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Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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1st FRANKLIN FINANCIAL CORPORATION
A Georgia Corporation I.R.S. Employer No. 58-0521233
213 East Tugalo Street
Post Office Box 880
Toccoa, Georgia 30577
(706) 886-7571
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Agent for Service: Copy To:
A. Roger Guimond W. Rhett Tanner
213 East Tugalo Street Jones, Day, Reavis & Pogue
Post Office Box 880 3500 SunTrust Plaza
Toccoa, Georgia 30577 303 Peachtree Street, N.E.
(706) 886-7571 Atlanta, Georgia 30308-3242
(404) 521-3939
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Approximate date of proposed sale to public: From time to time commencing
as soon as possible after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following. ( X )
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to
Item 11(a)(1) of this Form, check the following. ( X )
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following. ( )
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CALCULATION OF REGISTRATION FEE
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Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to to be offering aggregate registration
be registered registered price per unit offering price fee (1)
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Variable Rate
Subordinated
Debentures.... $20,000,000 100% $20,000,000 $5,900
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(1) Calculated in accordance with Rule 457(a) by multiplying the maximum
aggregate offering price by .000295.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1998
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1st FRANKLIN FINANCIAL CORPORATION
PROSPECTUS dated March __, 1998
$20,000,000 VARIABLE RATE SUBORDINATED DEBENTURES
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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 that 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 then 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" beginning 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)
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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 $50,400.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 6, 1998.
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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 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. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of that site is
http://www.sec.gov.
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, 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
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, 1997
and June 30, 1997 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,
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.
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 with 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 with a quarterly report containing
unaudited financial information.
RISK FACTORS
Prior to purchasing any of the securities offered hereby, prospective
investors should carefully consider the following factors relating to
the Company and the Debentures, together with the other information
and financial data included or incorporated by reference herein.
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 (including 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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The Company has a Credit Agreement with four major banks under which it
may make borrowings in order to meet the redemption requests of its
security holders 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 Credit Agreement has a commitment termination date of
June 30 in any year in which written notice of termination is given by
the banks. If written notice is given in accordance with the agreement,
the outstanding balance of the loans shall be paid in full on the date
which is three and one half years after the commitment termination date.
The banks also may terminate the agreement upon the violation of
any of the financial ratio requirements or covenants contained in the
agreement or in June of any calendar year if the financial condition of
the Company becomes unsatisfactory to the banks. Such financial ratio
requirements include a minimum equity requirement, an interest expense
coverage ratio and a minimum debt to equity ratio.
The Company has another Credit Agreement that provides for an additional
$2,000,000 in borrowings 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 either of the Company's
Credit Agreements will continue to be available to the Company at their
present amounts, or at all, because each is subject to periodic reviews
by the lenders, which take into account the Company's profitability,
economic conditions and other lending criteria.
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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SUMMARY DESCRIPTION OF SECURITIES OFFERED
The following is a summary of the principal features of the securities
being offered hereby. For a more 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.
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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 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 91
branch offices in Georgia, 31 in Alabama, 21 in South Carolina, 9 in
Mississippi and 5 in Louisiana. 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 Credit
Agreement), whichever is less. Appendix I sets forth the amount of unused
borrowings under the Credit Agreement as of a specified date.
USE OF PROCEEDS
Net proceeds from sales of the securities offered hereby, after payment of
estimated expenses of $50,400, will be placed in the general treasury of
the Company as sales are made. No segregation of proceeds will be made,
but the Company expects to 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
from time to time 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 consumer finance loans 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 proceeds
from sales of the Debentures will be placed in the general treasury of
the Company as sales are made. (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.
FORWARD LOOKING INFORMATION
This registration statement contains certain "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward looking statements are subject to known and unknown risks,
uncertainties and other factors, including those identified in the filings
made by the Company from time to time with the Commission, which may cause
the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward looking statements.
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DESCRIPTION OF VARIABLE RATE SUBORDINATED DEBENTURES
General
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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
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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
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<PAGE>
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
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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 requests 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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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
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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 against any loss, liability or expense.
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, Atlanta, Georgia.
-10-
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
Appendix I to Prospectus
Information as of September 30, 1997
1. Ratio of Earnings to Fixed Charges (page 3):
Sept. 30 December 31
-------- ---------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
1.75 1.95 2.06 2.73 2.58 2.31
2. Unused borrowings under the $21,000,000 Credit
Agreement (page 6): ........................... $21,000,000
3. Debentures outstanding under Indenture (page 7): .. $36,437,742
4. Senior Debt (as defined under the caption
"Description of Variable Rate
Subordinated Debentures -
Subordination") outstanding (page 8): ......... $98,452,962
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
-12-
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
- ----------------------------------------------------
The expenses to be incurred in the issuance and distribution of the
securities being registered are estimated as follows:
Filing Fee - Securities and Exchange
Commission. . . . . . . . . . . . . . . $ 5,900
Registration Fees in States. . . . . . . . . 1,800
Legal Fees and Expenses. . . . . . . . . . . 15,000
Accounting Fees. . . . . . . . . . . . . . . 5,000
Printing Cost. . . . . . . . . . . . . . . . 500
Advertising. . . . . . . . . . . . . . . . . 9,200
Trustee's Fees . . . . . . . . . . . . . . . 10,600
Postage and Miscellaneous. . . . . . . . . . 2,400
-------
Total . . . . . . . . . . . . . . . . . $50,400
=======
Item 15. Indemnification of Directors and Officers
- --------------------------------------------------
The registrant has, pursuant to the authority granted in Section 14-2-851 of
the Official Code of Georgia Annotated, agreed to indemnify any officer or
director of the registrant against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually or reasonably
incurred by him in any action, suit or proceeding brought or threatened to be
brought against him by reason of the fact that he is or was an officer or
director of the registrant if he acted in a manner he reasonably believed to
be in or not opposed to the best interests of the registrant, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Item 16. Exhibits
- -----------------
4. (a) The Variable Rate Indenture dated October 31, 1984 between the
registrant and The First National Bank of Gainesville, Trustee.
(Incorporated by reference to Exhibit 4(a) to the registrant's
Registration Statement on Form S-2, Registration No. 2-94191.)
(b) Form of Variable Rate Subordinated Debenture. (Incorporated by
reference to Exhibit 4(b) to the registrant's Registration
Statement on Form S-2, Registration No. 33-25180.)
(c) Agreement of Resignation, Appointment and Acceptance dated as of
May 28, 1993 between the registrant, the First National Bank of
Gainesville, and Columbus Bank and Trust Company. (Incorporated
herein by reference to Exhibit 4(c) to the registrant's Post-
Effective Amendment No. 1 dated June 8, 1993 to the Registration
Statement on Form S-2, Registration No. 33-49151.)
(d) Modification of Indenture dated March 29, 1995. (Incorporated
herein by reference to Exhibit 4(b) to the registrant's Form 10-K
for the year ended December 31, 1994, No. 2-27985.)
5. Opinion of Counsel (to be filed by amendment).
II-1
<PAGE>
10. (a) Credit Agreement dated May, 1993 between the registrant and
SouthTrust Bank of Georgia, N.A..(Incorporated by reference to
Exhibit 10(a) to the registrant's Form 10-K for the year ended
December 31, 1993, No. 2-27985.)
(b) Revolving Credit Agreement dated October 1, 1985 as amended
November 10, 1986; March 1, 1988; August 31, 1989 and May 1, 1990,
among the registrant and the banks named therein (Incorporated by
reference to Exhibit 10 to the registrant's Form SE dated November
9, 1990.)
(c) Fifth Amendment to Revolving Credit Agreement dated April 23,
1992. (Incorporated by reference to Exhibit 10(c) to the
Registrant's Form SE dated November 5, 1992.)
(d) Sixth Amendment to Revolving Credit Agreement dated July 20, 1992.
(Incorporated by reference to Exhibit 10(d) to the Registrant's
Form SE dated November 5, 1992.)
(e) Seventh Amendment to Revolving Credit Agreement dated June 20,
1994. (Incorporated by reference to Exhibit 10(e) to the
registrant's Registration Statement on Form S-2, Registration No.
33-56299.)
(f) Merger of 1st Franklin Corporation with 1st Franklin Financial
Corporation Consent, Waiver and Eighth Amendment to Revolving
Credit and Term Loan Agreement. (Incorporated herein by reference
to Exhibit 10(f) from Form 10-K for the fiscal year ended December
31, 1994.)
(g) Ninth Amendment to Revolving Credit Agreement and Term Loan
Agreement dated June 20, 1996. (Incorporated herein by reference
to Exhibit 10(g) from Form 10-K for the fiscal year ended December
31, 1996.)
(h) Tenth Amendment to Revolving Credit Agreement and Term Loan
Agreement dated January 23, 1998
11. Computation of Earnings per Share can be determined from the
Consolidated Statement of Income and Retained Earnings contained in the
Registrant's Annual Report to Security Holders for the fiscal year ended
December 31, 1996, incorporated herein by reference.
12. Calculation of Ratio of Earnings to Fixed Charges.
13. (a) Annual Report to securities holders for the year ended December
31, 1996. (Incorporated by reference to Exhibit 13 to the
Registrant's Form 10-K for the year ended December 31, 1996, No.
2-27985.)
(b) Form 10-Q for the period ended September 30, 1997. (Incorporated
by reference to registrant's Form 10-Q for the period ended
September 30, 1997, No. 2-27985.)
23. (a) Consent of Independent Public Accountants.
(b) Consent of Counsel (set forth in Exhibit 5, to be filed by
amendment).
24. Power of Attorney (included on signature page hereto)
25. Form T-1 as to the eligibility and qualification of Synovus
Trust Company, Trustee, under the indenture dated as of
October 31, 1984 (modified March 29, 1995) between the
registrant and Synovus Trust Company, an affiliate of Columbus
Bank and Trust Company.
II-2
<PAGE>
25.1-P A copy of the Charter and/or Articles of Incorporation of the
Columbus Bank and Trust Company, (Incorporated by reference to
Exhibit 25.1 of the registrant's Form SE dated June 8, 1993,
filed pursuant to continuing hardship exemption.)
25.1-1 A copy of the Charter and/or Articles of Incorporation of the
Synovus Trust Company. (Incorporated by reference to Exhibit
25.1-1 of the registrant's Registration Statement on form S-2,
Registration No. 333-1007 dated February 29, 1996.)
25.4-P Copy of the bylaws of Columbus Bank and Trust, as now in effect.
(Incorporated by reference to Exhibit 25.4 of the registrant's
Form SE dated June 8, 1993, filed pursuant to continuing hardship
exemption.)
25.4-1 Copy of the bylaws of Synovus Trust Company, as now in effect.
(Incorporated by reference to Exhibit 25.4-1 of the registrant's
Registration Statement on form S-2, Registration No. 333-1007
dated February 29, 1996.)
Item 17. Undertakings
- ------------------------
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price present no more than a twenty percent change in
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective statement; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; (iv) to file weekly with the Securities
and Exchange Commission a Rule 424(b)(2) prospectus supplement
setting forth the established features (as defined in the
prospectus).
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-2 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Toccoa, State of Georgia,
on March 6, 1998.
1st FRANKLIN FINANCIAL CORPORATION
S/ Ben F. Cheek, III
--------------------
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ben F. Cheek, III and A. Roger Guimond,
and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
to this registration statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and their substitutes, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, and their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement or amendment thereto has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
s/ Ben F. Cheek, III Chairman of the Board; March 6, 1998
- ---------------------- Principal Executive Officer; -------------
Director
s/ T. Bruce Childs President March 6, 1998
- ----------------------- -------------
s/ A. Roger Guimond Vice President; March 6, 1998
- ----------------------- Principal Financial Officer; -------------
Principal Accounting Officer
s/ Mrs. Lorene M. Cheek Director March 6, 1998
- ----------------------- -------------
s/ Jack Stovall Director March 6, 1998
- ----------------------- -------------
s/ Robert E. Thompson Director March 6, 1998
- ----------------------- -------------
II-5
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
4. (a) The Variable Rate Indenture dated October 31, 1984 between
the registrant and The First National Bank of Gainesville,
Trustee. (Incorporated by reference to Exhibit 4(a) to the
registrant's Registration Statement No. 2-94191.)
(b) Form of Variable Rate Subordinated Debenture. (Incorporated
by reference to Exhibit 4(b) to the registrant's
Registration Statement on Form S-2, Registration No. 33-
25180.)
(c) Agreement of Resignation, Appointment and Acceptance dated
as of May 28, 1993 between the registrant, The First
National Bank of Gainesville, and Columbus Bank and Trust
Company. (Incorporated herein by reference to Exhibit 4(c)
to the registrant's Post Effective Amendment No. 1, dated
June 8, 1993, to the Registration Statement on Form S-2,
Registration No. 33-49151.)
(d) Modification of Indenture dated March 29, 1995.
(Incorporated herein by reference to Exhibit 4(b) to the
registrant's Form 10-K for the year ended December 31, 1994,
No. 2-27985.)
10. (a) Credit Agreement dated May, 1993 between the registrant and
SouthTrust Bank of Georgia, N.A.. (Incorporated by reference
to Exhibit 10(a) to the registrant's Form 10-K for the year
ended December 31,1993, No. 2-27985.)
(b) Revolving Credit Agreement dated October 1, 1985 as amended
November 10, 1986; March 1,1988; August 31, 1989 and May 1,
1990, among the registrant and the banks named therein,
(Incorporated by reference to Exhibit 10 to the registrant's
Form SE dated November 9, 1990.)
(c) Fifth Amendment to Revolving Credit Agreement dated April
23, 1992. (Incorporated by reference to Exhibit 10(c) to the
Registrant's Form SE dated November 5, 1992.)
(d) Sixth Amendment to Revolving Credit Agreement dated July 20,
1992. (Incorporated by reference to Exhibit 10(d) to the
Registrant's Form SE dated November 5, 1992.)
(e) Seventh Amendment to Revolving Credit Agreement dated June
20, 1994. (Incorporated by reference to Exhibit 10(e) to
the registrant's Registration Statement on Form S-2,
Registration No. 33-56299.)
(f) Merger of 1st Franklin Corporation with 1st Franklin
Financial Corporation Consent, Waiver and Eighth Amendment
to Revolving Credit and Term Loan Agreement. (Incorporated
herein by reference to Exhibit 10(f) from Form 10-K for the
fiscal year ended December 31, 1994.)
<PAGE>
(g) Ninth Amendment to Revolving Credit Agreement and Term Loan
Agreement dated June 20, 1996. (Incorporated herein by
reference to Exhibit 10(g) from Form 10-K for the fiscal
year ended December 31, 1996.)
(h) Tenth Amendment to Revolving Credit Agreement and Term Loan
Agreement dated January 23, 1998.
11. Computation of Earnings per Share is self-evident from the Consolidated
Statement of Income and Retained Earnings in the Registrant's Annual
Report to Security Holders for the fiscal year ended December 31, 1996.
(Incorporated by reference to exhibit 11 to the registrant's Form 10-K
for the year ended December 31, 1996.)
12. Computation of Ratio of Earnings to Fixed Charges
13. (a) Annual Report to the securities holders for the year ended
December 31, 1996. (Incorporated by reference to Exhibit 13
to the registrant's Form 10-K for the year ended December
31, 1996, No. 2-27985.)
(b) Form 10-Q for the period ended September 30, 1997.
(Incorporated by reference to registrant's Form 10-Q for the
period ended September 30, 1997, No. 2-27985.)
23. (a) Consent of Arthur Andersen LLP
24. Power of Attorney (included on signature page, hereto)
25. Form T-1 as to the eligibility and qualification of Synovus Trust
Company, Trustee, under the indenture dated as of October 31, 1984
(modified March 29, 1995) between the registrant and Synovus Trust
Company, an affiliate of Columbus Bank and Trust Company.
25.1-P A copy of the Charter and/or Articles of Incorporation of the
Trustee. (Incorporated by reference to Exhibit 25.1 of the
registrant's Form SE dated June 8, 1993, filed pursuant to
continuing hardship exemption.)
25.1-1 A copy of the Charter and/or Articles of Incorporation of the
Synovus Trust Company. (Incorporated by reference to
Exhibit 25.1-1 of the registrant's Registration Statement on form
S-2, Registration No. 333-1007 dated February 29, 1996.)
25.4-P Copy of the bylaws of Columbus Bank and Trust Company, as now in
effect. (Incorporated by reference to Exhibit 25.4 of the
registrant's Form SE dated June 8, 1993, filed pursuant to
continuing hardship exemption.)
25.4-1 Copy of the bylaws of Synovus Trust Company, as now in effect.
(Incorporated by reference to Exhibit 25.4-1 of the registrant's
Registration Statement on form S-2, Registration No. 333-1007
dated February 29, 1996.)
<PAGE>
<PAGE>
Exhibit 10(h)
January 23, 1998 CoreStates
Bank
Mr. Roger Guimond, Vice President and CFO
1st Franklin Financial Corporation
213 E. Tugalo Street
P.O. Box 880
Toccoa, GA 30577
Re: Tenth Amendment of Section 6.14 of Revolving Credit and Term Loan
Agreement
-----------------------------------------------------------------
Dear Roger:
Reference is hereby made to that certain Revolving Credit and Term Loan
Agreement, as amended from time to time ("Credit Agreement") dated
October 1, 1985, by and among 1st Franklin Financial Corporation ("Company"),
the Agent (identified on the signature pages of this letter) and the "Banks"
(identified below as signatories hereto). All capitalized terms not
otherwise defined herein shall have the meanings respectively ascribed to
them in the Credit Agreement. Company has notified the Banks that effective
January 1, 1997, Company elected S Corporation status for income tax
reporting purposes. As a result, Company requests that Section 6.14
"Limitation on Dividends and Payments to Affiliates" be amended to
incorporate the change of tax status. The Agent and Banks acknowledge the
S Corporation election and agree as follows:
1) Section 6.14 is deleted and replaced with the following:
6.14 "Limitation on Dividends and Payments to Affiliates"
The Company shall not declare or pay any cash dividend on its common
stock in excess of 25 percent of the after S-Corporation tax
distribution net income of the Company, excluding income from the
sale of assets or from extraordinary or nonrecurring transactions,
earned during the immediately preceding fiscal year of the Company or
repurchase, redeem or retire, or make any other payment with respect
to any of its outstanding stock, or make any other payment to any
Affiliate except (i) reasonable and ordinary compensation for
services rendered or (ii) the Company's share of taxes payable by
Parent on a consolidated basis, or (iii) other reasonable payments
for shared facilities and other expenses in the ordinary course of
business.
2) Section 5.08 is expanded to include the following:
5.08(h) Each year, a copy of the completed and signed Federal Income
Tax Return, including all schedules, of Ben F. Cheek, III and
Elizabeth Cheek at the later of April 15th or the filing date if
granted extension(s).
This letter may be executed in counterparts, all of which taken together
shall constitute one and the same agreement, and any of the parties hereto
may execute this letter agreement by signing any such counterpart. The
Credit Agreement, as amended hereby and as previously amended, remains in
full force and effect.
<PAGE>
Each of the undersigned, by its signature hereto, hereby evidences its
consent to the terms and conditions of this letter to be effective only upon
the Agent's receipt of an executed counterpart or facsimile by Company and
Banks and delivery thereof to the Borrower.
Agreed to this 23rd day of January, 1998
1st Franklin Financial Corporation CoreStates Bank, N.A.,
as Agent and Bank
By: s/ A. Roger Guimond By: s/ Rita H. Stempin
------------------------ --------------------------------
A. Roger Guimond; VP/CFO Rita H. Stempin; Vice President
Print Name and Title Print Name and Title
Harris Trust and Savings Bank
Attest: s/ Judy Sheriff By: s/ Jerome P. Crokin
--------------------- -------------------------------
Judy Sheriff Jerome P. Crokin;
Vice President
Print Name and Title
Southtrust Bank of Georgia, N.A Fleet Bank, N.A.
By: s/ William E. Reid, III By: s/ Chris DiMarco
------------------------- -------------------------------
William E. Reid, III; Chris DiMarco;
Vice President Assist. Vice Pres.
Print Name and Title Print Name and Title
<PAGE>
<PAGE>
Exhibit 12
CALCULATION OF
RATIO OF EARNINGS TO FIXED CHARGES
Nine
Months
Ended Year Ended
Sept. 30 December 31
-------- -------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Income Before
Income Taxes. . . $ 5,236 $ 8,418 $ 8,969 $10,319 $ 8,322 $ 6,177
Interest on
Indebtedness. . . 6,571 8,312 8,048 5,556 4,910 4,423
Portion of rents
representative of
the interest
factor. . . . . . 443 518 449 419 362 304
------- ------- ------- ------- ------- -------
Earnings as
Adjusted . . $12,250 $17,248 $17,466 $16,294 $13,594 $10,904
======= ======= ======= ======= ======= =======
Interest on
Indebtedness. . . $ 6,571 $ 8,312 $ 8,048 $ 5,556 $ 4,910 $ 4,423
Portion of rents
representative of
the interest
factor. . . . . . 443 518 449 419 362 304
------- ------- ------- ------- ------- -------
Fixed Charges. . $ 7,014 $ 8,830 $ 8,497 $ 5,975 $ 5,272 $ 4,727
======= ======= ======= ======= ======= =======
Ratio of Earnings
to Fixed Charges.. 1.75 1.95 2.06 2.73 2.58 2.31
==== ==== ==== ==== ==== ====
<PAGE>
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 21,
1997 included in the Company's Form 10-K and Annual Report for the year ended
December 31, 1996 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 6, 1998
<PAGE>
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM T - 1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility
of a Trustee pursuant to Section 305(b)(2) _____
----------------------------------
SYNOVUS TRUST COMPANY
(Exact Name of Trustee as Specified in its Charter)
Georgia 58-2146977
(Jurisdiction of Incorporation or (I.R.S. Employer
Organization if not a National Bank) Indentification No.)
P.O. Box 120, Columbus, Georgia 31902-0120
(Address of Principal Executive Office) (Zip Code)
Ms. Alice H. Stagg
Vice President and Trust Officer
Synovus Trust Company
Post Office Box 120
Columbus, Georgia 31902-0120
(706) 649-2245
(Name, Address and Telephone No. of Agent for Service)
----------------------------------
1st FRANKLIN FINANCIAL CORPORATION
(Exact Name of Obligor as Specified in its Charter)
Georgia 58-0521233
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
213 East Tugalo Street
Toccoa, Georgia 30577
(Address of Principal Executive Offices) (Zip Code)
----------------------------------
Variable Rate Subordinated Debentures
Due Four Years From Date of Issuance
(Title of the Indenture Securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Georgia Department of Banking and Finance
2990 Brandywine Road
Suite 200
Atlanta, Georgia 30041
Federal Deposit Insurance Corporation
Marquis Tower One
Suite 1700
Atlanta, Georgia 30303
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe such
affiliation.
None
Item 3. Voting Securities of the Trustee. *
Item 4. Trusteeships under Other Indentures. *
Item 5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters. *
Item 6. Voting Securities of the Trustee Owned by the Obligor or its
Officials. *
Item 7. Voting Securities of the Trustee Owned by Underwriters or their
Officials. *
Item 8. Securities of the Obligor Owned or Held by the Trustee. *
Item 9. Securities of Underwriters Owned or Held by the Trustee. *
Item 10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor. *
Item 11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or more of the Voting Securities of the Obligor. *
_______________
* Not Applicable pursuant to General Instruction B.
<PAGE>
Item 12. Indebtedness of the Obligor to the Trustee. *
Item 13. Defaults by the Obligor.
There has been no default with respect to the securities under the
Indenture, or any other indenture or series under which (i) the
Trustee is a trustee, and (ii) any other securities, or certificates
of interest or participation in any other securities, of
1st Franklin Financial Corporation are outstanding.
Item 14. Affiliations with the Underwriters. *
Item 15. Foreign Trustee. *
Item 16. List of Exhibits.
(1) A copy of the Charter and/or Articles of Incorporation of the
Columbus Bank and Trust Company. (Incorporated herein by
reference to Exhibit 25.1 of the registrant's Form SE dated
June 8, 1993, filed pursuant to continuing hardship exemption.)
(1-1) A copy of the Charter and/or Articles of Incorporation of the
Trustee. (Incorporated by reference to Exhibit 25.1-1 of the
registrant's Registration Statement on form S-2, Registration
No. 333-1007 dated February 29, 1996.)
(2) Not applicable.
(3) Not applicable.
(4) Copy of the Bylaws of the Columbus Bank and Trust Company, as
now in effect. (Incorporated herein by reference to
Exhibit 25.4 of the Registrant's Form SE dated June 8, 1993,
filed pursuant to continuing hardship exemption.)
(4-1) Copy of the Bylaws of the Synovus Trust Company.
(Incorporated by reference to Exhibit 25.4-1 of the
registrant's Registration Statement on form S-2, Registration
No. 333-1007 dated February 29, 1996.)
(5) Not Applicable.
(6) The consent of the Trustee required by Section 321(b) of the
Act, filed as Exhibit 25.6.
(7) Copy of the latest Report of Condition of Columbus Bank and
Trust Company published pursuant to law or the requirements of
its supervising or examining authority, filed as Exhibit 25.7.
___________________
* Not Applicable pursuant to General Instruction B.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Synovus Trust Company, a corporation organized and existing under the laws of
Georgia, has duly caused this statement of eligibility and qualification to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Columbus, and the State of Georgia, on the 24th day of
February, 1998.
SYNOVUS TRUST COMPANY
By: s/ Alice H. Stagg
--------------------------------
Title: Vice President and Trust Officer
<PAGE>
<PAGE>
EXHIBIT 25.6
FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the proposed issuance of $20,000,000 Variable Rate
Subordinated Debentures of 1st Franklin Financial Corporation, Synovus Trust
Company hereby consents that reports of examinations by Federal, State,
Territorial or District Authorities may be furnished by such authority to the
Securities and Exchange Commission upon request therefor. It is understood
that the foregoing consent is subject to the non-disclosure provisions of
said Section 321(b).
SYNOVUS TRUST COMPANY
By: s/ Alice H. Stagg
--------------------------------
Title: Vice President and Trust Officer
Dated: February 24, 1998
--------------------------------
<PAGE>
<PAGE>
EXHIBIT 25.7
Legal Title of Bank: Columbus Bank and Trust Company Call Date: 12/31/97
Address: PO Box 120 ST-BK: 13-0890
City, State, Zip: Columbus, GA 31902
Page RC-1
FDIC Certificate No: 00873
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC -- Balance Sheet
Dollar Amounts in Thousands
ASSETS
1 Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . 86,133
b. Interest-bearing balances(2). . . . . . . . . . . . . . . . . 6,297
2. Securities:
a. Held-to-maturity securities . . . . . . . . . . . . . . . . . 43,142
b. Available-for-sale securities . . . . . . . . . . . . . . . . 244,045
3. Federal funds sold and securities
purchased under agreements to resell. . . . . . . . . . . . . 16,178
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income. . . 1,262,055
b. LESS: Allowance for loan and lease losses . . 18,880
c. LESS: Allocated transfer risk reserve . . . . 0
d. Loans and leases, net of unearned income,
allowance, and reserve. . . . . . . . . . . . . . . . . . . .1,243,175
5. Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . 0
6. Premises and fixed assets (including capitalized leases) . . . . 109,313
7. Other real estate owned. . . . . . . . . . . . . . . . . . . . . 390
8. Investments in unconsolidated
subsidiaries and associated companies. . . . . . . . . . . . . . 21,338
9. Customers' liability to this bank on acceptances outstanding . . 0
10. Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . 6,773
11. Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 182,032
12. Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .1,958,816
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
Legal Title of Bank: Columbus Bank and Trust Company Call Date: 12/31/97
Address: PO Box 120 ST-BK: 13-0890
City, State, Zip: Columbus, GA 31902
Page RC-2
FDIC Certificate No: 00873
Schedule RC -- Continued
Dollar Amounts in Thousands
LIABILITIES
13. Deposits:
a. In domestic offices . . . . . . . . . . . . . . . . . . . . 1,266,666
(1) Noninterest-bearing(1). . . . . . . . . . . . 242,808
(2) Interest-bearing. . . . . . . . . . . . . . . 1,023,858
b. In foreign offices, Edge and Agreement subsidiaries and IBF's
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . . /////////
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . /////////
14. Federal Funds purchased and securities
sold under agreements to repurchase. . . . . . . . . . . . . . 173,004
15. a. Demand notes issued to the U.S. Treasury. . . . . . . . . . 3,269
b. Trading liabilities . . . . . . . . . . . . . . . . . . . . 0
16. Other borrowed money:
a. With original maturity of one year or less. . . . . . . . . 31,043
b. With a remaining maturity of
more than one year through three years . . . . . . . . . . 25,475
b. With original maturity of more than three years . . . . . . 0
17. Not applicable . . . . . . . . . . . . . . . . . . . . . . . . /////////
18. Bank's liability on acceptances executed and outstanding . . . 0
19. Subordinated notes and debentures. . . . . . . . . . . . . . . 0
20. Other liabilities. . . . . . . . . . . . . . . . . . . . . . . 144,529
21. Total liabilities (sum of items 13 through 20) . . . . . . . . 1,643,986
22. Not applicable . . . . . . . . . . . . . . . . . . . . . . . . /////////
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus. . . . . . . . . 0
24. Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3,154
25. Surplus (exclude all surplus related to preferred stock) . . . 72,945
26. a. Undivided profits and capital reserves. . . . . . . . . . . 237,249
b. Net unrealized holding gains (losses)
on available-for-sale securities. . . . . . . . . . . . . . 1,482
27. Cumulative foreign currency translation adjustments. . . . . . /////////
28. Total equity capital (sum of items 23 through 27). . . . . . . 314,830
29. Total liabilities, limited-life
preferred stock, and equity capital. . . . . . . . . . . . . . 1,958,816
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of auditing
work performed for the bank by independent external auditors as
of any date during 1993 . . . . . . . . . . . . . . . . . . . N/A
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
<PAGE>
