<PAGE>
Rule 424(b)(2)
SEC File #333-1007
1st FRANKLIN FINANCIAL CORPORATION
INVESTMENTS
WEEK OF May 7, 1998 THRU May 13, 1998
VARIABLE RATE
SUBORDINATED DEBENTURES
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Effective Interest Interest Minimum
Yield (a) Rate (b) Adjustment (c) Amount
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5.65 5.50 1 Month $500
5.65 5.50 3 Months $500
6.18 6.00 6 Months $500
6.40 6.20 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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1st FRANKLIN FINANCIAL CORPORATION
Prospectus Supplement
Dated as of December 4, 1997
(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 as of December 31,
1996 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, 1996 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 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;
(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,
1997 filed pursuant to Section 15(d) of the Exchange Act filed with
the Commission.
(d) The Company's Quarterly Report on Fomr 10-Q dated as of June 30,
1997 filed pursuant to Section 15(d) of the Exchange Act filed with
the Commission.
(e) The Company's Quarterly Report on Form 10-Q dated as of
September 30, 1997 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 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 Prospecuts
Information as of September 30, 1997
1. Ratio of Earnings to Fix Charges (page 3)
Sept 30 December 31
------- --------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
1.75 1.95 2.60 2.73 2.58 2.31
==== ==== ==== ==== ==== ====
2. Unused borrowing under Credit Agreement (page 6): $21,000,000
3. Amount of Debentures outstanding under Indenture (page 7): 36,437,742
4. Senior Debt outstanding (page 8): 98,452,962
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."
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
PROSPECTUS dated February 29, 1996
$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, which may range from one month to four years
("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 weekly 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.
See "Risk Factors" on page 3 for a discussion of certain
factors that should be considered by prospective purchasers
of the Debentures offered hereby.
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)
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 $41,297.
<PAGE>
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 at 7 World Trade Center, 13th
Floor, New York, New York 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. 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,
1994 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 31,1994, 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, 1995 and June 30, 1995 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, 1995 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 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.
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.
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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.
RISK FACTORS
The operations of the Company are subject to regulation by federal, state and
local government authorities and are subject to various laws and judicial and
administrative decisions imposing various requirements and restrictions
which, among other things, require that the Company obtain and maintain
certain licenses and qualifications, limit the interest rates, fees and other
charges the Company is allowed to charge, limit or prescribe other terms of
the Company's loans, require specified disclosures to borrowers, govern the
sale and terms of insurance products offered by the Company and the insurers
for which it acts as agent, and define the Company's rights to repossess and
sell collateral. Although the Company believes that it is in compliance in
all material respects with applicable federal, state and local laws, rules
and regulations, there can be no assurance that a change in such laws, or in
the interpretation thereof, will not make the Company's compliance therewith
more difficult or expensive, restrict the Company's ability to originate
loans, further limit or restrict the amount of interest and other charges
earned under such loans, or otherwise adversely affect the business or
prospects of the Company.
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.
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<PAGE>
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 Agreement is scheduled
to expire on December 31, 1999, 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
$2,000,000 for general operating purposes. This agreement provides for
borrowings on an unsecured basis at 1/8% 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.
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 in "Description of Variable Rate Subordinated Debentures -
Subordination"). 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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<PAGE>
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 Synovus Trust
Company, an affiliate of Columbus Bank and Trust
Company, 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.
- -----------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------
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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<PAGE>
THE COMPANY
1st Franklin Financial Corporation 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 89 branch
offices in Georgia, 24 in Alabama and 15 in South Carolina. The Company
funds its loan demand through a combination of debt securities and a Credit
Agreement with four major banks. This 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 Credit 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, a financial services publication,
recently ranked the Company as the 52nd 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 $41,297, 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.
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.
(See "Use of Proceeds") All offering expenses, including registration fees,
printing, advertising, postage and professional fees, will be paid by the
Company.
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.
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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<PAGE>
DESCRIPTION OF VARIABLE RATE SUBORDINATED DEBENTURES
General
- -------
In January 1995, Columbus Bank and Trust Company (the prior trustee under the
Variable Rate Indenture) transferred its trust operations to its new separate
trust company affiliate named Synovus Trust Company, which has thereby become
the Trustee (hereinafter called the "Trustee") under the Variable Rate
Indenture. All references to the Trustee in this Prospectus and the
Registration Statement of which it is a part shall be deemed to refer to
Synovus Trust Company unless the context otherwise requires. The Company has
been informed that counsel to Columbus Bank and Trust Company believes that
pursuant to applicable banking regulations and by agreement with the Company,
Columbus Bank and Trust Company remains responsible to holders of Debentures
for all actions of Synovus Trust Company as if performed by Columbus Bank and
Trust Company itself. 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 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 at the end of the interest adjustment period. See "Redemption at
Request of Holder Prior to Maturity".
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<PAGE>
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.
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. Historically, the
Company has honored all such request for early redemption.
All redemptions will be made at the Company's executive offices in Toccoa,
Georgia, either in person or by mail.
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<PAGE>
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 of
the outstanding 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.
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.
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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 of the outstanding 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 of the outstanding 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.
Concerning the Trustee
- ----------------------
The Trustee does not have any other business relationship with the Company.
The Trustee maintains its principal corporate trust office in Columbus,
Georgia.
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 hereby 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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<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
Appendix I to Prospectus
Information as of September 30, 1995
1. Ratio of Earnings to Fixed Charges (page 3):
Sept. 30 December 31
-------- ---------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
2.28 2.73 2.58 2.31 2.04 1.95
2. Unused borrowings under the $21,000,000 Credit
Agreement (page 6): $21,000,000
3. Debentures outstanding under Indenture (page 7): $29,390,467
4. Senior Debt (as defined under the caption "Description
of Variable Rate Subordinated Debentures -
Subordination") outstanding (page 8): $89,465,718
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.
-11-
<PAGE>
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
Available Information . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . 2
Reports to Security Holders . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . 10
Appendix I. . . . . . . . . . . . . . . . . . . . . . 11
$20,000,000
Variable Rate Subordinated Debentures -
Series 1
<PAGE>
