less
attractive as a candidate for acquisition by another company than would
otherwise be the case in the absence of such provisions. For example, if
another company should seek to acquire a controlling interest of less than 66
2/3% of the outstanding shares of UPC Common Stock, the acquirer would not
thereby obtain the ability to replace a majority of the UPC Board until at
least the second annual meeting of shareholders following the acquisition, and
furthermore the acquirer would not obtain the ability immediately to effect a
merger, consolidation or other similar business combination unless the
described conditions were met. As a result, UPC's shareholders may be deprived
of opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices in a takeover context. The provisions
described above also may make it more difficult for UPC's shareholders to
replace the UPC Board or management, even if the holders of a majority of the
UPC Common Stock should believe that such replacement is in the interests of
UPC. As a result, such provisions may tend to perpetuate the incumbent UPC
Board and management.

VALIDITY OF UPC COMMON STOCK

The validity of the shares of UPC Common Stock offered hereby will be
passed upon by Gary A. Simanson, Assistant Secretary and Associate General
Counsel of UPC. Gary A. Simanson is an officer of UPC and UPNB and receives
compensation from UPC.

EXPERTS

The consolidated financial statements of Union Planters Corporation
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
of UPC for the year ended December 31, 1993, have been so incorporated in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

The consolidated balance sheets of Liberty Bancshares, Inc. and
subsidiary, as of December 31, 1993 and 1992, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1993, included herein and
elsewhere in the Proxy Statement/Prospectus have been included herein and
elsewhere in the Proxy Statement/Prospectus in reliance upon the report of KPMG
Peat Marwick, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

The consolidated financial statements of BANCFIRST Corporation and its
subsidiary, BANKFIRST, as of September 30, 1993 and 1992, and for the years
ended September 30, 1993, 1992, and 1991, incorporated in this Proxy
Statement/Prospectus by reference to the Current Report of UPC on Form 8-K,
dated February 8, 1994, have been audited by Deloitte & Touche, independent
auditors, as stated in their report which is incorporated herein by reference
and in reliance upon the report of such firm given their authority as experts
in accounting and auditing.

BY ORDER OF THE BOARD OF DIRECTORS

(SIGNATURE)

Thomas D. Enoch
Secretary

Paris, Tennessee
May 5, 1994

FORM 10-K

A COPY OF LBI'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WHICH DOES NOT CONTAIN
ANY MATERIAL INFORMATION THAT IS NOT SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF
THE VOTING RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, LIBERTY
BANCSHARES, INC., 914 EAST WOOD STREET, PARIS, TENNESSEE 38242.

101
<PAGE> 109
UNION PLANTERS CORPORATION
INDEX TO APPENDICES

<TABLE>
<CAPTION>
APPENDIX
NUMBER
- --------
<S> <C> <C>
A -- Liberty Bancshares, Inc. and Subsidiary Consolidated Financial Statements

B -- Agreement and Plan of Reorganization, along with the Plan of Merger and related letter agreement annexed thereto as
Exhibits A and B, respectively

C -- Fairness Opinion of Trident Financial Corporation

D -- Chapter 23 of Title 48 of the Tennessee Code

E -- Article XIV of Charter of Liberty Bancshares, Inc.
</TABLE>
<PAGE> 110

APPENDIX A

LIBERTY BANCSHARES, INC.
AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 111

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Liberty Bancshares, Inc.:

We have audited the accompanying consolidated balance sheets of
Liberty Bancshares, Inc. and subsidiary as of December 31, 1993
and 1992, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the
three year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Liberty Bancshares, Inc. and subsidiary as of December
31, 1993 and 1992, and the results of their operations and their
cash flows for each of the years in the three year period ended
December 31, 1993, in conformity with generally accepted
accounting principles.

As discussed in note 13 to the consolidated financial statements,
the Company adopted in 1993 the provisions of the Financial
Accounting Standards Board's Statements of Financial Accounting
Standards No. 109, Accounting for Income Taxes, and No. 115,
Accounting for Certain Investments in Debt and Equity Securities.

KPMG PEAT MARWICK

Nashville, Tennessee
January 31, 1994

A-1
<PAGE> 112

LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 1993 and 1992

<TABLE>
<CAPTION>
ASSETS 1993 1992
------ ---- ----
<S> <C> <C>
Cash $ 4,235,636 3,577,752
Interest-bearing deposits in other banks 1,024,956 1,664,385
Federal funds sold 19,100,000 12,925,000
----------- -----------
Total cash and cash equivalents 24,360,592 18,167,137

Securities (notes 2, 9, and 13):
Securities available for sale (amortized cost of $26,663,462 in
1993 and market value of $8,635,878 in 1992) 27,551,385 7,832,824
Securities held to maturity (market value of $20,996,422 in 1992) - 20,658,020
Loans receivable, net (notes 3, 4, and 5) 122,098,910 117,220,820
Loans available for sale (market value of $1,738,711 in 1993 and
$1,786,296 in 1992) 1,721,000 1,762,193
Accrued interest receivable, net (notes 3 and 6) 1,001,156 1,157,795
Premises and equipment, net (note 8) 2,238,444 2,280,037
Real estate owned, net (note 7) 340,112 129,856
Investment in Federal Home Loan Bank stock, at cost 1,282,300 1,226,300
Deferred income taxes (note 11) - 109,336
Other assets 133,424 124,607
----------- -----------
Total assets $ 180,727,323 170,668,925
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits (note 9) $ 148,717,132 151,274,462
Advances from the Federal Home Loan Bank (note 10) 9,906,906 -
Accrued interest payable 156,537 140,165
Advance payments by borrowers for taxes and insurance 525,378 494,945
Current income taxes (note 11) 42,043 54,597
Accrued expenses and other liabilities 522,894 431,886
Deferred income taxes (note 11) 144,726 -
Employee Stock Ownership Plan loan payable (note 17) 368,855 468,438
----------- -----------
Total liabilities 160,384,471 152,864,493

Stockholders' equity (notes 2, 11, 15, 16, and 17):
Preferred stock of $1.00 par value, authorized
1,000,000 shares, none issued or outstanding - -
Common stock of $1.00 par value, authorized 4,000,000 shares,
639,529 and 634,215 issued and outstanding, respectively 639,529 634,215
Additional paid-in capital 5,120,917 5,073,091
Retained earnings-substantially restricted 14,400,748 12,565,564
Employee Stock Ownership Plan borrowings (368,855) (468,438)
----------- -----------
Realized stockholders' equity 19,792,339 17,804,432

Net unrealized gains on securities available for sale, net of tax (note 2) 550,513 -
----------- -----------
Total stockholders' equity 20,342,852 17,804,432
----------- -----------
Commitments and contingencies (notes 4, 10, 14, 17, and 19)

Total liabilities and stockholders' equity $ 180,727,323 170,668,925
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

A-2
<PAGE> 113
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Earnings

Years ended December 31, 1993, 1992, and 1991

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income:
First mortgage loans $ 7,775,780 8,876,464 9,825,012
Consumer and other loans 2,712,470 2,514,825 2,528,857
Interest and dividends on securities 1,478,389 2,151,492 2,710,144
Federal funds sold 476,383 377,384 558,286
Interest on deposits with banks 52,707 37,130 167,170
---------- ---------- ----------
Total interest income 12,495,729 13,957,295 15,789,469
---------- ---------- ----------
Interest expense on deposits (note 9) 5,982,143 7,393,615 10,492,313
Interest expense on long-term Federal Home Loan Bank advances 93,269 - -
Interest expense on long-term ESOP loan 24,894 34,449 -
---------- ---------- ----------
Total interest expense 6,100,306 7,428,064 10,492,313
---------- ---------- ----------
Net interest income 6,395,423 6,529,231 5,297,156

Provision for loan losses (note 3) (259,016) (174,155) (200,632)
---------- ---------- ----------
Net interest income after provision for loan losses 6,136,407 6,355,076 5,096,524

Non-interest income (expense):
Gain on sales of interest-earning assets, net (note 12) 697,803 297,621 5,354
Loan servicing fees 137,429 98,845 89,388
Other loan fees 307,329 324,001 282,417
Service charges 381,686 322,145 296,274
Gain (loss) on sale of real estate owned, net 11,866 (4,737) 15,417
Other operating income 135,738 111,003 109,011
---------- ---------- ----------
Total non-interest income 1,671,851 1,148,878 797,861
---------- ---------- ----------
General and administrative expenses:
Compensation and benefits (note 14) 2,002,120 1,884,038 1,733,833
Occupancy and equipment 388,919 388,631 393,052
Federal deposit insurance premiums 305,255 342,798 343,236
Provision for losses on real estate owned (note 7) - 87,074 10,655
Data processing service fees 268,184 257,377 262,730
Stationery and supplies 166,656 141,129 129,003
Other operating expenses 1,285,346 1,049,771 976,187
---------- ---------- ----------
Total general and administrative expenses 4,416,480 4,150,818 3,848,696
---------- ---------- ----------
Earnings before income taxes and cumulative effect
of a change in accounting principle 3,391,778 3,353,136 2,045,689

Income tax expense (note 11) 1,301,621 1,198,199 732,260
---------- ---------- ----------
Earnings before cumulative effect of change in
accounting principle 2,090,157 2,154,937 1,313,429

Cumulative effect of change in accounting principle (note 13) 127,150 - -
---------- ---------- ----------
Net earnings $ 2,217,307 2,154,937 1,313,429
========== ========== ==========
Primary and fully diluted earnings per share (note 16):
Earnings before cumulative effect of change in accounting principle $ 3.13 3.40 .05
Cumulative effect of change in accounting principle .19 - -
---------- ---------- ----------
Net earnings $ 3.32 3.40 .05
========== ========== ==========

</TABLE>
See accompanying notes to consolidated financial statements.

A-3
<PAGE> 114
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders' Equity

Years ended December 31, 1993, 1992, and 1991

NET
RETAINED UNREALIZED
EARNINGS- GUARANTEE GAINS ON TOTAL
ADDITIONAL SUB- OF SECURITIES STOCK-
COMMON STOCK PAID-IN STANTIALLY ESOP AVAILABLE HOLDERS'
SHARES AMOUNT CAPITAL RESTRICTED BORROWINGS FOR SALE EQUITY
------ ------- ------- ---------- ------------ ---------- ----------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 - $ - - 9,477,727 - - 9,477,727

Proceeds from issuance
of common stock, net
of conversion expenses
of $631,088 (note 16) 634,215 634,215 5,076,846 - - - 5,711,061

ESOP debt guaranteed
(note 17) - - - - (634,290) - (634,290)

Net earnings for 1991 - - - 1,313,429 - - 1,313,429
------- ------- --------- ---------- ------- ---------- ----------
Balance at December 31, 1991 634,215 634,215 5,076,846 10,791,156 (634,290) - 15,867,927

Additional conversion
expenses - - (3,755) - - - (3,755)

Repayment of principal on
ESOP borrowings - - - - 165,852 - 165,852

Payment of cash dividends
of $.60 per share - - - (380,529) - - (380,529)

Net earnings for 1992 - - - 2,154,937 - - 2,154,937
------- ------- --------- ---------- ------- ---------- ----------
Balance at December 31, 1992 634,215 634,215 5,073,091 12,565,564 (468,438) - 17,804,432

Repayment of principal on
ESOP borrowings - - - - 99,583 - 99,583

Payment of cash dividends
of $.60 per share - - - (382,123) - - (382,123)

Options exercised (note 17) 5,314 5,314 47,826 - - - 53,140

Net earnings for 1993 - - - 2,217,307 - 2,217,307

Net unrealized gains on
securities available for
sale, net of tax (note 2) - - - - - 550,513 550,513
------- ------- --------- ---------- ------- --------- ----------
Balance at December 31, 1993 639,529 $639,529 5,120,917 14,400,748 (368,855) 550,513 20,342,852
======= ======= ========= ========== ======= ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

A-4
<PAGE> 115
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended December 31, 1993, 1992, and 1991

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,217,307 2,154,937 1,313,429
Adjustments to reconcile net earnings to net cash and
cash equivalents provided by operating activities:
Amortization of deferred loan origination fees (272,720) (205,556) (93,291)
Amortization of premium (accretion) of
discounts on securities 4,060 (24,134) (131,598)
Accretion of discounts on loans purchased (149,267) (123,082) (119,639)
Amortization of premium paid on deposits 44,866 179,550 179,550
Provision for loan losses 259,016 174,155 200,632
Provision for losses on real estate owned - 87,074 10,655
Deferred income tax expense (benefit) 43,800 (69,800) (157,333)
Cumulative effect of change in accounting principle (127,150) - -
Net (gain) loss on sales of:
First mortgage loans (697,178) (306,371) (4,119)
Securities available for sale (625) 8,750 (1,235)
Real estate owned, net (11,866) 4,737 (15,417)
Premises and equipment, net - (3,887) -
Depreciation and amortization of premises and equipment 174,387 197,120 192,967
Origination of mortgage loans available for sale (29,039,635) (25,489,078) -
Proceeds from sales of loans available for sale 29,763,339 23,446,395 165,625
Decrease in accrued interest receivable 156,639 132,039 155,435
Stock dividends on Federal Home Loan Bank stock (56,000) (53,500) (73,000)
Increase in other assets (8,817) (7,614) (6,336)
Increase (decrease) in accrued interest payable 16,372 (129,930) (76,156)
(Decrease) increase in income taxes payable (12,554) 9,451 (53,601)
Increase in accrued expenses and other liabilities 91,008 190,284 29,991
---------- ---------- ----------
Total adjustments 177,675 (1,983,397) 203,130
---------- ---------- ----------
Net cash and cash equivalents provided
by operating activities 2,394,982 171,540 1,516,559
---------- ---------- ----------
Cash flows from investing activities:
Net decrease (increase) in loans (3,465,444) 5,560,402 (8,615,030)
Purchases of securities available for sale (1,468,951) (995,000) -
Proceeds from maturities of securities available for sale 1,200,000 - -
Proceeds from sale of securities available for sale 1,691,249 986,250 -
Proceeds from principal payments on securities available
for sale 1,001,276 - -
Purchases of investment securities (27,129,905) (12,629,844) (16,933,289)
Proceeds from maturities of investment securities 24,300,000 12,100,000 12,075,000
Proceeds from sale of investment securities - - 1,009,375
Proceeds from principal payments on investment securities 2,230,280 2,864,477 1,171,170
Proceeds from sales of real estate owned 263,648 492,085 277,094
Decrease in certificates of deposits - - 300,000
Purchases of loan participations (1,697,046) - -
Purchases of premises and equipment (132,794) (105,820) (71,708)
Proceeds from sale of premises and equipment - 9,000 -
---------- ---------- ----------
Net cash and cash equivalents (used) provided
by investing activities $ (3,207,687) 8,281,550 (10,787,388)
---------- ---------- ----------
</TABLE>

A-5
<PAGE> 116
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net proceeds received from the issuance of common stock $ 53,140 - 5,711,061
Net (decrease) increase in deposits (2,602,196) (4,118,336) 1,068,738
Payment of additional conversion expenses - (3,755) -
Cash dividends paid (382,123) (380,529) -
Net increase in advances from borrowers
for taxes and insurance 30,433 9,531 41,729
Proceeds from FHLB advances 10,000,000 - -
Principal payments on FHLB advances (93,094) - -
------------ ---------- ----------
Net cash and cash equivalents provided
(used) by financing activities 7,006,160 (4,493,089) 6,821,528
------------ ---------- ----------
Net increase (decrease) in cash and cash
equivalents 6,193,455 3,960,001 (2,449,301)

Cash and cash equivalents at beginning of year 18,167,137 14,207,136 16,656,437
------------ ---------- ----------
Cash and cash equivalents at end of year 24,360,592 18,167,137 14,207,136
============ ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 2,238,722 2,664,878 3,863,112
Income taxes 1,266,494 1,259,475 943,145
============ ========== ==========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Foreclosures of loans during the year $ 462,037 138,560 581,216
Origination of loan to facilitate sale of in-substance
foreclosed loan - - 2,685,391
Interest credited to deposits 3,793,852 4,679,117 6,394,000
Guarantee (reduction) of ESOP borrowings (99,583) (165,852) 634,290
Investment securities transferred to securities available
for sale 21,026,676 7,832,824 -
============ ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

A-6
<PAGE> 117
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1993 and 1992

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Liberty Bancshares, Inc. was organized in July 1991, for the
purpose of becoming a holding company for Liberty Federal
Savings Bank (the "Bank") as part of the Bank's conversion from a
mutual to a stock institution. The Bank is a federally chartered
stock savings bank. The following is a description of the more
significant accounting policies that Liberty Bancshares, Inc. and
subsidiary (the "Company") follow in presenting their consolidated
financial statements.

(a) PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements for
1993 and 1992 include the accounts of Liberty Bancshares, Inc.
and Liberty Federal Savings Bank, its wholly-owned subsidiary.
The accounts of the Bank include Northwest Tennessee Service
Corporation, the Bank's wholly-owned subsidiary. All
significant intercompany transactions and balances are
eliminated in consolidation.

(b) CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents
includes cash, interest-bearing deposits in other banks, and
federal funds sold. Generally federal funds are sold for
one-day periods and certificates of deposit, included in
interest-bearing deposits in other banks, have original
maturities of three months or less at date of purchase.

The Company clears items to and from other banks with the Federal
Reserve Bank and therefore the Federal Reserve requires the
Company to maintain an average balance of $100,000 in an
account at the Federal Reserve Bank at December 31, 1993 and
1992.

Under SFAS No. 115, classification of a debt security as held to
maturity is based on the Company's positive intent and
ability to hold such security to maturity. Securities held
to maturity are stated at cost adjusted for amortization of
premiums and accretion of discounts, unless there is a
decline in market value which is considered to be other than
temporary, in which case the cost basis of the security is
written down to market and the amount of the write-down is
included in earnings.

(Continued)

A-7
<PAGE> 118
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Securities classified as available for sale, which are reported
at market value with unrealized gains and losses
excluded from earnings and reported, net of tax, in a
separate component of stockholders' equity, include all
securities not classified as trading account securities or
securities held to maturity. These include securities used
as part of the Company's asset/liability strategy which may
be sold in response to changes in interest rates, prepayment
risk, the need or desire to increase capital, and other
similar factors. Gains or losses on the sale of securities
available for sale are recognized at the time of sale, based
upon specific identification of the security sold, and are
included in other operating income in the consolidated income
statements. Premiums and discounts are amortized using the
interest method over the remaining period to contractual
maturity, adjusted for anticipated prepayments.

(d) LOANS RECEIVABLE

Loans receivable are recorded at the unpaid principal balance
owed by borrowers less deferrals, unearned interest,
the allowance for loan losses and purchase discounts.
Discounts and premiums on first mortgage loans are accreted
to interest income using the interest method over the
remaining period to contractual maturity, adjusted for
anticipated prepayments. Unearned income on consumer loans is
recognized over the lives of the loans using methods that
approximate the interest method.

The allowance for loan losses is based upon analyses of the
loans receivable portfolio and is maintained at a level
considered adequate by management to absorb estimated losses
inherent in the loan portfolio. The analyses include
management's consideration of such factors as economic
conditions, loan portfolio characteristics, prior loan loss
experiences, and results of reviews of the portfolio. The
allowance is increased by provisions charged against income
and reduced by net charge-offs. While management believes it
has established the allowance for loan losses in accordance
with generally accepted accounting principles and has taken
into account the views of its regulators and the current
economic environment, there can be no assurance that in the
future the Company's regulators or its economic environment
will not require further increases in the allowance.

The Company establishes an allowance for uncollectible interest
income for any loan on which collection is considered
doubtful. For mortgage loans greater than 90 days past due,
the Company establishes an allowance for uncollectible
interest for any loan in which the total of the principal
balance outstanding, and any accrued interest related
thereto, is greater than 90% of the appraised value of the
underlying collateral. The recorded investment is then
monitored and additional allowances established as warranted.
Mortgage loans on multi-family and industrial properties are
generally placed on nonaccrual status when the Company becomes
aware that the borrower has entered bankruptcy proceedings or
when they are past due 90 days as to either principal or
interest or when payment in full of principal or interest is
not expected. The allowance is established by a charge to
interest income equal to all interest previously accrued.
For all other loans, the Company generally accrues interest on
loans past due more than 90 days without establishing an
allowance for uncollectible interest when management
concludes such action is warranted, such as in the event the
loan is well collateralized or the borrower establishes the
temporary nature of the delinquency.

(e) LOANS AVAILABLE FOR SALE

Mortgage loans originated and available for sale are carried at
the lower of aggregate cost or estimated market value.
Market value is based on investor commitments, or in the
absence of such commitments, on current investor yield
requirements. Net unrealized losses are recognized in a
valuation allowance by charges to earnings.

(Continued)

A-8
<PAGE> 119
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

As part of this activity, the Company originates and sells loans
with servicing retained. Mortgage loans serviced for others
are not included in the accompanying consolidated balance
sheets and the amount of loans serviced for others is set forth
in note 3. The Company receives normal servicing fees and
servicing costs are charged to expense as incurred.

(f) LOAN ORIGINATION AND COMMITMENT FEES AND RELATED COSTS

Loan fees and certain direct loan origination costs are deferred,
and the net fee or cost is recognized in income using the
interest method over the contractual lives of the loans,
adjusted for estimated prepayments based on the Company's
historical prepayment experience. Commitment fees and costs
relating to commitments whose likelihood of exercise is
remote are recognized over the commitment period on a
straight-line basis. If the commitment is subsequently
exercised during the commitment period, the remaining
unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield.

(g) REAL ESTATE OWNED

Properties acquired through foreclosure and in-substance
foreclosures are carried at the lower of cost (the related
loan balance, less any specific allowance for loss), or
estimated fair value less estimated costs to sell based
on an appraisal at the foreclosure date. The fair value of
the properties is the amount that the bank could reasonably
expect to receive in a sale between a willing buyer and
a willing seller, that is, other than in a forced or
liquidation sale. In substance foreclosed properties are
those properties where the borrower retains title but has
little or no remaining equity in the property considering its
fair value; where repayment can only be expected to come from
the operation or sale of the property; and where the borrower
has effectively abandoned control of the property or it is
doubtful that the borrower will be able to rebuild equity in
the property. Property acquired by deed in lieu of
foreclosure results when a borrower voluntarily transfers
title to the Company in full settlement of the related debt
in an attempt to avoid foreclosure. Real estate acquired in
settlement of loans is carried at the lower of cost or fair
value. Costs relating to development and improvement of
property are capitalized, whereas costs relating to holding
property are expensed.

Valuations are periodically performed by management and an
allowance for losses is established by a charge to operations
if the carrying value of a property exceeds its estimated
fair value.

(h) INCOME TAXES

Effective January 1, 1993, the Company adopted SFAS No. 109,
Accounting for Income Taxes, which requires a change from
the deferred method of accounting under Accounting
Principles Bulletin No. 11 to the asset and liability method
of accounting for income taxes. Under SFAS No. 109,
deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets are reduced by a valuation allowance, if necessary,
to an amount that is more likely than not to be realized.

(i) PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less
accumulated depreciation and amortization. These assets are
depreciated using the straight-line method over the
estimated useful lives of the assets for assets acquired prior
to January 1, 1981. Premises and equipment acquired on or
after January 1, 1981 are depreciated using accelerated
methods under the guidelines of the Internal Revenue Service.
The difference between depreciation calculated using the
accelerated method and that under generally accepted
accounting principles is insignificant.

(Continued)
A-9
<PAGE> 120
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(j) PREMIUM ON DEPOSITS

Premium on deposits relates to the premium paid on an acquisition
of a branch from another financial institution. This premium
is being amortized to expense over eight years, the estimated
life of the deposits acquired.

(k) ESTIMATED FAIR VALUES

SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, requires the Company to disclose the estimated
fair value of its financial instruments. Estimates of the fair
value of financial instruments are presented within the notes
to the consolidated financial statements. Fair value
estimates are made at a point in time, based on relevant market
information and information about the financial instrument.
Accordingly, such estimates involve uncertainties and matters
of judgment and therefore cannot be determined with precision.
The more significant assumptions used in preparing the
Company's fair value estimates are set forth below.

For cash and due from banks and Federal funds sold, fair value
is estimated to approximate the carrying amount because they
mature within 90 days or less and do not present
unanticipated credit concerns. For securities, fair values
are based on quoted market prices or dealer quotes, if
available; if a quoted market price is not available, fair
value is estimated using quoted market prices for similar
securities. For most loans, fair value is estimated by
discounting estimated future cash flows using the current
rates at which similar loans would be made to borrowers with
similar credit risk and for similar remaining maturities.
For certain homogeneous categories of loans, such as
residential mortgages, fair value is estimated using quoted
market prices for securities backed by similar loans,
adjusted for differences in loan characteristics.

Under SFAS No. 107, the fair value of deposits with no stated
maturity, such as demand deposits, NOW accounts, money market
accounts, and regular savings accounts, is equal to the
amount payable on demand at the reporting date. The fair
value of certificates of deposit and advances from the
Federal Home Loan Bank is estimated using the rates currently
offered for deposits and advances of similar remaining
maturities.

(l) RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with
present year presentation.

(Continued)

A-10
<PAGE> 121
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(2) SECURITIES

Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. SFAS No. 115 requires
investments in equity securities that have a readily determinable fair
value and investments in debt securities to be classified into one of
three categories, as follows: held to maturity debt securities,
trading securities, and available for sale securities. In conjunction
with the adoption of SFAS No. 115 on December 31, 1993, the Company
reclassified $21,026,676 of securities to the available for sale
classification from the held to maturity category. At that date,
unrealized appreciation on total securities available for sale
amounted to $887,923, resulting in an increase in stockholders' equity
of $550,513, net of taxes. There was no impact on the Company's
consolidated net earnings as a result of the adoption of SFAS No. 115.

SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market value of securities available for sale at December
31, 1993 and 1992, are as follows:

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----

<S> <C> <C> <C> <C>
DECEMBER 31, 1993:
U.S. Treasury securities and obligations
of U.S. Government agencies $ 26,599,589 215,540 77,106 26,738,023
FHLMC preferred stock 63,873 749,489 - 813,362
---------- -------- -------- ----------
Total securities available for sale $ 26,663,462 965,029 77,106 27,551,385
========== ======== ======== ==========

DECEMBER 31, 1992:
U.S. Treasury securities and obligations
of U.S. Government agencies $ 7,768,951 99,277 21,250 7,846,978
FHLMC preferred stock 63,873 725,027 - 788,900
---------- -------- -------- ----------
$ 7,832,824 824,304 21,250 8,635,878
========== ======== ======== ==========
</TABLE>

Included in U.S. Treasury securities and obligations of U.S. Government
agencies are agency-issued mortgage-backed securities amounting to
$6,033,613 ($6,243,925 market value) at December 31, 1993, and
$2,569,356 ($2,666,978 market value) at December 31, 1992.

SECURITIES HELD TO MATURITY

The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market value of securities held to maturity at December 31,
1992 are as follows:
<TABLE>
<CAPTION>

GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----- ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1992:
U.S. Treasury securities and obligations
of U.S. Government agencies $ 20,658,020 359,027 20,625 20,996,422
========== ======== ======== ==========
</TABLE>

Included in U.S. Treasury securities and obligations of U.S. Government
agencies are agency-issued mortgage-backed securities amounting to
$5,709,230 ($5,944,484 market value) at December 31, 1992.
(Continued)

A-11
<PAGE> 122
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

TOTAL SECURITIES

The amortized cost and estimated market value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.

SECURITIES AVAILABLE FOR SALE
-----------------------------
ESTIMATED
AMORTIZED MARKET
COST VALUE
---- -----
<S> <C> <C>

U.S. Treasury securities and obligations of U.S. Government agencies:
Maturing within one year $ 15,516,967 15,515,627
Maturing within one to five years 5,049,009 4,978,471
Mortgage-backed securities 6,033,613 6,243,925
----------- ----------
Totals $ 26,599,589 26,738,023
=========== ==========
</TABLE>

Proceeds from sales of debt securities during 1993, 1992, and 1991 were
$1,691,249, $986,250, and $1,009,375, respectively. Gross gains of
$625 were realized on sales during 1993, gross losses of $8,750 were
realized on sales during 1992, gross gains of $1,235 were realized on
sales during 1991.

(Continued)

A-12
<PAGE> 123
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(3) LOANS RECEIVABLE

Loans receivable at December 31, 1993 and 1992, are summarized as
follows:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
First mortgage loans (principally conventional):
Secured by one-to-four family residences $ 74,976,804 75,455,171
Secured by other properties 9,920,002 10,807,112
Construction loans 1,732,250 2,043,750
Partially guaranteed by VA or insured by FHA 5,848,760 5,841,706
Participation investment in loans purchased 3,285,154 1,566,032
------------ -----------
95,762,970 95,713,771

Less:
Undisbursed portion of construction loans (1,478,737) (1,709,912)
Loans in process (590,209) (264,368)
Unearned discounts (382,593) (531,860)
Unamortized premiums 78,812 87,044
Net deferred loan origination fees (696,316) (633,359)
------------ -----------
Total first mortgage loans 92,693,927 92,661,316
------------ -----------

Consumer and other loans:
Lines of credit secured by real estate 3,856,995 3,767,196
Floor plan 681,667 716,307
Consumer 21,662,527 16,773,626
Commercial 3,399,808 3,240,199
Share 2,615,645 2,517,757
------------ -----------
32,216,642 27,015,085

Less:
Unearned income (1,524,646) (1,345,415)
------------ -----------
Total consumer and other loans 30,691,996 25,669,670
------------ -----------
Less allowance for loan losses (1,287,013) (1,110,166)
------------ -----------
$122,098,910 117,220,820
============ ===========

Weighted average contractual yield 7.94% 8.66%
===== =====

</TABLE>

The estimated fair value of total loans outstanding at December 31, 1993
and 1992 was $125,056,000 and $120,797,000, respectively. The
estimated fair value of loans includes credit risk considerations.

(Continued)

A-13
<PAGE> 124
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Activity in the allowance for loan losses for the years ended December 31,
1993, 1992, and 1991 is summarized as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at January 1, $ 1,110,166 958,313 875,569
Provision charged to income 259,016 174,155 200,632
Charge-offs, net of recoveries (82,169) (22,302) (117,888)
-------- -------- -------
Balance at December 31, $ 1,287,013 1,110,166 958,313
========= ========= =======
</TABLE>
Recoveries amounted to $5,128, $9,476, and $27,794 for the years ended
December 31, 1993, 1992, and 1991, respectively.

The following is a summary of the principal balances of loans on
nonaccrual status, and loans past due ninety days or more and not on
nonaccrual at December 31, 1993 and 1992:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Loans on nonaccrual status $ 269,708 461,937
Loans contractually past due 90 days or more:
Residential mortgage loans 364,705 376,134
Consumer 223,363 100,381
Commercial 726 132,130
------- --------
Total loans on nonaccrual and past due $ 858,502 1,070,582
======= =========

</TABLE>
The Company has established an allowance for uncollectible interest for
loans on nonaccrual status, which is netted with accrued interest
receivable, in the amount of $8,086 and $26,612 at December 31, 1993
and 1992, respectively.

During the years ended December 31, 1993 and 1992, gross interest income
of approximately $20,000 and $43,000, respectively, would have been
recorded on loans accounted for on a nonaccrual basis if the loans had
been current throughout the period. Interest received in cash on
nonaccrual loans and included in income during the years ended
December 31, 1993 and 1992, amounted to approximately $12,000 and
$18,000, respectively.

In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan, (SFAS No. 114) which must be adopted on a
prospective basis by January 1995. SFAS No. 114 requires that
impaired loans be measured at the present value of expected future
cash flows discounted at the effective interest rate of the loan, at
the observable market price of the loan, or the fair value of the
collateral if the loan is collateral dependent. The Company will
adopt SFAS No. 114 in January 1995 and is evaluating the possible
financial impact of this statement.

The amount of loans serviced for the benefit of others is as follows:

<TABLE>
<S> <C>
December 31, 1993 $ 55,741,172
December 31, 1992 34,275,134
December 31, 1991 17,423,129
===========
</TABLE>

(Continued)

A-14
<PAGE> 125

LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

In the ordinary course of business, the Company makes loans to directors
and executive officers and their related interests. Such loans
were made on substantially the same terms, including interest and
collateral, as those prevailing at the time for comparable
transactions with other borrowers and did not involve more than the
normal risk of collectibility or present other unfavorable features.
Loans to directors and executive officers and their related interests
are as follows:

Balance at January 1, 1993 $ 1,159,676
Advances 1,108,337
Repayments (643,129)
---------
Balance at December 31, 1993 $ 1,624,884
=========

(4) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit, standby letters of credit, and financial guarantees.
Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend
credit and standby letters of credit and financial guarantees written
is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making
these commitments and conditional obligations as it does for
on-balance sheet instruments.

Available but unused home equity lines of credit were approximately
$2,714,000 at December 31, 1993 and $2,536,000 at December 31, 1992,
with the majority having terms of fifteen years. At December 31,
1993 and 1992, outstanding letters of credit balances were $91,000
and $121,000, respectively. Commitments to originate or purchase
loans were $2,159,812 and $2,483,916 at December 31,1993 and 1992,
respectively. The commitments to originate loans at December 31,
1993, were composed of variable rate loans of $281,362 and fixed rate
loans of $1,878,450. The fixed rate loans had interest rates ranging
from 6.25% to 9.50%. Commitments to sell loans totaled $329,050 and
$1,334,243 at December 31, 1993 and 1992, respectively.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained
if deemed necessary by the Company upon extension of credit is based
on management's credit evaluation of the borrower. Collateral held
varies but may include property, plant, and equipment and
income-producing commercial properties.

(5) SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

Substantially all of the Company's business activity is with customers
located within the state of Tennessee. A majority of the loans
are secured by residential or commercial real estate or other
personal property. The loans are expected to be repaid from cash
flow or proceeds from the sale of selected assets of the borrowers.
The Company grants residential, consumer, and commercial loans to
customers throughout the state of Tennessee.

(Continued)
A-15
<PAGE> 126
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(6) ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at December 31, 1993 and 1992,
is summarized as follows:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Securities $ 214,975 339,314
Loans receivable 786,181 818,481
--------- ---------
$1,001,156 1,157,795
========= =========
</TABLE>

(7) REAL ESTATE OWNED

The following is a summary of real estate owned at December
31, 1993 and 1992:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Real estate acquired through foreclosure $ 340,112 143,157
Less allowance for possible losses - 13,301
------- -------
Real estate owned, net $ 340,112 129,856
======= =======
</TABLE>

Activity in the allowance for possible losses for real estate owned for
the years ended December 31, 1993, 1992 and 1991 is as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at January 1, 1993 $ 13,301 21,259 13,588

Provision charged to income - 87,074 10,655

Charge-offs, net of recoveries (13,301) (95,032) (2,984)
------ ------ ------
Balance at December 31, 1993 $ - 13,301 21,259
====== ====== ======
</TABLE>

(8) PREMISES AND EQUIPMENT

Premises and equipment, less accumulated depreciation and amortization
at December 31, 1993 and 1992, are summarized as follows:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Land $ 134,004 134,004
Buildings 2,982,222 2,863,955
Furniture, fixtures, and equipment 1,673,263 1,665,504
Purchased computer software 89,788 83,232
Automobiles 102,482 102,482
--------- ---------
4,981,759 4,849,177
Less accumulated depreciation and amortization (2,743,315) (2,569,140)
--------- ---------
$ 2,238,444 2,280,037
========= =========

(Continued)
</TABLE>
A-16

<PAGE> 127
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(9) DEPOSITS
Deposits at December 31, 1993 and 1992 are summarized as
follows:

<TABLE>
<CAPTION>
1993 1992
--------------------------- --------------------------
AMOUNT PERCENT AMOUNT PERCENT
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Non-interest bearing
demand deposits $ 2,290,894 1.5% 1,730,067 1.2%
NOW accounts at 2.25% in 1993
and 2.75% in 1992 14,805,075 10.0 13,636,524 9.0
Money market at 2.50% in
1993 and 3.00% in 1992 8,003,294 5.4 9,654,773 6.4
Passbook savings at 2.75% in
1993 and 3.00% in 1992 14,993,854 10.1 11,682,592 7.7
----------- ---- ---------- -----
40,093,117 27.0 36,703,956 24.3
----------- ---- ---------- -----
Certificates of deposit:

2.51% to 3.00% 18,431,079 12.4 - -
3.01% to 3.50% 30,712,187 20.6 18,458,136 12.2
3.51% to 4.00% 19,684,047 13.2 38,651,102 25.5
4.01% to 4.50% 7,653,914 5.1 28,183,003 18.6
4.51% to 5.00% 7,128,446 4.8 3,324,318 2.2
5.01% to 5.50% 7,094,624 4.8 2,236,613 1.5
5.51% to 6.00% 5,772,628 3.9 4,268,840 2.8
6.01% to 6.50% 3,582,611 2.4 4,444,031 2.9
6.51% to 7.00% 3,302,320 2.2 4,227,147 2.8
7.01% to 7.50% 894,362 0.6 1,515,669 1.0
7.51% to 8.00% 405,205 0.3 1,902,042 1.3
8.01% to 8.50% 658,017 0.4 3,369,309 2.2
8.51% to 9.00% 980,731 0.7 1,778,331 1.2
9.01% to 9.50% 2,323,844 1.6 2,256,831 1.5
----------- ---- ---------- -----
108,624,015 73.0 114,615,372 75.7
----------- ---- ----------- -----
148,717,132 100.0% 151,319,328 100.0%
----------- ----- ----------- -----
Less premium paid on deposits - 44,866
----------- -----------
$ 148,717,132 151,274,462
=========== ===========
Weighted average cost of
deposits 3.68% 4.13%
===== =====

</TABLE>
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 were $8,845,258 and $8,670,230 at December 31,
1993 and 1992, respectively.

The Company's estimated fair value of total deposits was $149,752,000 at
December 31, 1993 which exceeds the carrying amount, of total deposits
of $148,717,132 by $1,034,868. The Bank's estimated fair value of total
deposits was $152,416,000 at December 31, 1992, which exceeds the
carrying amount of total deposits of $151,274,462 by $1,141,538.

(Continued)

A-17
<PAGE> 128
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Scheduled maturities of certificates of deposit at December 31, 1993 and
1992, are as follows:

<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Under 6 months $ 58,444,720 61,939,702
6 months to 12 months 21,400,087 26,353,465
12 months to 24 months 8,536,720 15,674,599
24 months to 36 months 7,386,403 3,698,056
Over 36 months 12,856,085 6,949,550
----------- -----------
$ 108,624,015 114,615,372
=========== ===========
</TABLE>

Interest expense on deposits for the years ended December 31, 1993, 1992,
and 1991 is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Money market $ 253,917 336,481 428,571
Passbook savings 387,597 367,358 474,651
NOW 300,634 327,040 374,256
Certificates of deposit 4,995,129 6,183,186 9,035,285
Amortization of premium
paid on deposits 44,866 179,550 179,550
--------- --------- ----------
$ 5,982,143 7,393,615 10,492,313
========= ========= ==========
</TABLE>
Certain securities with a carrying value of approximately $3,228,000 and
$2,368,000 at December 31, 1993 and 1992, respectively, were pledged
to secure certain deposit accounts.

(10) ADVANCES FROM THE FEDERAL HOME LOAN BANK

In 1993, the Company entered into two advance agreements with the Federal
Home Loan Bank. The first advance in the original amount of
$5,000,000 matures on November 1, 1998 and bears interest at 4.40%.
The second advance in the original amount of $5,000,000 matures on
November 1, 2003 and bears interest at 5.20%.

Advances from the Federal Home Loan Bank mature in the year ended December
31, as follows:
<TABLE>
<S> <C>
1994 $ 1,310,711
1995 1,372,847
1996 1,437,947
1997 1,506,155
1998 1,484,630
Thereafter 2,794,616
---------
$ 9,906,906
=========
</TABLE>
At December 31, 1993, advances were collateralized by certain first
mortgage loans aggregating approximately $14,800,000.

The estimated fair value of advances from the Federal Home Loan Bank
approximates $9,607,000 at December 31, 1993.

(Continued)

A-18
<PAGE> 129
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(11) INCOME TAXES

Effective January 1, 1993, the Company prospectively adopted statement of
Financial Accounting Standards (SFAS) No. 109, which requires
a change from the deferred method (an income statement approach) of
accounting for income taxes under Accounting Principles Bulletin No.
11 to the asset and liability method of accounting for income taxes.
Under the asset liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. The cumulative effect of the adoption
of SFAS No. 109 was a $127,150 benefit. See note 13. The components
of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current income tax expense:
Federal $ 1,106,893 1,118,969 784,381
State 150,928 149,030 105,212
--------- --------- --------
Total current income tax expense 1,257,821 1,267,999 889,593
--------- --------- --------
Deferred income tax expense (benefit):
Federal 35,916 (64,200) (139,776)
State 7,884 (5,600) (17,557)
--------- --------- --------
Total deferred income tax expense (benefit)
from operations 43,800 (69,800) (157,333)
--------- --------- --------
Total income tax expense from operations $ 1,301,621 1,198,199 732,260
========= ========= ========
</TABLE>

SFAS No. 109 requires that the tax benefit of deductible temporary
differences be recorded as an asset to the extent that management
assesses the utilization of such temporary differences to be
"more likely than not." In accordance with SFAS No. 109, the
realization of tax benefits of deductible temporary differences depends
on whether the Company has sufficient taxable income within the
carryback and carryforward period permitted by tax law to allow for
utilization of the deductible amounts. Taxable income in the carryback
period and estimates of taxable income in the carryforward period were
expected to be sufficient to utilize such differences. As such, no
valuation allowance was established.

In addition to amounts in the above table, the Company provided taxes
relating to the adoption of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. In accordance with
SFAS No. 115, unrealized gains on securities available for sale of
887,923 were credited directly to stockholders' equity. The tax effect
applicable to the unrealized gain totaled $337,410 (composed of
$301,895 federal tax and $35,515 state tax and is included in deferred
taxes).

(Continued)
A-19
<PAGE> 130
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

The following table presents a reconciliation of the provision for income
taxes as shown in the consolidated statements of earnings with
that which would be computed by applying the statutory federal income
tax rate of 34% to earnings before income taxes and cumulative effect
of a change in accounting principle.

<TABLE>
<CAPTION>
1993 1992 1991
------------------- ------------------- -------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rates $ 1,153,205 34.0% 1,140,066 34.0% 695,534 34.0%
Increase (decrease) in taxes
resulting from:
Bad debt deduction - - (754) - 10,945 .5
State income tax, net of
federal effect 104,816 3.1 94,664 2.8 57,852 2.8
Accretion of purchase
method adjustment - - (32,842) (1.0) (27,301) (1.3)
Other, net 43,600 1.3 (2,935) (.1) (4,770) (0.2)
---------- ----- --------- ---- ------- -----
Actual tax expense
from operations $ 1,301,621 38.4% 1,198,199 35.7% 732,260 35.8%
========== ===== ========= ==== ======= =====
</TABLE>
The Company is allowed a special bad debt deduction limited generally to
8% of otherwise taxable income and subject to certain limitations
based on aggregate loans and savings accounts balances at the end of
the year. If the amounts that qualify as deductions for Federal
income tax purposes are later used for purposes other than for
bad debt losses, they will be subject to Federal income tax at the then
current corporate rate. Retained earnings at December 31, 1993 and
1992, includes approximately $3,200,000 and $2,700,000, respectively,
for which Federal income tax has not been provided.

The tax effects of temporary differences that give rise to the significant
portions of deferred tax assets and liabilities at December 31, 1993,
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------
<S> <C>
Deferred tax assets:
Allowance for loan losses $ 445,395
Deferred loan fees 269,327
Other 66,429
---------
Total deferred tax asset 781,151
---------
Deferred tax liabilities:
FHLB stock dividend 240,184
Unrealized gain on securities available for sale 337,410
Tax bad debt reserve in excess of base year 248,160
Property, plant, and equipment 86,571
Other 13,552
---------
Total deferred tax liability 925,877
---------
Net deferred tax liability $ 144,726
=========

</TABLE>

(Continued)

A-20
<PAGE> 131
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(12) GAIN ON SALES OF INTEREST-EARNING ASSETS

Gains and losses on sales of interest-earning assets for the years ended
December 31, 1993, 1992, and 1991, are summarized as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Realized gain (loss) on sales of:
Securities $ 625 (8,750) 1,235
First mortgage loans, net 697,178 306,371 4,119
------- ------- -------
$ 697,803 297,621 5,354
======= ======= =======
</TABLE>
(13) CHANGES IN ACCOUNTING PRINCIPLES

The changes in accounting principles reflected in the 1993 consolidated
financial statements relate to the Company's adoption of Statements of
Financial Accounting Standards (SFAS) Nos. 109, Accounting for Income
Taxes, and 115, Accounting for Investments in Certain Debt and Equity
Securities. SFAS No. 109, Accounting for Income Taxes, is addressed
in note 11 (income taxes) and SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities is discussed in note 2
(securities).

(14) PENSION PLAN

A trusteed noncontributory pension plan is in effect with the Financial
Institutions Retirement Fund for substantially all Company
employees who have been employed one year or more and have attained
age 21. Pension expense for the year ended December 31, 1993 was
$39,968. There was no pension expense related to this plan during the
years ended December 31, 1992 and 1991. All contributions to the fund
are commingled with other employers' contributions and all assets of
the fund are invested on a pooled basis, without allocation to
individual employers or employees. The latest available computation by
an independent actuary indicates that the value of the assets in the
pension fund exceeds the vested benefits.

(15) STOCKHOLDERS' EQUITY

On December 17, 1991, Liberty Federal Savings Bank converted from a
mutual to a stock form of ownership and was acquired by Liberty
Bancshares, Inc. At the time of the Bank's conversion, eligible
deposit account holders in the Bank were granted priority in the event
of future liquidation by the establishment of a liquidation account
equal to retained earnings as of December 31, 1990. In the event of
future liquidation, and only in such event, an eligible deposit account
holder who continues to maintain his deposit account shall be entitled
to receive a distribution from the liquidation account, in the
proportionate amount of the then current adjusted balance from deposit
accounts then held before any liquidations may be made with respect to
capital stock.

The Bank may not declare or pay a cash dividend on or repurchase any of its
stock if the effect would be to reduce retained earnings of the
Bank below either the amount of the liquidation account or capital
requirements of the OTS. Federal regulations adopted by the OTS impose
certain limitations on the payment of dividends and other capital
distributions, including stock repurchases, by the Bank. OTS
regulations utilize a tiered approach which permits various levels of
distributions based primarily upon an institution's capital level.
Based upon current OTS regulations and its capital structure at
December 31, 1993, the Bank may make, without prior OTS approval,
capital distributions during a year in an amount which is the greater
of (i) up to 100% of its net earnings to date during the year plus an
amount equal to one-half of the amount by which its total
capital-to-assets ratio exceeded its fully phased-in capital-to-assets
ratio at the beginning of the year or, (ii) 75% of its net income over
the most recent four quarter period. Capital distributions by the Bank
are further subject to 30-day advance written notice to the OTS.

(Continued)

A-21
<PAGE> 132
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(16) CONVERSION TO STOCK AND EARNINGS PER SHARE

The sale of 634,215 shares of $1.00 par value common stock
by the Company was consummated in 1991 pursuant to a plan of
conversion of the Bank from a Federally-chartered mutual savings bank
to a Federally-chartered stock savings bank previously approved by the
members of the Bank. From the proceeds, $634,215 was allocated to
common stock and $5,076,846, which is net of conversion costs of
$631,088, was allocated to additional paid- in capital.

Earnings per share for the year ended December 31, 1991, was
based upon the number of shares issued at conversion and the
earnings for the period from the date of conversion, December 17,
1991, to December 31, 1991. Earnings per share for the year ended
December 31, 1992, were based upon the weighted average number of
shares outstanding during the period, 634,215, and the earnings for
the year ended December 31, 1992. Earnings per share for the year
ended December 31, 1993, were based on the weighted average number of
shares and common share equivalents outstanding during the period,
666,976, and the earnings for the year ended December 31, 1993.

The Company's charter authorizes 1,000,000 shares of preferred stock of
the Company, of $1.00 par value. The consideration for the
iss uance of the shares shall be paid in full before their issuance
and shall not be less than the par value. The consideration for the
shares, other than cash, shall be determined by the Board of Directors
in accordance with the provisions of the Tennessee Business
Corporation Act. The preferred stock, and any series of preferred
stock, may be redeemable or convertible. Prior to the issuance of any
preferred stock, and any series of preferred stock, as established by
the Board of Directors, the Company shall file the articles of
amendment to the Company charter with the Tennessee Secretary of State
establishing and designating the series and fixing and determining the
relative rights and preferences thereof. The Company's charter
expressly vests in the Board of Directors of the Company the authority
to issue the preferred stock in one or more series and to determine,
to the extent permitted by law prior to the issuance of the preferred
stock (or any series of the preferred stock), the relative rights,
limitations, and preferences of the preferred stock or any such
series.

The purposes for which the Board of Directors of the Company might
issue preferred stock include, among others, acquisitions and
capital formation. In addition, the issuance of the shares of the
preferred stock under certain circumstances could discourage, or make
more difficult, an attempt to gain control of the Company.

The mere authorization of the preferred stock by itself does not
have any effect upon the rights of present holders of the
Company's common stock. Nevertheless, future issuances of preferred
stock, which the Board of Directors of the Company could make without
stockholder approval, in all likelihood would impact upon the rights
of the holders of the Company's common stock. Holders of shares of
preferred stock generally are entitled to receive specified dividends
prior to payment of dividends on shares of common stock and may have
voting rights that are separate from or in conjunction with holders of
the Company's common stock.

(Continued)

A-22
<PAGE> 133
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(17) EMPLOYEE STOCK OPTION AND STOCK OWNERSHIP PLANS

In conjunction with the conversion, the Company established a stock
option plan under which a total of 63,421 common shares were reserved
for options. The plan establishes the exercise price of the options
at least equal to the market value of the Company's common stock on
the date of grant. At December 31, 1993 and 1992, a total of 45,426
and 50,740, respectively, shares were granted under the stock option
plan all at $10 per share. During the year ended December 31, 1993,
5,314 options were exercised at $10 per share.

Also, in conjunction with converting to a stock ownership form, the
Company established an Employee Stock Ownership Plan (ESOP), under
which the Company will make annual contributions to a trust for the
benefit of eligible employees. To be eligible, an employee must be
21 years of age and have completed at least one year of service. The
contributions may be in the form of cash, other property, or common
shares. The plan is noncontributory and there is no past service
liability. The amount of the annual contribution is at the
discretion of the Board of Directors of the Company. Initially, the
ESOP acquired 63,429 shares of common stock financed by $634,290 in
borrowings by the ESOP. The Board of Directors intends to contribute
to the Plan annually at least an amount equal to the required
principal and interest payments related to the ESOP loan. The ESOP
loan is payable in quarterly principal and interest installments
beginning March 17, 1992, and maturing December 17, 2001. Interest
accrues at the base rate charged by the lender. Dividends received on
shares held by the ESOP are used to service a portion of the
principal and interest payments on the borrowing. During 1993 and
1992, dividends used for debt service totaled $36,154 and $19,029,
respectively. The Company contributed $88,323 in 1993 and $181,272
in 1992 for debt service. Benefit expense is recognized based on the
shares allocated method. This method requires that the percentage of
shares allocated for the period to total shares purchased be applied
to the original principal balance to calculate the benefit expense
which equaled in 1993 and 1992. No contribution was made in 1991 as
the first loan payment was not due until March 17, 1992. The
principal balance of the ESOP loan was $368,855 and $468,438 at
December 31, 1993 and 1992, respectively. At December 31, 1993 and
1992, the note was secured by 38,057 and 63,429 shares, respectively.

Future minimum principal payments of the Employee Stock Ownership Plan
loan are as follows:

<TABLE>
<S> <C>
1994 $ 63,429
1995 63,429
1996 63,429
1997 63,429
Thereafter 115,139
-------
$ 368,855
=======

</TABLE>

The estimated fair value of the ESOP loan approximates the carrying value
due to the interest rate being variable at the lender's base rate
which is the rate estimated to be currently offered for comparable
new long-term debt.

(Continued)

A-23
<PAGE> 134
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(18) PARENT COMPANY ONLY FINANCIAL INFORMATION

Financial information of Liberty Bancshares Inc. (Parent Company Only) is
as follows as of December 31, 1993 and 1992, and for each of the years
in the three year period ended December 31, 1993:

<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS 1993 1992
------ ---- ----
<S> <C> <C>
Cash in bank $ 169,111 58,635
Investment in subsidiary 20,542,596 18,214,235
---------- ----------
Total assets $ 20,711,707 18,272,870
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Employee Stock Ownership Plan loan payable $ 368,855 468,438
---------- ----------
Stockholders' equity:
Common stock 639,529 634,215
Additional paid-in capital 5,120,917 5,073,091
Retained earnings 14,400,748 12,565,564
Employee Stock Ownership Plan borrowings (368,855) (468,438)
---------- ----------
Realized stockholders' equity 19,792,339 17,804,432

Net unrealized gains on securities available for sale, net of tax 550,513 -
---------- ----------
Total stockholders' equity 20,342,852 17,804,432
---------- ----------
Total liabilities and stockholders' equity $ 20,711,707 18,272,870
========== ==========
</TABLE>

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
STATEMENTS OF EARNINGS

Dividends from bank subsidiary $ 600,000 382,000 -
Other operating expenses (160,541) - -
------------ ---------- ----------
Earnings before equity in undistributed earnings
of subsidiary 439,459 382,000 -

Equity in undistributed earnings of subsidiary 1,777,848 1,772,937 33,520
------------ ---------- ----------
Net earnings $ 2,217,307 2,154,937 33,520
============ ========== ==========
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net earnings $ 2,217,307 2,154,937 33,520
Adjustments to reconcile net earnings to net cash and
cash equivalents provided by operating activities:
Undistributed earnings of subsidiary (1,777,848) (1,772,937) (33,520)
------------ ---------- ----------
Net cash and cash equivalents provided
by operating activities 439,459 382,000 -
------------ ---------- ----------
Net cash used by investing in bank subsidiary - - (5,653,897)
------------ ---------- ----------
Cash flows from financing activities:
Cash paid for dividends (382,123) (380,529) -
Net cash provided by net proceeds received
from the issuance of common stock 53,140 - 5,711,061
------------ ---------- ----------
Net cash and cash equivalents (used) provided
by financing activities (328,983) (380,529) 5,711,061
------------ ---------- ----------
Net increase in cash and cash equivalents 110,476 1,471 57,164

Cash and cash equivalents at beginning of year 58,635 57,164 -
------------ ---------- ----------
Cash and cash equivalents at end of year $ 169,111 58,635 57,164
============ ========== ==========
(Continued)

</TABLE>

A-24
<PAGE> 135
LIBERTY BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(19) PENDING ACQUISITION

On November 23, 1993, the Company entered into an Agreement and Plan of
Reorganization (Reorganization Agreement) with Union Planters
Corporation (Union Planters), subject to various terms and conditions,
pursuant to which the Company will merge into Union Planters and each
outstanding share of the Company's common stock will be exchanged as
follows: (i) in the event the current market price, as defined in the
Reorganization Agreement, of Union Planters common stock should be
greater than or equal to $22.00 per share but less than or equal to
$28.00 per share, the exchange ratio shall be based on the fixed price
of $50.00 per share of Company common stock divided by the current
market price per share of Union Planters common stock; (ii) in the
event the current market price of Union Planters common stock should
be greater than $28.00 per share but less than or equal to $30.00 per
share, the exchange ratio shall be fixed at 1.7857 shares of Union
Planters common stock for each share of Company stock issued and
outstanding at the effective time of the merger; (iii) in the event
the current market price per share of Union Planters common stock
should be greater than $30.00 per share, the exchange ratio shall be
based on the fixed price of $53.57 per share of Company common stock
divided by the current market price per share of Union Planters common
stock; (iv) in the event the current market price per share of Union
Planters common stock should be greater than or equal to $20.00 per
share of Union Planters common stock but less than $22.00 per share,
the exchange ratio shall be fixed at 2.2727 shares of Union Planters
common stock for each share of Company common stock issued and
outstanding at the effective time of the merger; and (v) in the event
the current market price per share of Union Planters common stock
should be less than $20.00 per share, the exchange ratio shall be
fixed at 2.2727 shares of Union Planters common stock for each share
of Company common stock; however, the Company has the unilateral right
to either accept the fixed exchange ratio of 2.2727 or to terminate
the transaction and Reorganization Agreement, unless the Company and
Union Planters mutually agree in writing to increase the exchange
ratio to a level mutually satisfactory to the Company and Union
Planters.

Consummation of the merger is contingent upon, among other things,
stockholder and regulatory approval. The merger is expected to
be accounted for using the pooling of interests method of accounting.
Under the pooling of interest method of accounting, the historical
basis of the assets and liabilities of the Company and Union Planters
will be combined at the effective time of the merger. The
stockholders' equity accounts will be combined on Union Planter's
consolidated balance sheet.

At December 31, 1993, the Company had incurred $150,693 of costs
associated with the acquisition which is included in other operating
expenses.

A-25
<PAGE> 136
APPENDIX B

AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
NOVEMBER 23, 1993
BY AND BETWEEN
UNION PLANTERS CORPORATION, LBI ACQUISITION COMPANY, INC.,
LIBERTY BANCSHARES, INC. AND LIBERTY FEDERAL SAVINGS BANK,
ALONG WITH THE PLAN OF MERGER
AND RELATED LETTER AGREEMENT ANNEXED
THERETO AS EXHIBITS A AND B, RESPECTIVELY
<PAGE> 137
TABLE OF CONTENTS

Page
----

AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . 1

AGREEMENT. . . . . . . . . . . . . . . 2

ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . 2

1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE 2
TERMS OF THE MERGER . . . . . . . . . . . . 8

2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Articles of Incorporation, ByLaws, Directors,
Officers and Name of the Surviving Corporation . . . . . . . 9
(a) Articles of Incorporation. . . . . . . . . . . . . . . . 9
(b) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Directors and Officers . . . . . . . . . . . . . . . . . 9
(d) Name . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Due Diligence Review . . . . . . . . . . . . . . . . . . . . 9
2.4 Availability of Information . . . . . . . . . . . . . . . . 9
2.5 UPC's Right to Revise the Structure of the
Transaction. . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Holding Period of UPC Common Stock . . . . . . . . . . . . . 10
2.7 LBI Stock Options and Treasury Stock . . . . . . . . . . . . 11

ARTICLE 3
DESCRIPTION OF TRANSACTION . . . . . . . . . . 14

3.1 Terms of the Merger . . . . . . . . . . . . . . . . . . . . 14
(a) Satisfaction of Conditions to Closing. . . . . . . . . . 14
(b) Effective Time of the Merger . . . . . . . . . . . . . 14
(c) Conversion of Shares of INTERIM . . . . . . . . . . . . 15
(d) Conversion and Cancellation of Shares of LBI . . . . . . 15
(e) Conversion and Exchange of LBI Shares;
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 15
(f) Mechanics of Payment of the Consideration. . . . . . . . 18
(g) Stock Transfer Books . . . . . . . . . . . . . . . . . . 19
(h) Effects of the Merger. . . . . . . . . . . . . . . . . . 19
(i) Transfer of Assets . . . . . . . . . . . . . . . . . . . 19
(j) Assumption of Liabilities. . . . . . . . . . . . . . . . 20
(k) Dissenting Shareholders' Rights. . . . . . . . . . . . . 20
3.2 Time and Place of Closing . . . . . . . . . . . . . . . . . 20

i
<PAGE> 138
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC

4.1 Organization and Corporate Authority. . . . . . . . . . . . . 21
4.2 Authorization, Execution and Delivery;
Reorganization Agreement Not in Breach. . . . . . . . . . . . 21
4.3 No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Government Approvals . . . . . . . . . . . . . . . . . . . . 22
4.5 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 UPC Financial Statements. . . . . . . . . . . . . . . . . . . 23
4.7 Exchange Act Filings. . . . . . . . . . . . . . . . . . . . . 24
4.8 The UPC Common Stock . . . . . . . . . . . . . . . . . . . . 24
4.9 Licenses, Franchise, Etc. . . . . . . . . . . . . . . . . . . 25
4.10 Absence of Certain Changes. . . . . . . . . . . . . . . . . . 25
4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.13 Absence of Undisclosed Liabilities . . . . . . . . . . . . . 26
4.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 27
4.15 Material Contract Defaults . . . . . . . . . . . . . . . . . 27
4.16 Statements True and Correct . . . . . . . . . . . . . . . . 28
4.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LBI AND LIBERTY . . . . 29

5.1 Organization and Qualification of LBI and Subsidiaries. . . . 29
5.2 Authorization, Execution and Delivery;
Reorganization Agreement Not in Breach. . . . . . . . . . . . 29
5.3 No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Government and Other Approvals. . . . . . . . . . . . . . . . 31
5.5 Licenses, Franchises, etc . . . . . . . . . . . . . . . . . . 31
5.6 Charter Documents . . . . . . . . . . . . . . . . . . . . . . 31
5.7 LBI Financial Statements. . . . . . . . . . . . . . . . . . . 31
5.8 Absence of Certain Changes. . . . . . . . . . . . . . . . . . 32
5.9 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.11 LBI Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 35
5.12 Condition of Fixed Assets and Equipment . . . . . . . . . . . 35
5.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.15 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . 36
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.17 Labor and Employment Matters . . . . . . . . . . . . . . . . 40
5.18 Records and Documents . . . . . . . . . . . . . . . . . . . 41
5.19 Capitalization of LBI . . . . . . . . . . . . . . . . . . . . 41
5.20 Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . 42
5.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.22 Absence of Undisclosed Liabilities . . . . . . . . . . . . . 43
5.23 Classified Assets . . . . . . . . . . . . . . . . . . . . . 43
5.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 43
5.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 44

ii
<PAGE> 139
5.26 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . 46
5.27 Material Contract Defaults . . . . . . . . . . . . . . . . . . . 47
5.28 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.29 Statements True and Correct . . . . . . . . . . . . . . . . . . 48

ARTICLE 6
COVENANTS OF UPC . . . . . . . . . . . . . . . 48

6.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Registration of UPC Common Stock under the Securities Laws . . . 49
6.3 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 49

ARTICLE 7
COVENANTS OF LBI AND LIBERTY . . . . . . . . . . . . 50

7.1 Proxy Statement; LBI Shareholder Approval . . . . . . . . . . . 50
7.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . . 51
7.3 Conduct of Business -- Negative Covenants . . . . . . . . . . . 53
7.4 Conduct of Business -- Certain Actions . . . . . . . . . . . . . 56

ARTICLE 8
CONDITIONS TO CLOSING. . . . . . . . . . . . . . 59

8.1 Conditions to the Obligations of LBI . . . . . . . . . . . . . . 59
(a) Performance . . . . . . . . . . . . . . . . . . . . . . 59
(b) Representations and Warranties . . . . . . . . . . . . 60
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . 60
(d) Consideration . . . . . . . . . . . . . . . . . . . . . 61
(e) Opinion of UPC's and INTERIM' Counsel . . . . . . . . . 61
(g) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . 62
8.2 Conditions to the Obligations of UPC and INTERIM . . . . . . . . 62
(a) Performance . . . . . . . . . . . . . . . . . . . . . . 63
(b) Representations and Warranties . . . . . . . . . . . . 63
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . 63
(d) Destruction of Property . . . . . . . . . . . . . . . . 64
(e) Inspections Permitted . . . . . . . . . . . . . . . . . 64
(f) No Material Adverse Change . . . . . . . . . . . . . . 64
(g) Opinion of LBI's Counsel . . . . . . . . . . . . . . . 64
(h) Other Business Combinations, Etc . . . . . . . . . . . 65
(i) Maintenance of Certain Covenants, Etc . . . . . . . . . 66
(j) Non-Compete Agreements . . . . . . . . . . . . . . . . 66
(k) Pooling of Interests Accounting Treatment . . . . . . . 66
(l) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . 67
(m) Receipt of Affiliate Letters . . . . . . . . . . . . . 67
8.3 Conditions to Obligations of All Parties . . . . . . . . . . . . 68
(a) No Pending or Threatened Claims . . . . . . . . . . . . 68
(b) Governmental Approvals and Acquiescence Obtained . . . 68
(c) Registration Statement . . . . . . . . . . . . . . . . 68
(d) Shareholder Approval . . . . . . . . . . . . . . . . . 68

iii
<PAGE> 140

ARTICLE 9
TERMINATION . . . . . . . . . . . . . . 68

9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 68
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 69

ARTICLE 10
GENERAL PROVISIONS . . . . . . . . . . . . 70

10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.2 Assignability and Parties in Interest . . . . . . . . . . . 71
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 71
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 71
10.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . 71
10.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 71
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . 72
10.9 Modifications, Amendments and Waivers . . . . . . . . . . . 72
10.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 73
10.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . 73
10.12 Finders and Brokers . . . . . . . . . . . . . . . . . . . . 73
10.13 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . 73
10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 73
10.15 Survival of Representations and Warranties . . . . . . . . . 74
10.16 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.17 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 74

iv
<PAGE> 141
AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") dated as of the 23rd day of November, 1993, by and between UNION
PLANTERS CORPORATION ("UPC"), a corporation chartered and existing under the
laws of the State of Tennessee which is registered both as a bank holding
company and a savings and loan holding company and whose principal offices are
located at 7130 Goodlett Farms Parkway, Cordova, Shelby County, Tennessee
38018; LBI ACQUISITION COMPANY, INC. ("INTERIM"), a corporation chartered and
existing under the laws of the State of Tennessee, whose principal place of
business is located at 7130 Goodlett Farms Parkway, Cordova, Shelby County,
Tennessee 38018, and which is a wholly-owned subsidiary of UPC; LIBERTY
BANCSHARES, INC. ("LBI" or "Surviving Corporation" as the context may require),
a corporation chartered and existing under the laws of the State of Tennessee
which is a registered savings and loan holding company and whose principal
offices are located at 914 East Wood Street (P.O. Box 1149), Paris, Henry
County, Tennessee 38242; and LIBERTY FEDERAL SAVINGS BANK ("LIBERTY"), a
federal savings bank chartered and existing under the laws of the United States
of America, having its main offices at 914 East Wood Street (P.O. Box 1149),
Paris, Henry County, Tennessee 38242 and a wholly-owned subsidiary of LBI.

LIBERTY, for a valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by it, has joined in this Reorganization Agreement
for the sole purpose of making certain warranties and representations set forth
in Article 5 and binding itself to perform certain covenants set forth in
Article 7 as provided hereinafter. UPC, INTERIM, LBI and LIBERTY are sometimes
referred to herein as the "Parties."

RECITALS

A. LBI is the beneficial owner and holder of record of 100,000
shares of the common stock, $1.00 par value per share, of LIBERTY which
constitute all of the shares of common stock of LIBERTY issued and outstanding
(the "LIBERTY Common Stock"), and desires to have itself and LIBERTY acquired
by UPC on the terms and subject to the conditions set forth in this
Reorganization Agreement and the accompanying Plan of Merger (attached hereto
as Exhibit A) (the "Plan of Merger").

B. The Boards of Directors of LBI and LIBERTY deem it desirable
and in the best interests of LBI and LIBERTY and the shareholders of LBI (the
"LBI Shareholders") that INTERIM be merged with and into LBI (which would
survive the merger) on the

AGREEMENT AND PLAN OF REORGANIZATION - Page B-1
<PAGE> 142
terms and subject to the conditions set forth in this Reorganization Agreement
and in the manner provided in this Reorganization Agreement and the Plan of
Merger.

C. The Boards of Directors of UPC and INTERIM deem it desirable
and in the best interests of UPC, INTERIM and the shareholders of UPC that
INTERIM be merged with and into LBI on the terms and subject to the conditions
set forth in this Reorganization Agreement and in the manner provided in this
Reorganization Agreement and the Plan of Merger.

D. The respective Boards of Directors of UPC, INTERIM, LBI and
LIBERTY have each adopted resolutions setting forth and adopting this
Reorganization Agreement and the Plan of Merger, and have directed that this
Reorganization Agreement and the Plan of Merger and all resolutions adopted by
said Boards of Directors and by the LBI Shareholders related to this
Reorganization Agreement, be submitted with appropriate applications to, and
filed with the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), the Office of Thrift Supervision (the "OTS") and such other
regulatory agencies or authorities as may be necessary in order to obtain all
governmental authorizations required to consummate the proposed Merger (as
defined herein) in accordance with this Reorganization Agreement, the Plan of
Merger and applicable law.

NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

1.1 Definitions. As used in this Reorganization
Agreement, the following terms have the definitions indicated:

"AFFILIATE" of a party means any person, partnership,
corporation, association or other legal entity directly or indirectly
controlling, controlled by or under common Control, as that term is defined
herein, with that party.

"APPLICABLE ENVIRONMENTAL LAWS" shall have the meaning
assigned to such term in Section 5.15(a) of this Reorganization Agreement.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-2
<PAGE> 143
"AUDITED FINANCIAL STATEMENTS OF LBI" shall have the meaning
assigned to such term in Section 5.7 of this Reorganization Agreement.

"BALANCE SHEET DATE" shall have the meaning assigned to such
term in Section 5.8 of this Reorganization Agreement.

"BHCA" shall mean the Bank Holding Company Act of 1956, as
amended.

"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a federal or state holiday generally recognized
by banks in Tennessee.

"CERCLA" shall have the meaning set forth in Section 5.15(a)
of this Reorganization Agreement.

"CLOSING" shall have the meaning assigned to such term in
Section 3.1(a) of this Reorganization Agreement.

"CLOSING DATE" shall have the meaning assigned to such term in
Section 3.2 of this Reorganization Agreement.

"CONSIDERATION" shall mean the value to be received by the LBI
Record Holders in exchange for their LBI Common Stock, such value to be
determined as provided in Article 3, Section 3.1(e), of this Reorganization
Agreement.

"CONTROL" shall have the meaning assigned to such term in
Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended.

"CURRENT MARKET PRICE PER SHARE" shall have the meaning set
forth in Section 3.1(e) of this Reorganization Agreement.

"DEPOSITS" shall mean all deposits (including, but not limited
to, certificates of deposit, savings accounts, NOW accounts and checking
accounts) of LIBERTY.

"EFFECTIVE DATE OF THE MERGER" shall mean that date on which
the Effective Time of the Merger shall have occurred.

"EFFECTIVE TIME OF THE MERGER" shall have the meaning assigned
in Section 3.3 of the Plan of Merger and Section 3.1(b) of this Reorganization
Agreement.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-3
<PAGE> 144
"EXCHANGE AGENT" shall mean Union Planters National Bank,
Memphis, Tennessee, acting through its Corporate Trust Department.

"EXCHANGE RATIO" shall have the meaning assigned to such term
in Section 3.1(e) of this Reorganization Agreement.

"FDIC" means the Federal Deposit Insurance Corporation.

"FEDERAL RESERVE" shall mean the Board of Governors of the
Federal Reserve System and shall include the Federal Reserve Bank of St. Louis
acting under delegated authority.

"GAAP" shall mean generally accepted accounting principles,
consistently applied.

"GOVERNMENTAL APPROVALS" shall have the meaning assigned to
such term in Section 4.4 of this Reorganization Agreement.

"HAZARDOUS SUBSTANCES" shall have the meaning set forth in
Section 5.15(a) of this Reorganization Agreement.

"HOLA" shall mean the Home Owners' Loan Act of 1933, as
amended.
"INTERIM" shall mean LBI Acquisition Company, Inc., a
corporation chartered and existing under the laws of the State of Tennessee,
whose principal place of business is located at 7130 Goodlett Farms Parkway,
Cordova, Shelby County, Tennessee 38018, and which is a wholly-owned subsidiary
of UPC.

"INTERIM COMMON STOCK" shall have the meaning assigned to such
term in Section 3.1(c) of this Reorganization Agreement.

"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended.

"LBI" means Liberty Bancshares, Inc., a corporation chartered
and existing under the laws of the State of Tennessee which is a registered
savings and loan holding company and whose principal offices are located at 914
East Wood Street, Paris, Henry County, Tennessee 38242.

"LBI COMMON STOCK" has the meaning assigned to such term in
Section 3.1(d) of this Reorganization Agreement.

"LBI COMPANIES" shall mean LBI and all of its Subsidiaries,
including LIBERTY and all LIBERTY Subsidiaries.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-4
<PAGE> 145
"LBI EMPLOYEE PLANS" shall mean any pension plans, profit
sharing plans, deferred compensation plans, stock option plans, cafeteria
plans, and any other such or related benefit plans or arrangements offered or
funded by LBI or any LBI Subsidiary, including, but not limited to, LIBERTY, to
or for the benefit of the officers, directors or employees of LBI or any LBI
Subsidiary.

"LBI RECORD HOLDERS" means the holders of record of all of the
issued and outstanding shares of LBI Common Stock immediately prior to the
Effective Time of the Merger.

"LBI SHAREHOLDERS" shall have the meaning assigned to such
term in Recital B of this Reorganization Agreement.

"LBI STOCK OPTIONS" shall have the meaning assigned to such
term in Section 2.7 of this Reorganization Agreement.

"LIBERTY" means Liberty Federal Savings Bank, a federal
savings bank chartered and existing under the laws of the United States of
America, having its main offices at 914 East Wood Street, Paris, Henry County,
Tennessee 38242 and a wholly-owned subsidiary of LBI.

"LIBERTY COMMON STOCK" shall have the meaning assigned to such
term in Recital A of this Reorganization Agreement.

"MERGER" shall, as described in Section 2.1 of this
Reorganization Agreement, mean the merger of INTERIM with and into LBI, which
shall survive the Merger as the Surviving Corporation.

"NYSE" shall mean the New York Stock Exchange, or its
successor, upon which shares of the UPC Common Stock are listed for trading.

"1933 ACT" shall mean the Securities Act of 1933, as amended.

"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.

"OFFICER" shall have the meaning set forth in Section 5.8(k)
of this Reorganization Agreement.

"OTS" shall mean the Office of Thrift Supervision or any
successor thereto.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-5
<PAGE> 146
"PARTIES" shall mean LBI, LIBERTY, UPC, and INTERIM
collectively; LBI and LIBERTY on the one hand, or UPC and INTERIM on the other
hand, may sometimes be referred to as a "PARTY."

"PENSION PLAN" shall mean any employee pension benefit plan as
such term is defined in Section 3(2) of ERISA which is maintained by the
referenced Party.

"PERSON" shall mean any natural person, fiduciary,
corporation, partnership, joint venture, association, business trust or any
other entity of any kind.

"PLAN OF MERGER" shall mean the Plan of Merger substantially
in the form of Exhibit A hereto to be executed by authorized representatives of
LBI, UPC and INTERIM and filed with the Tennessee Secretary of State along with
the Articles of Merger in accordance with Section 48-21-105 of the Tennessee
Code and providing for the Merger of INTERIM with and into LBI as contemplated
by Section 2.1 of this Reorganization Agreement.

"PROPERTY" shall have the meaning assigned to such term in
Section 5.15(a) of this Reorganization Agreement.

"PROXY STATEMENT" shall mean the proxy statement to be used by
LBI to solicit proxies with a view to securing the approval of the LBI
Shareholders of this Reorganization Agreement and the Plan of Merger.

"REALTY" means the real property of LBI or LIBERTY owned or
leased by LBI or LIBERTY or any Subsidiary of LBI or LIBERTY.

"RECORDS" means all available records, minutes of meetings of
the Board of Directors, committees and shareholders of LBI or LIBERTY, original
instruments and other documentation, pertaining to LBI, LBI's assets (including
plans and specifications relating to the Realty), LBI's liabilities, the LBI
Common Stock, the LIBERTY Common Stock, the Deposits and the loans, and all
other business and financial records which are necessary or customary for use
in the conduct of LBI's or LIBERTY's business by UPC and LBI on and after the
Effective Time of the Merger as it was conducted prior to the Closing Date.

"REGULATORY AUTHORITIES" shall mean, collectively, the Federal
Reserve, the OTS, the SEC, or any other state or federal governmental or
quasi-governmental entity which has, or may hereafter have, jurisdiction over
any of the transactions described in this Reorganization Agreement.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-6
<PAGE> 147
"RELEASE" shall have the meaning assigned to such term in
Section 5.15(b)(i) of this Reorganization Agreement.

"REORGANIZATION AGREEMENT" means this Agreement and Plan of
Reorganization together with the Plan of Merger (Exhibit A), and all Exhibits
and Schedules annexed to, and incorporated by specific reference as a part of,
this Reorganization Agreement.

"SEC" shall mean the Securities and Exchange Commission.

"SEC DOCUMENTS" shall mean all reports, proxy statements and
registration statements filed, or required to be filed, by a Party or any of
its Subsidiaries pursuant to the Securities Laws, whether filed, or required to
be filed, with the SEC, the OTS, the Comptroller of the Currency, the FDIC or
with any other Regulatory Authority pursuant to the Securities Laws.

"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder, as well as any similar state
securities laws and any similar rules and regulations promulgated by the
applicable federal bank Regulatory Authorities.

"SHAREHOLDERS MEETING" shall mean the meeting of the LBI
Shareholders to be held pursuant to Section 7.1 of this Reorganization
Agreement, including any adjournment or adjournments thereof.

"SUBSIDIARIES" shall mean all of those corporations, banks,
associations or other entities of which the entity in question owns or controls
5% or more of the outstanding voting equity securities either directly or
through an unbroken chain of entities as to each of which 5% or more of the
outstanding equity securities is owned directly or indirectly by its parent;
provided, however, that there shall not be included any such entity acquired
through foreclosure or in satisfaction of a debt previously contracted in good
faith, any such entity that owns or operates an automatic teller machine
interchange network, any such entity that is a joint venture of the parent or
of a Subsidiary of the parent, or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity or through a small
business investment corporation.

"SURVIVING CORPORATION" shall mean LBI as the corporation
resulting from the consummation of the Merger as set forth in Section 2.1 of
this Reorganization Agreement.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-7
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"TDFI" shall mean the Tennessee Department of Financial
Institutions.

"TENNESSEE CODE" means the Tennessee Code Annotated, as
amended.

"TENNESSEE COMMISSIONER" shall mean the Commissioner of the
Tennessee Department of Financial Institutions.

"UPC" shall mean Union Planters Corporation, a
Tennessee-chartered bank holding company which is also registered as a savings
and loan holding company having its principal place of business at 7130
Goodlett Farms Parkway, Cordova, Shelby County, Tennessee 38018.

"UPC COMMON STOCK" shall have the meaning set forth in Section
4.5 of this Reorganization Agreement.

"UPC FINANCIAL STATEMENTS" shall mean (i) the audited
consolidated balance sheets and related consolidated statements of earnings, of
changes in shareholders' equity, and of cash flows (including related notes) of
UPC and its Subsidiaries as of December 31, 1991 and 1992 and each subsequent
December 31 prior to the Effective Time of the Merger, and (ii) the related
unaudited consolidated balance sheets and related consolidated statements of
earnings, of changes in shareholders' equity, and of cash flows (including
related notes) of UPC and its Subsidiaries for each of the quarters ended or
ending after January 1, 1993, as filed by UPC in SEC Documents.

"UPC PREFERRED STOCK" shall have the meaning assigned to such
term in Section 4.5 of this Reorganization Agreement.

ARTICLE 2

TERMS OF THE MERGER

2.1 The Merger.

Subject to the satisfaction (or lawful waiver) of all of the
conditions to the obligations of each of the Parties to this Reorganization
Agreement, at the Effective Time of the Merger, INTERIM shall be merged with
and into LBI (the "Merger"), which latter corporation (the "Surviving
Corporation") shall survive the Merger.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-8
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2.2 Articles of Incorporation, ByLaws, Directors,
Officers and Name of the Surviving Corporation.

(a) Articles of Incorporation. At the Effective
Time of the Merger, the Charter of LBI, as in effect immediately prior to the
Effective Time of the Merger, shall continue to be the Charter of LBI as the
Surviving Corporation, unless and until the same shall be amended thereafter as
provided by law and the terms of such Charter.

(b) Bylaws. At the Effective Time of the Merger,
the Bylaws of LBI, as in effect immediately prior to the Effective Time of the
Merger, shall continue to be the Bylaws of LBI as the Surviving Corporation,
unless and until amended or repealed as provided by law, its Charter and such
Bylaws.

(c) Directors and Officers. The directors and
officers of LBI in office immediately prior to the Effective Time of the Merger
shall continue to be the directors and officers of the Surviving Corporation,
to hold office as provided in the Charter and Bylaws of the Surviving
Corporation, unless and until their successors shall have been elected or
appointed and shall have qualified or until they shall have been removed in the
manner provided therein.

(d) Name. The name of LBI as the Surviving
Corporation following the Merger shall remain unchanged and continue to be:

LIBERTY BANCSHARES, INC.

2.3 Due Diligence Review. Prior to the date of this
Reorganization Agreement, each Party has conducted a due diligence review of
the books, records and operations of the other Party, including, but not
limited to, a review of the Party's loan portfolios, ORE and classified assets,
investment portfolios and properties, to verify the reasonableness of the
Party's earnings projections, growth projections and sustained earnings
prospects after consummation of the Merger at reasonable growth rates.

2.4 Availability of Information. Each Party shall
continue to provide to the other Party, its Officers, employees, agents, and
representatives access, on reasonable notice and during customary business
hours, to all of the books, records, properties and facilities of the Party and
shall use its best efforts to cause its Officers, employees, agents and
representatives to cooperate with any of the reviewing Party's reasonable
requests for information which would be customary in order to verify that there
has been no material adverse change in

AGREEMENT AND PLAN OF REORGANIZATION - Page B-9
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the reviewed Party since the date of the due diligence review provided for in
Section 2.3 of this Reorganization Agreement. Except as expressly permitted
by the disclosing Party, the receiving Party shall keep confidential all
non-public information received by the disclosing Party in connection with the
provisions of this Section 2.4 and, in the event the Merger shall not be
consummated, the receiving Party shall not directly or indirectly use any
information provided by the disclosing Party for any competitive or commercial
purpose, and the receiving Party shall promptly return to the disclosing Party
all non-public proprietary and business information received from the
disclosing Party.

2.5 UPC's Right to Revise the Structure of the
Transaction. UPC shall have the unilateral right to revise the structure of
the corporate reorganization contemplated by this Reorganization Agreement in
order to achieve tax benefits or for any other reason which UPC may deem
advisable; provided, however, that UPC shall not have the right, without the
approval of the Board of Directors of LBI, to make any revision to the
structure of the reorganization which (i) changes the amount of the
Consideration which the LBI Record Holders are entitled to receive (determined
in the manner provided in Section 3.1(e) of this Reorganization Agreement);
(ii) changes the intended tax-free effects of the Merger to UPC, INTERIM, LBI
or the LBI Record Holders; (iii) would permit UPC to pay the Consideration
other than by delivery of UPC Common Stock registered with the SEC (in the
manner described in Section 6.2 of this Reorganization Agreement); or (iv)
would be materially adverse to the interests of LBI or the LBI Record Holders
as shareholders of LBI. UPC may exercise this right of revision by giving
written Notice to LBI and LIBERTY in the manner provided in Section 10.1 of
this Reorganization Agreement which Notice shall be in the form of an amendment
to this Reorganization Agreement or in the form of an Amended and Restated
Agreement and Plan of Reorganization.

2.6 Holding Period of UPC Common Stock. LBI hereby
acknowledges and agrees that, in order to qualify the Merger under the Internal
Revenue Code as a tax-free reorganization and for accounting purposes as a
"pooling of interests" under the rules and regulations promulgated by the SEC,
Accounting Principles Board Opinion No. 16 and GAAP, any LBI Record Holder who
would be deemed an Affiliate of LBI at the time of Closing under the Securities
Laws and who accepts shares of UPC Common Stock as Consideration for the
cancellation, exchange and conversion of his shares of LBI Common Stock
pursuant to the terms and conditions of this Reorganization Agreement, may not
pledge on a nonrecourse basis, assign, sell, transfer, devise, otherwise
alienate or take any action which would eliminate or diminish the risk of
owning or holding the shares of UPC Common

AGREEMENT AND PLAN OF REORGANIZATION - Page B-10
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Stock to be received by such LBI Record Holder upon consummation of the Merger,
nor enter into any formal or informal agreement to pledge on a nonrecourse
basis, assign, sell or transfer, devise, or otherwise alienate his right, title
and interests in any of the shares of UPC Common Stock to be delivered by UPC
to such LBI Record Holder pursuant to the terms and conditions of this
Reorganization Agreement until such time as UPC shall have publicly released a
statement of UPC's consolidated earnings reflecting the combined financial
results of operations of UPC and LBI for a period of not less than thirty (30)
days subsequent to the Effective Time of the Merger. LBI further acknowledges
and agrees that any UPC Common Stock Certificates issued in connection with the
Merger to LBI Record Holders who would be deemed Affiliates of LBI or UPC at
the time of Closing under the Securities Laws shall be subject to and bear a
restrictive legend substantially in the form as follows:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT
TO ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE RULES AND REGULATIONS PROMULGATED BY
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") THEREUNDER. NO SALES,
TRANSFERS OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT (OTHER THAN A REGISTRATION STATEMENT ON SEC FORM S-4) OR IN
ACCORDANCE WITH THE REQUIREMENTS OF SEC RULES 144 AND 145 OR IS
OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. NO SALE,
TRANSFER, OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE UNTIL AFTER
THE PUBLICATION OF FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF POST
MERGER COMBINED OPERATIONS OF UPC AND LIBERTY BANCSHARES, INC. NO
AGREEMENT MAY BE ENTERED INTO BY THE HOLDER OF THIS CERTIFICATE WHICH
WOULD ALLOW OR REQUIRE THE SALE, TRANSFER, OR OTHER DISPOSITION OF
THESE SHARES DURING THE TIME PERIOD MENTIONED ABOVE OR WHICH WOULD
OTHERWISE REDUCE THE RISK BORNE BY THE SHAREHOLDER NAMED ON THE
REVERSE SIDE OF THIS CERTIFICATE SUBSEQUENT TO THE CONSUMMATION OF THE
MERGER THROUGH THE END OF SUCH TIME PERIOD.

2.7 LBI Stock Options and Treasury Stock.

(a) Description of Plans. LBI and LIBERTY have
established the following benefit programs which provide for the granting of
certain stock options or the issuance of restricted shares of LBI Common Stock:

(i) The LBI Stock Option Plan. In connection with LBI's 1991
Stock Option Plan (the "LBI Option Plan"), LBI has reserved 63,421
shares of LBI Common Stock for future issuance by LBI upon the
exercise of LBI stock options to

AGREEMENT AND PLAN OF REORGANIZATION - Page B-11
<PAGE> 152
directors and key employees of LBI and LIBERTY from time to time under
the Option Plan. No options were granted or exercised during the
fiscal year ended December 31, 1992. As of the date of this
Reorganization Agreement, the following LBI stock options have been
granted by LBI in connection with the LBI Option Plan:

All executive officers as
a group. 19,782

Current directors who are not
executive officers as a group. 25,370

All employees, including all current
officers who are not executive officers,
as a group. 5,080
------
Total 50,232

The option price for these options is $10.00 per share of LBI Common
Stock.

(ii) The LIBERTY ESOP. LIBERTY has established an employee
stock ownership plan (the "LIBERTY ESOP") for the exclusive benefit of
participating LIBERTY employees. As of the date of this
Reorganization Agreement the LIBERTY ESOP is the holder of 63,429
shares of LBI Common Stock with 6,343 of such shares allocated to the
ESOP accounts of certain employees of LIBERTY.

LBI will not grant any LBI Stock Options at year-end December 31, 1993, to
participants of the above-described benefit plans based on the criteria of such
plans (the "1993 Option Awards").

As of the date of this Reorganization Agreement, there are no other options,
rights, warrants, scrip or similar rights issued and outstanding by LBI to
purchase shares of LBI Common Stock. Therefore, at the Effective Time of the
Merger there will be in the aggregate 50,232 issued and outstanding LBI Stock
Options, plus that number (if any) of LBI Stock Options granted pursuant to the
1993 Option Awards. As of the date of this Reorganization Agreement, LBI has
not repurchased any shares of its capital stock. Therefore, as of the date of
this Reorganization Agreement, there are no shares of LBI Common Stock held by
LBI as Treasury Stock, nor will there be any such shares at the Effective Time
of the Merger.

(b) Continuation of the LBI Option Plan. LBI's
Option Plans shall continue in effect but no additional options shall be
available for grant thereunder after the Effective Time of the Merger. At the
Effective Time of the Merger, each

AGREEMENT AND PLAN OF REORGANIZATION - Page B-12
<PAGE> 153
outstanding option under the LBI Option Plans shall continue outstanding as an
option to purchase, in place of the purchase of a share of LBI Common Stock,
that number of shares (rounded up to the nearest whole share) of UPC Common
Stock that would have been received by the optionee in connection with the
Merger had such option been exercised in full (without regard to any
limitations contained thereon on exercise) for shares of LBI Common Stock
immediately prior to the Effective Time of the Merger upon the same terms and
conditions under the relevant option as were applicable immediately prior to
the Effective Time of the Merger, except for appropriate pro rata adjustments
as to the relevant option price for shares of UPC Common Stock substituted
therefor so that the aggregate option exercise price of shares subject to an
option immediately following the assumption and substitution shall be the same
as the aggregate option exercise price for such shares immediately prior to
such assumption and substitution. UPC, INTERIM and LBI agree to take such
actions as shall be necessary to give effect to the foregoing. At all times
after the Effective Time of the Merger, UPC shall reserve for issuance such
number of shares of UPC Common Stock as necessary so as to permit the exercise
of any LBI Stock Options granted under the LBI Option Plans and which were
unexercised prior to the Effective Time of the Merger in the manner
contemplated by this Reorganization Agreement and the instruments pursuant to
which the LBI Stock Options were granted. UPC shall make all filings required
under the Securities Laws so as to permit the exercise of such LBI Stock
Options and the sale or transfer of the shares of UPC Common Stock received by
the optionee upon such exercise.

(c) Reclassification, etc. In case of any
reclassification, reorganization, recapitalization, stock dividend or
distribution, subdivision, combination or exchange of the outstanding shares of
the UPC Common Stock or in case of any consolidation or merger of UPC with or
into any other corporation, or in the case of any sale or transfer of all or
substantially all of UPC's assets, then the rights of the optionees under the
LBI Option Plans shall be appropriately adjusted so that the optionees will be
in the same position as if their options had been exercised immediately before
such corporate action or transaction. The provisions hereof shall similarly
apply to successive reclassifications, reorganizations, recapitalizations,
stock dividends or distributions, subdivisions, combinations or exchanges,
consolidations, mergers, sales or transfers.

(d) Limited Obligations. Nothing contained in
this Reorganization Agreement or in the other documentation of the proposed
transactions shall be deemed to have reduced, contracted, enlarged, ratified,
affirmed, undertaken, authorized, approved or otherwise to have affected
whatever contractual

AGREEMENT AND PLAN OF REORGANIZATION - Page B-13
<PAGE> 154
rights the holders of LBI Stock Options may have under applicable documentation
other than as expressly stated in this Reorganization Agreement with respect to
the outstanding LBI Stock Options identified herein which are outstanding under
the LBI Option Plans at the Effective Time of the Merger.

ARTICLE 3

DESCRIPTION OF TRANSACTION

3.1 Terms of the Merger.

(a) Satisfaction of Conditions to Closing. After
the transactions contemplated herein have been approved by the shareholders of
LBI and INTERIM, and each other condition to the obligations of the Parties
hereto, other than those conditions which are to be satisfied by delivery of
documents by any Party to any other Party, has been satisfied or, if lawfully
permitted, waived by the Party or Parties entitled to the benefits thereof, a
closing (the "Closing") will be held on the date (the "Closing Date") and at
the time of day and place referred to in Section 3.2 of this Reorganization
Agreement. At the Closing the Parties shall use their respective best efforts
to deliver the certificates, letters and opinions which constitute conditions
to effecting the Merger and each Party will provide the other Parties with such
proof or indication of satisfaction of the conditions to the obligations of
such other Parties to consummate the Merger as such other Parties may
reasonably require. If all conditions to the obligations of each of the
Parties shall have been satisfied or lawfully waived by the Party entitled to
the benefits thereof, the Parties shall, at the Closing, duly execute Articles
of Merger for filing with the Secretary of State of the State of Tennessee and
promptly thereafter LBI and INTERIM shall take all steps necessary or desirable
to consummate the Merger in accordance with all applicable laws, rules and
regulations and the Plan of Merger which is attached hereto as Exhibit A and
incorporated by reference as part of this Reorganization Agreement. The
Parties shall thereupon take such other and further actions as UPC shall direct
or as may be required by law or this Reorganization Agreement to consummate the
transactions contemplated herein.

(b) Effective Time of the Merger. Upon the
satisfaction of all conditions to Closing, the Merger shall become effective on
the date and at the time of filing of Articles of Merger with the Secretary of
State of the State of Tennessee or at such later date and/or time as may be
agreed upon by the Parties and set forth in the Articles of Merger so filed
(the "Effective Time of the Merger").

AGREEMENT AND PLAN OF REORGANIZATION - Page B-14
<PAGE> 155
(c) Conversion of Shares of INTERIM. At the
Effective Time of the Merger, each share of $1.00 par value common stock of
INTERIM (the "INTERIM Common Stock") issued and outstanding immediately prior
to the Effective Time of The Merger shall, by virtue of the Merger becoming
effective and without any further action on the part of anyone, be converted
into and become one share of the issued and outstanding common stock of the
Surviving Corporation.

(d) Conversion and Cancellation of Shares of LBI.
At the Effective Time of the Merger, each share of $1.00 par value common stock
of LBI (the "LBI Common Stock") validly issued and outstanding immediately
prior to the Effective Time of the Merger shall, by virtue of the Merger
becoming effective and without any further action on the part of anyone, be
converted, exchanged and cancelled as provided in Section 3.1(e) hereof.

(e) Conversion and Exchange of LBI Shares;
Exchange Ratio. At the Effective Time of the Merger, the outstanding shares of
LBI Common Stock held by the LBI Record Holders immediately prior to the
Effective Time of the Merger shall, without any further action on the part of
anyone, cease to represent any interest (equity, shareholder or otherwise) in
LBI and shall, except for those shares of LBI Common Stock held and registered
in the name of any LBI Record Holder who shall have perfected his dissenter's
rights and shall have continued such dissenting status through the Effective
Time of the Merger, automatically be converted exclusively into, and constitute
only the right of the LBI Record Holders to receive in exchange for their
shares of LBI Common Stock, whole shares of UPC Common Stock and a cash payment
in settlement of any remaining fractional share of UPC Common Stock in
accordance with the terms and conditions of this Section 3.1(e). The shares of
UPC Common Stock and the cash settlement of any remaining fractional share of
UPC Common Stock deliverable by UPC to the LBI Record Holders pursuant to the
terms of this Reorganization Agreement are sometimes collectively referred to
herein as the "Consideration."

The number of shares of UPC Common Stock to be exchanged for each share of LBI
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger shall be based on an exchange ratio (the "Exchange Ratio") as
determined and set forth in this Section 3.1(e). The Exchange Ratio shall be
determined as follows:

AGREEMENT AND PLAN OF REORGANIZATION - Page B-15
<PAGE> 156
a fixed price of $50.00 per share of LBI Common Stockdivided by (b)
the Current Market Price Per Share of UPC Common Stock;

(ii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $28.00 per share
of UPC Common Stock but less than or equal to $30.00 per share of UPC
Common Stock (the "Upper Secondary Collar"), the Exchange Ratio shall
be fixed at 1.7857 shares of UPC Common Stock for each share of LBI
Common Stock issued and outstanding at the Effective Time of the
Merger;

(iii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $30.00 per share
of UPC Common Stock (the "Ceiling"), the Exchange Ratio shall be based
on (a) a fixed price of $53.57 per share of LBI Common Stockdivided by
(b) the Current Market Price Per Share of UPC Common Stock; provided,
however, in the event that UPC shall have, between the date hereof and
the Effective Time of the Merger, entered into a letter of intent,
agreement or understanding with a third party for a change in control
of UPC, the Exchange Ratio shall remain fixed at 1.7857 shares of UPC
Common Stock (or the equivalent number of shares of common stock of
the entity into which the shares of UPC Common Stock would be
converted into based on the exchange ratio of any such transaction)
for each share of LBI Common Stock validly issued and outstanding at
the Effective Time of the Merger; and

(iv) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than or equal to
$20.00 per share of UPC Common Stock but less than $22.00 per share of
UPC Common Stock (the "Lower Secondary Collar"), the Exchange Ratio
shall be fixed at 2.2727 shares of UPC Common Stock for each share of
LBI Common Stock issued and outstanding at the Effective Time of the
Merger; and

(v) In the event the Current Market Price
Per Share of UPC Common Stock should be less than $20.00 per share of
UPC Common Stock (the "Floor"), the Exchange Ratio shall be fixed at
2.2727 shares of UPC Common Stock for each share or LBI Common
Stock;provided, however, LBI shall have the unilateral right to either
accept the fixed Exchange Ratio of 2.2727 or to terminate the
transaction and this Reorganization Agreement, unless the Parties
shall mutually agree in writing to increase the Exchange Ratio to a
level mutually satisfactory to the Parties.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-16
<PAGE> 157
The Exchange Ratio as determined in this Section 3.1(e) shall be based on an
aggregate of no more than 684,955 shares of LBI Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger and, for
purposes of this paragraph, counting all LBI Stock Options issued and
outstanding immediately prior to the Effective Time of the Merger as shares of
LBI Common Stock) so converted and exchanged; provided, however, that no
fractional shares of UPC Common Stock shall be issued and if, after aggregating
all of the shares of UPC Common Stock to which a LBI Record Holder is entitled
based upon the Exchange Ratio, there shall be a fractional share of UPC Common
Stock remaining, such fractional share shall be settled by a cash payment
therefor pursuant to the Mechanics of Payment of the Consideration set forth in
Section 3.1(f) hereof, which shall be calculated based upon the Current Market
Price Per Share of one (1) full share of UPC Common Stock.

(i) DEFINITION OF "CURRENT MARKET PRICE
PER SHARE." The "Current Market Price Per Share" shall be the average
closing price per share of the "last" real time trades (i.e., closing
price) of the UPC Common Stock on the NYSE (as published in The Wall
Street Journal) for each of the twenty (20) NYSE general market
trading days next preceding the Closing Date on which the NYSE was
open for business (the "Pricing Period"). In the event the UPC Common
Stock does not trade on one or more of the trading days during the
Pricing Period (a "No Trade Date"), any such No Trade Date shall be
disregarded in computing the average closing price per share of UPC
Common Stock and the average shall be based upon the "last" real time
trades and number of days on which the UPC Common Stock actually
traded during the Pricing Period.

(ii) EFFECTS OF DISSENTERS' RIGHTS ON THE
EXCHANGE RATIO. Should LBI Record Holders representing at least 7% of
the shares of LBI Common Stock issued and outstanding at the time of
Closing perfect such LBI Record Holder's Dissenters' Rights pursuant
to the Tennessee Code and maintain the perfected status of such
Dissenters' Rights through the Closing Date, UPC and INTERIM shall
have the right, exercisable in their sole discretion, to terminate
this Reorganization Agreement.

(iii) EFFECT OF STOCK SPLITS, REVERSE
STOCK SPLITS, STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF
UPC OR LBI. Should either UPC or LBI effect any stock splits, reverse
stock splits, stock dividends, reclassifications, recapitalizations,
exchange of shares or similar changes in their respective capital
accounts subsequent to the date of this Reorganization Agreement but

AGREEMENT AND PLAN OF REORGANIZATION - Page B-17
<PAGE> 158
prior to the Effective Time of the Merger, the Exchange Ratio shall be
proportionally adjusted in order to give effect to such changes.

(f) Mechanics of Payment of the Consideration.
As soon as reasonably practicable after the Effective Time of the Merger and
the receipt by UPC of the Certified LBI Shareholder List from the transfer
agent of LBI, but in any event no later than five (5) business days thereafter,
the Corporate Trust Department of Union Planters National Bank, Memphis,
Tennessee (the "Exchange Agent") shall deliver to each of the LBI Record
Holders such materials and information deemed necessary by the Exchange Agent
to advise the LBI Record Holders of the procedures required for proper
surrender of their certificates evidencing and representing shares of the LBI
Common Stock in order for the LBI Record Holders to receive the Consideration.
Such materials shall include, without limitation, a Letter of Transmittal, an
Instruction Sheet, and a return mailing envelope addressed to the Exchange
Agent (collectively the "Shareholder Materials"). All Shareholder Materials
shall be sent by United States mail to the LBI Record Holders at the addresses
set forth on a certified shareholder list to be delivered by LBI to UPC at the
Closing (the "Shareholder List"). As soon as reasonably practicable
thereafter, the LBI Record Holders of all of the outstanding shares of LBI
Common Stock, shall deliver, or cause to be delivered, to the Exchange Agent,
pursuant to the Shareholder Materials, the certificates formerly evidencing and
representing all of the shares of LBI Common Stock which were validly issued
and outstanding immediately prior to the Effective Time of the Merger, and the
Exchange Agent shall take prompt action to process such certificates formerly
evidencing and representing shares of LBI Common Stock received by it
(including the prompt return of any defective submissions with instructions as
to those actions which may be necessary to remedy any defects). Upon receipt
of the proper submission of the certificate(s) formerly representing and
evidencing ownership of the shares of LBI Common Stock, the Exchange Agent
shall, on or prior to the 30th day after the Effective Time of the Merger, mail
to the former LBI Shareholders in exchange for the certificate(s) surrendered
by them, the Consideration to be paid for each such LBI Shareholder's shares of
LBI Common Stock evidenced by the certificate or certificates which were
cancelled and converted exclusively into the right to receive the Consideration
upon the Merger becoming effective. After the Effective Time of the Merger and
until properly surrendered to the Exchange Agent, each outstanding certificate
or certificates which formerly evidenced and represented the shares of LBI
Common Stock of an LBI Record Holder, subject to the provisions of this
Section, shall be deemed for all corporate purposes to represent and evidence
only the right to receive the Consideration into which such LBI Record

AGREEMENT AND PLAN OF REORGANIZATION - Page B-18
<PAGE> 159
Holder's shares of LBI Common Stock were converted and aggregated at the
Effective Time of the Merger. Unless and until the outstanding certificate or
certificates, which immediately prior to the Effective Time of the Merger
evidenced and represented the LBI Record Holder's LBI Common Stock shall have
been surrendered as provided above, the Consideration payable to the LBI Record
Holder(s) of the cancelled shares as of any time after the Effective Date shall
not be paid to the LBI Record Holder(s) of such certificate(s) until such
certificates shall have been surrendered in the manner required. Each LBI
Shareholder will be responsible for all federal, state and local taxes which
may be incurred by him on account of his receipt of the Consideration to be
paid in the Merger. The LBI Record Holder(s) of any certificate(s) which shall
have been lost or destroyed may nevertheless, subject to the provisions of this
Section, receive the Consideration to which each such LBI Record Holder is
entitled, provided that each such LBI Record Holder shall deliver to UPC and to
the Exchange Agent: (i) a sworn statement certifying such loss or destruction
and specifying the circumstances thereof and (ii) a lost instrument bond in
form satisfactory to UPC and the Exchange Agent which has been duly executed by
a corporate surety satisfactory to UPC and the Exchange Agent, indemnifying the
Surviving Corporation, UPC, the Exchange Agent (and their respective
successors) to their satisfaction against any loss or expense which any of them
may incur as a result of such lost or destroyed certificates being thereafter
presented. Any costs or expenses which may arise from such replacement
procedure, including the premium on the lost instrument bond, shall be for the
account of the LBI Shareholder.

(g) Stock Transfer Books. At the Effective Time
of the Merger, the stock transfer books of LBI shall be closed and no transfer
of shares of LBI Common Stock shall be made thereafter.

(h) Effects of the Merger. At the Effective Time
of the Merger, the separate existence of INTERIM shall cease, and INTERIM shall
be merged with and into LBI which, as the Surviving Corporation, shall
thereupon and thereafter possess all of the assets, rights, privileges,
appointments, powers, licenses, permits and franchises of the two merged
corporations, whether of a public or a private nature, and shall be subject to
all of the liabilities, restrictions, disabilities and duties of both LBI and
INTERIM.

(i) Transfer of Assets. At the Effective Time of
the Merger, all rights, assets, licenses, permits, franchises and interests of
LBI and INTERIM in and to every type of property, whether real, personal, or
mixed, whether tangible or intangible, and to choices in action shall be deemed
to be vested in LBI as

AGREEMENT AND PLAN OF REORGANIZATION - Page B-19
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the Surviving Corporation by virtue of the Merger becoming effective and
without any deed or other instrument or act of transfer whatsoever.

(j) Assumption of Liabilities. At the Effective
Time of the Merger, the Surviving Corporation shall become and be liable for
all debts, liabilities, obligations and contracts of LBI as well as those of
INTERIM, whether the same shall be matured or unmatured; whether accrued,
absolute, contingent or otherwise; and whether or not reflected or reserved
against in the balance sheets, other financial statements, books of account or
records of LBI or INTERIM.

(k) Dissenting Shareholders' Rights. Any LBI
Record Holder of shares of LBI Common Stock who shall comply strictly with the
provisions of Sections 48-23-201 et seq. of the Tennessee Code, shall be
entitled to dissent from the Merger and to seek those appraisal remedies
afforded by the Tennessee Code. Such an LBI Shareholder is referred to herein
as an "LBI Dissenting Shareholder." However, UPC and INTERIM shall not be
obligated to consummate the Merger if LBI Record Holders holding or controlling
more than seven percent (7%) of the shares of the LBI Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall have
perfected and maintained in perfected status their Dissenters' Rights in
accordance with the Tennessee Code and the perfected status of said Dissenters'
Rights shall have continued to the time of Closing.

(l) Reservation of shares of UPC Common Stock.
UPC shall reserve for issuance a sufficient number of shares of UPC Common
Stock for the purpose of issuing shares of UPC Common Stock to the LBI Record
Holders in accordance with the terms and conditions of this Section 3.1.

3.2 Time and Place of Closing. The Closing shall take
place at 10:00 a.m. on the Business Day next preceding the date on which the
Effective Time of the Merger is expected to occur, or at such other time as the
Parties, acting through their chief executive officers, presidents or chief
financial officers, may mutually agree (the "Closing Date"). The place of
Closing shall be at Union Planters National Bank, Administrative Center, Union
Planters Corporation Executive Offices (Fourth Floor), 7130 Goodlett Farms
Parkway, Cordova, Shelby County, Tennessee 38018. The Closing may be held at
such other time and place as may be mutually agreed upon by the Parties.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-20
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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF UPC

Except as described in the UPC Disclosure Schedule, UPC and
INTERIM represent and warrant to LBI as follows:

4.1 Organization and Corporate Authority. UPC, each UPC
Subsidiary and INTERIM are corporations duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and (i)
have, in all material respects, all requisite corporate power and authority to
own, operate and lease their material properties and carry on their businesses
as they are currently being conducted; (ii) are in good standing and are duly
qualified to do business in each jurisdiction where the character of their
properties owned or held under lease or the nature of their business makes such
qualification necessary; and (iii) have in effect all federal, state, local and
foreign governmental authorizations, permits and licenses necessary for them to
own or lease their properties and assets and to carry on their businesses as
they are currently being conducted. The corporate Charters and Bylaws of UPC,
INTERIM and all material Subsidiaries of UPC, as amended to date, are in full
force and effect as of the date of this Reorganization Agreement. UPC is duly
registered as a bank holding company with the Federal Reserve and as a savings
and loan holding company with the OTS.

4.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.

(a) UPC and INTERIM have all requisite corporate
power and authority to execute and deliver this Reorganization Agreement and
the Plan of Merger and to consummate the transactions contemplated hereby and
thereby. This Reorganization Agreement, and all other agreements contemplated
to be executed in connection herewith by UPC and INTERIM, have been duly
executed and delivered by UPC and INTERIM, have been duly authorized by all
necessary action by UPC and INTERIM, corporate or otherwise, and no other
corporate proceedings on the part of UPC or INTERIM are (or will be) necessary
to authorize such execution and delivery and the consummation of the
transactions contemplated hereby, and constitute (or upon execution will
constitute) legal, valid and enforceable obligations of UPC and INTERIM,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally, and to the application of equitable principles and
judicial discretion.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-21
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(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transactions contemplated hereby and the fulfillment of the terms hereof will
not result in a breach of any of the terms or provisions of, or constitute a
default under (or an event which, with the passage of time or the giving of
notice or both, would constitute a default under), or conflict with, or permit
the acceleration of any obligation under, any material mortgage, lease,
covenant, agreement, indenture or other instrument to which UPC, any UPC
Subsidiary or INTERIM is a party or by which they or their property or any of
their assets are bound; the corporate Charters or Bylaws of UPC, any UPC
Subsidiary or INTERIM; or any material judgment, decree, order or award of any
court, governmental body or arbitrator by which UPC, any UPC Subsidiary or
INTERIM is bound; or any material permit, concession, grant, franchise,
license, law, statute, ordinance, rule or regulation applicable to UPC or
INTERIM or their properties; or result in the creation of any lien, claim,
security interest, encumbrance, charge, restriction or right of any third party
of any kind whatsoever upon the property or assets of UPC or INTERIM, except
that the Government Approvals shall be required in order for UPC and INTERIM to
consummate the Merger.

4.3 No Legal Bar. Neither UPC nor INTERIM is a party to,
subject to or bound by any agreement, judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body of competent
jurisdiction which would prevent the execution of this Reorganization Agreement
by UPC or INTERIM, its delivery to LBI and LIBERTY or the consummation of the
transactions contemplated hereby, and no action or proceeding is pending
against UPC or INTERIM in which the validity of this Reorganization Agreement,
any of the transactions contemplated hereby or any action which has been taken
by any of the Parties in connection herewith or in connection with any of the
transactions contemplated hereby is at issue.

4.4 Government Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by UPC
or INTERIM in connection with the execution and delivery of this Reorganization
Agreement or the consummation of the transactions contemplated hereby by UPC or
INTERIM, except for: (a) the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") of the Merger under the Bank
Holding Company Act of 1956, as amended, and the regulations promulgated by the
Federal Reserve thereunder, and (b) the prior approval of the Office of Thrift
Supervision (the"OTS") under the Home Owners Loan Act, as amended, and the
regulations promulgated by the OTS thereunder

AGREEMENT AND PLAN OF REORGANIZATION - Page B-22
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(collectively, the "Government Approvals"). UPC is unaware of any reason why
the Government Approvals required to be obtained by the Regulatory Authorities
in connection with the Merger should not be granted by such Regulatory
Authorities or why such Government Approvals should be conditioned on any
requirement which would be a significant impediment to UPC's ability to carry
on its businesses, or acquisition programs, or which would require UPC to
increase its capital ratios to amounts in excess of the Federal Reserve's
minimum capital ratio guidelines in effect from time to time for bank holding
companies.

4.5 Capitalization. (a) The authorized capital stock of
UPC consists of 10,000,000 shares of preferred stock having no par value (the
"UPC Preferred Stock"), and 50,000,000 shares of common stock having a par
value of $5.00 per share (the "UPC Common Stock"). As of November 1, 1993, UPC
had issued and outstanding: 44,000 shares of $8.00 Nonredeemable Cumulative
Convertible Preferred Stock, Series B; 690,000 shares of 10-3/8% Increasing
Rate, Redeemable, Cumulative Preferred Stock, Series C; 253,655 shares of 9.5%
Redeemable, Cumulative Preferred Stock, Series D; and 3,107,922 shares of 8%
Cumulative, Convertible Preferred Stock, Series E. In addition, 250,000 shares
of UPC Preferred Stock have been reserved for issuance as Series A Preferred
Stock pursuant to the UPC Share Purchase Rights Agreement dated January 19,
1989, between UPC and Union Planters National Bank as Rights Agent (the "UPC
Share Purchase Rights Agreement"). As of November 1, 1993, 19,598,092 shares
of UPC Common Stock were validly issued and outstanding.

Except as described on Schedule 4.5 hereto, UPC owns and is the
beneficial record holder, directly or indirectly, of all of the outstanding
capital stock of its Subsidiaries except for directors' qualifying shares, free
and clear of all liens, charges or encumbrances.

(b) The authorized capital stock of INTERIM consists
of 1,000 shares of common stock having a par value of $1.00 per share (the
"INTERIM Common Stock") and no preferred stock. As of the date hereof, INTERIM
had issued all 1,000 shares of the authorized INTERIM Common Stock to UPC.
Therefore, UPC is the record holder and beneficial owner of all of the INTERIM
Common Stock outstanding.

4.6 UPC Financial Statements. UPC has delivered and, to
the extent reference is made to financial statements not yet available or
capable of development, will deliver to LBI true and complete copies of: the
audited consolidated balance sheets of UPC as of December 31, 1992, the audited
consolidated balance sheets of UPC as of December 31, 1991, and the related
consolidated statements of earnings and stockholders' equity and

AGREEMENT AND PLAN OF REORGANIZATION - Page B-23
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cash flows of UPC for the years ended December 31, 1992, and 1991 (the "UPC
Financial Statements") and the comparative interim (or annual) financial
statements for any subsequent quarter (or year) ending after December 31, 1992,
and prior to the Closing Date (to the extent that such statements are not
available or currently capable of being developed these will be delivered
immediately upon being made available or developed). Such financial statements
(i) were (or will be) prepared from the books and records of UPC; (ii) were (or
will be) prepared in accordance with generally accepted accounting principles
consistently applied; (iii) accurately present (or will present) UPC's
consolidated financial condition and the consolidated results of its
operations, changes in stockholders' equity and cash flows at the relevant
dates thereof and for the periods covered thereby; (iv) do contain or reflect
(or will contain and reflect) all necessary adjustments and accruals for an
accurate presentation of UPC's consolidated financial condition and the
consolidated results of UPC's operations and cash flows for the periods covered
by such financial statements; (v) in the opinion of the management of UPC, do
contain and reflect (or will contain and reflect) adequate provisions for loan
losses and for ORE reserves to absorb all known and reasonably anticipated
losses as of the date of such financial statements and for all reasonably
anticipatable liabilities for all taxes, federal, state, local or foreign, with
respect to the periods then ended; and (vi) in the opinion of the management of
UPC do contain and reflect (or will contain and reflect) adequate provisions
for all reasonably anticipated losses liabilities for Post Retirement Benefits
Other Than Pensions ("OPEB") pursuant to FASB 106 and 112 as of the date of
such financial statements.

4.7 Exchange Act Filings. The outstanding shares of UPC
Common Stock are registered with the SEC pursuant to the 1934 Act and UPC has
filed with the SEC all material forms and reports required by law to be filed
by UPC with the SEC, which forms and reports, taken as a whole, are true and
correct in all material respects, and do not misstate a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.

4.8 The UPC Common Stock. All shares of UPC Common Stock
to be issued by UPC and delivered to the LBI Record Holders in exchange for all
of the LBI Common Stock held by the LBI Record Holders will be duly authorized,
validly issued, fully paid and non-assessable, and none of such shares of UPC
Common Stock will have been issued in violation of any preemptive rights of any
UPC shareholders. The shares of UPC Common Stock to be delivered in payment of
the Consideration shall have in all material respects such distinguishing
characteristics as those of

AGREEMENT AND PLAN OF REORGANIZATION - Page B-24
<PAGE> 165
the shares of UPC Common Stock outstanding immediately prior to the Effective
Time of the Merger.

4.9 Licenses, Franchise, Etc. UPC and all UPC
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses. The benefits
of all of such licenses, franchises, permits and authorizations are in full
force and effect and may continue to be enjoyed by UPC and all UPC Subsidiaries
subsequent to the Closing of the transactions contemplated herein without any
consent or approval. Neither UPC nor any UPC Subsidiary has received notice of
any proceeding for the suspension or revocation of any such license, franchise,
permit, or authorization and no such proceeding is pending or has been
threatened by any governmental authority.

4.10 Absence of Certain Changes. Except as disclosed in
Schedule 4.10 or as provided for or contemplated in this Reorganization
Agreement, since December 31, 1992 (the "Balance Sheet Date") there has not
been any material adverse change in the business, property, assets (including
loan portfolios), liabilities (whether absolute, accrued, contingent or
otherwise), prospects, operations, liquidity, income, condition (financial or
otherwise) or net worth of UPC or INTERIM.

4.11 Tax Matters. Except as described in Schedule 4.11
hereto:

(a) all federal, state, local, and foreign tax
returns required to be filed by or on behalf of UPC and each UPC Subsidiary
have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before the date of this
Reorganization Agreement, and all returns filed are, and the information
contained therein is, complete and accurate. All tax obligations reflected in
such returns have been paid. As of the date of this Reorganization Agreement,
there is no audit examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to UPC or any UPC Subsidiary except as fully reserved for in
the UPC Financial Statements. All taxes, interest, additions, and penalties
due with respect to completed and settled examinations or concluded litigation
have been paid.

(b) Neither UPC nor any UPC Subsidiary has executed
an extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-25
<PAGE> 166
(c) Adequate provision for any federal, state,
local, or foreign taxes due or to become due for UPC and all UPC Subsidiaries
for all periods through and including December 31, 1992, has been made and is
reflected on the December 31, 1992 financial statements included in the UPC
Financial Statements, and have been and will continue to be made with respect
to periods ending after December 31, 1992.

(d) Deferred taxes of LBI and each UPC Subsidiary
have been and will be provided for in accordance with GAAP.

(e) To the best knowledge of UPC and INTERIM,
neither the Internal Revenue Service nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert against UPC or any
UPC Subsidiary any deficiency or claim for additional taxes, or interest
thereon or penalties in connection therewith. All material income, payroll,
withholding, property, excise, sales, use, franchise and transfer taxes, and
all other taxes, charges, fees, levies or other assessments, imposed upon UPC
by the United States or by any state, municipality, subdivision or
instrumentality of the United States or by any other taxing authority,
including all interest, penalties or additions attributable thereto, which are
due and payable by UPC or any UPC Subsidiary, either have been paid in full, or
have been properly accrued and reflected in UPC's Financial Statements referred
to in Section 4.6 of this Reorganization Agreement.

4.12 Litigation. Except as set forth in Schedule 4.12
hereto, there is no action, suit or proceeding pending against UPC or any UPC
Subsidiary, or to the best knowledge of UPC or INTERIM threatened against or
affecting UPC, any UPC Subsidiary or any of their assets, before any court or
arbitrator or any governmental body, agency or official that (i) would, if
decided against UPC or the UPC Subsidiary, have a material adverse impact on
the business, properties, assets, liabilities, condition (financial or other)
or prospects of UPC or INTERIM and that are not reflected in the UPC Financial
Statements or (ii) has been brought by or on behalf of any employee employed or
formerly employed by UPC or any UPC Subsidiary.

4.13 Absence of Undisclosed Liabilities. Except as
described in Schedule 4.13 hereto, neither UPC nor any UPC Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of UPC or any UPC Subsidiary, or that, when
combined with all similar obligations or liabilities, would be material to the
financial condition or operations of UPC or any UPC Subsidiary (i) except as
disclosed in the UPC Financial Statements delivered to UPC prior to the date of
this

AGREEMENT AND PLAN OF REORGANIZATION - Page B-26
<PAGE> 167
Reorganization Agreement or (ii) except obligations or liabilities incurred in
the ordinary course of its business consistent with past practices or (iii)
except as contemplated under this Reorganization Agreement. Since December 31,
1992, neither UPC nor any UPC Subsidiary has incurred or paid any obligation or
liability which would be material to the financial condition or operations of
UPC or such UPC Subsidiary, except for obligations paid in connection with
transactions made by it in the ordinary course of its business consistent with
past practices, laws and regulations applicable to UPC or any UPC Subsidiary.

4.14 Compliance with Laws. UPC and each UPC Subsidiary:

(a) Is in compliance with all laws, rules,
regulations, reporting and licensing requirements, and orders applicable to its
business or employees conducting its business (including, but not limited to,
those relating to consumer disclosure and currency transaction reporting) the
breach or violation of which would or could reasonably be expected to have a
material adverse effect on the financial condition or operations of UPC or any
UPC Subsidiary, or which would or could reasonably be expected to subject UPC
or any UPC Subsidiary or any of its directors or officers to civil money
penalties; and

(b) Has received no notification or communication
from any agency or department of federal, state, or local government or any of
the Regulatory Authorities, or the staff thereof (i) asserting that UPC or any
UPC Subsidiary is not in compliance with any of the statutes, rules,
regulations, or ordinances which such governmental authority or Regulatory
Authority enforces, which, as a result of such noncompliance, would result in a
material adverse impact on UPC or any UPC Subsidiary, (ii) threatening to
revoke any license, franchise, permit, or governmental authorization which is
material to the financial condition or operations of UPC or any UPC Subsidiary,
or (iii) requiring UPC or any UPC Subsidiary to enter into a cease and desist
order, consent, agreement, or memorandum of understanding.

4.15 Material Contract Defaults. Neither UPC nor any UPC
Subsidiary is in default in any respect under any contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its respective assets, business, or operations may be
bound or affected or under which it or its respective assets, business, or
operations receives benefits, and which default is reasonably expected to have
either individually or in the aggregate a material adverse effect on UPC or any
UPC Subsidiary, and there

AGREEMENT AND PLAN OF REORGANIZATION - Page B-27
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has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default.

4.16 Statements True and Correct. None of the information
prepared by, or on behalf of, UPC or any UPC Subsidiary regarding UPC, INTERIM
or any other UPC Subsidiary included or to be included in the Proxy Statement
to be mailed to LBI's shareholders in connection with the LBI's Shareholders
Meeting, and any other documents to be filed with the SEC, or any other
Regulatory Authority in connection with the transaction contemplated herein,
will, at the respective times such documents are filed, and, with respect to
the Proxy Statement, when first mailed to the shareholders of LBI, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
LBI's Shareholders Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
LBI's Shareholders Meeting. All documents which UPC or any UPC Subsidiary is
responsible for filing with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law, including
applicable provisions of the Securities Laws and the rules and regulations
issued thereunder.

4.17 Disclosure. The information concerning, and the
representations or warranties made by UPC and/or INTERIM as set forth in this
Reorganization Agreement, or in any document, statement, certificate or other
writing furnished or to be furnished by UPC and/or INTERIM to LBI and LIBERTY
pursuant hereto, do not and will not contain any untrue statement of a material
fact or omit and will not omit to state a material fact required to be stated
herein or therein which is necessary to make the statements and facts contained
herein or therein, in light of the circumstances under which they were or are
made, not false or misleading. Copies of all documents heretofore or hereafter
delivered or made available to LBI and LIBERTY by UPC and/or INTERIM pursuant
hereto were or will be complete and accurate copies of such documents.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-28
<PAGE> 169
ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF LBI AND LIBERTY

Except as described in the LBI Disclosure Schedule, LBI and LIBERTY
represent and warrant to UPC and INTERIM as follows:

5.1 Organization and Qualification of LBI and
Subsidiaries. LBI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee and (a) has in all
material respects all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as it is currently being
conducted; (b) is in good standing and is duly qualified to do business in each
jurisdiction where the character of its material properties owned or held under
lease or the nature of its business makes such qualification necessary, except
to the extent that any failure to so qualify would not have a material adverse
effect on the business or financial condition of LBI; and (c) is a registered
savings and loan holding company with the OTS. Each LBI Subsidiary is duly
chartered, validly existing and in good standing under the laws of the state or
jurisdiction of its incorporation and (a) has, in all material respects, all
requisite corporate power and authority to own, operate and lease its material
properties and to carry on its business as it is currently being conducted and
(b) is in good standing and is duly qualified to do business in each
jurisdiction where the character of its properties owned or held under lease
or the nature of its business makes such qualification necessary, except to the
extent that any failure to so qualify would not have a material adverse effect
on the business or financial condition of any LBI Subsidiary. LBI and each of
its Subsidiaries have in effect all federal, state, local and foreign
governmental authorizations, permits and licenses necessary for them to own or
lease their respective properties and assets and to carry on their business as
it is currently being conducted. LIBERTY is a federal savings bank duly
organized, validly existing and in good standing under the laws of the United
States of America and engages only in activities (and holds properties only of
the types) permitted by the HOLA and the rules and regulations promulgated by
the OTS thereunder or the FDIC for insured depository institutions. LIBERTY's
deposit accounts are insured by the Savings Association Insurance Fund (the
"SAIF") as administered by the FDIC to the fullest extent permitted under
applicable law.

5.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.

(a) LBI and LIBERTY have all requisite power and
authority to execute and deliver this Reorganization Agreement

AGREEMENT AND PLAN OF REORGANIZATION - Page B-29
<PAGE> 170
and the Plan of Merger and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Reorganization Agreement and
the Plan of Merger and the consummation of the proposed transaction have been
duly authorized by majorities of the entire Boards of Directors of both LBI and
LIBERTY and, except for the approval of the LBI Shareholders, no other
corporate proceedings on the part of LBI are necessary to authorize the
execution and delivery of this Reorganization Agreement and the Plan of Merger
and the consummation of the transactions contemplated hereby and thereby. This
Reorganization Agreement and all other agreements and instruments herein
contemplated to be executed by LBI and LIBERTY have been (or upon execution
will have been) duly executed and delivered by LBI and LIBERTY and constitute
(or upon execution will constitute) legal, valid and enforceable obligations of
LBI and LIBERTY, subject, as to enforceability, to applicable bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and to
the application of equitable principles and judicial discretion.

(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transaction contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof will not result in a violation or breach of any of the terms
or provisions of, or constitute a default under (or an event which, with the
passage of time or the giving of notice, or both, would constitute a default
under), or conflict with, or permit the acceleration of, any obligation under
any mortgage, lease, covenant, agreement, indenture or other instrument to
which LBI or any LBI Subsidiary is a party or by which LBI or any LBI
Subsidiary is bound; the Charter or Bylaws of LBI or LIBERTY (except for the
restrictions on acquisition of an amount in excess of ten percent (10%) of the
shares of LBI Common Stock); or any judgment, decree, order, regulatory letter
of understanding or award of any court, governmental body, authority or
arbitrator by which LBI or any LBI Subsidiary is bound; or any permit,
concession, grant, franchise, license, law, statute, ordinance, rule or
regulation applicable to LBI or any LBI Subsidiary or the properties of any of
them; or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or right of any third party of any kind
whatsoever upon the properties or assets of LBI or any LBI Subsidiary, except
that the Government Approvals shall be required in order for LBI to consummate
the Merger.

5.3 No Legal Bar. Neither LBI nor LIBERTY is a party
to, or subject to, or bound by, any agreement or judgment, order, letter of
understanding, writ, prohibition, injunction or decree of any court or other
governmental authority or body, or any law

AGREEMENT AND PLAN OF REORGANIZATION - Page B-30
<PAGE> 171
which would prevent the execution of this Reorganization Agreement or the Plan
of Merger by LBI or LIBERTY, the delivery thereof to UPC and INTERIM, or the
consummation of the transaction contemplated hereby and thereby, and no action
or proceeding is pending against LBI or LIBERTY in which the validity of this
Reorganization Agreement, any of the transactions contemplated hereby or any
action which has been taken by any of the Parties in connection herewith or in
connection with the transaction contemplated hereby is at issue.

5.4 Government and Other Approvals. Except for the
Government Approvals described in Section 4.4, no consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by LBI
or LIBERTY in connection with the execution and delivery of this Reorganization
Agreement or the consummation of the transactions contemplated by this
Reorganization Agreement nor, except as set forth in Schedule 5.4 hereto, is
any consent or approval required from any landlord, licensor or other
non-governmental party which has granted rights to LBI or LIBERTY in order to
avoid forfeiture or impairment of such rights.

5.5 Licenses, Franchises, etc. LBI and all LBI
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses. The benefits
of all of such licenses, franchises, permits and authorizations are in full
force and effect and may continue to be enjoyed by LBI and LIBERTY subsequent
to the Closing of the transactions contemplated herein without any consent or
approval. Neither LBI nor any LBI Subsidiary has received notice of any
proceeding for the suspension or revocation of any such license, franchise,
permit, or authorization and no such proceeding is pending or has been
threatened by any governmental authority.

5.6 Charter Documents. Included in Schedule 5.6 hereto
are true and correct copies of the Charter and Bylaws of LBI and LIBERTY,
respectively. The Charter and Bylaws of LBI and LIBERTY, as amended to date,
are in full force and effect.

5.7 LBI Financial Statements. Accompanying Schedule 5.7
hereto are true copies of the audited consolidated balance sheets of LBI as of
December 31, 1992, the audited consolidated balance sheets of LBI as of
December 31, 1991, and selected financial data for LBI as of December 31, 1990,
1989 and 1988, and the related consolidated statements of earnings and
stockholders' equity and cash flows of LBI and LIBERTY for the years ended
December 31, 1992, 1991 and 1990 (the "Audited Financial Statements of LBI")
and the comparative interim (or

AGREEMENT AND PLAN OF REORGANIZATION - Page B-31
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annual) financial statements for any subsequent quarter (or year) ending after
December 31, 1992 and prior to the Closing Date (to the extent that such
statements are not available or currently capable of being developed these will
be delivered immediately upon being made available or developed). Such
financial statements (i) were (or will be) prepared from the books and records
of LBI and LIBERTY; (ii) were (or will be) prepared in accordance with
generally accepted accounting principles consistently applied; (iii) accurately
present (or will present) LBI's and LIBERTY's consolidated financial condition
and the consolidated results of their operations, changes in stockholders'
equity and cash flows at the relevant dates thereof and for the periods covered
thereby; (iv) do contain or reflect (or will contain and reflect) all necessary
adjustments and accruals for an accurate presentation of LBI's and LIBERTY's
consolidated financial condition and the consolidated results of LBI's and
LIBERTY's operations and cash flows for the periods covered by such financial
statements; (v) in the opinion of the management of LBI, do contain and reflect
(or will contain and reflect) adequate provisions for loan losses and for ORE
reserves to absorb all known and reasonably anticipated losses as of the date
of such financial statements and for all reasonably anticipatable liabilities
for all taxes, federal, state, local or foreign, with respect to the periods
then ended; and (vi) in the opinion of the management of LBI do contain and
reflect (or will contain and reflect) adequate provisions for all reasonably
anticipated losses liabilities for Post Retirement Benefits Other Than Pensions
("OPEB") pursuant to FASB 106 and 112 as of the date of such financial
statements.

5.8 Absence of Certain Changes. Except as disclosed in
Schedule 5.8, or in the LBI SEC Documents, or as provided for or contemplated
in this Reorganization Agreement, since December 31, 1992 (the "Balance Sheet
Date") there has not been as of the date of this Reorganization Agreement:

(a) any transaction by LBI or LIBERTY not in the
ordinary course of business and in conformity with past practice;

(b) any material adverse change in the business,
property, assets (including loan portfolios), liabilities (whether absolute,
accrued, contingent or otherwise), prospects, operations, liquidity, income,
condition (financial or otherwise) or net worth of LBI or LIBERTY;

(c) any damage, destruction or loss, whether or
not covered by insurance, which has had or is reasonably expected to have a
material adverse effect on any of the properties or business or prospects of
LBI or LIBERTY or their future use and operation by LBI or LIBERTY;

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(d) any acquisition or disposition by LBI or
LIBERTY of any property or asset of LBI or LIBERTY, whether real or personal,
having a fair market value, singularly or in the aggregate, in an amount
greater than Twenty Thousand Dollars ($20,000), except in the ordinary course
of business and in conformity with past practice;

(e) any mortgage, pledge or subjection to lien,
charge or encumbrance of any kind on any of the respective properties or assets
of LBI or LIBERTY, except to secure extensions of credit in the ordinary course
of business and in conformity with past practice;

(f) any amendment, modification or termination of
any contract or agreement, relating to LBI or LIBERTY, to which LBI or LIBERTY
is a party which would have an adverse effect upon the financial condition or
operations of LBI or LIBERTY.

(g) any increase in, or commitment to increase,
the compensation payable or to become payable to any officer, director,
employee or agent of LBI or LIBERTY, or any bonus payment or similar
arrangement made to or with any of such officers, directors, employees or
agents, other than routine increases made in the ordinary course of business
not exceeding the greater of ten percent (10%) per annum or $6,000 for any of
them individually;

(h) any incurring of, assumption of, or taking
of, by LBI or LIBERTY, any property subject to, any liability, except for
liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the ordinary course of business and in conformity with past
practice;

(i) any material alteration in the manner of
keeping the books, accounts or Records of LBI or LIBERTY, or in the accounting
policies or practices therein reflected, except as may be required by generally
accepted accounting principles or as required by the OTS;

(j) any release or discharge of any obligation or
liability of any person or entity related to or arising out of any loan made by
LBI or LIBERTY of any nature whatsoever, except in the ordinary course of
business and in conformity with past practice; or

(k) to the best of the knowledge, information and
belief of the management of LBI and LIBERTY, any loan (except credit card
loans, passbook loans or home loans) by LBI or LIBERTY to any Officer, director
or known 2% shareholder of LBI or LIBERTY or any Affiliate of LBI or LIBERTY;
or to any member

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of the immediate family of such Officer, director or known 2% shareholder of
LBI or LIBERTY or any Affiliate of LBI; or to any Person in which such Officer,
director or known 2% shareholder directly or indirectly owns beneficially or of
record ten percent (10%) or more of any class of equity securities in the case
of a corporation, or of any equity interest, in the case of a partnership or
other non-corporate entity; or to any trust or estate in which such Officer,
director or 2% shareholder has a ten percent (10%) or more beneficial interest;
or as to which such Officer, director or 2% shareholder serves as a trustee or
in a similar capacity. As used in this Section, "Officer" shall refer to a
person who holds the title of chairman, president, executive vice president,
senior vice president, controller, secretary, cashier or treasurer or who
performs the normal duties of such officer whether or not he or she is
compensated for such service or has an official title.

5.9 Deposits. Except as described in Schedule 5.9
hereto, none of the LIBERTY Deposits is a "brokered" Deposit or subject to any
encumbrance, legal restraint or other legal process. Except as set forth in
Schedule 5.9, no portion of the Deposits represents a Deposit by any Affiliate
of LBI or LIBERTY.

5.10 Properties. Except (i) for encumbrances which do not
materially effect the value thereof, (ii) liens for current taxes and special
assessments not yet due and payable, (iii) as described in Schedule 5.10 hereto
or (iv) adequately reserved against in the LBI Financial Statements, LBI and
each LBI Subsidiary has good and marketable title free and clear of all
material liens, encumbrances, charges, defaults, or equities of whatever
character to all of the material properties and assets, tangible or intangible,
reflected in the LBI Financial Statements as being owned by LBI or any LBI
Subsidiary as of the dates thereof. All buildings, and all fixtures,
equipment, and other property and assets that are material to the business of
LBI and its Subsidiaries on a consolidated basis, held under leases or
subleases by LBI or any LBI Subsidiary, are held under valid instruments
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting the enforcement of creditors' rights
generally, and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be pending). The policies of fire, theft,
liability, and other insurance maintained with respect to the properties,
assets or businesses of the LBI Companies provide coverage reasonably believed
by management of LBI to be adequate against loss, and the fidelity bonds in
effect as to which any of the LBI Companies is a named insured are believed to
be sufficient.

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5.11 LBI Subsidiaries. Schedule 5.11 hereto lists all of
the active and inactive LBI Subsidiaries (including any LIBERTY Subsidiary) as
of the date of this Reorganization Agreement and describes generally the
business activities conducted, or permitted to be conducted, by each LBI
Subsidiary. No equity securities of any of the LBI Subsidiaries are or may
become required to be issued (other than to LBI or LIBERTY) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any LBI Subsidiary, and there
are no contracts, commitments, understandings, or arrangements by which any LBI
Subsidiary is bound to issue (other than to LBI) any additional shares of its
capital stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock. All of the shares of capital stock of
each LBI Subsidiary held by LBI or by any LBI Subsidiary are fully paid and
nonassessable and are owned by LBI or such LBI Subsidiary free and clear of any
claim, lien, or encumbrance of any nature whatsoever, whether perfected or not.

5.12 Condition of Fixed Assets and Equipment. Except as
disclosed in Schedule 5.12 hereto, each item of LBI's or LIBERTY's fixed assets
and equipment having a net book value in excess of Twenty-five Thousand Dollars
($25,000) included in the Fixed Assets is in good operating condition and
repair, normal wear and tear excepted.

5.13 Tax Matters. Except as described in Schedule 5.13
hereto:

(a) all federal, state, local, and foreign tax
returns required to be filed by or on behalf of LBI and each LBI Subsidiary
have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before the date of this
Reorganization Agreement, and all returns filed are, and the information
contained therein is, complete and accurate. All tax obligations reflected in
such returns have been paid. As of the date of this Reorganization Agreement,
there is no audit examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to LBI or any LBI Subsidiary except as fully reserved for in
the Audited Financial Statements of LBI. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid.

(b) Neither LBI nor any LBI Subsidiary has executed
an extension or waiver of any statute of limitations on

AGREEMENT AND PLAN OF REORGANIZATION - Page B-35
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the assessment or collection of any tax due that is currently in effect.

(c) Adequate provision for any federal, state,
local, or foreign taxes due or to become due for LBI and all LBI Subsidiaries
for all periods through and including December 31, 1992, has been made and is
reflected on the December 31, 1992 financial statements included in the Audited
Financial Statements of LBI, and have been and will continue to be made with
respect to periods ending after December 31, 1992.

(d) Deferred taxes of LBI and each LBI Subsidiary
have been and will be provided for in accordance with GAAP.

(e) To the best knowledge of LBI and LIBERTY,
neither the Internal Revenue Service nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert against LBI or any
LBI Subsidiary any deficiency or claim for additional taxes, or interest
thereon or penalties in connection therewith. All material income, payroll,
withholding, property, excise, sales, use, franchise and transfer taxes, and
all other taxes, charges, fees, levies or other assessments, imposed upon LBI
by the United States or by any state, municipality, subdivision or
instrumentality of the United States or by any other taxing authority,
including all interest, penalties or additions attributable thereto, which are
due and payable by LBI or any LBI Subsidiary, either have been paid in full, or
have been properly accrued and reflected in the Audited Financial Statements of
LBI referred to in Section 5.7 of this Reorganization Agreement.

5.14 Litigation. Except as set forth in Schedule 5.14
hereto, there is no action, suit or proceeding pending against LBI or any LBI
Subsidiary, or to the best knowledge of LBI or LIBERTY threatened against or
affecting LBI, any LBI Subsidiary or any of their assets, before any court or
arbitrator or any governmental body, agency or official that (i) is reasonably
expected to, if decided against LBI or the LBI Subsidiary, have a material
adverse impact on the business, properties, assets, liabilities, condition
(financial or other) or prospects of LBI and LIBERTY taken as a whole and that
are not reflected in the Audited Financial Statements of LBI or (ii) has been
brought by or on behalf of any employee employed or formerly employed by LBI or
any LBI Subsidiary.

5.15 Hazardous Materials.

(a) LBI and all LBI Subsidiaries have obtained
all permits, licenses and other authorizations which are required to be
obtained by LBI or its Subsidiaries with respect to the

AGREEMENT AND PLAN OF REORGANIZATION - Page B-36
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Property (as defined herein) under all Applicable Environmental Laws (as
defined herein). All Property controlled, directly or indirectly, by LBI or
any LBI Subsidiary is in compliance with the terms and conditions of all of
such permits, licenses and authorizations, and is also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any Applicable
Environmental Laws or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except (i) the noncompliance of which would not have a material
adverse effect on the financial condition or operations or prospects of LBI or
any LBI Subsidiary or (ii) as described in detail in Schedule 5.15 hereto. For
purposes hereof, the following terms shall have the following meanings:

"APPLICABLE ENVIRONMENTAL LAWS" shall mean all federal, state,
local and municipal environmental laws, rules or regulations to the extent
applicable to the Property, including, but not limited to, (a) the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. ("CERCLA"); (b) the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq. "RCRA"; (c) the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq.; (d) the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (e) the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1471 et seq.; (f) the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; (g) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (h) the National Environmental Policy Act, 42
U.S.C. Section 4321 et seq.; (i) the Rivers and Harbours Act of 1899, 33 U.S.C.
Section 401 et seq.; (j) the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; (k) the Safe Drinking Water Act, 42 U.S.C. Section 300(f)
et seq.; (l) the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; (m)
the Hazardous Waste Management Act of 1977, Sections 68-46-101 et seq. of the
Tennessee Code; (n) the Hazardous Waste Management Act of 1983, Sections
68-46-201 et seq. of the Tennessee Code; (o) the Hazardous Waste Reduction Act
of 1990, Sections 68-46-301 et seq. of the Tennessee Code; (p) the Petroleum
Underground Storage Tank Act, Sections 68-58-101 et seq. of the Tennessee Code;
(q) any amendments to the foregoing Acts as adopted from time to time on or
before the Closing; and (r) any rule, regulation, order, injunction, judgment,
declaration or decree implementing or interpreting any of the foregoing Acts,
as amended.

"HAZARDOUS SUBSTANCES" shall mean any substance, material,
waste, or pollutant that is now (or prior to the Closing) listed, defined,
characterized or regulated as hazardous, toxic or dangerous under or pursuant
to any statute,

AGREEMENT AND PLAN OF REORGANIZATION - Page B-37
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law, ordinance, rule or regulation of any federal, state, regional, county or
local governmental authority having jurisdiction over the Property of LBI or
any LBI Subsidiary or its use or operation, including, without limitation, (a)
any substance, material, element, compound, mixture, solution, waste, chemical
or pollutant listed, defined, characterized or regulated as hazardous, toxic or
dangerous under any Applicable Environmental Laws, (b) petroleum, petroleum
derivatives or by-products, and other hydrocarbons, (c) polychlorinated
biphenyls (PCBs), asbestos and urea formaldehyde, and (d) radioactive
substances, materials or waste.

"PROPERTY" shall be deemed to include, but shall not be
limited to, all real property owned, controlled, leased or held by LBI or a LBI
Subsidiary, in whole or in part, solely or in a joint venture or other business
arrangement, either for operational or investment purposes, and whether
assigned, purchased, or obtained through foreclosure (or similar action) or in
satisfaction of debts previously contracted.

(b) In addition, except as set forth in Schedule
5.15(b) hereto:

(i) No notice, notification, demand,
request for information, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending by any governmental or other entity
with respect to any alleged failure by LBI or any LBI Subsidiary to
have any permit, license or authorization required in connection with
the conduct of the business of LBI or any LBI Subsidiary or with
respect to any generation, treatment, storage, recycling,
transportation, release or disposal, or any release as defined in 42
U.S.C. Section 9601(22) ("Release"), of any Hazardous Substances
generated by LBI or any Affiliate of LBI at the Property;

(ii) To the best of the knowledge,
information and belief of the management of LBI and LIBERTY, none of
the Property has received or held any Hazardous Substances in such
amount and in such manner as to constitute a violation of the
Applicable Environmental Laws, and no Hazardous Substances have been
Released or disposed of on, in or under any of the Property during
LBI's or any LBI Subsidiary's occupancy thereof, or during the
occupancy thereof by any assignee or sublessee of LBI or any LBI
Subsidiary, except in compliance with all Applicable Environmental
Laws;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-38
<PAGE> 179
(iii) There are no Hazardous Substances
being stored at any Property or located in, on or upon, any Property
(including the subsurface thereof) or installed or affixed to
structures or equipment on the Property; and there are no underground
storage tanks for Hazardous Substances, active or abandoned, at any
Property; and

(iv) No Hazardous Substances have been
Released in a reportable quantity, where such a quantity has been
established by statute, ordinance, rule, regulation or order, at, on
or under any Property.

(c) Neither LBI nor any Affiliate of LBI has
transported or arranged for the transportation of any Hazardous Substances to
any location which is listed on the National Priorities List under CERCLA,
listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the CERCLA Information System ("CERCLIS") or
on any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against
the owner of the Property for cleanup costs, remedial work, damages to natural
resources or for personal injury claims, including, but not limited to, claims
under CERCLA.

(d) Except as set forth in Schedule 5.15(d), no
Hazardous Substances have been generated, recycled, treated, stored, disposed
of or Released by, LBI or any Affiliate of LBI in violation of Applicable
Environmental Laws.

(e) No oral or written notification of a Release
of Hazardous Substances has been filed by or on behalf of LBI or any Affiliate
of LBI relating to the Property and no Property is listed or proposed for
listing on the National Priority List promulgated pursuant to CERCLA, on
CERCLIS or on any similar state list of sites requiring investigation or
clean-up.

(f) There are no liens arising under or pursuant
to any Applicable Environmental Laws on any Property, and no government actions
have been taken or, to the best knowledge of LBI, threatened, or are in process
which could subject any of such properties to such liens and none of the
Property would be required to place any notice or restriction relating to the
presence of Hazardous Substances at any Property in any deed to such Property.

(g) Except as described in Schedule 5.15(g)
hereto, there have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which

AGREEMENT AND PLAN OF REORGANIZATION - Page B-39
<PAGE> 180
are in the possession of LBI or any Affiliate of LBI in relation to any
Property, which have not been made available to UPC.

(h) Neither LBI nor LIBERTY is aware of any facts
which might suggest that LBI or any LBI Subsidiary has engaged in any
management practice with respect to any of its past or existing borrowers which
could reasonably be expected to subject LBI or any LBI Subsidiary or the
Property to any liability, either directly or indirectly, under the principles
of law as set forth in United States v. Fleet Factors Corp., 901 F.2d 1550
(11th Cir. 1990) as modified by 40 C.F.R. Part 300.

5.16 Insurance. LBI and LIBERTY have paid all material
amounts due and payable under any insurance policies and guaranties applicable
to LBI and LIBERTY and LBI's or LIBERTY's assets and operations; all such
insurance policies and guaranties are in full force and effect; and LBI and
LIBERTY and all of LBI's and LIBERTY's material Realty and other material
properties are insured against fire, casualty, theft, loss, and such other
events against which it is customary to insure, all such insurance policies
being in amounts that are reasonably believed by LBI management to be adequate
and consistent with past practice and experience.

5.17 Labor and Employment Matters. Except as reflected in
Schedule 5.17 hereto, there is no (i) collective bargaining agreement or other
labor agreement to which LBI or any LBI Subsidiary is a party or by which any
of them is bound; (ii) employment, profit sharing, deferred compensation,
bonus, stock option, purchase, retainer, consulting, retirement, welfare or
incentive plan or contract to which LBI or any LBI Subsidiary is a party or by
which it is bound; or (iii) plan or agreement under which "fringe benefits"
(including, but not limited to, vacation plans or programs, sick leave plans or
programs and related benefits) are afforded any of the employees of LBI or any
LBI Subsidiary. No party to any such agreement, plan or contract is in default
with respect to any material term or condition thereof, nor has any event
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto. Neither LBI nor any LBI Subsidiary has
received notice from any governmental agency of any alleged violation of
applicable laws that remains unresolved respecting employment and employment
practices, terms and conditions of employment and wages and hours. LBI and
each LBI Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including
those related to its employment practices, employee disabilities, wages, hours,
collective bargaining and the payment and withholding of taxes and other sums
as required by the

AGREEMENT AND PLAN OF REORGANIZATION - Page B-40
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appropriate governmental authorities, except for failures to comply with such
laws which would not have a material adverse effect on the business or
operations of LBI and the LBI Subsidiaries taken as a whole, and LBI and each
LBI Subsidiary have withheld and paid to the appropriate governmental
authorities or are holding for payment not yet due to such authorities, all
amounts required to be withheld from the employees of LBI and each LBI
Subsidiary and are not liable for any arrears of wages, taxes, penalties or
other sums for failure to comply with any of the foregoing. Except as set
forth in Schedule 5.17, there is no: unfair labor practice complaint against
LBI or any LBI Subsidiary pending before the National Labor Relations Board or
any state or local agency; pending labor strike or other labor trouble
affecting LBI or any LBI Subsidiary; labor grievance pending against LBI or any
LBI Subsidiary; pending representation question respecting the employees of LBI
or any LBI Subsidiary; pending arbitration proceedings arising out of or under
any collective bargaining agreement to which LBI or any LBI Subsidiary is a
party, or to the best knowledge of LBI, any basis for which a claim may be made
under any collective bargaining agreement to which LBI or any LBI Subsidiary is
a party.

5.18 Records and Documents. The Records of LIBERTY are
and will be sufficient to enable LIBERTY to continue conducting its business as
a federal savings bank under similar standards as LIBERTY has heretofore
conducted such business.

5.19 Capitalization of LBI. The authorized capital stock
of LBI consists of 4,000,000 shares of common stock having a par value of $1.00
per share (the "LBI Common Stock"), 1,000,000 shares of preferred stock having
a par value of $1.00 per share (the "LBI Preferred Stock") and no other class
of equity security. As of the date of this Reorganization Agreement, 634,723
shares of LBI Common Stock were issued and outstanding, no shares of LBI Common
Stock were held by LBI as treasury stock and no shares of LBI Preferred Stock
were issued and outstanding. All of the outstanding LBI Common Stock is
validly issued, fully-paid and nonassessable and has not been issued in
violation of any preemptive rights of any LBI Shareholder. Except as described
in Section 2.7 of this Reorganization Agreement or as described on Schedule
5.19 hereto, as of the date hereof, there are no outstanding securities or
other obligations which are convertible into LBI Common Stock or into any other
equity or debt security of LBI, and there are no outstanding options, warrants,
rights, scrip, rights to subscribe to, calls or other commitments of any nature
which would entitle the holder, upon exercise thereof, to be issued LBI Common
Stock or any other equity or debt security of LBI. Accordingly, immediately
prior to the Effective Time of the Merger, there will

AGREEMENT AND PLAN OF REORGANIZATION - Page B-41
<PAGE> 182
be not more than (nor less than) 634,723 shares of LBI Common Stock issued and
outstanding, plus that number of shares issued pursuant to the exercise of any
LBI Stock Options. Except as set forth in Schedule 5.19 hereto, LBI owns and
is the beneficial record holder of, and has good and freely transferable title
to, all of the 100,000 shares of LIBERTY Common Stock outstanding, and recorded
on the books and Records of LIBERTY as being held in its name, free and clear
of all liens, charges or encumbrances, and such stock is not subject to any
voting trusts, agreements or similar arrangements or other claims which could
effect the ability of LBI to freely vote such stock in support of the
transactions contemplated herein.

5.20 Sole Agreement. With the exception of this
Reorganization Agreement, neither LBI, nor LIBERTY, nor any Subsidiary of
either has been or is a party to: any letter of intent or agreement to merge,
to consolidate, to sell or purchase assets (other than in the normal course of
its business) or to any other agreement which contemplates the involvement of
LBI or LIBERTY or any Subsidiary of either (or any of their assets) in any
business combination of any kind; or any agreement obligating LBI or LIBERTY to
issue or sell or authorize the sale or transfer of LBI Common Stock or the
capital stock of LIBERTY. Except as described in Section 2.7, Schedule 5.19 or
Schedule 5.20 hereto, there are no (nor will there be at the Effective Time of
the Merger any) shares of capital stock or other equity securities of LBI
outstanding, except for shares of LBI Common Stock presently issued and
outstanding, and there are no (nor will there be at the Effective Time of the
Merger any) outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of LBI or
LIBERTY, or contracts, commitments, understandings, or arrangements by which
LBI or LIBERTY is or may be bound to issue additional shares of their capital
stock or options, warrants, or rights to purchase or acquire any additional
shares of their capital stock. There are no (nor will there be at the
Effective Time of the Merger any) contracts, commitments, understandings, or
arrangements by which LBI or any LBI Subsidiary is or may be bound to transfer
or issue to any third party any shares of the capital stock of any LBI
Subsidiary, and there are no (nor will there be at the Effective Time of the
Merger any) contracts, agreements, understandings or commitments relating to
the right of LBI to vote or to dispose of any such shares.

5.21 Disclosure. The information concerning, and
representations and warranties made by, LBI and LIBERTY set forth in this
Reorganization Agreement, or in the Schedules of Exceptions of LBI hereto, or
in any document, statement, certificate or other writing furnished or to be
furnished by LBI

AGREEMENT AND PLAN OF REORGANIZATION - Page B-42
<PAGE> 183
or LIBERTY to UPC and INTERIM pursuant hereto, does not and will not contain
any untrue statement of a material fact or omit and will not omit to state a
material fact required to be stated herein or therein necessary to make the
statements and facts contained herein or therein, in light of the circumstances
in which they were or are made, not false or misleading. Copies of all
documents heretofore or hereafter delivered or made available to UPC by LBI or
LIBERTY pursuant hereto were or will be complete and accurate copies of such
documents.

5.22 Absence of Undisclosed Liabilities. Except as
described in Schedule 5.22 hereto, neither LBI nor any LBI Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of LBI or any LBI Subsidiary, or that, when
combined with all similar obligations or liabilities, would be material to the
financial condition or operations of LBI or any LBI Subsidiary (i) except as
disclosed in the Audited Financial Statements of LBI delivered to UPC prior to
the date of this Reorganization Agreement or (ii) except obligations or
liabilities incurred in the ordinary course of its business consistent with
past practices or (iii) except as contemplated under this Reorganization
Agreement. Since December 31, 1992, neither LBI nor any LBI Subsidiary has
incurred or paid any obligation or liability which would be material to the
financial condition or operations of LBI or such LBI Subsidiary, except for
obligations paid in connection with transactions made by it in the ordinary
course of its business consistent with past practices, laws and regulations
applicable to LBI or any LBI Subsidiary.

5.23 Classified Assets. Except as disclosed in Schedule
5.23 hereto, as of the date thereof, neither LBI nor LIBERTY has any Loan which
has been criticized or classified by bank examiners representing any Regulatory
Authority or by its independent auditors as "Special Mention," "Substandard,"
"Doubtful" or "Loss" or as a "Potential Problem Loan" as defined under the
SEC's Guide 3 to the Securities Act of 1933.

In the opinion of the management of LBI, the net book value of ORE on the
Balance Sheet of LBI Financial Statements is no greater than the net realizable
value of the ORE in accordance with Statement of Position 92-3.

5.24 Compliance with Laws. LBI and each LBI Subsidiary:

AGREEMENT AND PLAN OF REORGANIZATION - Page B-43
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disclosure and currency transaction reporting) the breach or violation of which
would or could reasonably be expected to have a material adverse effect on the
financial condition or operations of LBI or any LBI Subsidiary taken as a
whole, or which would or could reasonably be expected to subject LBI or any LBI
Subsidiary or any of its directors or officers to civil money penalties; and

(b) Has received no notification or communication
from any agency or department of federal, state, or local government or any of
the Regulatory Authorities, or the staff thereof (i) asserting that LBI or any
LBI Subsidiary is not in compliance with any of the statutes, rules,
regulations, or ordinances which such governmental authority or Regulatory
Authority enforces, which, as a result of such noncompliance, would result in a
material adverse impact on LBI or any LBI Subsidiary, (ii) threatening to
revoke any license, franchise, permit, or governmental authorization which is
material to the financial condition or operations of LBI or any LBI Subsidiary,
or (iii) requiring LBI or any LBI Subsidiary to enter into a cease and desist
order, consent, agreement, or memorandum of understanding.

5.25 Employee Benefit Plans. (a) LBI has previously
provided to UPC true and complete copies of each "employee benefit plan," as
defined in ERISA, which, to the best of its knowledge, is subject to any
provision of ERISA and covers any employee, whether active or retired, of LBI
or any LBI Subsidiary, together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan. Such plans are hereinafter referred to collectively as the
"Employee Plans", and each such Employee Plan is listed in Schedule 5.25(a)
hereto. Each Employee Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code, is so qualified. Except as disclosed in
Schedule 5.25(a) hereto, all Employee Plans were in effect for substantially
all of calendar year 1992 and there has been no material amendment thereof
(other than amendments required to comply with applicable law) or material
increase in the cost thereof or benefits thereunder on or after January 1,
1993.

(b) LBI has furnished to UPC true and complete
copies and descriptions of each plan or arrangement maintained or otherwise
contributed to by LBI or any LBI Subsidiary which is not an Employee Plan and
which (exclusive of base salary and base wages) provides for any form of
current or deferred compensation, bonus, stock option, profit sharing, benefit,
retirement, incentive, group health or insurance, welfare plan (including, but
not limited to, "employee welfare benefit plans" as that term

AGREEMENT AND PLAN OF REORGANIZATION - Page B-44
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is defined in ERISA), or similar plan or arrangement for the benefit of any
employee or class of employees, whether active or retired, of LBI or any LBI
Subsidiary (such plans and arrangements being collectively referred to herein
as "Benefit Arrangements" and all such Benefit Arrangements of LBI and LBI's
Subsidiaries are listed on Schedule 5.25(b) hereto). Except as disclosed in
Schedule 5.25(b) hereto, there are no other Benefit Arrangements of the LBI
Companies and all Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1992. Except as disclosed in Schedule
5.25(b) or Schedule 5.8 hereto or as was required by applicable law, there has
been with respect to Benefit Arrangements no material amendment thereof or
material increase in the cost thereof or benefits payable thereunder on or
after January 1, 1993, and no material increase in the base salary and wage
levels of LBI or any LBI Subsidiary and except in the ordinary course of
business, no change in the terms or conditions of employment (including
severance benefits) compared, in each case, to those prevailing for
substantially all of calendar year 1992. Except as disclosed in Schedule
5.25(b) or Schedule 5.8 hereto, there has been no material increase in the
compensation of or benefits payable to any senior executive employee of LBI or
any LBI Subsidiary since January 1, 1993, nor any employment, severance or
similar contract entered into with any such employee, nor any amendment to any
such contract, since January 1, 1993. Except as disclosed in Schedule 5.25(b)
hereto, there is no contract, agreement or Benefit Arrangement covering any
employee of LBI or any LBI Subsidiary which individually or collectively could
give rise to the payment of any amount which would constitute an "excess
parachute payment," as such term is defined in Section 280(G) of the Internal
Revenue Code.

(c) With respect to all Employee Plans and
Benefit Arrangements, LBI and each LBI Subsidiary are in substantial compliance
with the requirements prescribed by any and all statutes, governmental or court
orders, or rules or regulations currently in effect, including but not limited
to ERISA and the Internal Revenue Code, applicable to such Employee Plans or
Benefit Arrangements except to the extent that any such non-compliance would
not have a material adverse effect on the financial condition, operations or
prospects of LBI. No condition exists that could constitute grounds for the
termination of any Employee Plan under Section 4042 of ERISA. No "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code, has occurred with respect to any Employee Plan, or any
other employee benefit plan maintained by LBI or any LBI Subsidiary which is
covered by Title I of ERISA, which could subject any person (other than a
person for whom neither LBI nor any LBI Subsidiary is directly or indirectly
responsible) to liability under Title I of ERISA or to

AGREEMENT AND PLAN OF REORGANIZATION - Page B-45
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the imposition of any tax under Section 4975 of the Internal Revenue Code which
could have an adverse effect on the business, assets, financial condition,
results of operations or prospects of any LBI Company. No Employee Plan
subject to Part III of Subtitle B of Title I of ERISA or Section 412 of the
Internal Revenue Code, or both, has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code, whether or not waived.
Neither LBI nor any LBI Subsidiary has failed to make any contribution or pay
any amount due and owing as required by the terms of any Employee Plan or
Benefit Arrangement. No Benefit Arrangement has incurred, nor does any Benefit
Arrangement have, any unfunded plan liabilities, except for normal expenses
associated with the operation of such plans, whether or not waived. Neither
LBI nor any LBI Subsidiary has incurred or expects to incur, directly or
indirectly, any liability under Title IV of ERISA arising in connection with
the termination of, or a complete or partial withdrawal from, any plan covered
or previously covered by Title IV of ERISA which could constitute a liability
of UPC or any of its Affiliates (including LBI or any LBI Subsidiary) at or
after the Effective Time of the Merger. Except as disclosed in Schedule
5.25(c) hereto, to the best knowledge, information and belief of LBI, no
condition exists that could subject any person (other than a person for whom
neither LBI nor any LBI Subsidiary is directly or indirectly responsible) to
liabilities, damages, losses, taxes or sanctions that arise under Sections
106(b), 162(i) and 4980B of the Internal Revenue Code or Sections 601 through
608 of ERISA for failure to comply with the continuation health care coverage
requirements of Sections 162(k) and 4980B of the Internal Revenue Code with
respect to any current or former employee, including their beneficiaries, of
LBI or any LBI Subsidiary.

(d) Except as described in Schedule 5.25(d)
hereto, each Employee Plan or Benefit Arrangement and each personal services
contract, fringe benefit, consulting contract or similar arrangement with or
for the benefit of any officer, director, employee or other person can be
terminated by LBI (or by INTERIM as the Surviving Corporation) within a period
of 30 days following the Effective Time of the Merger, without payment of any
amount as a penalty, bonus, premium, severance pay or other compensation for
such termination. Any amounts representing or attributable to overfunding for
a LBI defined benefit plan may be returned to LBI or any LBI Subsidiary in
accordance with the respective plan's arrangements as described in the
respective plan's organic documents.

5.26 Material Contracts. Except as reflected in the
Audited Financial Statements of LBI, or as described in Schedule 5.26 hereto,
neither LBI nor any LBI Subsidiary, nor any of their respective assets,
businesses, or operations, is as of the date

AGREEMENT AND PLAN OF REORGANIZATION - Page B-46
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of this Reorganization Agreement a party to, or is bound or affected by, or
receives benefits under any contract or agreement or amendment thereto that in
each case would (assuming that each were a reporting company under the 1934
Act, whether or not it is so registered) be required to be filed as an exhibit
to an Annual Report on Form 10-K filed by LBI as of the date of this
Reorganization Agreement that has not already been filed as an exhibit to LBI's
Form 10-K filed for the fiscal year ended December 31, 1992, or in any other
SEC Document filed prior to the date of this Reorganization Agreement.

5.27 Material Contract Defaults. Neither LBI nor any LBI
Subsidiary is in default in any respect under any contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its respective assets, business, or operations may be
bound or affected or under which it or its respective assets, business, or
operations receives benefits, and which default is reasonably expected to have
either individually or in the aggregate a material adverse effect on LBI or any
LBI Subsidiary taken as a whole, and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute such a
default.

5.28 Reports. Except as described in Schedule 5.28
hereto, since January 1, 1988, LBI and LIBERTY have filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the FDIC; (ii) the OTS, (iii)
the SEC, including, but not limited to, Annual Reports on Form 10-K, Quarterly
Reports on Form 10- Q and Reports on Forms 8-K, OTS Annual and Quarterly
Reports on Form H-(b)11, and FFIEC 034 and proxy statements; and (iv) any other
applicable federal or state securities or banking authorities (except, in the
case of federal or state securities authorities, filings that are not
material). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied
in all material respects with all of the requirements of their respective forms
and all of the statutes, rules, and regulations enforced or promulgated by the
Regulatory Authority with which they were filed. All such reports were true
and complete in all material respects and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. LBI has previously
made available to UPC true and correct copies of all such reports filed by LBI
or LIBERTY after January 1, 1988.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-47
<PAGE> 188
5.29 Statements True and Correct. None of the information
prepared by, or on behalf of, LBI or any LBI Subsidiary regarding LBI, LIBERTY
or any other LBI Subsidiary included or to be included in the Proxy Statement
to be mailed to LBI's shareholders in connection with the Shareholders Meeting,
and any other documents to be filed with the SEC, or any other Regulatory
Authority in connection with the transaction contemplated herein, will, at the
respective times such documents are filed, and, with respect to the Proxy
Statement, when first mailed to the shareholders of LBI, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders Meeting. All documents which LBI or any LBI Subsidiary is
responsible for filing with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law, including
applicable provisions of the Securities Laws and the rules and regulations
issued thereunder.

ARTICLE 6

COVENANTS OF UPC

6.1 Regulatory Approvals. Within thirty (30) days after
execution of this Reorganization Agreement, UPC shall file any and all
applications with the appropriate government Regulatory Authorities in order to
obtain the Government Approvals and shall take such other actions as may be
reasonably required to consummate the transactions contemplated in this
Reorganization Agreement and the Plan of Merger with reasonable promptness.
UPC shall at least two Business Days prior to filing such applications provide
LBI with copies thereof for its review. UPC shall pay all fees and expenses
arising in connection with such applications for regulatory approval and for
all SEC filing fees and the costs of qualifying the shares of UPC Common Stock
under State blue sky laws as necessary. UPC agrees to provide the appropriate
Regulatory Authorities with the information required by such authorities in
connection with UPC's applications for regulatory approval and UPC agrees to
use its best efforts to obtain such regulatory approvals, and any other
approvals and consents as may be required for the Closing, as

AGREEMENT AND PLAN OF REORGANIZATION - Page B-48
<PAGE> 189
promptly as practicable; provided, however, that nothing in this Section 6.1
shall be construed to obligate UPC to take any action to meet any condition
required to obtain prior regulatory approval if UPC shall reasonably deem such
condition to constitute a significant impediment upon UPC's ability to carry on
its business or acquisition programs or to require UPC to increase UPC's
capital ratios to amounts in excess of the Federal Reserve's minimum capital
ratio guidelines which may be in effect from time to time. UPC shall not
knowingly take any action, or omit to take any action during the term of this
Reorganization Agreement which would adversely affect the receipt by UPC of the
Government Approvals or adversely affect the ability of UPC to perform its
obligations under this Reorganization Agreement. Subject to the terms and
conditions of this Reorganization Agreement, UPC and INTERIM agree to use all
reasonable efforts and to take, or to cause to be taken, all actions, and to
do, or to cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective, with
reasonable promptness after the date of this Reorganization Agreement, the
transaction contemplated by this Reorganization Agreement, including, without
limitation, using reasonable efforts to lift or rescind any injunction or
restraining or other order adversely affecting the ability of the Parties to
consummate the transaction contemplated by this Reorganization Agreement. UPC
shall use, and shall cause each of its Subsidiaries to use, its best efforts to
obtain consents of all third parties and Regulatory Authorities necessary or
desirable for the consummation of each of the transactions contemplated by this
Reorganization Agreement.

6.2 Registration of UPC Common Stock under the Securities
Laws. UPC shall cooperate with LBI in the preparation of the LBI Proxy
Statement to be used at the Shareholders Meeting (and which shall serve also as
UPC's prospectus with respect to UPC's issuance of shares of the UPC Common
Stock) and, with the assistance of LBI, shall use its best efforts to cause a
registration statement on the appropriate form of the SEC to be prepared and
filed by January 15, 1994, so as to cause any shares of UPC Common Stock which
may be delivered to the LBI Record Holders in payment of the Consideration to
be registered under the 1933 Act and to be duly qualified under appropriate
state securities laws. UPC shall also list for trading on the New York Stock
Exchange the UPC Common Stock. Such registration, qualification and listing
shall be effected prior to the Closing.

6.3 Employee Benefits. Following the consummation of the
transactions contemplated herein, UPC shall not be obligated to make further
contributions to any of the Employee Plans or Benefit Arrangements of LBI or
the LBI Subsidiaries and all employees of LBI and the LBI Subsidiaries
immediately prior to

AGREEMENT AND PLAN OF REORGANIZATION - Page B-49
<PAGE> 190
the Effective Time of the Merger who shall continue as employees of INTERIM as
the Surviving Corporation or as employees of any other UPC Subsidiary will be
afforded the opportunity to participate in any employee benefit plans
maintained by UPC or UPC's Subsidiaries, including but not limited to any
"employee benefit plan," as that term is defined in ERISA, on an equal basis
with employees of UPC or any UPC Subsidiaries with comparable positions,
compensation, and tenure. Service with LBI or with any LBI Subsidiary prior to
the Effective Time of the Merger by such former LBI Company employees will be
deemed service with UPC for purposes of determining eligibility for
participation and vesting in such employee benefit plans of UPC and UPC's
Subsidiaries. In its sole discretion, UPC may elect to postpone until the first
day of January next following the Effective Time of the Merger the
participation of the employees of LBI and LBI's Subsidiaries in the employee
benefit plans maintained by UPC or UPC's Subsidiaries; provided, however,
during any such postponement period, The LBI Employee Plans and all related
employee benefit plans shall continue in full force and effect, except as
expressly modified or amended by the terms of this Reorganization Agreement, or
until such time as the plans are replaced by benefit plans maintained by UPC.

ARTICLE 7

COVENANTS OF LBI AND LIBERTY

7.1 Proxy Statement; LBI Shareholder Approval. LBI shall
call the Shareholders Meeting to be held within forty-five (45) days after the
registration statement for the Proxy Statement-Prospectus has been declared
effective by the SEC and under all applicable Securities Laws for the purpose
of (i) approving this Reorganization Agreement and the Plan of Merger, (ii)
amending the LBI Charter to permit the transactions contemplated in this
Reorganization Agreement and the Plan of Merger; and (iii) such other related
matters as LBI deems appropriate. In connection with the Shareholders Meeting,
(i) as soon as reasonably practicable after the date of this Reorganization
Agreement, LBI shall, with UPC's assistance, use its best efforts to prepare a
Proxy Statement to be filed with the SEC as part of UPC's registration
statement and with any other appropriate Regulatory Authority by January 15,
1994; shall, upon such Proxy Statement-Prospectus becoming effective, mail or
cause to be mailed such Proxy Statement to its shareholders and shall provide
UPC the opportunity to review and comment on the Proxy Statement at least five
(5) Business Days prior to the filing of the Proxy Statement with the
Regulatory Authorities for prior review and at least five (5) Business Days

AGREEMENT AND PLAN OF REORGANIZATION - Page B-50
<PAGE> 191
prior to the mailing of the Proxy Statement to the LBI Shareholders; (ii) the
Parties shall furnish to each other all information concerning them that the
other Party may reasonably request in connection with the preparation of such
Proxy Statement; (iii) the Board of Directors of LBI shall recommend (subject
to compliance with their legal and fiduciary duties as advised by counsel) to
LBI Shareholders the approval of this Reorganization Agreement and the Plan of
Merger; and (iv) LBI shall use its best efforts, subject to compliance with its
legal and fiduciary duty as advised by counsel, to obtain such LBI
Shareholders' approvals.

7.2 Conduct of Business -- Affirmative Covenants. Unless
the prior written consent of UPC shall have been obtained (which consent shall
not be unreasonably withheld) and, except as otherwise contemplated herein:

(a) LBI and LIBERTY shall, and shall cause each
LBI Subsidiary to:

(i) Operate its business only in the
usual, regular, and ordinary course;

(ii) Preserve intact its business
organizations and assets and to maintain its rights and franchises;

(iii) Take no action, unless otherwise
required by law, fiduciary duty, rules or regulation, that would (A)
adversely affect the ability of any of them or UPC to obtain any
necessary approvals of Regulatory Authorities required to consummate
the transactions contemplated by this Reorganization Agreement, or (B)
adversely affect the ability of such Party to perform its covenants
and agreements under this Reorganization Agreement;

(iv) Except as they may terminate in
accordance with their terms, use its best efforts to keep in full
force and effect, and not default in any of their obligations under,
all material contracts;

(v) Use its best efforts to keep in full
force and effect insurance coverage with responsible insurance
carriers which is reasonably adequate in coverage and amount for
companies the size of LBI or such LBI Subsidiary and for the
businesses and properties owned by each and in which each is engaged,
to the extent that such insurance is reasonably available;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-51

<PAGE> 192
(vi) Use its best efforts to retain
LIBERTY's present customer base and to facilitate the retention of
such customers by LIBERTY and its branches after the Effective Time of
the Merger; and

(vii) Maintain, renew, keep in full force
and effect, and preserve its business organization and material rights
and franchises, permits and licenses, and to use its best efforts to
maintain positive relations with its present employees so that such
employees will continue to perform effectively and will be available
to LBI, LIBERTY or UPC and UPC's Subsidiaries at and after the
Effective Time of the Merger, and to use its best efforts to maintain
its existing, or substantially equivalent, credit arrangements with
banks and other financial institutions and to assure the continuance
of LIBERTY's customer relationships;

(b) LBI and LIBERTY agree to use their best
efforts to assist UPC in obtaining the Government Approvals necessary to
complete the transactions contemplated hereby and do not know of any reason
that such Government Approvals can not be obtained, and LBI and LIBERTY shall
provide to UPC or to the appropriate governmental authorities all information
reasonably required to be submitted in connection with obtaining such
approvals;

(c) LBI and LIBERTY, at their own cost and
expense, shall use their best efforts to secure all necessary consents and all
consents and releases, if any, required of LBI or LIBERTY from third parties
and shall comply with all applicable laws, regulations and rulings in
connection with this Reorganization Agreement and the consummation of the
transactions contemplated hereby;

(d) At all times to and including, and as of, the
Closing, LBI and LIBERTY shall inform UPC in writing of any and all facts
necessary to amend or supplement the representations and warranties made herein
and the Schedules attached hereto as necessary so that the information
contained herein and therein will accurately reflect the current status of LBI
and LIBERTY; provided, however, that any such updates to Schedules shall be
required prior to the Closing only with respect to matters which represent
material changes to the Schedules and the information contained therein; and
provided further, that before such amendment, supplement or update may be
deemed to be a part of this Reorganization Agreement, UPC shall have agreed in
writing to each amendment, supplement or update to the Schedules made
subsequent to the date of this Reorganization Agreement as an amendment to this
Reorganization Agreement;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-52
<PAGE> 193
(e) On and after the Closing Date, LBI and
LIBERTY shall give such further assistance to UPC and shall execute,
acknowledge and deliver all such documents and instruments as UPC may
reasonably request and take such further action as may be necessary or
appropriate effectively to consummate the transaction contemplated by this
Reorganization Agreement;

(f) Between the date of this Reorganization
Agreement and the Closing Date, LBI and LIBERTY shall afford UPC and its
authorized agents and representatives reasonable access during normal business
hours to the properties, operations, books, records, contracts, documents, loan
files and other information of, or relating to LBI and LIBERTY. LBI and
LIBERTY shall provide reasonable assistance to UPC in its investigation of
matters relating to LBI and LIBERTY. Any non-public information provided by
LBI or LIBERTY to UPC shall be kept confidential by UPC pursuant to the
provisions of Section 2.4 of this Reorganization Agreement; and

(g) Subject to the terms and conditions of this
Reorganization Agreement, LBI and LIBERTY agree to use all reasonable efforts
and to take, or to cause to be taken, all actions, and to do, or to cause to be
done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective, with reasonable promptness after
the date of this Reorganization Agreement, the transaction contemplated by this
Reorganization Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining or other order
adversely affecting the ability of the Parties to consummate the transaction
contemplated by this Reorganization Agreement. LBI shall use, and shall cause
each of its Subsidiaries to use, its best efforts to obtain consents of all
Regulatory Authorities necessary or desirable for the consummation of each of
the transactions contemplated by this Reorganization Agreement.

7.3 Conduct of Business -- Negative Covenants. From the
date of this Reorganization Agreement until the earlier of the Effective Time
of the Merger or the termination of this Reorganization Agreement, LBI and
LIBERTY covenant and agree that they will neither do, nor agree or commit to
do, nor permit any LBI Subsidiary to do or commit or agree to do any of the
following without the prior written consent of the chief executive officer,
president, or chief financial officer of UPC, which consent will not be
unreasonably withheld:

(a) Except as expressly contemplated by this
Reorganization Agreement or the Plan of Merger, amend its Articles of
Incorporation or Bylaws; or

AGREEMENT AND PLAN OF REORGANIZATION - Page B-53
<PAGE> 194
(b) Impose, or suffer the imposition, on any
share of capital stock held by it or by any of its Subsidiaries of any lien,
charge, or encumbrance, or permit any such lien, charge, or encumbrance to
exist; or

(c) (i) Repurchase, redeem, or otherwise acquire
or exchange, directly or indirectly, any shares of its capital stock or other
equity securities or any securities or instruments convertible into any shares
of its capital stock, or any rights or options to acquire any shares of its
capital stock or other equity securities except as expressly permitted by this
Reorganization Agreement or the Plan of Merger; or (ii) split or otherwise
subdivide its capital stock; or (iii) recapitalize in any way; or (iv) declare
a stock dividend on the LBI Common Stock; or (v) pay any cash dividend on the
LBI Common Stock other than the declaration and payment by LBI of either LBI's
customary and ordinary semi-annual cash dividends of $.30 per share of LBI
Common Stock or cash dividends equivalent to the dividend payout ratio of UPC
on shares of UPC Common Stock adjusted by the Exchange Ratio; or

(d) Except as expressly permitted by this
Reorganization Agreement, acquire direct or indirect control over any
corporation, association, firm, organization or other entity, other than in
connection with (i) mergers, acquisitions, or other transactions approved in
writing by UPC, (ii) internal reorganizations or consolidations involving
existing Subsidiaries, (iii) foreclosures in the ordinary course of business
and not knowingly exposing it to liability by reason of Hazardous Substances,
(iv) acquisitions of control in its fiduciary capacity, or (v) the creation of
new subsidiaries organized to conduct or continue activities otherwise
permitted by this Reorganization Agreement; or

(e) Except as expressly permitted by this
Reorganization Agreement or the Plan of Merger, to (i) issue, sell, agree to
sell, or otherwise dispose of or otherwise permit to become outstanding any
additional shares of LBI Common Stock (except in connection with the LBI Option
Plan), or any other capital stock of LBI or of any LBI Subsidiary, or any stock
appreciation rights, or any option, warrant, conversion, call, scrip, or other
right to acquire any such stock, or any security convertible into any such
stock, unless any such shares of such stock are directly sold or otherwise
directly transferred to LBI or any LBI Subsidiary, or are issued in connection
with any of the above-described securities encompassed in the LBI Option Plans,
or (ii) sell, agree to sell, or otherwise dispose of any substantial part of
the assets or earning power of LBI or of any LBI Subsidiary; or (iii) sell,
agree to sell, or otherwise dispose of any asset of LBI or any LBI Subsidiary
other than in

AGREEMENT AND PLAN OF REORGANIZATION - Page B-54
<PAGE> 195
the ordinary course of business for reasonable and adequate consideration; or
(iv) buy, agree to buy or otherwise acquire a substantial part of the assets or
earning power of any other Person or entity; or

(f) Incur, or permit any LBI Subsidiary to incur,
any additional debt obligation or other obligation for borrowed money [other
than (i) in replacement of existing short-term debt with other short-term debt
of an equal or lesser amount, (ii) financing of banking related activities
consistent with past practices, (iii) indebtedness of LBI or any LBI Subsidiary
to LIBERTY or another LBI Subsidiary] in excess of an aggregate of $50,000 (for
LBI and its Subsidiaries on a consolidated basis) or (iv) FHLB advances, except
in the ordinary course of the business of LBI or such LBI Subsidiary consistent
with past practices (and such ordinary course of business shall include, but
shall not be limited to, creation of deposit liabilities, entry into repurchase
agreements or reverse repurchase agreements, purchases or sales of federal
funds, Federal Reserve advances, and sales of certificates of deposit); or

(g) Grant any increase in compensation or
benefits to any of its employees or officers, except in accordance with past
practices or as required by law; pay any bonus except in accordance with past
practices; enter into any severance agreements with any of its officers or
employees; grant any material increase in fees or other increases in
compensation or other benefits to any director of LBI or of any LBI Subsidiary;
or effect any change in retirement benefits for any class of its employees or
officers, unless such change is required by applicable law; or

(h) Except as expressly permitted in this
Reorganization Agreement or any Addenda hereto, amend any existing employment
contract between it and any person having a salary thereunder in excess of
$30,000 per year (unless such amendment is required by law) to increase the
compensation or benefits payable thereunder; or to enter into any new
employment contract with any person having an annual salary thereunder in
excess of $30,000 that LBI or LIBERTY (or their respective successors) do not
have the unconditional right to terminate without liability (other than
liability for services already rendered), at any time on or after the Effective
Time of the Merger; or

(i) Adopt any new employee benefit plan or
terminate or make any material change in or to any existing employee benefit
plan other than any change that is required by law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax-qualified status of any
such plan; or

AGREEMENT AND PLAN OF REORGANIZATION - Page B-55
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(j) Enter into any new service agreements,
purchase agreements, lease agreements that are material to LBI or any LBI
Subsidiary; or

(k) Make any capital expenditure except for
ordinary purchases, repairs, renewals or replacements; or

(l) Enter into any transactions other than in the
ordinary course of business; or

(m) Grant or commit to grant any new extension of
credit to any officer, director or holder of 2% or more of the outstanding LBI
Common Stock, or to any corporation, partnership, trust or other entity
controlled by any such person, if such extension of credit, together with all
other credits then outstanding to the same borrower and all affiliated persons
of such borrower, would exceed two percent (2%) of the capital of LBI or amend
the terms of any such credit outstanding on the date hereof.

7.4 Conduct of Business -- Certain Actions.

(a) Except to the extent necessary to consummate
the transactions specifically contemplated by this Reorganization Agreement,
LBI and LIBERTY shall not, and shall use their respective best efforts to
ensure that their respective directors, officers, employees, and advisors do
not, directly or indirectly, institute, solicit, or knowingly encourage
(including by way of furnishing any information not legally required to be
furnished) any inquiry, discussion, or proposal, or participate in any
discussions or negotiations with, or provide any confidential or non-public
information to, any corporate, partnership, person or other entity or group
(other than to UPC or any UPC Subsidiary) concerning any "Acquisition Proposal"
(as defined below), except for actions reasonably considered by the Board of
Directors of LBI, based upon the advice of outside legal counsel, to be
required in order to fulfill its fiduciary obligations. LBI shall notify UPC
immediately if any Acquisition Proposal has been or should hereafter be
received by LBI or LIBERTY, such notice to contain, at a minimum, the identity
of such persons, and, subject to disclosure being consistent with the fiduciary
obligations of LBI's Board of Directors, a copy of any written inquiry, the
terms of any proposal or inquiry, any information requested or discussions
sought to be initiated, and the status of any reports, negotiations or
expressions of interest. For purposes of this Section, "Acquisition Proposal"
means any tender offer, agreement, understanding or other proposal of any
nature pursuant to which any corporation, partnership, person or other entity
or group, other than UPC or any UPC Subsidiary, would directly or indirectly
(i) acquire or

AGREEMENT AND PLAN OF REORGANIZATION - Page B-56
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participate in a merger, share exchange, consolidation or any other business
combination involving LBI or LIBERTY; (ii) acquire the right to vote ten
percent (10%) or more of the LBI Common Stock or LIBERTY Common Stock; (iii)
acquire a significant portion of the assets or earning power of LBI or of
LIBERTY; or (iv) acquire in excess of ten percent (10%) of the outstanding LBI
Common Stock or LIBERTY Common Stock.

(b) As a condition of and as an inducement to
UPC's entering into this Reorganization Agreement, LBI and LIBERTY covenant,
acknowledge, and agree that it shall be a specific, absolute, and
unconditionally binding condition precedent to either LBI's or LIBERTY's
entering into a letter of intent, agreement in principle, or definitive
agreement (whether or not considered binding, non-binding, conditional or
unconditional) with any third-party with respect to an Acquisition Proposal, or
supporting or indicating an intent to support an Acquisition Proposal, other
than this Reorganization Agreement and the transactions contemplated in this
Reorganization Agreement, regardless of whether LBI or LIBERTY has otherwise
complied with the provisions of Section 7.4(a) hereof, that LBI or such
third-party which is a party of the Acquisition Proposal shall have paid UPC
the sum of One Million Nine Hundred Twenty Thousand and No/100 Dollars
($1,920,000), which sum represents the (i) direct costs and expenses
(including, but not limited to, fees and expenses incurred by UPC's financial
or other consultants, printing costs, investment bankers, accountants, and
counsel) incurred by or on behalf of UPC in negotiating and undertaking to
carry out the transactions contemplated by this Reorganization Agreement; and
(ii) indirect costs and expenses of UPC in connection with the transactions
contemplated by this Reorganization Agreement, including UPC's management time
devoted to negotiation and preparation for the transactions contemplated by
this Reorganization Agreement; and (iii) UPC's loss as a result of the
transactions contemplated by this Reorganization Agreement not being
consummated. Accordingly, LBI and LIBERTY hereby jointly and severally
stipulate and covenant that prior to LBI's or LIBERTY's entering into a letter
of intent, agreement in principle, or definitive agreement, (whether binding or
non-binding, conditional or unconditional) with any third-party with respect to
an Acquisition Proposal or supporting or indicating an intent to support an
Acquisition Proposal, either LBI or such third-party shall have paid to UPC the
amount set forth above in immediately available funds to satisfy the specific,
absolute, and unconditionally binding condition precedent imposed by this
Section 7.4. Notwithstanding anything in this Section 7.4(b) to the contrary,
in the event such Acquisition Proposal should be the result of a hostile
takeover of LBI or LIBERTY, any sums due UPC by LBI pursuant to the terms of
this Section 7.4 shall be

AGREEMENT AND PLAN OF REORGANIZATION - Page B-57
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paid by LBI to UPC at the closing of the transactions set forth in such
Acquisition Proposal. UPC and INTERIM each acknowledges that under no
circumstances shall any officer or director of LBI or LIBERTY (unless such
officer or director shall have an interest in a potential acquiring party in
any Acquisition Proposal) be held personally liable to UPC or INTERIM for any
amount of the foregoing payment. On payment of such amount to UPC, UPC and
INTERIM shall have no cause of action or claim (either in law or equity)
whatsoever against LBI or LIBERTY, or any officer or director of LBI or
LIBERTY, with respect to or in connection with such Acquisition Proposal, this
Reorganization Agreement or the Plan of Merger.

(c) The requirements, conditions, and obligations
imposed by this Section 7.4 shall continue in full force and effect from the
date of this Reorganization Agreement until September 30, 1994, unless and
until the earlier of any of the following events shall occur, in which event,
thereafter neither LBI nor LIBERTY shall be obligated to pay the amount
required by this Section 7.4 as a condition precedent to such transaction:

(1) This Reorganization Agreement shall have been terminated (i)
mutually by the Parties pursuant to Section 9.1(a) of this
Reorganization Agreement; (ii) by UPC and INTERIM pursuant to
Section 9.1(b) of this Reorganization Agreement; (iii) by UPC
and INTERIM or LBI and LIBERTY pursuant to Section 9.1(c) of
this Reorganization Agreement; (iv) by UPC and INTERIM or LBI
and LIBERTY pursuant to Section 9.1(d) of this Reorganization
Agreement; (v) by UPC and INTERIM or LBI and LIBERTY pursuant
to Section 9.1(e) of this Reorganization Agreement, and in the
case of termination pursuant to Section 9.1(e), only on the
basis of the failure to satisfy the conditions enumerated in
subparagraph (2) below; (vi) by UPC and INTERIM pursuant to
Section 9.1(f) of this Reorganization Agreement; (vii) by UPC
and INTERIM pursuant to Section 9.1(g) of this Reorganization
Agreement; or (viii) by LBI and LIBERTY pursuant to Section
9.1(h) of this Reorganization Agreement; or

(2) In the event the Merger should not be consummated as a result
of the failure to satisfy any of the following conditions:

(i) Material inaccuracy (without waiver thereof) of
representations and warranties of UPC as contemplated
by the provisions of Section 8.1(b) of this
Reorganization Agreement;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-58
<PAGE> 199
(ii) Noncompliance by UPC or INTERIM with their
respective obligations as required by the provisions
of Section 8.1(a) of this Reorganization Agreement;

(iii) The failure by UPC or INTERIM to effect all
corporate action necessary on their respective parts
as required by the provisions of Section 8.1 of this
Reorganization Agreement or to satisfy the conditions
set forth in Sections 8.1(d) or 8.1(g) of this
Reorganization Agreement;

(iv) The failure to receive the requisite approvals
as required by the provisions of Section 8.3(b) of
this Reorganization Agreement other than any such
failure arising out of any action or inaction on the
part of LBI or LIBERTY;

(v) The occurrence of material legal proceedings as
contemplated by the provisions of Section 8.3(a) of
this Reorganization Agreement;

(vi) The failure on the part of counsel to UPC to
deliver the requisite opinion required by the
provisions of Section 8.1(e) of this Reorganization
Agreement;

(vii) UPC shall have determined not to consummate the
Merger pursuant to Sections 8.2(d), 8.2(f), 8.2(i),
8.2(k) or 8.2(l); or

(viii) The failure by UPC to deliver to LBI and
LIBERTY the certificates contemplated by Section
8.1(c) of this Reorganization Agreement.

ARTICLE 8

CONDITIONS TO CLOSING

8.1 Conditions to the Obligations of LBI. Unless waived
in writing by LBI, the obligation of LBI to consummate the transaction
contemplated by this Reorganization Agreement is subject to the satisfaction at
or prior to the Closing Date of the following conditions:

(a) Performance. Each of the material acts and
undertakings of UPC and INTERIM to be performed at or prior to the Closing Date
pursuant to this Reorganization Agreement shall

AGREEMENT AND PLAN OF REORGANIZATION - Page B-59
<PAGE> 200
have been duly performed, except for breaches of acts and undertakings which
would not have, or would not reasonably be expected to have, any material
adverse effect on the business or operations of UPC and the UPC Subsidiaries
taken as a whole;

(b) Representations and Warranties. The
representations and warranties of UPC and INTERIM contained in Article 4 of
this Reorganization Agreement shall be true and complete, in all material
respects, on and as of the Effective Time of the Merger with the same effect as
though made on and as of the Effective Time of the Merger, except (i) for any
such representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date and (ii) for breaches
or representations and warranties which would not have, or would not reasonably
be expected to have, a material adverse effect on the business or operations of
UPC and the UPC Subsidiaries taken as a whole;

(c) Documents. In addition to the other
deliveries of UPC or INTERIM described elsewhere in this Reorganization
Agreement, LBI shall have received the following documents and instruments:

(i) a certificate signed by the
Secretary or an assistant secretary of UPC and INTERIM dated as of the
Closing Date certifying that:

(A) UPC's and INTERIM' respective
Boards of Directors have duly adopted resolutions (copies of
which shall be attached to such certificate) approving the
substantive terms of this Reorganization Agreement (including
the Plan of Merger) and authorizing the consummation of the
transactions contemplated by this Reorganization Agreement and
certifying that such resolutions have not been amended or
modified and remain in full force and effect;

(B) each person executing this
Reorganization Agreement on behalf of UPC or INTERIM is an
officer of UPC or INTERIM, as the case may be, holding the
office or offices specified therein and that the signature of
each person set forth on such certificate is his or her
genuine signature;

(D) UPC and INTERIM are in good
standing under their respective corporate charters; and

AGREEMENT AND PLAN OF REORGANIZATION - Page B-60
<PAGE> 201
(ii) a certificate signed respectively by
duly authorized officers of UPC or INTERIM stating that the conditions
set forth in Section 8.1(a) and Section 8.1(b) of this Reorganization
Agreement have been fulfilled;

(d) Consideration. LBI shall have received a
certificate executed by an authorized officer of the Exchange Agent to the
effect that the Exchange Agent has received and holds in its possession
certificates evidencing and representing that number of shares of UPC Common
Stock and cash funds sufficient to meet the obligations of UPC to the LBI
Record Holders to deliver the Consideration under this Reorganization Agreement
and the Plan of Merger; and

(e) Opinion of UPC's and INTERIM' Counsel. LBI
shall have been furnished with an opinion of counsel to UPC and INTERIM, dated
as of the Closing Date, addressed to and in form and substance satisfactory to
LBI, to the effect that:

(i) UPC is a Tennessee corporation duly
organized, validly existing, and in good standing under the laws of
the State of Tennessee; and INTERIM is a Tennessee corporation duly
organized, validly existing, and in good standing under the laws of
the State of Tennessee;

(ii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by UPC and
INTERIM and (assuming this Reorganization Agreement is a binding
obligation of LBI and LIBERTY) constitutes a valid and binding
obligation of UPC and INTERIM enforceable in accordance with its
terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to the application of
equitable principles and judicial discretion;

(iii) neither the execution and delivery
by UPC or INTERIM of this Reorganization Agreement nor any of the
documents to be executed and delivered by UPC or INTERIM in connection
herewith violates or conflicts with UPC's or INTERIM' corporate
charters or bylaws or, to the best of the knowledge, information and
belief (without making special inquiry) of such counsel, any material
contracts, agreements or other commitments of UPC or INTERIM;

(iv) to the knowledge of such counsel
after due inquiry, no consent or approval by any Governmental
Authority which has not already been obtained is required for
execution and delivery by UPC and INTERIM of this Reorganization
Agreement or any of the documents to be

AGREEMENT AND PLAN OF REORGANIZATION - Page B-61
<PAGE> 202
executed and delivered by UPC or INTERIM in connection herewith; and

(v) the shares of UPC Common Stock to be
issued in the names of the LBI Record Holders and delivered in
exchange for their LBI Common Stock will be duly authorized, validly
issued, fully paid and non-assessable.

Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of UPC or INTERIM or appropriate government
officials; (ii) in the case of matters of law governed by the laws of the
states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event, to
Federal Law and the State of Tennessee; and (iii) incorporate, be guided by,
and be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991).

(f) Fairness Opinion. LBI shall have received a
"fairness opinion" letter from Trident Financial Corporation to the effect
that, in the opinion of Trident Financial Corporation the Consideration to be
received by the LBI Record Holders is fair to the shareholders of LBI from a
financial point of view, and such "fairness opinion" shall not have been
withdrawn prior to the LBI Shareholder Meeting, and LBI shall have received an
updated "fairness opinion" letter from Trident Financial Corporation within
five (5) days prior to the Closing Date reinforcing the opinions provided in
the initial "fairness opinion" letter.

(g) Tax Opinion. LBI shall have received a
written opinion from counsel to the effect that the transactions contemplated
by this Reorganization Agreement and the Plan of Merger will constitute one or
more tax-free reorganizations under Section 368 of the Internal Revenue Code
and that the LBI Record Holders will not recognize any gain or loss to the
extent that such LBI Record Holders exchange shares of LBI Common Stock for
shares of UPC Common Stock as contemplated by this Reorganization Agreement and
the Plan of Merger assuming that the shares of LBI Common Stock so exchanged by
such LBI Record Holders are held by them as capital assets at the time of such
exchange.

8.2 Conditions to the Obligations of UPC and INTERIM.
Unless waived in writing by UPC and INTERIM, the obligation of UPC and INTERIM
to consummate the transactions contemplated by this Reorganization Agreement is
subject to the satisfaction at or prior to the Closing Date of the following
conditions:

AGREEMENT AND PLAN OF REORGANIZATION - Page B-62
<PAGE> 203
(a) Performance. Each of the material acts and
undertakings of LBI and/or LIBERTY to be performed at or before the Closing
Date pursuant to this Reorganization Agreement shall have been duly performed,
except for breaches of acts and undertakings which would not have, or would not
reasonably be expected to have, any material adverse effect on the business or
operations of LBI and the LBI Subsidiaries taken as a whole;

(b) Representations and Warranties. The
representations and warranties of LBI and/or LIBERTY contained in Article 5 of
this Reorganization Agreement shall be true and correct, in all material
respects, on and as of the Closing Date with the same effect as though made on
and as of the Closing Date except (i) for any such representations and
warranties made as of a specified date, which shall be true and correct in all
material respects as of such date and (ii) for breaches or representations and
warranties which would not have, or would not reasonably be expected to have, a
material adverse effect on the business or operations of LBI and the LBI
Subsidiaries taken as a whole;

(c) Documents. In addition to the documents
described elsewhere in this Reorganization Agreement, UPC shall have received
the following documents and instruments:

(i) a certificate signed by the
Secretary or an assistant secretary of LBI and LIBERTY dated as of the
Closing Date certifying that:

(A) LBI's and LIBERTY'S respective
Boards of Directors have duly adopted resolutions (copies of
which shall be attached to such certificate) approving the
substantive terms of this Reorganization Agreement (including
the Plan of Merger) and authorizing the consummation of the
transactions contemplated by this Reorganization Agreement and
certifying that such resolutions have not been amended or
modified and remain in full force and effect;

(B) each person executing this
Reorganization Agreement on behalf of LBI or LIBERTY is an
officer of LBI or LIBERTY, as the case may be, holding the
office or offices specified therein and that the signature of
each person set forth on such certificate is his or her
genuine signature;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-63
<PAGE> 204
(D) LBI and LIBERTY are in good
standing under their respective corporate charters; and

(ii) a certificate signed by the
respective President, Chief Executive Officer or an Executive Vice
President of each of LBI and LIBERTY stating that the conditions set
forth in Section 8.2(a), Section 8.2(b) and 8.2(f) this Reorganization
Agreement have been satisfied.

(d) Destruction of Property. Between the date of
this Reorganization Agreement and the Closing Date, there shall have been no
damage to or destruction of real property, improvements or personal property of
LBI or LIBERTY which materially reduces the market value of such property, and
no zoning or other order, limitation or restriction imposed against the same
that might have in either case a material adverse impact upon the operations,
business or prospects of LBI or LIBERTY; provided, however, that the
availability of insurance coverage shall be taken into account in determining
whether there has been such a material adverse impact;

(e) Inspections Permitted. Between the date of
this Reorganization Agreement and the Closing Date, LBI and LIBERTY shall have
afforded UPC and its authorized agents and representatives reasonable access
during normal business hours to the properties, operations, books, records,
contracts, documents, loan files and other information of or relating to LBI
and LIBERTY. LBI and LIBERTY shall have caused all LBI or LIBERTY personnel to
provide reasonable assistance to UPC in its investigation of matters relating
to LBI and LIBERTY;

(f) No Material Adverse Change. No material
adverse change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), prospects, operations,
liquidity, income, or condition (financial or otherwise), or net worth of LBI
or LIBERTY taken as a whole shall have occurred since the date of this
Reorganization Agreement. In the event of such a material adverse change with
respect to LBI or LIBERTY, UPC may elect either (i) to close the contemplated
transaction in accordance with the terms of this Reorganization Agreement or
(ii) to terminate this Reorganization Agreement without penalty;

(g) Opinion of LBI's Counsel. UPC shall have
been furnished with an opinion of counsel to LBI and LIBERTY, dated the Closing
Date, addressed to and in form and substance satisfactory to UPC, to the effect
that:

AGREEMENT AND PLAN OF REORGANIZATION - Page B-64
<PAGE> 205
(i) LBI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Tennessee;

(ii) LIBERTY is a federal savings bank
duly organized, validly existing, and in good standing under the laws
of the United States of America;

(iii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by LBI and
LIBERTY and (assuming that this Reorganization Agreement is a binding
obligation of UPC and INTERIM and the Plan of Merger is a binding
obligation of UPC and INTERIM) constitutes a valid and binding
obligation of LBI and LIBERTY enforceable in accordance with its
terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to the application of
equitable principles and judicial discretion; and

(iv) to the knowledge of such counsel
after due inquiry, no consent or approval, which has not already been
obtained, by any governmental authority is required for execution and
delivery by LBI or LIBERTY of this Reorganization Agreement or any of
the documents to be executed and delivered by LBI and LIBERTY in
connection herewith.

Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of LBI or LIBERTY or appropriate government
officials; (ii) in the case of matters of law governed by the laws of the
states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event, to
Federal Law and the State of Tennessee and (iii) incorporate, be guided by, and
be interpreted in accordance with, the Legal Opinion Accord of the ABA Section
of Business Law (1991);

(h) Other Business Combinations, Etc. Neither
LBI nor LIBERTY shall have entered into any agreement, letter of intent,
understanding or other arrangement pursuant to which LBI or LIBERTY would
merge; consolidate with; effect a business combination with; sell any
substantial part of LBI's or LIBERTY's assets; acquire a significant part of
the shares or assets of any other Person or entity (financial or otherwise);
adopt any "poison pill" or other type of anti-takeover arrangement, any
shareholder rights provision, any "golden parachute" or similar program which
would have the effect of materially decreasing the

AGREEMENT AND PLAN OF REORGANIZATION - Page B-65
<PAGE> 206
value of LBI or LIBERTY or the benefits of acquiring the LBI Common Stock;

(i) Maintenance of Certain Covenants, Etc. At
the time of Closing (i) the total assets of LBI shall be not less than
$175,000,000; (ii) the tangible equity capital of LBI shall be not less than
$19,000,000; (iii) the tangible equity capital of LIBERTY shall be not less
than $19,000,000; (iv) neither LBI nor LIBERTY shall have issued or repurchased
from the date hereof any additional equity or debt securities, or any rights to
purchase or repurchase such securities, except as set forth in this Agreement
(therefore, there shall be not more than 684,955 shares of LBI Common Stock
validly issued and outstanding at the Effective Time of the Merger); (v) from
the date hereof, there shall have been no extraordinary sale of assets, nor any
investment portfolio restructuring or any dividend declaration by either LBI or
LIBERTY except as provided for in Section 7.3(c) of this Reorganization
Agreement; (vi) the Merger can be accounted for on the financial statements of
UPC as a "pooling of interests"; and (vii) neither LBI nor LIBERTY shall have
issued or granted since December 31, 1992 through the Closing Date any
additional shares of restricted or unrestricted LBI Common Stock in connection
with the LBI Option Plans, except for shares issued in satisfaction of any LBI
Stock Options exercised prior to the Closing Date or as expressly provided for
in this Reorganization Agreement. The criteria and calculations set forth
above shall be determined in accordance with GAAP assuming that LBI and LIBERTY
shall have been operated consistently in the normal course of their business;
provided, however, that the effects of any balance sheet expansion through
abnormal, unusual or out of the ordinary borrowings or by the realization of
extraordinary gains or other income from the disposition of assets or
liabilities or through similar transactions shall be eliminated from the
calculations;

(j) Non-Compete Agreements. Each member of the
Board of Directors of LBI shall have entered into a non-compete agreement with
UPC and/or INTERIM substantially in the form of UPC's standard form of
non-compete agreement, providing for a term of not less than two (2) years and
covering the general geographic region(s) in which LBI and LIBERTY currently
operate and do business in or have a present intention to do business in;

(k) Pooling of Interests Accounting Treatment.
UPC shall have received (i) from Price Waterhouse, or other independent
accountants acceptable to UPC, a letter dated within five (5) days prior to the
Closing Date, in form and substance acceptable to UPC, stating the accountants'
opinion that, based upon the information furnished to them, the Reorganization
and Merger should be accounted for by UPC as a "pooling of interests"

AGREEMENT AND PLAN OF REORGANIZATION - Page B-66
<PAGE> 207
for financial statement purposes and that such accounting treatment is in
accordance with generally accepted accounting principles and (ii) from LBI's
regularly retained independent accountants or other independent accountants
acceptable to UPC, a letter dated within five (5) days prior to the Closing
Date stating that, in connection with their audits, nothing came to their
attention that caused them to believe that LBI has taken, or failed to take,
any actions that would cause the acquisition by UPC not to qualify for pooling
of interests accounting treatment insofar as they relate to accounting matters.
However, their audits were not directed primarily toward obtaining knowledge of
such actions;

(l) Tax Opinion. UPC shall have received a
written opinion from counsel to the effect that the transactions contemplated
by this Reorganization Agreement and the Plan of Merger will constitute one or
more tax-free reorganizations under Section 368 of the Internal Revenue Code
and that the LBI Record Holders will not recognize any gain or loss to the
extent that such LBI Record Holders exchange shares of LBI Common Stock for
shares of UPC Common Stock as contemplated by this Reorganization Agreement and
the Plan of Merger assuming that the shares of LBI Common Stock so exchanged by
such LBI Record Holders are held by them as capital assets at the time of such
exchange; and

(m) Receipt of Affiliate Letters. Pursuant to
the provisions of Section 6.2 of this Reorganization Agreement, UPC shall have
received a written commitment in form and substance satisfactory to UPC and its
counsel (an "Affiliate Letter") from each LBI Record Holder who would be deemed
an Affiliate of LBI at the time of Closing under the Securities Laws and who
accepts shares of UPC Common Stock as Consideration for the cancellation,
exchange and conversion of his shares of LBI Common Stock pursuant to the terms
and conditions of this Reorganization Agreement, committing to UPC that such
LBI Record Holder shall not pledge, assign, sell, transfer, devise, otherwise
alienate or take any action which would eliminate or diminish the risk of
owning or holding the shares of UPC Common Stock to be received by such LBI
Record Holder upon consummation of the Merger, nor enter into any formal or
informal agreement to pledge, assign, sell or transfer, devise, or otherwise
alienate his right, title and interests in any of the shares of UPC Common
Stock to be delivered by UPC to such LBI Record Holder pursuant to the terms
and conditions of this Reorganization Agreement until such time as UPC shall
have publicly released a statement of UPC's consolidated earnings reflecting
the combined financial results of operations of UPC and LBI for a period of not
less than thirty (30) days subsequent to the Effective Time of the Merger.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-67
<PAGE> 208
8.3 Conditions to Obligations of All Parties. The
obligation of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment, at or prior to the Closing, of the following
conditions:

(a) No Pending or Threatened Claims. That no
claim, action, suit, investigation or other proceeding shall be pending or
threatened before any court or governmental agency which presents a substantial
risk of the restraint or prohibition of the transactions contemplated by this
Reorganization Agreement or the obtaining of material damages or other relief
in connection therewith; and

(b) Governmental Approvals and Acquiescence
Obtained. The Parties hereto shall have received all applicable Governmental
Approvals for the consummation of the transactions contemplated herein and all
waiting periods incidental to such approvals or notices given shall have
expired.

(c) Registration Statement. The registration
statement shall have been declared effective and shall not be subject to a stop
order of the SEC and, if the offer and sale of UPC Common Stock in the Merger
pursuant to this Reorganization Agreement is subject to the Blue Sky laws of
any state, shall not be subject to a stop order of any state securities
commission.

(d) Shareholder Approval. This Reorganization
Agreement and the Plan of Merger shall have been approved by the LBI
Shareholders by vote of at least the number of LBI Shareholders as required by
applicable law and the Charter of LBI.

ARTICLE 9

TERMINATION

9.1 Termination. This Reorganization Agreement and the
Plan of Merger may be terminated at any time prior to the Closing, as follows:

(a) By mutual consent in writing of the Parties;

(b) By UPC or INTERIM, should LBI or any LBI
Subsidiary fail to conduct its business pursuant to LBI's and LIBERTY's
Covenants made in Article 7;

AGREEMENT AND PLAN OF REORGANIZATION - Page B-68
<PAGE> 209
(c) By UPC, INTERIM or LBI in the event the
Closing shall not have occurred by September 30, 1994 (the "Target Date"),
unless the failure of the Closing to occur shall be due to the failure of the
Party seeking to terminate this Agreement to perform its obligations hereunder
in a timely manner.

(d) By either UPC, INTERIM or LBI, upon written
notice to the other Party, upon denial of any Governmental Approval necessary
for the consummation of the Merger (or should such approval be conditioned upon
a substantial deviation from the transaction contemplated); provided, however,
that either UPC or LBI may, upon written notice to the other, extend the term
of this Reorganization Agreement for only one sixty (60) day period to
prosecute diligently and overturn such denial, provided that such denial has
been appealed within ten (10) business days of the receipt thereof;

(e) By UPC or INTERIM if the conditions set forth
in Sections 8.2 or 8.3 are not satisfied in all material respects as of the
Closing Date, or by LBI if the conditions set forth in Section 8.1 or 8.3 are
not satisfied in all material respects as of the Closing Date, and such failure
has not been waived prior to the Closing;

(f) By UPC or INTERIM should LBI or LIBERTY or
any LBI Subsidiary enter into any formal agreement, letter of understanding,
memorandum or other similar arrangement with any bank regulatory authority
establishing a formal capital plan requiring LBI or LIBERTY to raise additional
capital or to sell a substantial portion of its assets;

(g) By UPC or INTERIM in the event that more than
seven percent (7%) of the LBI Record Holders assert and maintain in perfected
status their dissenters' rights with respect to the Merger under the Tennessee
Code; or

(h) By LBI or LIBERTY in the event the Current
Market Price Per Share of the UPC Common Stock should be less than $20.00 per
share of UPC Common Stock.

If a Party should elect to terminate this Reorganization Agreement pursuant to
subsections (b), (c), (d), (e), (f), (g) or (h) of this Section 9.1, it shall
give notice to the other Party, in writing, of its election in the manner
prescribed in Section 10.1 ("Notices") of this Reorganization Agreement.

9.2 Effect of Termination. In the event that this
Reorganization Agreement should be terminated pursuant to Section 9.1 hereof,
all further obligations of the Parties under this Reorganization Agreement
shall terminate without further

AGREEMENT AND PLAN OF REORGANIZATION - Page B-69
<PAGE> 210
liability of any Party to another; provided, however, that a termination under
Section 9.1 hereof shall not relieve any Party of any liability for a breach of
this Reorganization Agreement or for any misstatement or misrepresentation made
hereunder prior to such termination, or be deemed to constitute a waiver of any
available remedy for any such breach, misstatement or misrepresentation.

ARTICLE 10

GENERAL PROVISIONS

10.1 Notices. Any notice, request, demand and other
communication which either Party hereto may desire or may be required hereunder
to give shall be in writing and shall be deemed to be duly given if delivered
personally or mailed by certified or registered mail (postage prepaid, return
receipt requested), air courier or facsimile transmission, addressed or
transmitted to such other Party as follows:

If to LBI or LIBERTY:

Liberty Bancshares, Inc.
914 East Wood Street
(P.O. Box 1149)
Paris, Tennessee 38242
Fax: (901) 642-0151
Attn: Larry A. Watson
President and Chairman of the Board

With a copy to: Housley, Goldberg & Kantarian, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Fax: (202) 822-0140
Attn: Leonard S. Volin, Esq.

If to UPC or INTERIM:

Union Planters Corporation
P.O. Box 387 (mailing address)
Memphis, Tennessee 38147

or 7130 Goodlett Farms Parkway (deliveries)
Cordova, Tennessee 38018
Fax: (901) 383-2877
Attn: Jackson W. Moore, President
Gary A. Simanson, Associate General Counsel

AGREEMENT AND PLAN OF REORGANIZATION - Page B-70
<PAGE> 211
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the
date reflected in the proof or evidence of delivery, or if none, on the date
actually received.

10.2 Assignability and Parties in Interest. This
Reorganization Agreement shall not be assignable by any of the Parties hereto;
provided, however, that UPC may assign, set over and transfer all, or any part
of its rights and obligations under this Reorganization Agreement to any one or
more of its present or future wholly-owned nonbanking Subsidiaries. This
Reorganization Agreement shall inure to the benefit of, and be binding only
upon the Parties hereto and their respective successors and permitted assigns
and no other Persons.

10.3 Governing Law. This Reorganization Agreement shall
be governed by, and construed and enforced in accordance with, the internal
laws, and not the laws pertaining to choice or conflicts of laws, of the State
of Tennessee, unless and to the extent that federal law controls. Any dispute
arising between the Parties in connection with the transactions which are the
subject of this Reorganization Agreement shall be heard in a court of competent
jurisdiction located in Tennessee.

10.4 Counterparts. This Reorganization Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the same
instrument.

10.5 Best Efforts. LBI, LIBERTY, UPC and INTERIM each
agrees to use its best efforts to complete the transactions contemplated by
this Reorganization Agreement; provided, however, that the use of best efforts
by UPC shall not obligate UPC to obtain or to provide LBI additional capital in
an amount, to divest any Subsidiary or branch, or to meet any other condition
which may be imposed by any Regulatory Authority as a condition to approval
which UPC shall deem, in good faith, to be unreasonable in the circumstances.

10.6 Publicity. The Parties agree that press releases and
other public announcements to be made by any of them with respect to the
transactions contemplated hereby shall be subject to mutual agreement.
Notwithstanding the foregoing, each of the Parties hereto may respond to
inquiries relating to this Reorganization Agreement and the transactions
contemplated hereby by the press, employees or customers without any notice or
further consent of the other Parties.

10.7 Entire Agreement. This Reorganization Agreement,
together with the Plan of Merger which is Exhibit A

AGREEMENT AND PLAN OF REORGANIZATION - Page B-71
<PAGE> 212
hereto, the Letter Agreement between the Parties dated as of the date hereof,
the Schedules, Annexes, Exhibits and certificates required to be delivered
hereunder and any amendments or addenda hereafter executed and delivered in
accordance with Section 10.9 hereof constitute the entire agreement of the
Parties hereto pertaining to the transaction contemplated hereby and supersede
all prior written and oral (and all contemporaneous oral) agreements and
understandings of the Parties hereto concerning the subject matter hereof. The
Letter Agreement, Schedules, Annexes, Exhibits and certificates attached hereto
or furnished pursuant to this Reorganization Agreement are hereby incorporated
as integral parts of this Reorganization Agreement. Except as provided herein,
by specific language and not by mere implication, this Reorganization Agreement
is not intended to confer upon any other person not a Party to this
Reorganization Agreement any rights or remedies hereunder.

10.8 Severability. If any portion or provision of this
Reorganization Agreement should be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any jurisdiction, such
portion or provision shall be ineffective as to that jurisdiction to the extent
of such invalidity, illegality or unenforceability, without affecting in any
way the validity or enforceability of the remaining portions or provisions
hereof in such jurisdiction or rendering that or any other portions or
provisions of this Reorganization Agreement invalid, illegal or unenforceable
in any other jurisdiction.

10.9 Modifications, Amendments and Waivers. At any time
prior to the Closing or termination of this Reorganization Agreement, the
Parties may, solely by written agreement executed by their duly authorized
officers:

(a) extend the time for the performance of any of
the obligations or other acts of the other Party hereto;

(b) waive any inaccuracies in the representations
and warranties made by the other Party contained in this Reorganization
Agreement or in the Annexes, Schedules or Exhibits hereto or any other document
delivered pursuant to this Reorganization Agreement;

(c) waive compliance with any of the covenants or
agreements of the other Party contained in this Reorganization Agreement; and

(d) amend or add to any provision of this
Reorganization Agreement or the Plan of Merger; provided, however, that no
provision of this Reorganization Agreement may be amended or added to except by
an agreement in writing signed

AGREEMENT AND PLAN OF REORGANIZATION - Page B-72
<PAGE> 213
by the Parties hereto or their respective successors in interest and expressly
stating that it is an amendment to this Reorganization Agreement.

10.10 Interpretation. The headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Reorganization Agreement.

10.11 Payment of Expenses. Except as set forth herein, UPC
and LBI shall each pay its own fees and expenses (including, without
limitation, legal fees and expenses) incurred by it in connection with the
transactions contemplated hereunder.

10.12 Finders and Brokers. Except as described in Schedule
10.12 hereto, UPC, INTERIM, LBI and LIBERTY represent and warrant to each other
that they have employed no broker or finder in connection with the transactions
described in this Reorganization Agreement under an arrangement pursuant to
which a fee is, or may be due to such broker or finder as a result of the
execution of this Reorganization Agreement or the closing of the transaction
contemplated herein. This section shall survive the termination of this
Reorganization Agreement.

10.13 Equitable Remedies. The Parties hereto agree that,
in the event of a breach of this Reorganization Agreement by LBI or LIBERTY,
UPC and INTERIM will be without an adequate remedy at law by reason of the
unique nature of LBI and LIBERTY. In recognition thereof, in addition to (and
not in lieu of) any remedies at law which may be available to UPC and INTERIM,
UPC and INTERIM shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Reorganization Agreement by LBI or LIBERTY, and no attempt on the part of
UPC or INTERIM to obtain such equitable relief shall be deemed to constitute an
election of remedies by UPC or INTERIM which would preclude UPC or INTERIM from
obtaining any remedies at law to which it would otherwise be entitled. LBI and
LIBERTY covenant that they shall not contend in any such proceeding that UPC or
INTERIM is not entitled to a decree of specific performance by reason of having
an adequate remedy at law.

10.14 Attorneys' Fees. If any Party hereto shall bring an
action at law or in equity to enforce its rights under this Reorganization
Agreement (including an action based upon a misrepresentation or the breach of
any warranty, covenant, agreement or obligation contained herein), the
prevailing Party in such action shall be entitled to recover from the other
Party its reasonable costs and expenses necessarily incurred in

AGREEMENT AND PLAN OF REORGANIZATION - Page B-73
<PAGE> 214
connection with such action (including fees, disbursements and expenses of
attorneys and costs of investigation).

10.15 Survival of Representations and Warranties. All
representations and warranties made by the Parties hereto or in any instrument
or document furnished in connection herewith, shall survive the Closing and any
investigation at any time made by or on behalf of the Parties hereto and shall
expire at the Effective Time of the Merger except as to any matter which is
based upon willful fraud with respect to which the representations and
warranties set forth in this Reorganization Agreement shall expire only upon
expiration of the applicable statutes of limitation. Nothing in this Section
10.15 shall limit LBI's, LIBERTY's, UPC's or INTERIM's rights or remedies for
misrepresentations, breaches of this Reorganization Agreement or any other
improper action or inaction by the other Party hereto prior to the its
termination. All obligations, agreements, covenants and undertakings of the
Parties hereto or to the Letter Agreement to be performed either in whole or in
part after the Effective Time of the Merger shall survive the Closing and shall
not expire at the Effective Time of the Merger.

10.16 No Waiver. No failure, delay or omission of or by
any Party in exercising any right, power or remedy upon any breach or default
of any other Party shall impair any such rights, powers or remedies of the
Party not in breach or default, nor shall it be construed to be a waiver of any
such right, power or remedy, or an acquiescence in any similar breach or
default; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Party of any provisions of this Reorganization Agreement must be in writing and
must be executed by the Parties to this Reorganization Agreement and shall be
effective only to the extent specifically set forth in such writing.

10.17 Remedies Cumulative. All remedies provided in this
Reorganization Agreement, by law or otherwise, shall be cumulative and not
alternative.

AGREEMENT AND PLAN OF REORGANIZATION - Page B-74
<PAGE> 215
IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Reorganization Agreement or has caused this Reorganization
Agreement to be executed and delivered in its name and on its behalf by its
representative thereunto duly authorized, all as of the date first written
above.

LIBERTY BANCSHARES, INC.

By: /s/ Larry A. Watson
-------------------------
Larry A. Watson
Its: President and Chairman
of the Board

ATTEST:

/s/ Thomas D. Enoch
- ------------------------------
Thomas D. Enoch, Secretary

LIBERTY FEDERAL SAVINGS BANK

By: /s/ Larry A. Watson
-------------------------------
Larry A. Watson
Its: President and Chairman
of the Board

ATTEST:

/s/ Thomas D. Enoch
- ------------------------------
Thomas D. Enoch, Secretary

UNION PLANTERS CORPORATION

By: /s/ Jackson W. Moore
-------------------------------
Jackson W. Moore
Its: President
ATTEST:

/s/ J. F. Springfield
- ------------------------------
J. F. Springfield, Secretary

AGREEMENT AND PLAN OF REORGANIZATION - Page B-75
<PAGE> 216

LBI ACQUISITION COMPANY, INC.

By: /s/ Jackson W. Moore
---------------------------
Jackson W. Moore
Its: President

ATTEST:

/s/ J. F. Springfield
- ------------------------------
J. F. Springfield, Secretary

AGREEMENT AND PLAN OF REORGANIZATION - Page B-76
<PAGE> 217
EXHIBIT A

PLAN OF MERGER

SETTING FORTH THE PLAN OF MERGER

LBI ACQUISITION COMPANY, INC.
(A TENNESSEE CORPORATION)

WITH AND INTO

LIBERTY BANCSHARES, INC.
(A TENNESSEE CORPORATION)

THIS PLAN OF MERGER ("Plan of Merger") is made and entered into as of
the 23rd day of November, 1993, by and between LIBERTY BANCSHARES, INC.
("LBI"), a corporation chartered and existing under the laws of the State of
Tennessee which is a registered savings and loan holding company and whose
principal offices are located at 914 East Wood Street (P.O. Box 1149), Paris,
Henry County, Tennessee 38242; UNION PLANTERS CORPORATION ("UPC"), a
corporation organized and existing under the laws of the State of Tennessee
having its principal office at 7130 Goodlett Farms Parkway, Memphis, Shelby
County, Tennessee 38018 and which is registered as a bank holding company under
the Bank Holding Company Act; and LBI ACQUISITION COMPANY, INC. ("INTERIM"), a
corporation chartered and existing under the laws of the State of Tennessee,
whose principal place of business is located at 7130 Goodlett Farms Parkway,
Memphis, Shelby County, Tennessee 38018, and which is a wholly-owned subsidiary
of UPC. All of the authorized, issued and outstanding shares of capital stock
of INTERIM are owned and held of record by UPC.

PREAMBLE

WHEREAS, UPC, INTERIM and LBI have entered into an Agreement and Plan
of Reorganization dated as of the 23rd day of November, 1993 ("Reorganization
Agreement") to which this Plan of Merger is Exhibit A and is incorporated by
reference as a part thereof providing for the merger of INTERIM with and into
LBI (which would be the Surviving Corporation) and the acquisition of all of
the LBI Common Stock outstanding immediately prior to the Effective Time of the
Merger by UPC for the Consideration set forth in the Reorganization Agreement;
and

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-77
<PAGE> 218
WHEREAS, As provided in the Reorganization Agreement, UPC has caused
INTERIM to join in this Plan of Merger by executing and delivering same; and

WHEREAS, The Boards of Directors of UPC, INTERIM and LBI are each of
the opinion that the interests of their respective corporations and their
corporations' respective shareholders would best be served if INTERIM were to
be merged with and into LBI, which would survive the Merger, on the terms and
conditions provided in the Reorganization Agreement and in this Plan of Merger,
and as a result of such Merger becoming effective, the Surviving Corporation
would become a wholly-owned subsidiary of UPC.

NOW, THEREFORE, in consideration of the covenants and agreements of
the Parties contained herein, LBI, UPC, and INTERIM hereby make, adopt and
approve this Plan of Merger in order to set forth the terms and conditions for
the merger of INTERIM with and into LBI (the "Merger").

ARTICLE I.
DEFINITIONS

1.1 As used in this Plan of Merger and in any amendments hereto,
all capitalized terms herein shall have the meanings assigned to such terms in
the Reorganization Agreement unless otherwise defined herein.

ARTICLE 2
CAPITALIZATION

2.1 LBI ACQUISITION COMPANY, INC.. The authorized capital stock
of INTERIM consists of 1,000 shares of common stock having a par value of $1.00
per share (the "INTERIM Common Stock") and no shares of preferred stock. As of
the date of this Plan of Merger, 1,000 shares of INTERIM Common Stock are
issued and outstanding, and no shares of INTERIM Common Stock are held by it as
treasury stock. All such issued and outstanding shares of INTERIM Common Stock
are owned beneficially and of record by UPC.

2.2 UNION PLANTERS CORPORATION. The authorized capital stock of
UPC consists of 10,000,000 shares of preferred stock having no par value (the
"UPC Preferred Stock"), and 50,000,000 shares of common stock having a par
value of $5.00 per share (the "UPC Common Stock"). As of December 31, 1992,
UPC had issued and outstanding: 44,000 shares of $8.00 Nonredeemable,
Cumulative, Convertible Preferred Stock, Series B; 690,000 shares of 10-3/8%

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-78
<PAGE> 219
Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C; 253,655
shares of 9.5% Redeemable, Cumulative, Convertible Preferred Stock, Series D;
and 2,200,000 shares of 8% Cumulative, Convertible Preferred Stock, Series E.
On January 4, 1993, UPC issued an additional 331,741 shares of its Series E
Preferred Stock in connection with its acquisition of a 44% equity interest in
the Bank of East Tennessee. In addition, 250,000 shares of UPC Series A
Preferred Stock have been reserved for issuance as Series A Preferred Stock
pursuant to the UPC Share Purchase Rights Agreement dated January 19, 1989,
between UPC and Union Planters National Bank as Rights Agent (the "UPC Share
Purchase Rights Agreement"). As of March 31, 1993, 17,589,954 shares of UPC
Common Stock were validly issued and outstanding; approximately 2,500,000
shares of UPC Common Stock were reserved for issuance pursuant to outstanding
stock option plans and certain other employee benefit plans; and approximately
200,000 shares of UPC Common Stock have been reserved for issuance in
connection with UPC's Dividend Reinvestment Plan.

2.3 LIBERTY BANCSHARES, INC. The authorized capital stock of LBI
consists of 4,000,000 shares of common stock having a par value of $1.00 per
share (the "LBI Common Stock") and 1,000,000 shares of preferred stock having a
par value of $1.00 per share (the "LBI Preferred Stock). As of the date
hereof, 634,723 shares of LBI Common Stock were issued and outstanding, no
shares of LBI Common Stock were held by LBI as LBI Treasury Stock and no shares
of LBI Preferred Stock were issued and outstanding.

ARTICLE 3
PLAN OF MERGER

3.1 Constituent Corporations. The name of each constituent
corporation to the Merger is:

LBI ACQUISITION COMPANY, INC.
and
LIBERTY BANCSHARES, INC.

3.2 Surviving Corporation. The Surviving Corporation shall be:

LIBERTY BANCSHARES, INC.

which as of the Effective Time of the Merger shall continue to be named:

LIBERTY BANCSHARES, INC.

3.3 Terms and Conditions of Merger. The Merger shall be
consummated only pursuant to, and in accordance with this Plan of Merger and
the Reorganization Agreement. Conditioned upon the

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-79
<PAGE> 220
satisfaction or lawful waiver (by the Party or Parties entitled to the benefit
thereof) of all conditions precedent to consummation of the Merger, the Merger
will become effective on the date and at the time (the "Effective Time of the
Merger") of the filing of Articles of Merger with the Secretary of State of the
State of Tennessee, or at such later time and/or date as may be agreed upon by
the parties and set forth in the Articles of Merger. At the Effective Time of
the Merger, INTERIM shall be merged with and into LBI which will survive the
Merger, and the separate existence of INTERIM shall cease thereupon, and
without further action, LBI shall thereafter possess all of the assets, rights,
privileges, appointments, powers, licenses, permits and franchises of both LBI
and INTERIM, whether of a public or private nature, and shall be subject to all
of the liabilities, restrictions, disabilities, and duties of both LBI and
INTERIM.

3.4 Charter. Immediately subsequent to the Effective Time of the
Merger, the Charter of LBI, as in effect immediately prior to the Effective
Time of the Merger, shall constitute the Charter of LBI as the Surviving
Corporation, unless and until the same shall be amended as provided by law and
the terms of such Charter.

3.5 Bylaws. Immediately subsequent to the Effective Time of the
Merger, the Bylaws of LBI, as in effect immediately prior to the Effective Time
of the Merger, shall continue to be its Bylaws as the Surviving Corporation,
unless and until amended or repealed as provided by law, its Charter and such
Bylaws.

3.6 Directors and Officers. The directors and officers of LBI in
office immediately prior to the Effective Time of the Merger shall continue to
be the directors and officers of the Surviving Corporation, to hold office as
provided in the Charter and Bylaws of the Surviving Corporation, unless and
until their successors shall have been elected or appointed and shall have
qualified or they shall be removed as provided therein.

3.7 Name. The name of LBI as the Surviving Corporation following
the Merger, shall remain:

LIBERTY BANCSHARES, INC.

ARTICLE 4
DESCRIPTION OF THE TRANSACTION

4.1 Conversion of the INTERIM Common Stock. Immediately
subsequent to the Effective Time of the Merger, each share of $1.00 par value
common stock of INTERIM (the "INTERIM Common

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-80
<PAGE> 221
Stock") issued and outstanding immediately prior to the Effective Time of The
Merger shall, by virtue of the Merger becoming effective and without any
further action on the part of anyone, be converted into and become one share of
the issued and outstanding common stock of the Surviving Corporation.

4.2 Conversion and Cancellation of Shares of LBI. Immediately
subsequent to the Effective Time of the Merger, each share of $1.00 par value
common stock of LBI issued and outstanding immediately prior to the Effective
Time of the Merger shall, by virtue of the Merger becoming effective and
without any further action on the part of anyone, be converted, exchanged and
cancelled as provided in Section 4.4 hereof.

4.3 Exchange of LBI Shares; Exchange Ratio. At the Effective Time
of the Merger, the outstanding shares of LBI Common Stock held by the LBI
Record Holders immediately prior to the Effective Time of the Merger shall,
without any further action on the part of anyone, cease to represent any
interest (equity, shareholder or otherwise) in LBI and shall, except for those
shares of LBI Common Stock held and registered in the name of any LBI Record
Holder who shall have perfected his dissenter's rights and shall have continued
such dissenting status through the Effective Time of the Merger, automatically
be converted exclusively into, and constitute only the right of the LBI Record
Holders to receive in exchange for their shares of LBI Common Stock, whole
shares of UPC Common Stock and a cash payment in settlement of any remaining
fractional share of UPC Common Stock in accordance with the terms and
conditions of this Section 4.3. The shares of UPC Common Stock and the cash
settlement of any remaining fractional share of UPC Common Stock deliverable by
UPC to the LBI Record Holders pursuant to the terms of this Reorganization
Agreement are sometimes collectively referred to herein as the "Consideration."

The number of shares of UPC Common Stock to be exchanged for each share of LBI
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger shall be based on an exchange ratio (the "Exchange Ratio") as
determined and set forth in this Section 4.3. The Exchange Ratio shall be
determined as follows:

(i) In the event the Current Market
Price Per Share of UPC Common Stock should be greater than or equal to
$22.00 per share of UPC Common Stock but less than or equal to $28.00
per share of UPC Common Stock (the "Primary Collar"), the Exchange
Ratio shall be based on (a) a fixed price of $50.00 per share of LBI
Common Stockdivided by (b) the Current Market Price Per Share of UPC
Common Stock;

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-81
<PAGE> 222
(ii) In the event the Current Market
Price Per Share of UPC Common Stock should be greater than $28.00 per
share of UPC Common Stock but less than or equal to $30.00 per share
of UPC Common Stock (the "Upper Secondary Collar"), the Exchange Ratio
shall be fixed at 1.7857 shares of UPC Common Stock for each share of
LBI Common Stock issued and outstanding at the Effective Time of the
Merger;

(iii) In the event the Current Market
Price Per Share of UPC Common Stock should be greater than $30.00 per
share of UPC Common Stock (the "Ceiling"), the Exchange Ratio shall be
based on (a) a fixed price of $53.57 per share of LBI Common Stock
divided by (b) the Current Market Price Per Share of UPC Common
Stock; provided, however, in the event that UPC shall have, between
the date hereof and the Effective Time of the Merger, entered into a
letter of intent, agreement or understanding with a third party for a
change in control of UPC, the Exchange Ratio shall remain fixed at
1.7857 shares of UPC Common Stock (or the equivalent number of shares
of common stock of the entity into which the shares of UPC Common
Stock would be converted into based on the exchange ratio of any such
transaction) for each share of LBI Common Stock validly issued and
outstanding at the Effective Time of the Merger; and

(iv) In the event the Current Market
Price Per Share of UPC Common Stock should be greater than or equal to
$20.00 per share of UPC Common Stock but less than $22.00 per share of
UPC Common Stock (the "Lower Secondary Collar"), the Exchange Ratio
shall be fixed at 2.2727 shares of UPC Common Stock for each share of
LBI Common Stock issued and outstanding at the Effective Time of the
Merger; and

(v) In the event the Current Market
Price Per Share of UPC Common Stock should be less than $20.00 per
share of UPC Common Stock (the "Floor"), the Exchange Ratio shall be
fixed at 2.2727 shares of UPC Common Stock for each share or LBI
Common Stock;provided, however, LBI shall have the unilateral right to
either accept the fixed Exchange Ratio of 2.2727 or to terminate the
transaction and this Reorganization Agreement, unless the Parties
shall mutually agree in writing to increase the Exchange Ratio to a
level mutually satisfactory to the Parties.

The Exchange Ratio as determined in this Section 4.3 shall be based on an
aggregate of no more than 684,955 shares of LBI Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger and, for
purposes of this paragraph, counting all LBI Stock Options issued and
outstanding immediately

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-82
<PAGE> 223
prior to the Effective Time of the Merger as shares of LBI Common Stock) so
converted and exchanged; provided, however, that no fractional shares of UPC
Common Stock shall be issued and if, after aggregating all of the shares of UPC
Common Stock to which a LBI Record Holder is entitled based upon the Exchange
Ratio, there shall be a fractional share of UPC Common Stock remaining, such
fractional share shall be settled by a cash payment therefor pursuant to the
Mechanics of Payment of the Consideration set forth in Section 4.4 hereof,
which shall be calculated based upon the Current Market Price Per Share of one
(1) full share of UPC Common Stock.

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-83
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4.4 Mechanics of Payment of Consideration. As soon as reasonably
practicable after the Effective Time of the Merger and the receipt by UPC of
the Certified LBI Shareholder List from the transfer agent of LBI, but in any
event no later than five (5) business days thereafter, the Corporate Trust
Department of Union Planters National Bank, Memphis, Tennessee (the "Exchange
Agent") shall deliver to each of the LBI Record Holders such materials and
information deemed necessary by the Exchange Agent to advise the LBI Record
Holders of the procedures required for proper surrender of their certificates
evidencing and representing shares of the LBI Common Stock in order for the LBI
Record Holders to receive the Consideration. Such materials shall include,
without limitation, a Letter of Transmittal, an Instruction Sheet, and a return
mailing envelope addressed to the Exchange Agent (collectively the "Shareholder
Materials"). All Shareholder Materials shall be sent by United States mail to
the LBI Record Holders at the addresses set forth on a certified shareholder
list to be delivered by LBI to UPC at the Closing (the "Shareholder List"). As
soon as reasonably practicable thereafter, the LBI Record Holders of all of the
outstanding shares of LBI Common Stock, shall deliver, or cause to be
delivered, to the Exchange Agent, pursuant to the Shareholder Materials, the
certificates formerly evidencing and representing all of the shares of LBI
Common Stock which were validly issued and outstanding immediately prior to the
Effective Time of the Merger, and the Exchange Agent shall take prompt action
to process such certificates formerly evidencing and representing shares of LBI
Common Stock received by it (including the prompt return of any defective
submissions with instructions as to those actions which may be necessary to
remedy any defects). Upon receipt of the proper submission of the
certificate(s) formerly representing and evidencing ownership of the shares of
LBI Common Stock, the Exchange Agent shall, on or prior to the 30th day after
the Effective Time of the Merger, mail to the former LBI Shareholders in
exchange for the certificate(s) surrendered by them, the Consideration to be
paid for each such LBI Shareholder's shares of LBI Common Stock evidenced by
the certificate or certificates which were cancelled and converted exclusively
into the right to receive the Consideration upon the Merger becoming effective.
After the Effective Time of the Merger and until properly surrendered to the
Exchange Agent, each outstanding certificate or certificates which formerly
evidenced and represented the shares of LBI Common Stock of an LBI Record
Holder, subject to the provisions of this Section, shall be deemed for all
corporate purposes to represent and evidence only the right to receive the
Consideration into which such LBI Record Holder's shares of LBI Common Stock
were converted and aggregated at the Effective Time of the Merger. Unless and
until the outstanding certificate or certificates, which immediately prior to
the Effective Time of the Merger evidenced and represented the

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LBI Record Holder's LBI Common Stock shall have been surrendered as provided
above, the Consideration payable to the LBI Record Holder(s) of the cancelled
shares as of any time after the Effective Date shall not be paid to the LBI
Record Holder(s) of such certificate(s) until such certificates shall have been
surrendered in the manner required. Each LBI Shareholder will be responsible
for all federal, state and local taxes which may be incurred by him on account
of his receipt of the Consideration to be paid in the Merger. The LBI Record
Holder(s) of any certificate(s) which shall have been lost or destroyed may
nevertheless, subject to the provisions of this Section, receive the
Consideration to which each such LBI Record Holder is entitled, provided that
each such LBI Record Holder shall deliver to UPC and to the Exchange Agent: (i)
a sworn statement certifying such loss or destruction and specifying the
circumstances thereof and (ii) a lost instrument bond in form satisfactory to
UPC and the Exchange Agent which has been duly executed by a corporate surety
satisfactory to UPC and the Exchange Agent, indemnifying the Surviving
Corporation, UPC, the Exchange Agent (and their respective successors) to their
satisfaction against any loss or expense which any of them may incur as a
result of such lost or destroyed certificates being thereafter presented. Any
costs or expenses which may arise from such replacement procedure, including
the premium on the lost instrument bond, shall be for the account of the LBI
Shareholder.

4.5 Stock Transfer Books. At the Effective Time of the Merger,
the stock transfer books of LBI shall be closed and no transfer of shares of
LBI Common Stock shall be made thereafter.

4.6 Effects of the Merger. As of the Effective Time of the
Merger, the separate existence of INTERIM shall cease, and INTERIM shall be
merged with and into LBI which, as the Surviving Corporation, shall thereupon
and thereafter possess all of the assets, rights, privileges, appointments,
powers, licenses, permits and franchises of the two merged corporations,
whether of a public or a private nature, and shall be subject to all of the
liabilities, restrictions, disabilities and duties of both LBI and INTERIM.

4.7 Transfer of Assets. At the Effective Time of the Merger, all
rights, assets, licenses, permits, franchises and interests of LBI and INTERIM
in and to every type of property, whether real, personal, or mixed, whether
tangible or intangible, and to choices in action shall be deemed to be vested
in LBI as the Surviving Corporation by virtue of the Merger and without any
deed or other instrument or act of transfer whatsoever.

4.8 Assumption of Liabilities. At the Effective Time of the
Merger, the Surviving Corporation shall become and be liable

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-85
<PAGE> 226
for all debts, liabilities, obligations and contracts of INTERIM as well as
those of the Surviving Corporation, whether the same shall be matured or
unmatured; whether accrued, absolute, contingent or otherwise; and whether or
not reflected or reserved against in the balance sheets, other financial
statements, books of account or records of INTERIM or the Surviving
Corporation.

4.9 Dissenting Shareholders' Rights. Any LBI Record Holder of
shares of LBI Common Stock who shall comply strictly with the provisions of
Sections 48-23-201 et seq. of the Tennessee Code, shall be entitled to dissent
from the Merger and to seek those appraisal remedies afforded by the Tennessee
Code. Such an LBI Shareholder is referred to herein as an "LBI Dissenting
Shareholder." However, UPC and INTERIM shall not be obligated to consummate
the Merger if LBI Record Holders holding or controlling more than seven percent
(7%) of the shares of the LBI Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall have perfected and maintained
in perfected status their Dissenters' Rights in accordance with the Tennessee
Code and the perfected status of said Dissenters' Rights shall have continued
to the time of Closing.

4.10 Approvals of Shareholders of LBI and INTERIM. In order to
become effective, the Merger must be approved by the respective shareholders of
LBI and of INTERIM at meetings to be called for that purpose by their
respective Boards of Directors, or by their unanimous action by written consent
complying fully with the laws of Tennessee.

4.11 LBI Stock Options. At the Effective Time of the Merger, the
LBI Option Plans and any LBI Stock Options issued and outstanding shall be
affected as follows:

(a) Continuation of the LBI Option Plan. LBI's
Option Plans shall continue in effect but no additional options shall be
available for grant thereunder after the Effective Time of the Merger. At the
Effective Time of the Merger, each outstanding option under the Option Plans
shall continue outstanding as an option to purchase, in place of the purchase
of a share of LBI Common Stock, that number of shares (rounded down to the
nearest whole share) of UPC Common Stock that would have been received by the
optionee in connection with the Merger had such option been exercised in full
(without regard to any limitations contained thereon on exercise) for shares of
LBI Common Stock immediately prior to the Effective Time of the Merger upon the
same terms and conditions under the relevant option as were applicable
immediately prior to the Effective Time of the Merger, except for appropriate
pro rata adjustments as to the relevant option price for shares of UPC Common
Stock substituted therefor so that the aggregate option exercise price

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-86
<PAGE> 227
of shares subject to an option immediately following the assumption and
substitution shall be the same as the aggregate option exercise price for such
shares immediately prior to such assumption and substitution. UPC, INTERIM and
LBI agree to take such actions as shall be necessary to give effect to the
foregoing.

(b) Reclassification, etc. In case of any
reclassification, reorganization, recapitalization, stock dividend or
distribution, subdivision, combination or exchange of the outstanding shares of
the UPC Common Stock or in case of any consolidation or merger of UPC with or
into any other corporation, or in the case of any sale or transfer of all or
substantially all of UPC's assets, then the rights of the optionees under the
LBI Option Plans shall be appropriately adjusted so that the optionees will be
in the same position as if their options had been exercised immediately before
such corporate action or transaction. The provisions hereof shall similarly
apply to successive reclassifications, reorganizations, recapitalizations,
stock dividends or distributions, subdivisions, combinations or exchanges,
consolidations, mergers, sales or transfers.

(c) Limited Obligations. Nothing contained in
this Plan of Merger or in the other documentation of the proposed transactions
shall be deemed to have reduced, contracted, enlarged, ratified, affirmed,
undertaken, authorized, approved or otherwise to have affected whatever
contractual rights the holders of LBI Stock Options may have under applicable
documentation other than as expressly stated in this Plan of Merger with
respect to the outstanding LBI Stock Options identified in the Reorganization
Agreement which are outstanding under the LBI Option Plans at the Effective
Time of the Merger.

ARTICLE 5
AMENDMENTS AND WAIVERS

5.1 AMENDMENTS. To the extent permitted by law, this
Plan of Merger may be amended unilaterally by UPC and INTERIM as set forth in
Section 10.9(d) of the Reorganization Agreement; provided, however, that the
provisions of Section 4.4 of this Plan of Merger relating to the manner or
basis upon which shares of LBI Common Stock will be converted into the
exclusive right to receive the Consideration from UPC shall not be amended in
such a manner as to reduce the amount of the Consideration payable to the LBI
Record Holders determined as provided in Section 4.3 of the Reorganization
Agreement nor shall this Plan of Merger be amended to permit UPC to utilize
assets other than its UPC Common Stock or cash to make payment of the
Consideration as provided in

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-87
<PAGE> 228
Section 3.1(e) of the Reorganization Agreement at any time after the
Shareholders' Meeting without the requisite approval (except as provided for in
the Reorganization Agreement) of the LBI Record Holders of the shares of LBI
Common Stock outstanding, and that no amendment to this Plan of Merger shall
modify the requirements of regulatory approval as set forth in Section 8.3(b)
of the Reorganization Agreement.

5.2 AUTHORITY FOR AMENDMENTS AND WAIVERS. Prior to the
Effective Time of the Merger, UPC and INTERIM, acting through their respective
Boards of Directors or chief executive officers or presidents or other
authorized officers, shall have the right to amend this Plan of Merger to
postpone the Effective Time of the Merger to a date and time subsequent to the
time of filing of the Plan of Merger with the Tennessee Secretary of State, to
waive any default in the performance of any term of this Plan of Merger by LBI,
to waive or extend the time for the compliance or fulfillment by LBI of any and
all of its obligations under this Plan of Merger, and to waive any or all of
the conditions precedent to the obligations of UPC and INTERIM under this Plan
of Merger, except any condition that, if not satisfied, would result in the
violation of any law or applicable governmental regulation. Prior to the
Effective Time of the Merger, LBI, acting through its Board of Directors or
chief executive officer or president or other authorized officer, shall have
the right to amend this Plan of Merger to postpone the Effective Time of the
Merger to a date and time subsequent to the time of filing of the Plan of
Merger with the Tennessee Secretary of State, to waive any default in the
performance of any term of this Plan of Merger by UPC or INTERIM, to waive or
extend the time for the compliance or fulfillment by UPC or INTERIM of any and
all of their obligations under this Plan of Merger, and to waive any or all of
the conditions precedent to the obligations of LBI under this Plan of Merger
except any condition that, if not satisfied, would result in the violation of
any law or applicable governmental regulation.

ARTICLE 6
MISCELLANEOUS

6.1 NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, or by registered or certified
mail, postage pre-paid to the persons at the addresses set forth below (or at
such other addresses or facsimile numbers as may hereafter be designated as
provided below), and shall be deemed to have been delivered as of the date
received by the Party to which, or to whom it is addressed:

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-88
<PAGE> 229
If to UPC or INTERIM:

Union Planters Corporation
P.O. Box 387 (mailing)
Memphis, Tennessee 38147

7130 Goodlett Farms Parkway (deliveries)
Cordova, Tennessee 38018
Fax: (901) 383-2877
Attn: Mr. Jackson W. Moore, President
Gary A. Simanson,
Associate General Counsel

If to LBI or LIBERTY: Liberty Bancshares, Inc.
914 East Wood Street
Paris, Tennessee 38242
(P.O. Box 1149)
Fax: (901) 642-0151
Attn: Larry A. Watson,
President and Chairman of the Board

With a copy to: Housley, Goldberg & Kantarian, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Fax: (202) 822-0140
Attn: Leonard S. Volin, Esq.

or at such other address as shall be furnished in writing by any of the Parties
to the others by notice given as provided in this section 6.1.

6.2 GOVERNING LAW. Except to the extent federal law
shall be controlling, this Plan of Merger shall be governed by and construed
and enforced in accordance with the laws of the State of Tennessee
disregarding, however, the Tennessee conflicts of laws rules.

6.3 CAPTIONS. The Captions heading the Sections in this
Plan of Merger are for convenience only and shall not affect the construction
or interpretation of this Plan of Merger.

6.4 COUNTERPARTS. This Plan of Merger may be executed in
two or more counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger
to be duly executed and delivered by its duly authorized officers as of the
date first above written.

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-89
<PAGE> 230
<TABLE>
<S> <C>
ATTEST: UNION PLANTERS CORPORATION

/s/ J. F. Springfield By: /s/ Jackson W. Moore
- ------------------------ -------------------------
J. F. Springfield Jackson W. Moore
Its: Secretary Its: President

ATTEST: LBI ACQUISITION COMPANY, INC.

/s/ J. F. Springfield By: /s/ Jackson W. Moore
- ------------------------ -------------------------
J. F. Springfield Jackson W. Moore
Its: Secretary Its: President

ATTEST: LIBERTY BANCSHARES, INC.

/s/ Thomas D. Enoch By: /s/ Larry A. Watson
- ------------------------ --------------------------
Thomas D. Enoch Larry A. Watson
Its: Secretary Its: President and Chairman
of the Board
</TABLE>

PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION

PAGE B-90
<PAGE> 231
(LOGO)
UNION PLANTERS
CORPORATION

November 23, 1993

Liberty Bancshares, Inc.
Liberty Federal Savings Bank
914 East Wood Street
Paris, Tennessee 38242

Gentlemen:

We have today entered into an Agreement and Plan of Reorganization
(the "Agreement"), between Union Planters Corporation ("UPC"); LBI Acquisition
Company, Inc., a wholly owned acquisition subsidiary of UPC; Liberty
Bancshares, Inc. ("LBI"); and Liberty Federal Savings Bank ("Savings Bank").
This letter is intended to set forth certain additional agreements and
undertakings of each of the above parties and each of such parties agrees that
this letter is an integral part of the Agreement (as referred in Section 10.7
thereof) and is being entered into separately solely as an accommodation to
UPC. All terms used herein without definition shall have the same meaning as
ascribed in the Agreement.

Accordingly, in consideration of the parties having entered into the
Agreement and for other good and valuable considerations the receipt and
efficiency of which are hereby acknowledged it is hereby further agreed that:

1. Following the Effective Time of the Merger, and for at least
three years thereafter, the Savings Bank shall be operated and maintained as a
separate subsidiary financial institution and will not be combined (whether
directly or indirectly through merger, consolidation, purchase of assets or
otherwise) into any other financial institution and all offices of the Savings
Bank will continue as offices of the Savings Bank following the Effective Time
of the Merger.

2. The Savings Bank's Board of Directors following the Effective
Time of the Merger shall consist of those persons serving as directors
immediately prior to such effective time and each such person shall continue to
serve as a director for the remainder of the term for which he was elected in
accordance with law and the Savings Bank's Charter and Bylaws. Thereafter, UPC
agrees that each such person shall be reelected director for at least one (1)
additional 3 year term regardless of any otherwise applicable age-related
requirement; provided, however, each director shall be eligible for reelection
only if (i) he continues to qualify to serve as a director, (ii) he is not
permanently incapacitated and unable to serve as a director, (iii) he continues
to adequately perform his services as a director and (iv) UPC has not
determined

Exhibit B to Agreement and Plan of Reorganization (Appendix B)
P.O. BOX 387 - MEMPHIS, TENNESSEE 38147

B-91
<PAGE> 232
Liberty Bancshares, Inc.
Liberty Federal Savings Bank
November 23, 1993
Page 2

that the Savings Bank has failed to meet the general performance standards of
other UPC banking subsidiaries. The fees paid to the directors of the Savings
Bank following the Effective Time of the Merger shall be at least the same
amount paid to the directors immediately prior to such time and all of the
Savings Bank's directors shall be eligible to receive such fees other than
persons who serve in day to day management positions with the Savings Bank.

3. Following the Effective Time of the Merger, while no
contractual right of employment shall be deemed created hereunder (except as
provided below for Messrs. Watson, Enoch and Nelson), the officers and
employees of the Savings Bank shall continue their current employment positions
and titles with the Savings Bank (subject to the normal and usual Savings Bank
employment policies and management practices and the safe and sound operation
of the Savings Bank) and, except as provided below, receive compensation at
least the same level as paid immediately prior to the Effective Time of the
Merger. As of the Effective Time of the Merger, the existing employment
agreements between the Savings Bank and Larry A. Watson, Thomas D. Enoch and
Daniel B. Nelson shall continue in place except that the term of each shall be
amended to be three years from the Effective Time of the Merger and the salary
for each shall be such person's then 1994 base salary plus, for Messrs. Watson
and Enoch, $1,000 per month (in lieu of Board fees). Mr. Watson shall
participate in UPC's cash bonus plan and he, together with another person
selected by LBI, shall also participate in UPC's stock option plan (Mr. Watson
to be eligible to receive between 1,500 - 3,000 options to acquire UPC common
stock annually and the other person selected to be eligible to receive between
500 - 1,000 such options annually).

4. Long term medical and health insurance shall be provided to
all of LBI's and the Savings Bank's employees through the health insurance plan
provided by UPC to its employees and those of its subsidiaries and any
pre-existing medical condition of an LBI or Savings Bank employee insured under
the LBI or Savings Bank plan as of the Effective Time of the Merger shall
continue to be insured under UPC's plan.

5. (a) From and after the Effective Time of the Merger, UPC
(including its successors) shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time of the Merger, an officer, director or
employee of LBI or the Savings Bank (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including attorney's fees),
liabilities or judgments or amounts that are paid in settlement of or in
connection with any claim, action, suit, proceeding or investigation (each a
"Claim") in which an Indemnified Party is, or

Exhibit B to Agreement and Plan of Reorganization (Appendix B)

B-92
<PAGE> 233
Liberty Bancshares, Inc.
Liberty Federal Savings Bank
November 23, 1993
Page 3

is threatened to be made, a party or a witness based in whole of in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of LBI or the Savings Bank or any LBI subsidiary
if such Claim pertains to any matter or fact arising, existing or occurring
prior to the Effective Time of the Merger (including, without limitation, the
Merger and other transactions contemplated by the Agreement), regardless of
whether such Claim is asserted or claimed prior to, or at or after, the
Effective Time of the Merger (the "Indemnified Liabilities") to the full extent
permitted under applicable state or federal law in effect as of the date hereof
or as amended applicable to a time prior to the Effective Time of the Merger
and under LBI's Certificate of Incorporation and Bylaws and the Savings Bank's
Federal Stock Charter and Bylaws (and UPC shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by applicable state or federal law in effect as of
the date hereof or as amended applicable to a time prior to the Effective Time
of the Merger upon receipt of any undertaking required by applicable law). Any
Indemnified Party wishing to claim indemnification hereunder upon learning of
any Claim shall notify UPC (but the failure to notify UPC shall not relieve UPC
from any liability which they may have hereunder except to the extent such
failure prejudices UPC) and shall deliver to UPC the undertaking, if any,
required by applicable law. The obligations of UPC hereunder shall continue in
full force and effect, without any amendment thereto, for a period of not less
than six years from the Effective Time of the Merger; provided, however, that
all rights to indemnification in respect of any Claim asserted or made within
such period shall continue until the final disposition of such Claim.

(b) From and after the Effective Time of the Merger, the
directors, officers and employees of LBI or the Savings Bank who become
directors, officers or employees of UPC or any of its subsidiaries, (i) except
for the indemnification rights set forth in paragraph (a) hereunder, shall have
indemnification rights having prospective application only and (ii) shall be
covered on a prospective basis by UPC's directors and officers liability
insurance policy on a basis at least equal to the coverage provided to persons
in similar positions at UPC and its subsidiaries. The prospective
indemnification rights shall consist of such rights to which directors,
officers and employees of UPC or its subsidiaries are entitled under the
provisions of the Articles of Incorporation, or similar governing documents, of
UPC and its subsidiaries, as in effect from time to time after the Effective
Time of the Merger, as applicable, and provisions of applicable state and
federal law as in effect from time to time after the Effective Time of the
Merger.

Exhibit B to Agreement and Plan of Reorganization (Appendix B)

B-93
<PAGE> 234
Liberty Bancshares, Inc.
Liberty Federal Savings Bank
November 23, 1993
Page 4

(c) The obligations of UPC provided under paragraphs (a) and (b)
hereunder are intended to benefit, and be enforceable against UPC directly by,
the Indemnified Parties, and shall be binding on all respective successors and
permitted assigns of UPC.

6. UPC and LBI and the Savings Bank acknowledge that the Savings
Bank ESOP has (or will have) unallocated assets with a fair market value
exceeding the outstanding balance of the loan secured by those assets. Without
changing the existing vesting provisions in the ESOP, the parties intend that
current and future employees of the Savings Bank will benefit from this
investment. Therefore, after the Effective Time of the Merger the ESOP will be
continued for the sole benefit of current and future employees of the Savings
Bank eligible to participate therein in accordance with the ESOP's terms,
provided that a separate plan is legally permissible under the Internal Revenue
Code and the rules promulgated thereunder without causing disqualification of
that Plan or any other plan maintained by UPC or its affiliates, when such
plans are operated in accordance with their terms. If it becomes legally
impermissible under the Internal Revenue Code and the rules promulgated
thereunder to maintain the Savings Bank ESOP as a separate plan, the ESOP shall
be merged with the UPC Employee Stock Ownership Plan, and thereafter, to the
extent legally permissible under Internal Revenue Code qualification
requirements, the assets now held by the ESOP shall continue to be allocated
only to current and future Savings Bank employees.

Upon execution of this letter (or counterparts thereof) by the parties
hereto, this letter shall constitute an agreement between the parties to be
enforceable following the Effective Time of the Merger by either party hereto
or any other party who is intended to be benefitted hereunder.

Union Planters Corporation

By: /s/ Jackson W Moore
--------------------------
President

Liberty Bancshares, Inc.

By: /s/ Larry A. Watson
--------------------------
Chairman & President

Liberty Federal Savings Bank

By: /s/ Larry A. Watson
--------------------------
Chairman/President

Exhibit B to Agreement and Plan of Reorganization (Appendix B)

B-94
<PAGE> 235

APPENDIX C

FAIRNESS OPINION OF TRIDENT FINANCIAL CORPORATION
<PAGE> 236
(TRIDENT FINANCIAL LETTERHEAD)

April 27, 1994

Board of Directors
Liberty Bancshares, Inc.
914 East Wood Street
Paris, Tennessee 38242

Gentlemen:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of common stock, $1.00 par value (the "Liberty
Common Stock"), of Liberty Bancshares, Inc. ("Liberty") of the consideration to
be received by such stockholders in the proposed merger (the "Proposed Merger")
of Liberty with a newly-formed subsidiary of Union Planters Corporation
("UPC"), pursuant to the proposed Agreement and Plan of Reorganization (the
"Agreement") executed November 23, 1993.

As more specifically set forth in the Agreement, and subject to a number of
conditions in the Proposed Merger, each share of Liberty Common Stock that is
issued and outstanding immediately prior to the time the Proposed Merger
becomes effective, will be exchanged into $50.00 of UPC Common Stock, as long
as UPC's Current Market Price (as defined in the Agreement) is within a range
of $22.00 and $28.00 (the "Consideration"). In the event that UPC's Current
Market Price exceeds $28.00, but is less than or equal to $30.00, then holders
of Liberty Common Stock will receive 1.7857 shares of UPC Common Stock per
share of Liberty Common Stock. If UPC's Current Market Price exceeds $30.00,
then Liberty stockholders will receive $53.57 of UPC Common Stock for each
share of Liberty Common Stock. If UPC's Current Market Price is less than
$22.00, but greater than or equal to $20.00, then Liberty stockholders will
receive 2.2727 shares of UPC Common Stock for each share of Liberty Common
Stock. If UPC's Current Market Price is less than $20.00, then Liberty has the
unilateral right to terminate the Proposed Merger or accept 2.2727 shares of
UPC Common Stock for each share of Liberty Common Stock. If UPC enters into a
letter of intent, agreement or understanding with a third party for a change of
control of UPC prior to the effective date of the Proposed Merger, then Liberty
stockholders will receive 1.7857 shares of UPC Common Stock for each share of
Liberty Common Stock. Options for the purchase of shares of Liberty Common
Stock will be converted into options to purchase shares of UPC Common Stock
using the same exchange ratio as is applicable to the shares of Liberty Common
Stock.

Trident Financial Corporation ("Trident") is a financial consulting and
investment banking firm experienced in the valuation of business enterprises
with considerable experience in the valuation of thrift institutions. Since
1975, Trident has valued in excess of 300 thrift institutions in connection
with mutual-to-stock conversions, mergers and acquisitions, as well as other
transactions. Trident is not affiliated with Liberty or UPC.

In connection with rendering our opinion, we have reviewed and analyzed, among
other things, the following (i) the Proxy Statement/Prospectus, dated as of the
date hereof, that describes the Proposed Merger; (ii) the Agreement; (iii)
certain publicly available information concerning Liberty, including the
audited financial statements of Liberty for each of the years in the five year
period ended December 31, 1993; (iv) certain publicly available information
concerning UPC, including the audited financial statements of UPC for each of
the years in the five year period ended December 31, 1993; (v) certain other
internal information, primarily financial in nature, concerning the business
and operations of Liberty and UPC furnished to us by Liberty and UPC for
purposes of our analysis; (vi) certain information supplied by Liberty
concerning the limited trading of, and the limited trading market for, Liberty
Common Stock; (vii) information with respect to the trading market for UPC
Common Stock; (viii) certain publicly available information with respect to
other companies that we believe to be comparable to Liberty and the trading
markets for such other companies' securities; and (ix) certain publicly
available information concerning the nature and terms of other transactions
that we consider relevant to our inquiry. We have also met with certain
officers and employees of Liberty and UPC to discuss the foregoing as well as
other matters
<PAGE> 237
Board of Directors
November 22, 1993
Page 2

we believe relevant to our inquiry.

In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us by Liberty and UPC, or that is publicly available,
and have not attempted independently to verify any such information. We have
not conducted a physical inspection of the properties or facilities of Liberty
or UPC, nor have we made or obtained any independent evaluations or appraisals
of any of such properties or facilities. We did not specifically evaluate
UPC's loan portfolio or the adequacy of UPC's reserve for possible loan losses.

In conducting our analysis and arriving at our opinion as expressed
herein, we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial condition and results of operations of
Liberty and UPC, including interest income, interest expense, net interest
income, net interest margin, interest sensitivity, non-interest income and
expense, earnings, dividends, book value, return on assets, return on equity,
capitalization, the amount and type of non-performing assets and the reserve
for possible loan losses; (ii) the business prospects of Liberty and UPC; (iii)
the economy in Liberty's and UPC's market areas; (iv) the historical and
current market for Liberty Common Stock and UPC common stock and for the equity
securities of certain other companies that we believe to be comparable to
Liberty and UPC; and (v) the nature and terms of certain other acquisition
transactions that we believe to be relevant. We have also taken into account
our assessment of general economic, market, financial and regulatory conditions
and trends, as well as our knowledge of the thrift industry, our experience in
connection with similar transactions, and our knowledge of securities valuation
generally. Our opinion necessarily is based upon conditions as they exist and
can be evaluated on the date hereof. Our opinion is, in any event, limited to
the fairness, from a financial point of view, of the Consideration to be
received by the holders of Liberty Common Stock in the Proposed Merger and does
not address Liberty's underlying business decision to effect the Proposed
Merger.

Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by the holders of Liberty Common Stock in the
Proposed Merger is fair, as of the date hereof, from a financial point of view,
to such holders.

This opinion is being delivered to the Board of Directors of Liberty for
its exclusive use and is not to be reproduced, disseminated or delivered to any
third party without the express written consent of Trident Financial
Corporation, except as required by law.

Very truly yours,

TRIDENT FINANCIAL CORPORATION
<PAGE> 238

APPENDIX D

CHAPTER 23 OF TITLE 48 OF THE TENNESSEE CODE
<PAGE> 239
CHAPTER 23

BUSINESS CORPORATIONS--DISSENTERS' RIGHTS

<TABLE>
<S> <C>
SECTION. SECTION.

PART 1--RIGHT TO DISSENT AND OBTAIN 48-23-203. Dissenters' notice.
PAYMENT FOR SHARES 48-23-204. Duty to demand payment.
48-23-101. Definitions. 48-23-205. Share restrictions.
48-23-102. Right to dissent. 48-23-206. Payment.
48-23-103. Dissent by nominees and 48-23-207. Failure to take action.
beneficial owners. 48-23-208. After-acquired shares.
48-23-209. Procedure if shareholder
dissatisfied with payment
or offer.

PART 2--PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-201. Notice of dissenters' 48-23-301. Court action.
rights. 48-23-302. Court costs and counsel fees.
48-23-202. Notice of intent to demand
payment.
</TABLE>

PART 1--RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

48-23-101. DEFINITIONS--(1) "Beneficial shareholder" means the person who is
a beneficial owner of shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under sec. 48-23-102 and who exercises that right when and in the
manner required by secs. 48-23-201--48-23-209;
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate action
that give rise to the shareholder's right to dissent until the date of payment,
at the average auction rate paid on United States treasury bills with a
maturity of six (6) months (or the closest maturity thereto) as of the auction
date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation; and
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
(Acts 1986, ch. 887, sec. 13.01)

48-23-102. RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:

(1) Consummation of a plan of merger to which the corporation is a party:

Appendix D - Page 1
<PAGE> 240
(A) If shareholder approval is required for the merger by sec.
48-21-103 or the charter and the shareholder is entitled to vote on the merger;
or
(B) If the corporation is a subsidiary that is merged with its parent
under sec. 48-21-104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;
(4) An amendment of the charter that materially and adversely effects rights
in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share, if the fractional share is to be acquired for cash under
sec. 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares under
this chapter may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the
effectuation of the transaction which would otherwise give rise to dissenters'
rights, is listed on an exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended, or is a "national market system security," as
defined in rules promulgated pursuant to the Securities Exchange Act of 1934,
as amended (Acts 1986, ch. 887, sec. 13.02)

48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection

Appendix D - Page 2
<PAGE> 241
are determined as if the shares as to which he dissents and his other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of
any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's written consent to
the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(2) He does so with respect to all shares of the same class of which he is
the beneficial shareholder or over which he has power to direct the vote.
(Acts 1986, ch. 887, sec. 13.03)

PART 2--PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

48-23-201. NOTICE OF DISSENTER'S RIGHTS.--(a) If proposed corporate action
creating dissenters' rights under sec. 48-23-102 is submitted to a vote at
a shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under sec. 48-23-102
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in sec. 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will not
invalidate the corporate action. (Acts 1986, ch. 887, sec. 13.20.)

48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT.--(a) If proposed corporate
action creating dissenters' rights under sec. 48-23-102 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights:
(1) Must deliver to the corporation, before the vote is taken, written notice
of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by sec. 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this chapter. (Acts 1986, ch. 887,
sec. 13.21.)

48-23-203. DISSENTERS' NOTICE.--(a) If proposed corporate action creating
dissenters' rights under sec. 48-23-102 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of sec. 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after the
corporate action was authorized by the shareholders or effectuated, whichever
is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'

Appendix D - Page 3
<PAGE> 242
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than one (1) nor more than two (2) months after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to Sec.
48-23-201 (Acts 1986, ch. 887 sec. 13.22.)

48-23-204. DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in sec. 48-23-203 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to sec. 48-23-203 (b)(3), and
deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the effectuation of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto. (Acts 1986, ch. 887, sec. 13.23.)

48-23-205. SHARE RESTRICTIONS.--(a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effectuated or the restrictions
released under sec. 48-23- 207.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the effectuation of the proposed corporate action.
(Acts 1986, ch. 887, sec. 13.24.)

48-23-206. PAYMENT.--(a) Except as provided in sec. 48-23-208, as soon
as the proposed corporate action is effectuated, or upon receipt of a payment
demand, whichever is later, the corporation shall pay each dissenter who
complied with sec. 48-23-204 the amount the corporation estimates to be the
fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under sec.
48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent a copy
of this chapter to the shareholder pursuant to sec. 48-23-201 or sec.
48-23-203. (Acts 1986, ch. 887, sec. 13.25.)

Appendix D - Page 4
<PAGE> 243
48-23-207. FAILURE TO TAKE ACTION.--(a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under sec. 48-23-203 and repeat the payment demand
procedure. (Acts 1986, ch. 887, sec. 13.26.)

48-23-208. AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by sec. 48-23-206 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after effectuating the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under sec. 48-23-209.
(Acts 1986, ch. 887, sec. 13.27.)

48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--(a)
A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate (less any payment under sec. 48-23-206), or reject the
corporation's offer under sec. 48-23-208 and demand payment of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under sec. 48-23-206 or
offered under sec. 48-23-208 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under sec. 48-23-206 within two
(2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within two (2) months after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection (a)
within one (1) month after the corporation made or offered payment for his
shares. (Acts 1986, ch. 887, sec. 13.28.)

PART 3--JUDICIAL APPRAISAL OF SHARES

48-23-301. COURT ACTION.--(a) If a demand for payment under sec. 48-23-209
remains unsettled, the corporation shall commence a proceeding within two (2)
months after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the two-month period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.

Appendix D - Page 5
<PAGE> 244
(b) The corporation shall commence the proceeding in a court of record having
equity jurisdiction in the county where the corporation's principal office (or,
if none in this state, its registered office) is located. If the corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of his
shares, plus accrued interest, exceeds the amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under sec. 48-23-208.
(Acts 1986, ch. 887, sec. 13.03.)

48-23-302. COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under sec. 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under sec. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the courts find equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of secs. 48-23-201--48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those service should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited. (Acts 1986, ch. 887, 13.31.)

Appendix D - Page 6
<PAGE> 245

APPENDIX E

ARTICLE XIV OF CHARTER OF LIBERTY BANCSHARES, INC.

<PAGE> 246
ARTICLE XIV TO CHARTER OF LIBERTY BANCSHARES, INC.
(PROPOSED AMENDMENTS ARE IN ITALICS)

ARTICLE XIV

ACQUISITION OF CAPITAL STOCK

(A) Five Year Prohibition. For a period of five years from the
effective date of the completion of the conversion of Liberty Federal Savings
Bank from mutual to stock form (which entity shall become a wholly owned
subsidiary of the Corporation upon such conversion), no person shall directly
or indirectly offer to acquire or acquire the beneficial ownership of more than
10% of any class of equity security of the Corporation. In addition, for a
period of five years from the completion of the conversion of Liberty Federal
Savings Bank from mutual to stock form, and notwithstanding any provision to
the contrary in this Charter or the bylaws of the Corporation, where any person
directly or indirectly acquires beneficial ownership of more than 10% of any
class of equity security of the Corporation in violation of this Article XIV,
the securities beneficially owned in excess of 10% shall not be counted as
shares entitled to vote, shall not be voted by any person or counted as voting
shares in connection with any matter submitted to the shareholders for a vote,
and shall not be counted as outstanding for purposes of determining a quorum or
the affirmative vote necessary to approve any matter submitted to the
shareholders for a vote.

(B) Prohibition After Five Years. If, at any time after five years from
the effective date of the completion of the conversion of Liberty Federal
Savings Bank from mutual to stock form, any person shall acquire the beneficial
ownership of more than 10% of any class of equity security of the Corporation
without the prior approval by a two-thirds vote of the Continuing Directors, as
defined in Article XV of this Charter, then the record holders of voting stock
of the Corporation beneficially owned by such acquiring person shall have only
the voting rights set forth in this Section (B) on any matter requiring their
vote or consent. With respect to each vote in excess of 10% of the voting
power of the outstanding shares of voting stock of the Corporation which such
record holders would otherwise be entitled to cast without giving effect to
this Section (B), such record holders in the aggregate shall be entitled to
cast only one-hundredth (1/100) of a vote, and the aggregate voting power of
such record holders, so limited for all shares of voting stock of the
Corporation beneficially owned by such acquiring person, shall be allocated
proportionately among such record holders. For each such record holder, this
allocation shall be accomplished by multiplying the aggregate voting power, as
so limited, of the outstanding shares of voting stock of the Corporation
beneficially owned by such acquiring person by a fraction whose numerator is
the number of votes represented by the shares of voting stock of the
Corporation owned of record by such record holder (and which are beneficially
owned by such acquiring person) and whose denominator is the total number of
votes represented by the shares of voting stock of the Corporation that are
beneficially owned by such acquiring person. A person who is a record owner of
shares of voting stock of the Corporation that are beneficially owned
simultaneously by more than one person shall have, with respect to such shares,
the right to cast the least number of votes that such person would be entitled
to cast under this Section (B) by virtue of such shares being so beneficially
owned by any of such acquiring persons.

(C) Definitions. The term "person" means an individual, a group acting
in concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate or any other group acting in concert formed for the purpose of
acquiring, holding or disposing of securities of the Corporation. The term
"acquire" includes every type of acquisition, whether effected by purchase,
exchange, operation of law or otherwise. The term "offer" includes every offer
to buy or otherwise acquire, solicitation of an offer to sell, tender offer for
or request for invitation for tenders of, a security or interest in a security
for value. The term "acting in concert" includes (1) knowing participation in
a joint activity or conscious parallel action towards a common goal whether or
not pursuant to an express agreement and (2) a combination or pooling of voting
or other interests in the Corporation's outstanding shares for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. The term "beneficial ownership"
shall have the meaning defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934.

(D) Exclusions. The restrictions contained in this Article XIV shall
not apply to (1) any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Corporation or a
subsidiary thereof; provided, however, that upon completion of the sale or
resale of such securities, no such underwriter or member of such selling group
is a beneficial owner of more than 10% of any class of equity security of the
Corporation; (2) any proxy

E - 1
<PAGE> 247
granted to one or more Continuing Directors, as defined in Article XV of this
Charter, by a shareholder of the Corporation; (3) any employee benefit plans of
the Corporation or a subsidiary thereof; or (4) any transaction approved in
advance by a majority of the Continuing Directors, as defined in Article XV of
this Charter. In addition, the Continuing Directors, as defined in Article XV
of this Charter, the officers and employees of the Corporation and its
subsidiaries, the directors of subsidiaries of the Corporation, the employee
benefit plans of the Corporation and its subsidiaries, entities organized or
established by the Corporation or any subsidiary thereof pursuant to the terms
of such plans and trustees and fiduciaries with respect to such plans acting in
such capacity shall not be deemed to be a group with respect to their
beneficial ownership of voting stock of the Corporation solely by virtue of
their being directors, officers or employees of the Corporation or a subsidiary
thereof or by virtue of the Continuing Directors, as defined in Article XV of
this Charter, the officers and employees of the Corporation and its
subsidiaries and the directors of subsidiaries of the Corporation being
fiduciaries or beneficiaries of an employee benefit plan of the Corporation or
a subsidiary of the Corporation. Notwithstanding the foregoing, no director,
officer or employee of the Corporation or any of its subsidiaries, or group of
any of them, shall be exempt from the provisions of this Article XIV should any
such person or group become a beneficial owner of more than 10% of any class of
equity security of the Corporation.

(E) Determinations. A majority of the Continuing Directors, as defined
in Article XV of this Charter, shall have the power to construe and apply the
provisions of this Article XIV and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (1) the number of shares beneficially owned by any person; (2)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in the definition of beneficial ownership; (3) the
application of any other definition or operative provision of this Article XIV
to the given facts; or (4) any other matter relating to the applicability or
effect of this Article XIV. Any constructions, applications or determinations
made by the Continuing Directors, as defined in Article XV of this Charter,
pursuant to this Article XIV in good faith and on the basis of such information
and assistance as was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its shareholders.

E - 2
<PAGE> 248

REVOCABLE PROXY
LIBERTY BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 1994

The undersigned hereby appoints William C. Greer, Robert F. Swayne and Larry
A. Watson, or any of them, with full power of substitution, to act as proxies
for the undersigned, to vote all shares of Common Stock of Liberty Bancshares,
Inc. ("LBI") which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the Best Western Motel Lafayette Room, 1297 East Wood
Street, Paris, Tennessee, on Monday, June 13, 1994 at 10:00 a.m., and at any and
all adjournments thereof, as follows:

1. The election as directors of all nominees listed below (except as marked to
the contrary below). FOR / / VOTE WITHHELD / /

James L. Adams, Robert L. Kenworthy, David B. Travis

INSTRUCTION: To withhold your vote for any Individual nominee(s), insert the
name of the nominee(s) on the line provided below.

- --------------------------------------------------------------------------------
2. The ratification of the appointment of KPMG Peat Marwick as independent
auditors of LBI for the year ending December 31, 1994.

FOR / / AGAINST / / ABSTAIN / /

3. The approval of the Agreement and Plan of Reorganization dated as of November
23, 1993 between Union Planters Corporation ("UPC"), LBI Acquisition Company,
Inc., LBI and Liberty Federal Savings Bank, including the Plan of Merger and
related letter agreement annexed thereto as Exhibits A and B, respectively
(collectively, the "Reorganization Agreement"), and the acquisition by UPC of
sole ownership and control of LBI pursuant thereto (the "Reorganization").

FOR / / AGAINST / / ABSTAIN / /

4. The approval of the amendment of the corporate charter of LBI to exclude any
transaction, including the Reorganization, approved in advance by a majority
of LBI's Continuing Directors, as defined therein, from LBI's charter
prohibition against acquisitions of more than ten percent of any class of
equity security of LBI.

FOR / / AGAINST / / ABSTAIN / /

5. The approval of the adjournment of the Annual Meeting in the event there are
not sufficient votes cast in person or by proxy at the Annual Meeting to
approve the Reorganization Agreement, the Reorganization and the charter
amendment.

FOR / / AGAINST / / ABSTAIN / /

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSITIONS.

THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE
PROXIES NAMED IN THIS PROXY AS DETERMINED BY A MAJORITY 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 1994 ANNUAL MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
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 LBI at the
Annual Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from LBI prior to the execution of this
proxy of notice of the Annual Meeting and the Proxy Statement/Prospectus dated
May 5, 1994.

Dated: , 1994
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Signature of Stockholder

Please sign exactly as your
name appears hereon. When
signing as attorney, executor,
administrator, trustee or
guardian, please give your
full title. If shares are held
jointly, each holder should
sign.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ACCOMPANYING
POSTAGE-PREPAID ENVELOPE