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Rule 424(b)(2)
SEC File #33-49151
1st FRANKLIN FINANCIAL CORPORATION
INVESTMENTS
WEEK OF July 28, 1994 THRU August 3, 1994
VARIABLE RATE
SUBORDINATED DEBENTURES
=======================================================
Effective Interest Interest Mininum
Yield (a) Rate (b) Adjustment (c) Amount
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5.91 5.75 1 Month $500
5.91 5.75 3 Months $500
6.18 6.00 6 Months $500
6.45 6.25 1 Year $500
6.72 6.50 2 Years $500
6.72 6.50 4 Years $500
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(a) Compounded daily based on a 365 day year.
(b) Interest is earned daily and will be payable at
anytime at the holder's request.
(c) At the end of this period, interest rate will be
adjusted to a new rate or the holder may redeem
without penalty. Redemptions at any other time
subject to interest penalty.
For a Prospectus, write or call 1st FRANKLIN
FINANCIAL, P.O. Box 880, Toccoa, Georgia 30577, (706)
886-7571 or 1-800-282-0709. Offer is made only by the
Prospectus.
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PROSPECTUS SUPPLEMENT dated as of May 31, 1994
(1) INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE on page 2 of the
Prospectus is hereby changed to read in its entirety, as changed, as follows:
"The Company incorporates herein by reference the following documents:
(a) The Company's Annual Report on Form 10-K dated for the year ended
December 31, 1993 and filed pursuant to Section 15(d) of the Exchange
Act with the Commission.
(b) From the Company's annual report to security holders dated for the
year ended December 31, 1993 which is delivered with this Prospectus,
the following:
(i) Description of business furnished in accordance with the
provisions of Rule 14a-3(b)(6) under the Exhange Act;
(ii) Financial statements and information furnished in
accordance with the provisions of Rule 14a-3(b)(1);
(iii) Selected financial data furnished as required by Item 301
of Regulation S-K;
(iv) Supplementary financial data furnished as required by Item
302 of Regulation S-K; and
(v) Management's Discussion and Analysis of Financial Condition
and Results of Operations furnished as required by Item 303
of Regulation S-K."
(c) The Company's Quarterly Report on Form 10-Q dated as of March 31,
1994 filed pursuant to Section 15(d) of the Exchange Act with the
Commission.
Any statement in the documents incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a
statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as modified
or superseded, to constitute a part of this Prospectus or the Registration
Statement of which it is a part.
(2) APPENDIX I on page 11 of the Prospectus is hereby changed to read in
its entirety, as changed, as follows:
"Appendix I to Prospectus
Information as of March 31, 1994
1. Ratio of Earnings to Fixed Charges (page 3):
Mar. 31 December 31
------- ------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
2.99 2.60 2.34 2.09 2.01 2.01
2. Unused borrowings under Credit Agreement (page 5): $15,454,000
3. Amount of Debentures outstanding under Indenture
(page 6): $20,792,780
4. Senior Debt outstanding (page 7): $65,701,060
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A more current Appendix I, if appropriate, will be attached to
the cover page of the Prospectus as a supplement. If attached, that
supplement Appendix I supersedes this information."
(3) "SUMMARY DESCRIPTION OF SECURITIES OFFERED -- Variable Rate Subordinated
Debentures -- Indenture Trustee" on page 5 of the Prospectus is hereby changed
to read in its entirety, as changed, as follows:
"Indenture Trustee Columbus Bank and Trust Company has
been appointed trustee under the
Indenture pursuant to which the
Debentures are issued."
(4) "DESCRIPTION OF VARIABLE RATE SUBORDINATED DEBENTURES -- General" on
page 7 of the Prospectus, the first paragraph is hereby changed to read in
in its entirety, as changed, as follows:
"The Variable Rate Subordinated Debentures are issued under
an indenture (hereinafter called the "Variable Rate Indenture")
dated as of October 31, 1984 between the Company and the First
National Bank of Gainesville as trustee. Effective June 16, 1993,
the First National Bank of Gainesville resigned as Trustee and
Columbus Bank and Trust Company ("CB&T" or the "Trustee") was
duly appointed as successor trustee pursuant to the Variable Rate
Indenture. The following statements with respect to the Debentures
are subject to the detailed provisions of the Variable Rate
Indenture. Whenever any particular article or section of the
Variable Rate Indenture is referred to, the statement made in
connection with such reference is qualified in its entirety by such
reference."
(5) "DESCRIPTION OF VARIABLE RATE SUBORDINATED DEBENTURES - Concerning the
Trustee" on page 10 of the Prospectus is hereby changed to read in its
entirety, as changed, as follows:
"Effective June 16, 1993, the First National Bank of Gainsville
resigned as trustee and CB&T was duly appointed as successor trustee
pursuant to the Variable Rate Indenture. CB&T shall have all the
rights, powers and duties of the Trustee under the Variable Rate
Indenture, and all references to the Trustee in this Prospectus
and the Registration Statement of which it is a part shall be deemed
to refer to CB&T unless the context otherwise requires.
The Company has been informed that the First National Bank of
of Gainesville is ceasing its corporate trust operations, and that
as a result it would no longer have the capability to serve as
Trustee under the Variable Rate Indenture.
CB&T does not have any business relationship with the Company
other than in its capacity as Trustee under the Variable Rate
Indenture."
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(6) The following APPENDIX II is hereby added to page 11 of the Prospectus
immediately following APPENDIX I:
"Appendix II to Prospectus
Legal Proceedings
On May 17, 1994, a complaint was filed in the Circuit Court of Jefferson
County, Alabama (CV-94-03629-W), against thirteen consumer finance and
insurance companies doing business in Alabama, including the Company.
The complaint was subsequently amended to add numerous other consumer
finance companies and insurance companies as defendants. The complaint
alleges that certain lending practices of the defendant consumer finance
companies violate the Alabama Consumer Finance Act and other laws. The
plaintiff borrowers assert that the defendant consumer finance companies
improperly charged fees for non-filing insurance and credit property
insurance, conspired with the defendant insurance companies in
connection therewith, failed to refund unearned premiums with respect
to such insurance, and breached a duty to disclose to the plaintiff
borrowers that refinancing a loan is more expensive than obtaining a
separate loan. The complaint further alleges that such practices were
fraudulent, usurious and unconscionable. The plaintiffs have requested
that the Court certify the action as a national class action. The
plaintiffs have also requested that the Court void all of the loans
made to the plaintiffs by the defendant consumer finance companies,
order refunds of all payments on the loans, assess all penalties and
other damages provided by Alabama law, award compensatory and punitive
damages and provide declaratory and injunctive relief.
On June 6, 1994, a complaint was filed in the U.S. District Court for
the Middle District of Alabama, Southern Division (94-T-699-N), against
eight consumer finance and insurance companies doing business in
Alabama, including the Company. The complaint was subsequently amended
to add numerous other consumer finance companies and insurance companies
as defendants. The complaint alleges that certain lending practices of
the defendants violated the federal Truth-in-Lending Act and the federal
Racketeer Influenced and Corrupt Organizations Act. The plaintiffs
assert that the defendant consumer finance companies improperly excluded
fees for non-filing insurance from the "finance charge" and the
computation of the "annual percentage rate" disclosed in loans to the
plaintiff borrowers, and conspired with the defendant insurance
companies in connection therewith. The plaintiffs have requested that
the Court certify the action as a class action. The plaintiffs have
also requested treble damages, attorneys' fees, litigation expenses and
cost and other relief.
Both of these actions are in their early stages and their outcome
currently is not determinable. Management believes that these actions
are without merit as to the Company and intends to contest these
actions vigorously."
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1st FRANKLIN FINANCIAL CORPORATION
PROSPECTUS dated November 21, 1992.
$20,000,000 VARIABLE RATE SUBORDINATED DEBENTURES
The Variable Rate Subordinated Debentures (the "Debentures") will be issued
in varying minimum purchase amounts established by 1st Franklin Financial
Corporation (the "Company") each Thursday, on a weekly basis. For each
respective purchase amount, the Company will establish an interest rate and
an interest adjustment period ("established features"). The established
features will be available for the period from Thursday through the
following Wednesday and will be applicable to all Debentures sold by the
Company during that period. At the end of each interest adjustment period,
the interest rate will be adjusted to the current rate or the holder may
request redemption. All other provisions will remain unchanged for the
entire term of the Debenture.
The established features will be published in a newspaper of general
circulation and, in addition, may be obtained from the Company in Toccoa,
Georgia. A Rule 424(b)(2) prospectus supplement setting forth the
established features will be filed weekly with the Securities and Exchange
Commission.
The Debentures mature four years from date of issue but may be redeemed by
the holder without penalty at the end of any interest adjustment period.
There is not, nor is there likely to be, a market for these securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT BANK DEPOSITS NOR BANK OBLIGATIONS AND ARE NOT
INSURED BY THE FDIC.
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Underwriting
Price to Discounts and Proceeds to
Public Commissions (a) Company (b)
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Per Debenture ----------------- 100% None 100%
Total------------------------ $20,000,000 None $20,000,000
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(a) None of the securities described above will be underwritten and no
commissions or other remunerations will be paid in connection with their
sale. They will be sold at face value by the Company through its executive
officers.
(b) Before deduction of the Company's expenses, estimated at $29,750.
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AVAILABLE INFORMATION
1st Franklin Financial Corporation is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
St., N.W., Washington, D.C. 20549 and at the Commission's Regional Offices
or the public reference offices thereof located on the 14th Floor, 75 Park
Place, New York, New York 10007 and at Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60601. In addition, copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth St.,N.W., Washington, D.C. 20549 at the rates
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents:
(a) The Company's Annual Report on Form 10-K dated as of
December 31, 1991 and filed pursuant to Section 15(d) of the Exchange Act
with the Commission.
(b) From the Company's annual report to security holders dated as of
December 31, 1991 which is delivered with this Prospectus, the following:
(i) Description of business furnished in accordance with the
provisions of Rule 14a-3(b) (6) under the Exchange Act;
(ii) Financial statements and information furnished in accordance
with the provisions of Rule 14a-3(b) (1);
(iii) Selected financial data furnished as required by Item 301 of
Regulation S-K;
(iv) Supplementary financial data furnished as required by Item 302
of Regulation S-K; and
(v) Management's Discussion and Analysis of Financial Condition
and Results of Operations furnished as required by Item 303 of
Regulation S-K.
(c) The Company's Quarterly Reports on Form 10-Q dated as of March 31,
1992 and June 30, 1992 filed pursuant to Section 15(d) of the Exchange Act
with the Commission.
(d) The Company's Quarterly Report on Form 10-Q dated as of September
30, 1992 and the quarterly report to security holders, included therein,
which is delivered with this Prospectus.
Any statement in the documents incorporated by reference herein shall
be deemed to be modified or susperseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a
statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as modified
or superseded, to constitute a part of this Prospectus or the Registration
Statement of which it is a part.
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Copies of the Forms 10-K and 10-Q (other than exhibits) will be
provided without charge upon request to the Company's Secretary at 213 East
Tugalo Street, Post Office Box 880, Toccoa, Georgia 30577, telephone number
(706) 886-7571 or 1-800-282-0709.
REPORTS TO SECURITY HOLDERS
The Company provides each security holder an annual report containing
financial information that has been examined and reported upon, with an
opinion expressed, by an independent public accountant. Additionally, the
Company provides each security holder a quarterly report containing
unaudited financial information.
INVESTOR CONSIDERATIONS
The loans made by the Company in the ordinary course of its business
are subject to the interest rate and regulatory provisions of each
applicable state's lending laws and are made at fixed rates which are not
adjustable during the term of the loan. Since the loans are made at fixed
interest rates and are made using the proceeds from the sale of the
Company's fixed and variable rate securities (such as the securities
offered hereby), the Company may experience a decrease in its net interest
margin because increased interest costs cannot be passed on to all of the
Company's loan customers. Net interest margin represents the difference
between the amount the Company earns on loans and investments and the
amount the Company pays on debt securities and other borrowings. An
increase in prevailing interest rates could adversely affect the Company's
net interest margin.
Liquidity of the Company is dependent on the sale of its debt
securities, the continued availability of unused bank credit from its
lenders and the collection of its receivables. Numerous investment
alternatives have caused investors to evaluate more critically investment
opportunities. The securities offered hereby will have interest rates and
redemption terms which the Company believes will generate sufficient sales
of debt securities to meet the Company's liquidity requirements. Although
all of the Company's debt securities are subject to redemption prior to
maturity at the option of the holder thereof, management does not
anticipate that redemptions will have a material adverse effect on the
Company's liquidity because all of the subordinated debt securities
contain an interest penalty for holders thereof who request early
redemption.
The Company has a Credit Agreement with four major banks to meet the
redemption requests of debtholders and other liquidity and operating
requirements of the Company. The Credit Agreement provides for maximum
borrowings of $21,000,000 or 70% of the net finance receivables, whichever
is less. Borrowings are on an unsecured basis at 1/4% above the prime rate
of interest. In addition, there is a commitment fee of 5/8% of the
available line less average borrowings and an agent's fee of 1/8% of the
total line. The Company's right to borrow funds under this Credit
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Agreement is scheduled to expire on December 31, 1995, unless extended, on
which date the outstanding balance of all loans pursuant to such Credit
Agreement must be paid in full. The Company intends to seek to extend such
Credit Agreement or enter into a new agreement on similar terms. Although
the Company does not anticipate difficulty in obtaining bank credit in the
future on acceptable terms, no assurance can be given that the terms of a
new credit facility would not be less favorable than the current Credit
Agreement.
Another Credit Agreement with a major bank provides for an additional
$1,500,000 for general operating purposes. This agreement provides for
borrowings on an unsecured basis at 1/4% above the prime rate of interest.
There can be no assurances that these Agreements will continue to be
available to the Company at their present amounts, or at all, because each
are subject to periodic reviews by the lenders, which consider the
Company's profitability, economic conditions and other lending criteria in
evaluating whether they will continue the Agreements.
The Company's liquidity is dependent, among other things, on the
collection of its receivables. The Company continually monitors the
delinquency status of its receivables and promptly institutes collection
efforts on each delinquent account. The Company also utilizes an automated
credit scoring system in an effort to continue the overall quality of its
loan portfolio. Delinquencies of the Company's consumer finance
receivables are likely to be affected by general economic conditions.
Although current economic conditions have not had a material adverse
effect on the Company's ability to collect its receivables, no assurances
can be given regarding future economic conditions or their effect on the
Company's ability to collect its receivables.
If one or more of the sources of funds discussed above are
significantly curtailed for any reason, the Company's ability to meet its
obligations, including its obligations with respect to the securities
offered hereby, could be adversely affected.
The Debentures will be general, unsecured obligations of the Company
and subordinated in right of payment to all of the Company's Senior Debt
(as defined). The incurrence of additional Senior Debt or secured
obligations is not limited.
In the event of any insolvency or bankruptcy proceeding, or of any
receivership, liquidation, reorganization or other similar proceeding in
connection therewith, relative to the Company or to its creditors, as
such, or to its property, or in the event of any proceeding for voluntary
liquidation, dissolution or other winding up of the Company, whether or
not involving insolvency or bankruptcy, then the holders of Senior Debt
shall be entitled to receive payment in full of all principal and interest
on all Senior Debt before the holders of the Debentures are entitled to
receive any payments.
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SUMMARY DESCRIPTION OF SECURITIES OFFERED
The following is a summary of the principal features of the
securities being offered hereby. For a detailed discussion,
see "Description of Variable Rate Subordinated Debentures".
Variable Rate Subordinated Debentures
Denominations Established weekly by the Company.
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Indenture Trustee The Debentures will be issued pursuant to an
indenture between the Company and the First
National Bank of Gainesville, as trustee.
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Interest Rate Weekly offering rate, compounded daily, for each
established amount.
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Interest Adjustment Rate adjusted at the end of each interest
adjustment period to the current interest rate,
compounded daily.
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Payment of Interest Interest will be earned daily and will be payable
at any time at the holder's request.
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Maturity Four years from date of issue but may be redeemed
at the end of any interest adjustment period
without penalty.
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Redemption by Holder At the end of any interest adjustment period
without penalty; redemption at any other time
subject to an interest penalty.
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Redemption by Company The Company may redeem prior to maturity upon 30
days written notice to holder for a price equal to
principal plus interest accrued to date of
redemption.
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Extension of Maturity Maturity of each Debenture is automatically
extended on its original terms for one additional
four-year term subject to Interest Adjustment.
Holder may prevent such extension by redeeming the
Debenture within 15 days after maturity. The
Company will notify holders 30 days in advance of
maturity date.
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Compound Interest Debentures are offered at interest rates which are
compounded daily. Examples of annualized effective
yields for daily compounded rates are set forth
below:
Example Effective
Nominal Annual
Rates Yield
5.0% 5.13%
6.0 6.18
7.0 7.25
8.0 8.33
9.0 9.42
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THE COMPANY
1st Franklin Financial Corporation is a wholly owned subsidiary of 1st
Franklin Corporation. The Company has been engaged in the consumer finance
business since 1941, particularly in making and servicing direct cash, real
estate and sales finance loans. The business is operated through 80 branch
offices in Georgia, 12 in Alabama and 8 in South Carolina. The Company funds
its loan demand through a combination of debt securities and a Credit
Agreement with four major banks. The Agreement provides for borrowings on an
unsecured basis up to $21,000,000 or 70% of the net finance receivables (as
defined by the Agreement), whichever is less. The amount of unused
borrowings under this Agreement at a recent date is set forth on Appendix I.
On the basis of total capital funds employed (common stockholder's
equity and subordinated debt), American Banker recently ranked the Company
as the 74th largest finance company in the United States.
USE OF PROCEEDS
Net proceeds from sales of the securities offered hereby, after payment
of estimated expenses of $29,750, will be placed in the general treasury of
the Company as sales are made. No segregation of proceeds will be made, but
the Company will use the net proceeds for the redemption of senior and
subordinated securities as such debtholders request redemption over the next
two years. Such subordinated securities include debentures of the same
series as the Debentures offered hereby; such senior securities include
senior demand notes of the Company, which are sold in varying principal
amounts and at various interest rates. Any proceeds not used for redemptions
will be used to repay bank borrowings and repay amounts outstanding under
the Company's commercial paper program as such amounts come due, make
additional finance receivables and for general operating purposes.
The offering is to be conducted by the Company through its executive
officers and there is no assurance that all of the securities offered herein
will be sold. The offering, however, is not made contingent upon any minimum
amount of securities being sold.
PLAN OF DISTRIBUTION
The Debentures will be offered by the Company through its executive
officers. No selling commissions or other remunerations will be paid
directly or indirectly to any officers, directors or employees of the
Company in connection with the sale of the Debentures. All purchase proceeds
from sales of the Debentures will be placed in the general treasury of the
Company. All offering expenses, including registration fees, printing,
advertising, postage and professional fees, will be paid by the Company.
The Debentures will be sold and redeemed at the Company's executive
office located at 213 East Tugalo Street, Post Office Box 880, Toccoa,
Georgia 30577. The telephone number is (706) 886-7571 or 1-800-282-0709.
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DESCRIPTION OF VARIABLE RATE SUBORDINATED DEBENTURES
General
The Variable Rate Subordinated Debentures are issued under an indenture
(hereinafter called the "Variable Rate Indenture") dated as of October 31,
1984 between the Company and The First National Bank of Gainesville
(hereinafter called the "Trustee"). The following statements with respect to
the Debentures are subject to the detailed provisions of the Variable Rate
Indenture. Whenever any particular article or section of the Variable Rate
Indenture is referred to, the statement made in connection with such
reference is qualified in its entirety by such reference.
The Debentures are registered and issued without coupons in Series
form. Any amount of any Series may be issued. There is no limit on the
principal amount of Debentures of any Series, or of all Series issuable
under the Variable Rate Indenture. The dollar amount of Debentures
outstanding under the Variable Rate Indenture as of a recent date is set
forth on Appendix I. The Company and the Trustee may amend the Variable Rate
Indenture to limit the principal amount of a particular Series or to allow
additional Series of Debentures with no limitations as to the maximum amount
of any increase or to the number of increases which may be made. The Company
may change the interest rates and the maturities of the Debentures offered
herein and of any subsequent Series which may be offered, provided that no
such change shall affect any Debenture of any Series issued prior to the
date of change.
The Debentures are direct obligations of the Company, but are not
secured. Principal and interest are payable at the executive office of the
Company in Toccoa, Georgia. The Debentures are executed by the Company and
authenticated and delivered to the purchaser by the Trustee upon written
order of the Company.
Established Features of Series 1 Debentures
The Variable Rate Subordinated Debentures Series 1 ("Series 1
Debentures") offered herein are issued and dated as of the date when
purchased. The interest rate for a Series 1 Debenture is compounded daily
and payable at any time at the holder's request. The Series 1 Debentures
mature four years from date of issue, and may be extended for one additional
four-year term as described under "Extension After Maturity".
Each Thursday, on a weekly basis, the Company establishes various
minimum purchase amounts with varying interest rates and interest adjustment
periods ("established features") for each respective minimum purchase
amount. The purchase amount and the interest adjustment period thereby
established are maintained for the term of the Series 1 Debenture. The
interest rate at which the Series 1 Debenture is sold is set only for the
initial interest adjustment period. The Company anticipates that it will
offer the Series 1 Debentures with interest rate adjustment periods ranging
from one month to four years.
At the end of each interest adjustment period, the Company will notify
the holder by mail of the new interest rate which will be the same interest
rate that is applicable to all new Series 1 Debentures being offered during
the same week and at the same terms. The new interest rate will be
determined by the Company, in its discretion, based on general market rates
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of interest. If the holder elects to retain the Series 1 Debenture at the
new rate, no action is required of the holder as the new rate will become
effective as of the first day of the interest adjustment period. If the
holder elects not to accept the new rate, the holder can redeem the Series 1
Debenture without penalty prior to the first day of the interest adjustment
period. See "Redemption at Request of Holder Prior to Maturity."
Debentures with the current established features are available for the
period from Thursday through the following Wednesday. The current
established features are applicable to all Series 1 Debentures sold by the
Company during that period. The Company publishes this information in a
newspaper of general circulation and, in addition, such information may be
obtained directly from the Company's executive offices in Toccoa, Georgia.
Subordination
The payment of the principal of and interest on the Debentures is
subordinate in right of payment, as set forth in Article Ten of the Variable
Rate Indenture, to all Senior Debt of the Company.
The term "Senior Debt" means all indebtedness of the Company
outstanding at any time except debt of the Company that by its terms is not
senior in right of payment to the Debentures, and indebtedness represented
by the Company's outstanding Debentures, all of which are pari passu.
The indebtedness evidenced by the Debentures shall, in case the
Debentures are declared due and payable before their expressed maturity
because of the occurrence of a default under the Variable Rate Indenture, be
entitled to payment only after there shall have been paid in full all
principal and interest on such Senior Debt. Likewise, in the event of any
insolvency or bankruptcy proceeding, or of any receivership, liquidation,
reorganization or other similar proceeding in connection therewith, relative
to the Company or to its creditors, as such, or to its property, or in the
event of any proceeding for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy, then the holders of Senior Debt shall be entitled to receive
payment in full of all principal and interest on all Senior Debt before the
holders of the Debentures are entitled to receive any payments.
The amount of the Company's Senior Debt outstanding at a recent date is
set forth in Appendix I.
Redemption by Company Prior to Maturity
The Company may redeem any Debenture of any Series at any time prior to
maturity for a redemption price equal to the principal amount plus any
unpaid interest thereon to date of redemption. The Company will notify
Debentureholders whose Debentures are to be redeemed not less than 30 nor
more than 60 days prior to the date fixed for redemption. In the event the
entire Series is not called for redemption, the redemption call shall be
made pro rata.
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Redemption at Request of Holder Prior to Maturity
At the request of the holder, the Company will redeem any Series 1
Debenture at the end of any interest adjustment period for a redemption
price equal to the principal amount plus any unpaid interest thereon to date
of redemption.
At the request of the holder, the Company may, at its option, redeem
any Series 1 Debenture during any interest adjustment period for a price
equal to the principal amount plus interest at one-half the stated rate on
the Series 1 Debenture.
If the holder dies before maturity, the Company may, at its option,
redeem any Series 1 Debenture for a redemption price equal to the principal
amount plus any unpaid interest thereon to date of redemption.
All redemptions will be made at the Company's executive offices in
Toccoa, Georgia, either in person or by mail.
Extension After Maturity
The maturity of a Series 1 Debenture will be automatically extended
from the original maturity date for a period equal to the original term of
such Series 1 Debenture unless the holder submits the Series 1 Debenture for
redemption within 15 days after its maturity or the Company tenders the
amount due the holder within 15 days after maturity. In the event of such an
extension, all provisions of the Series 1 Debenture will remain unchanged
with the exception of the interest rate which will be changed in accordance
with the interest adjustment provision. If the Company does not elect to
tender payment, it will notify the holder of this extension provision at
least 30 days prior to the maturity date.
Restrictions Upon the Company
There are no restrictions in the Variable Rate Indenture against the
issuance of additional securities or the incurring of additional debt
including Senior Debt and secured obligations.
Modification of the Variable Rate Indenture
The Variable Rate Indenture contains provisions permitting the Company
and the Trustee, with the consent of the holders of not less than two-thirds
in principal amount of the Debentures, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Variable Rate Indenture or of any supplemental indenture
or modifying in any manner the rights of the holders of such Debentures;
provided, however, that no such supplemental indenture shall change the
fixed maturity of any Debenture, reduce the principal amount thereof, reduce
the rate, change the time of payment of interest thereon, reduce the amount
of Debentures whose holders must consent to an amendment, or make any
changes regarding the Variable Rate Indenture that relate to waiver of
default, the rights of holders to receive payments, and the requirements of
consent of the Debentureholders, without the consent of the holder of each
Debenture so affected.
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The Company and the Trustee may amend the Variable Rate Indenture to
allow the issuance of additional amounts of a particular Series or
additional Series of Debentures without the consent of the Debentureholders.
There are no limitations as to the maximum amount of any increase or to the
number of increases which may be made. The Company may change the interest
rates and the maturities of the Debentures offered hereby and of any
subsequent Series which may be offered without entering into a supplemental
indenture, provided that no such change will affect any Debenture of any
Series issued prior to the date of change.
Events of Default and Notice Thereof
An Event of Default is defined by the Variable Rate Indenture to mean
any of the following: (a) failure to pay principal upon any Debenture when
the same becomes due; (b) failure to pay interest upon any Debenture when
the same becomes due and the Default continues for 30 days; (c) failure,
after notice from the Trustee or from the holders of at least 25% in
principal amount of the Debentures of the affected Series, to observe or
perform within 30 days any of the covenants contained in the Variable Rate
Indenture or Debentures; or (d) the occurrence of certain events of
bankruptcy, insolvency or reorganization.
The Variable Rate Indenture provides that the Trustee shall, within 90
days after the occurrence thereof, give the registered holders of the
Debentures notice of any existing default known to the Trustee, but, except
in case of a default in the payment of principal or interest, the Trustee
may withhold such notice if and for so long as the Trustee in good faith
determines that the withholding of such notice is in the interest of such
holders.
Rights on Default
The Trustee by notice to the Company, or the holders of at least 25% in
principal amount of the Debentures of the affected Series, may declare the
principal of and accrued interest on all Debentures due upon the happening
of any of the Events of Default specified in the Variable Rate Indenture,
but the holders of a majority in principal amount of such Debentures may
waive any default and rescind such declaration if the default is cured
within the 30 day period, except a default in the payment of the principal
of or interest on any Debenture or a default on Senior Debt. The holders of
a majority in principal amount of the Debentures of the affected Series may
direct the time, method and place of conducting any proceeding for any
remedy available to, or exercising any power or trust conferred upon, the
Trustee, but the Trustee may decline to follow any direction that conflicts
with law, provisions of the Variable Rate Indenture, or is unduly
prejudicial to the rights of the other Debentureholders or would involve the
Trustee in personal liability. Holders may not institute any proceeding to
enforce the Variable Rate Indenture unless the Trustee refuses to act for 60
days after request from the holders of at least 25% in principal amount of
the Debentures of the affected Series and during such 60 day period the
holders of a majority in principal amount do not give the Trustee a
direction inconsistent with the request, and tender to the Trustee of
satisfactory indemnity. Nevertheless, any holder may enforce the payment of
the principal of and interest on the holder's Debenture when due.
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Concerning the Trustee
The First National Bank of Gainesville, trustee under the Variable Rate
Indenture, does not have any other business relationship with the Company.
Evidence to be Furnished Trustee
The Variable Rate Indenture provides that, as evidence of compliance
with the conditions precedent provided for in the Variable Rate Indenture
relating to any action to be taken by the Trustee upon the application or
demand of the Company, the Company shall furnish to the Trustee an officer's
certificate and an opinion of counsel stating that all such conditions
precedent have been met. Within 120 days after the end of each fiscal year,
the Company shall file with the Trustee an officer's certificate stating
whether or not, to the best knowledge of the signers, the Company is in
default in the performance of any covenant, agreement or condition contained
in the Variable Rate Indenture and, if so, specifying each such default,
and, with respect to each, the action taken or proposed to be taken by the
Company to remedy such default.
LEGAL OPINION
The validity of the securities offered herein has been passed upon for
the Company by Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303
Peachtree Street, N.E., Atlanta, Georgia 30308-3242.
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1st FRANKLIN FINANCIAL CORPORATION
Appendix I to Prospectus
Information as of September 30, 1992
1. Ratio of Earnings to Fixed Charges (page 3):
Sept. 30 December 31
1992 1991 1990 1989 1988 1987
2.48 2.09 2.01 2.01 2.10 2.28
2. Unused borrowings under the $21,000,000 Credit
Agreement (page 6): $13,246,000
3. Debentures outstanding under Indenture (page 6): $21,521,281
4. Senior Debt (as defined) outstanding (page 8): $47,476,334
A more current Appendix I, if appropriate, will be attached to the
cover page of this Prospectus as a supplement. If attached, that
supplemental Appendix I supersedes this information.
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No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus in connection
with the offering contained herein, and if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities covered by this Prospectus
in any State to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale hereunder
shall, under any circumstances, create an implication that there has been no
change in the facts herein set forth since the date hereof.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . 2
Reports to Security Holders . . . . . . . . . . . . . . . . . 3
Investor Considerations . . . . . . . . . . . . . . . . . . . 3
Summary Description of Securities Offered . . . . . . . . . . 5
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 6
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . 6
Description of Variable Rate Subordinated Debentures. . . . . 7
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 11
Appendix I. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(Logo)
$20,000,000
Variable Rate Subordinated Debentures -
Series 1
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