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Registration No. 333-47515
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
to
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 filing fee was previously
paid.
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 APRIL 24, 1998
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1st FRANKLIN FINANCIAL CORPORATION
PROSPECTUS dated April __, 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 each 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
automatically 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 may be redeemed by the Company, upon at least 30 days written
notice, at any time prior to maturity for a redemption price equal to the
principal price equal to the principal amount plus any unpaid interest
thereon to the date of redemption. Holders of Debentures may request
redemption of the Debentures at the end of any interest adjustment period for
a redemption price equal to the principal amount plus any unpaid interest
thereon to the date of redemption. In addition, at the request of a holder
of Debentures, the Company may, at its option, redeem such holder's
Debentures during any interest adjustment period for a redemption price equal
to the principal amount plus interest thereon at the rate of one-half the
stated rate on such Debentures.
The Debentures mature four years from date of issue, subject to automatic
extension for one four year period, but may be redeemed by the holder without
penalty at the end of any interest adjustment period or at maturity.
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 APRIL 24, 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, 1997
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 31,1997, 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.
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 (other than exhibits) will be provided without
charge upon request to the Company's Secretary at 213 East Tugalo Street,
Post Office Box 880, Toccoa, Georgia 30577, telephone number (706) 886-7571
or 1-(800)-282-0709.
REPORTS TO SECURITY HOLDERS
The Company provides each security holder 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.
2
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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.
Government Regulation
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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.
Fluctuations in Interest Rates
- ------------------------------
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.
Dependence on Continued Sales of Securities and Risk of Unanticipated
Redemptions
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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, the Company is not obligated to accept requests for
redemption of Debentures during any interest adjustment period, and any
requests for redemption during an interest adjustment period are subject to
interest at one-half the stated rate. Based upon the Company's experience,
management does not anticipate that redemptions will have a material adverse
effect on the Company's liquidity. However, there can be no assurance that
the Company will not experience unanticipated declines in sales of securities
or increases in redemption requests, either of which could have a material
adverse effect on the Company's liquidity or financial condition.
Liquidity and Capital Requirements; Collectibility of Receivables
- -----------------------------------------------------------------
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
3
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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. Management believes the
available borrowings under the two aforementioned Credit Agreements will be
adequate to meet the Company's presently anticipated funding needs for the
foreseeable future.
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.
Unsecured Nature of the Debentures
- ----------------------------------
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. For information regarding Senior Debt
outstanding as of a recent date, See Appendix I to this prospectus or the
most recent prospectus supplement.
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.
Risk of Increased Credit Losses
- -------------------------------
Because the business of the Company consists mainly of the making of loans to
individuals who depend on their earnings to make their repayments, the
continued profitable operation of the Company will depend to a large extent on
the continued employment of those people and their ability to meet their
financial obligations as they become due. In the event of a sustained
recession or a significant downturn in business with consequent umemployment
or continued increases in the number of personal bankruptcies among the
Company's typical customer base, which events are beyond the Company's
control, the Company could experience increased credit losses and the
Company's collection ratios and profitability could be adversely affected.
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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 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 December 31, 1997.
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.
The Company can not presently estimate the amount of proceeds which will
be required to make mandatory redemption payments. 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
- -------
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 is payable at
any time at the holder's request. This request may be made to the Company
by phone, mail or in person at the Investment Center. 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. Established features are also set forth in Rule 424(b)
prospectus supplements that are filed weekly with the Securities and Exchange
Commission.
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 requests for early redemption.
All redemptions will be made at the Company's executive offices in Toccoa,
Georgia, either in person or by mail.
-8-
<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.
-9-
<PAGE>
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 December 31, 1997
1. Ratio of Earnings to Fixed Charges (page 3):
December 31
---------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
1.72 1.95 2.06 2.73 2.58
2. Unused borrowings under the $21,000,000 Credit
Agreement (page 6): ........................... $21,000,000
3. Debentures outstanding under Indenture (page 7): .. $37,246,521
4. Senior Debt (as defined under the caption
"Description of Variable Rate
Subordinated Debentures -
Subordination") outstanding (page 8): ......... $98,929,587
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 . . . . . . . . . . . . . . 2
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.
(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.
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).
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 24 day of April, 1998.
1st FRANKLIN FINANCIAL CORPORATION
S/ Ben F. Cheek, III
--------------------
Chairman of the Board
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; April 24, 1998
- ---------------------- Principal Executive Officer; --------------
Director
s/ T. Bruce Childs President April 24, 1998
- ----------------------- --------------
s/ A. Roger Guimond Vice President; April 24, 1998
- ----------------------- Principal Financial Officer; --------------
Principal Accounting Officer
* Director April 24, 1998
- ----------------------- --------------
Mrs. Lorene M. Cheek
* Director April 24, 1998
- ----------------------- --------------
Jack Stovall
* Director April 24, 1998
- ----------------------- --------------
Robert E. Thompson
* By: s/ A. Roger Guimond
Attorney-in-Fact
April 24, 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.
(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.
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
(b) Consent of Jones, Day, Reavis & Pogue (Set forth in
Exhibit5).
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 4(a)
1ST FRANKLIN FINANCIAL CORPORATION
TO
FIRST NATIONAL BANK OF GAINESVILLE
Trustee
________________________
INDENTURE
Dated as of October 31, 1984
_________________________
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE 1 DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions.. . . . . . . . . . . . . . 1
Section 1.02. Other Definitions.. . . . . . . . . . . 2
Section 1.03. Incorporation by Reference of
Trust Indenture Act . . . . . . . . . . 2
Section 1.04. Rules of Construction . . . . . . . . . 3
ARTICLE 2 THE SECURITIES . . . . . . . . . . . . . . . . . . . . 3
Section 2.01. Amount Issuable; Series. . . . . . . . 3
Section 2.02. Form and Dating . . . . . . . . . . . . 5
Section 2.03. Execution and Authentication. . . . . . 5
Section 2.04. Registrar and Paying Agent. . . . . . . 5
Section 2.05. Paying Agent to Hold Money in Trust . . 5
Section 2.06. Securityholder Lists. . . . . . . . . . 5
Section 2.07. Transfer and Exchange . . . . . . . . . 6
Section 2.08. Replacement Securities. . . . . . . . . 6
Section 2.09. Outstanding Securities. . . . . . . . . 6
Section 2.10. Treasury Securities . . . . . . . . . . 6
Section 2.11. Temporary Securities. . . . . . . . . . 6
Section 2.12. Cancellation. . . . . . . . . . . . . . 6
Section 2.13. Defaulted Interest. . . . . . . . . . . 7
ARTICLE 3 REDEMPTION . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.01. Notices to Trustee. . . . . . . . . . . 7
Section 3.02. Selection of Securities to be Redeemed. 7
Section 3.03. Notice of Redemption. . . . . . . . . . 7
Section 3.04. Effect of Notice of Redemption. . . . . 8
Section 3.05. Deposit of Redemption Price . . . . . . 8
Section 3.06. Securities Redeemed in Part . . . . . . 8
ARTICLE 4 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
Section 4.01. Payment of Securities . . . . . . . . . 8
Section 4.02. SEC Reports . . . . . . . . . . . . . . 8
Section 4.03. Compliance Certificate. . . . . . . . . 9
ARTICLE 5 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.01. When Company May Merge, etc . . . . . . 9
ARTICLE 6 DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . 9
Section 6.01. Events of Default . . . . . . . . . . . 9
Section 6.02. Acceleration. . . . . . . . . . . . . .10
Section 6.03. Other Remedies. . . . . . . . . . . . .11
Section 6.04. Waiver of Past Defaults . . . . . . . .11
Section 6.05. Control by Majority . . . . . . . . . .11
Section 6.06. Limitation on Suits . . . . . . . . . .11
Section 6.07. Rights of Holders to Receive Payment. .12
Section 6.08. Collection Suit by Trustee. . . . . . .12
Section 6.09. Trustee May File Proofs of Claim. . . .12
Section 6.10. Priorities. . . . . . . . . . . . . . .12
Section 6.11. Undertaking for Costs . . . . . . . . .12
ARTICLE 7 TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . .13
Section 7.01. Duties of Trustee.. . . . . . . . . . .13
Section 7.02. Rights of Trustee . . . . . . . . . . .14
Section 7.03. Individual Rights of Trustee. . . . . .14
Section 7.04. Trustee's Disclaimer. . . . . . . . . .14
Section 7.05. Notice of Defaults. . . . . . . . . . .14
Section 7.06. Reports by Trustee to Holders . . . . .14
Section 7.07. Compensation and Indemnity. . . . . . .14
Section 7.08. Replacement of Trustee. . . . . . . . .15
Section 7.09. Successor Trustee by Merger, etc. . . .16
Section 7.10. Eligibility; Disqualification . . . . .16
Section 7.11. Preferential Collection of
Claims Against Company. . . . . . . . .16
ARTICLE 8 DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . .16
Section 8.01. Termination of Company's Obligations. .16
Section 8.02. Application of Trust Money. . . . . . .17
ii
<PAGE>
Section 8.03. Repayment to Company. . . . . . . . . .17
ARTICLE 9 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . .17
Section 9.01. Without Consent of Holders. . . . . . .17
Section 9.02. With Consent of Holders . . . . . . . .18
Section 9.03. Compliance with Trust Indenture Act . .18
Section 9.04. Revocation and Effect of Consents . . .18
Section 9.05. Notation on or Exchange of Securities .19
Section 9.06. Trustee Protected . . . . . . . . . . .19
ARTICLE 10 SUBORDINATION . . . . . . . . . . . . . . . . . .19
Section 10.01. Agreement to Subordinate . . . . . . .19
Section 10.02. Certain Definitions. . . . . . . . . .19
Section 10.03. Liquidation; Dissolution; Bankruptcy .19
Section 10.04. Default on Senior Debt . . . . . . . .20
Section 10.05. Acceleration of Securities . . . . . .20
Section 10.06. When Distribution Must Be Paid Over. .20
Section 10.07. Notice by Company. . . . . . . . . . .20
Section 10.08. Subrogation. . . . . . . . . . . . . .21
Section 10.09. Relative Rights. . . . . . . . . . . .21
Section 10.10. Subordination May Not Be
Impaired by Company. . . . . . . . . .21
Section 10.11. Distribution or Notice
to Representative. . . . . . . . . . .21
Section 10.12. Rights of Trustee and Paying Agent . .21
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . .22
Section 11.01. Trust Indenture Act Controls . . . . .22
Section 11.02. Notices. . . . . . . . . . . . . . . .22
Section 11.03. Communications by Holders
with Other Holders . . . . . . . . . .22
Section 11.04. Certificate Opinion as to
Conditions Precedent . . . . . . . . .22
Section 11.05. Statements Required in
Certificate or Opinion . . . . . . . .22
Section 11.06. Rules by Trustee and Agents. . . . . .23
Section 11.07. Legal Holidays . . . . . . . . . . . .23
Section 11.08. No Recourse Against Others . . . . . .23
Section 11.09. Duplicate Originals. . . . . . . . . .23
Section 11.10. Variable Provisions. . . . . . . . . .23
Section 11.11. Governing Law. . . . . . . . . . . . .24
Signatures
iii
<PAGE>
Exhibit A--Form of Security
iv
<PAGE>
CROSS-REFERENCE TABLE
TIA Section Indenture Section
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.08; 7.10; 11.02
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.06
(b) 11.03
(c) 11.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 11.02
(d) 7.06
314(a) 4.02; 11.02
(b) N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d) N.A.
(e) 11.05
(f) N.A.
315(a) 7.01(b)
(b) 7.05; 11.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a)(last sentence) 2.10
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.05
318(a) 11.01
N.A. means not applicable.
v
<PAGE>
INDENTURE dated as of October 31, 1984, between 1st FRANKLIN FINANCIAL
CORPORATION, a Georgia corporation ("Company"), and FIRST NATIONAL BANK OF
GAINESVILLE, a Georgia banking corporation ("Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Variable
Rate Subordinated Debentures ("Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
-----------
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Company" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
"Holder" or "Securityholder" means a person in whose name a Security
is registered.
"Indenture" means this Indenture as amended from time to time.
"Officers' Certificate" means a certificate signed by either the
President, the Treasurer or a Vice-President of the Company. See
Sections 11.04 and 11.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee. See Sections 11.04 and 11.05.
"Principal" of a debt security means the principal of the security
plus the premium, if any, on the security.
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued under this
Indenture, and unless the contest otherwise requires, means Securities of
any series.
"TIA" means the Trust Indenture Act of 1939. (15 U.S.
Code #77aaa77bbbb) as in effect on the date shown above.
"Trustee" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
Section 1.02. Other Definitions.
-----------------
Term Defined in Section
---- ------------------
"Bankruptcy" 6.01
"Custodian" 6.01
"Debt" 10.02
"Event of Default" 6.01
"Interest Payment Date" 2.01
"Legal Holiday" 11.07
"Officer" 11.10
"Paying Agent" 2.03
"Registrar" 2.03
"Regular Record Date" 2.01
"Representative" 10.02
"Senior Debt" 10.02
"Stated Maturity" 2.01
"U.S. Government Obligations" 8.01
Section 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
2
<PAGE>
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by
TIA reference to another statute or defined by SEC rule under the TIA have
the meanings assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.01. Amount Issuable; Series.
------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto, prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration, of transfer of, or in exchange for,
or in lieu of, other Securities of the series as otherwise
provided in this Indenture;
(3) the date or dates on which the principal of the
Securities of the series is payable;
3
<PAGE>
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, the date or dates from which such
interest shall accrue, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the
interest payable on any Interest Payment Date;
(5) the place or places where the principal of (and
premium, if any) and interest on Securities of the series shall
be payable;
(6) the period or periods within which, the price or prices
at which and the terms and conditions upon which Securities of
the Series may be redeemed, in whole or in part, at the option of
the Company;
(7) the obligation, if any, of the Company to redeem or
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the
period or periods within which, the price or prices at which and
the terms and conditions upon which Securities of the series
shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(8) if other than denominations of $100 and any integral
multiple thereof, the denominations in which Securities of the
series shall be issuable;
(9) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
"Interest Payment Date" means the Stated Maturity of an installment of
interest on a Security.
"Regular Record Date" means, as to interest payable on any Interest
Payment Date on the Securities, the date specified for that purpose as
contemplated by this Section 2.01.
"Stated Maturity" means, as to any Security or any installment of
principal thereof or interest thereon, the date specified in such Security as
the fixed date on which the principal or installment is due and payable.
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such supplemental indenture hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
4
<PAGE>
Section 2.02. Form and Dating.
---------------
The Securities shall be substantially in the form of Exhibit A, which
is part of this Indenture, or in such other form as shall be established by
or pursuant to a Board Resolution or in one or more supplemental indentures
hereto. The Securities may have notations, legends or endorsements required
by law or usage. Each Security and each replacement Security shall be dated
the date of its issue by the Company.
Section 2.03. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that
the Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue up to the
aggregate principal amount stated in the Board Resolution or supplemental
indenture described in Section 2.01. The aggregate principal amount of
Securities outstanding at any time may not exceed that amount except as
provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
Section 2.04. Registrar and Paying Agent.
--------------------------
The Company shall designate a person to whom the Securities may be
presented for registration of transfer or for exchange ("Registrar") and a
person (who may be the same as the Registrar) to whom Securities may be
presented for payment ("Paying Agent"). The Registrar shall keep a register
of the Securities and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. If the Company
fails to designate a Registrar or Paying Agent, the Company shall act as such.
Section 2.05. Paying Agent to Hold Money in Trust.
-----------------------------------
If the Company acts as Paying Agent, the Company shall hold all money
held by it as Paying Agent in trust for the purposes for which such money was
paid but need not segregate such money from other funds except to the extent
required by law.
Section 2.06. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee from time to time as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders.
5
<PAGE>
Section 2.07. Transfer and Exchange.
---------------------
Where Securities are presented to the Registrar or a co-registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Securities of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are
met. To permit registrations of transfer and exchanges, the Trustee shall
authenticate Securities at the Registrar's request. The Company may charge
a reasonable fee for any registration of transfer or exchange but not for any
exchange pursuant to Section 2.11, 3.06 or 9.05.
Section 2.08. Replacement Securities.
----------------------
If the Holder of a Security claims that the Security has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Security if the Company's requirements are
met. If required by the Trustee or the Company, an indemnity bond must be
sufficient in the judgment of both to protect the Company, the Trustee or any
authenticating agent from any loss which any of them may suffer if a Security
is replaced. The Company may charge for its expenses in replacing a Security.
Section 2.09. Outstanding Securities.
----------------------
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If Securities are considered paid under Section 4.01, they cease to be
outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
Section 2.10. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or an Affiliate shall be disregarded, except that for
the purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded.
Section 2.11. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities.
Section 2.12. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration or transfer, exchange,
payment or conversion. The Trustee shall cancel all Securities surrendered
6
<PAGE>
for registration of transfer, exchange, payment, conversion or cancellation
and shall dispose of cancelled Securities as the Company directs. The
Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation.
Section 2.13. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner. It may pay the
defaulted interest, plus any interest payable on the defaulted interest, to
the persons who are Securityholders on a subsequent special record date. The
Company shall fix the record date and payment date. At least 15 days before
the record date, the Company shall mail to Securityholders a notice that
states the record date, payment date and amount of interest to be paid.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Company wants to redeem Securities pursuant to paragraph 2 of
the Securities, it shall notify the Trustee of the redemption date and the
principal amount of Securities to be redeemed. The Company's notice shall
specify the paragraph of the Securities pursuant to which it wants to redeem
Securities.
The Company shall give each notice provided for in this Section at
least 50 days before the redemption date.
Section 3.02. Selection of Securities to be Redeemed.
--------------------------------------
If less than all the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed pro rata or by lot. The Trustee
shall make the selection not more than 75 days before the redemption date
from Securities outstanding not previously called for redemption. The
Trustee may select for redemption portions of the Principal of Securities
that have denominations larger than $100. Securities and portions of them it
selects shall be in amounts of $100 or whole multiples of $100. Provisions
of this Indenture that apply to Securities called for redemption also apply
to portions of Securities called for redemption.
Section 3.03. Notice of Redemption.
--------------------
At least 30 days, but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder whose Securities
are to be redeemed.
The Notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
7
<PAGE>
(4) that Securities called for redemption may be converted
at any time before the close of business on the redemption date;
(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price; and
(6) that interest on Securities called for redemption
ceases to accrue on and after the redemption date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the redemption price.
Section 3.05. Deposit of Redemption Price.
---------------------------
On or before the redemption date, the Company shall deposit money
sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date.
Section 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. Principal and
interest shall be considered paid on the date due if the Paying Agent holds
on that date money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the rate borne
by the Securities, it shall pay interest on overdue installments of interest
at the same rate to the extent lawful.
Section 4.02. SEC Rights.
----------
The Company shall file with the Trustee within 15 days after it files
them with the SEC copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. The Company also shall comply with the
other provisions of TIA #314(a).
8
<PAGE>
Section 4.03. Compliance Certificate.
----------------------
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether
or not the signers know of any Default that occurred during the fiscal year.
If they do, the certificate shall describe the Default and its status. The
certificate need not comply with Section 11.05. See Section 11.10.
ARTICLE 5
SUCCESSORS
Section 5.01. When Company May Merge, etc.
---------------------------
The Company shall not consolidate or merge into, or transfer or lease
all or substantially all of its assets to, any person unless:
(1) the person is a corporation;
(2) the person assumes by supplemental indenture all the
obligations of the Company under the Securities and this
Indenture; and
(3) immediately after the transaction no Default exists.
The surviving, transferee or lessee corporation shall be the successor
Company, but the predecessor Company in the case of a transfer of lease shall
not be released from the obligation to pay the principal of and interest on
the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and the Default
continues for a period of 30 days.
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at maturity,
upon redemption or otherwise;
(3) the Company fails to comply with any of its other
agreements in the Securities or this Indenture and the Default
continues for the period and after the notice specified below;
(4) the Company pursuant to or within the meaning of any
Bankruptcy Law:
9
<PAGE>
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(5) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary
case,
(B) appoints a Custodian of the Company or for all or
substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (3) is not an Event of Default until the Trustee
or the Holders of at least 25% in principal amount of the Securities of the
affected series notify the Company of the Default and the Company does not
cure the Default within 60 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is
a "Notice of Default."
Section 6.02. Acceleration.
------------
If an event of Default occurs and is continuing, the Trustee by notice
to the Company, or the Holders of at least 25% in principal amount of the
Securities of the affected series by notice to the Company and the Trustee,
may declare the principal of and accrued interest on all the Securities of
such series to be due and payable. Upon such declaration the principal and
interest shall be due and payable immediately. The Holders of a majority in
principal amount of the Securities of such series by notice to the Trustee
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
10
<PAGE>
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest
on the Securities or to enforce the performance of any provision of the
Securities of this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities of the affected series or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
-----------------------
The Holders of the affected series of a majority in principal amount
of the Securities by notice to the Trustee may waive an existing Default and
its consequences except a Default in the payment of the principal of or
interest on any Security or a Default under Article 10.
Section 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities of the
affected series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, is unduly prejudicial
to the rights of other Securityholders, or would involve the Trustee in
personal liability.
Section 6.06. Limitation on Suits.
-------------------
A Securityholder may pursue a remedy with respect to this Indenture or
the Securities of the affected series only if:
(1) the Holder gives to the Trustee notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the
Securities make a request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the Securities do not give the Trustee a
direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
11
<PAGE>
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security of the affected series to receive payment of principal
and interest on the Security, on or after the respective due dates expressed
in the Security, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of the Holder.
Notwithstanding any of the provision of this Indenture, the right of
any Holder of a Security to bring suit for the enforcement of the right to
convert the Security shall not be impaired or affected without the consent of
the Holder.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid.
Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
and the Securityholders allowed in any judicial proceedings relative to the
Company, its creditors or its property.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to holders of Senior Debt to the extent required by
Article 10;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the Securities for principal and interest, respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee,
a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more
than 10% in principal amount of the Securities.
12
<PAGE>
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against
any loss, liability or expense.
13
<PAGE>
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money
held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02. Rights of Trustee.
-----------------
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or reflects from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on the Certificate or Opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers.
Section 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities other than its authentication.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to Securityholders of the affected series a notice of
the Default within 90 days after it occurs. Except in the case of a Default
in payment on any Security, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of such Securityholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after the reporting date stated in Section 11.10, the
Trustee shall mail to Securityholders a brief report dated as of such
reporting date that complies with TIA #313(a). The Trustee also shall comply
with TIA #313(b)(2).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC.
Section 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be
14
<PAGE>
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable out-of-
pocket expenses of the Trustee's agents but the Trustee shall be responsible
for its own legal fees, except as specified in the following paragraph.
The Company shall indemnify the Trustee against any loss or liability
incurred by it. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel.
The Company need not pay for any settlement made without its consent.
The Company need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance
of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
15
<PAGE>
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the Securities may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Securityholders. The retiring Trustee shall promptly
Transfer all property held by it as Trustee to the successor Trustee, subject
to the lien provided for in Section 7.07.
Section 7.09. Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA #313(a)(1). The Trustee shall always have a combined
capital and surplus as stated in #12.10. The Trustee is subject to TIA
#310(b), including the optional provision permitted by the second sentence of
TIA #310(b)(9). #12.10 lists any excluded indenture or trust agreement.
Section 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee is subject to TIA #313(a), excluding any creditor
relationship have listed in TIA #311(b). A Trustee who has resigned or been
removed is subject to TIA #311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations.
------------------------------------
The Company may terminate all of its obligations under this Indenture
if:
(1) the Securities mature within one year or all of them
are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice
of redemption; and
(2) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations sufficient to pay
16
<PAGE>
principal and interest on the Securities to maturity or
redemption, as the case may be. The Company may make the deposit
only during the one-year period and only if Article 11 permits it.
However, the Company's obligations in Section 2.04, 2.05, 2.06, 2.07,
2.08, 4.01, 7.07, 7.08 and 8.03 shall survive until the Securities are no
longer outstanding. Thereafter the Company's obligations in Section 7.07 and
8.03 shall survive.
After a deposit the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under this Indenture except for
those surviving obligations specified above.
In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government obligations shall be payable
as to principal or interest on or before such payment date in such amounts as
will provide the necessary money. U. S. Government Obligations shall not be
callable at the issuer's option.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged.
Section 8.02. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal and
interest on the Securities. Money and securities so held in trust are not
subject to Article 10.
Section 8.03. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years. After payment to the Company, Securityholders
entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
person.
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders.
--------------------------
The Company and the Trustee may amend this Indenture or the Securities
without the consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Sections 5.01 and 10.15;
17
<PAGE>
(3) to provide for uncertificated Securities in addition to
certificated Securities; or
(4) to make any change that does not adversely affect the
rights of any Securityholder.
Section 9.02. With Consent of Holders.
-----------------------
The Company and the Trustee may amend this Indenture or the Securities
with the written consent of the Holders of at least 66-2/3% in principal
amount of the Securities. However, without the consent of each
Securityholder affected, an amendment under this Section may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or change the time for payment of
interest on any Security;
(3) reduce the principal of or change the fixed maturity of
any Security;
(4) make any Security payable in money other than that
stated in the Security;
(5) make any change in Section 6.04, 6.07 or 9.02 (second
sentence);
(6) make any change that adversely affects the right to
convert any Security; or
(7) make any change in Article 11 that adversely affects
the rights of any Securityholder.
An amendment under this Section may not make any change that adversely
affect the rights under Article 11 of any holder of an issue of Senior Debt
unless the holders of the issue pursuant to its terms consent to the change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing the amendment.
Section 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Securities shall be set forth
in a supplemental indenture that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
18
<PAGE>
same debt as the consenting Holder's Security, even if notation of the
consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of a security if
the Trustee receives the notice of revocation before the date the amendment
or waiver becomes effective. An amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Securityholder.
Section 9.05. Notation on or Exchange of Securities.
-------------------------------------
The Trustee may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities
that reflect the amendment or waiver.
Section 9.06. Trustee Protected.
-----------------
The Trustee need not sign any supplemental indenture that adversely
affects its rights.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
------------------------
The Company agrees, and each Securityholder by accepting a Security
agrees, that the indebtedness evidenced by the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article,
to the prior payment in full of all Senior Debt, and that the subordination
is for the benefit of the holders of Senior Debt.
Section 10.02. Certain Definitions.
-------------------
"Debt" means any indebtedness for borrowed money or any guarantee of
such indebtedness.
"Representative" means the indenture trustee or other Trustee, agent or
representative for an issue of Senior Debt.
"Senior Debt" means Debt of the Company outstanding at any time, except
Debt that by its terms is not senior in right of payment to the Securities.
Senior Debt may be further defined in Section 11.10.
A distribution may consist of cash, securities or other property.
Section 10.03. Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive
payment in full in cash of the principal of and interest
(including interest accruing after the commencement of any such
19
<PAGE>
proceeding) to the date of payment on the Senior Debt before
Securityholders shall be entitled to receive any payment of
principal of or interest on Securities; and
(2) until the Senior Debt is paid in full in cash, any
distribution to which Securityholders would be entitled but for
this Article shall be made to holders of Senior Debt as their
interest may appear, except that Securityholders may receive
securities that are subordinated to Senior Debt to at least the
same extent as the Securities.
Section 10.04. Default on Senior Debt.
----------------------
The Company may not pay principal of or interest on the Securities and
may not acquire any Securities for cash or property other than capital stock
of the Company if:
(1) a default on Senior Debt occurs and is continuing that
permits holders of such Senior Debt to accelerate its maturity,
and
(2) the default is the subject of judicial proceedings or
the Company receives a notice of the default from a person who
may give it pursuant to Section 10.12. If the Company receives
any such notice, a similar notice received within nine months
thereafter relating to the same default on the same issue of
Senior Debt shall not be effective for purposes of this Section.
The Company may resume payments on the Securities and may acquire them
when:
(a) the default is cured or waived, or
(b) 120 days pass after the notice is given if the default is
not the subject of judicial proceedings.
if this Article otherwise permits the payment or acquisition at that time.
Section 10.05. Acceleration of Securities.
--------------------------
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration. The Company may pay the Securities when 120 days pass after
the acceleration occurs if this Article permits the payment at that time.
Section 10.06. When Distribution Must Be Paid Over.
-----------------------------------
If a distribution is made to Securityholders that because of this
Article should not have been made to them, the Securityholders who receive
the distribution shall hold it in trust for holders of Senior Debt and pay
it over to them as their interests may appear.
Section 10.07. Notice by Company.
-----------------
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of principal of or
interest on the Securities to violate this Article.
20
<PAGE>
Section 10.08. Subrogation.
-----------
After all Senior Debt is paid in full and until the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Securityholders have been applied
to the payment of Senior Debt. A distribution made under this Article to
holders of Senior Debt which otherwise would have been made to
Securityholders is not, as between the Company and Securityholders, a payment
by the Company on Senior Debt.
Section 10.09. Relative Rights.
---------------
This Article defines the relative rights of Securityholders and
holders of Senior Debt. Nothing in the Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional,
to pay principal of and interest on the Securities in accordance
with their terms;
(2) affect the relative rights of Securityholders and
creditors of the Company other than holders of Senior Debt; or
(3) prevent the Trustee or any Securityholder from
exercising its available remedies upon a Default, subject to the
rights of holders of Senior Debt to receive distributions
otherwise payable to Securityholders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default.
Section 10.10. Subordination May Not Be Impaired by Company.
--------------------------------------------
No right of any holder of Senior Debt to enforce the subordination of
the indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Section 10.12. Rights of Trustee and Paying Agent.
----------------------------------
The Trustee or Paying Agent may continue to make payments on the
Securities until it receives notice of facts that would cause a payment of
principal of or interest on the Securities to violate this Article. Only the
Company, a Representative or a holder of an issue of Senior Debt that has no
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
21
<PAGE>
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 11.02. Notices.
-------
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person or mailed by first-class
mail to the other's address stated in Section 11.10. The Company or the
Trustee by notice to the other may designate additional or different
addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or comunication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
Section 11.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA #312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA #312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 11.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
22
<PAGE>
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
Section 11.06. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or a meeting of
Security holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
Section 11.07. Legal Holidays.
--------------
"Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Section 11.08. No Recourse Against Others.
--------------------------
All liability described in the Securities of any director, officer,
employee or stockholder, as such, of the Company is waived and released.
Section 11.09. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
Section 11.10. Variable Provisions.
-------------------
"Officer" means the President, any Vice-President, the Treasurer, the
Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.
The Trustee does not initially appoint an authenticating agent.
The Company initially shall serve as Paying Agent and Registrar.
The first certificate pursuant to Section 4.03 shall be for the fiscal
year ending on December 31, 1984.
The reporting date for Section 7.06 is April 15 of each year. The
first reporting date is April 15, 1985.
23
<PAGE>
The Trustee shall always have a combined capital and surplus of at
least $10,000,000 as set forth in its most recent published annual report of
condition.
In determining whether the Trustee has a conflicting interest as
defined in TIA #310(b)(1), the following is excluded: [recitations if
appropriate].
Senior Debt does not include the Company's subordinated notes and
debentures all of which are pari passu;
The Securities are not senior in right of payment to the foregoing
debt securities of the Company.
The Company's address is:
213 East Tugalo Street
P.0. Box 880
Toccoa, Georgia 30577
The Trustee's address is:
111 Green Street, S.E.
P. O. Drawer 937
Gainesville, GA 30501
Section 11.11. Governing Laws.
--------------
The laws of the State of Georgia shall govern this Indenture and the
Securities.
Dated: As of October 31, 1984 1st FRANKLIN FINANCIAL CORPORATION
----------------------
By: /s/ Terry E. Fields
------------------------
Terry E. Fields,
Vice President-Finance
Attest:
/s/ A. R. Guimond
- ----------------------
Assistant Secretary (SEAL)
<PAGE>
<PAGE>
JONES, DAY, REAVIS & POGUE
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
April 24, 1998
1st Franklin Financial Corporation
213 East Tugalo Street
P.O. Box 880
Toccoa, Georgia 30577
Re: 1st Franklin Financial Corporation
Form S-2 Registration Statement
File No. 333-447515
----------------------------------
Gentlemen:
We have acted as special counsel to 1st Franklin Financial Corporation, a
Georgia corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of $20,000,000
in aggregate principal amount of Variable Rate Subordinated Debentures,
Series I ("Subordinated Debentures") to be issued pursuant to an Indenture,
dated as of October 31, 1984, between the Company and First National Bank of
Gainesville, as Trustee, (as amended by the Agreement of Resignation,
Appointment and Acceptance dated as of May 28, 1993 among the Company, First
National Bank of Gainesville, and Columbus Bank and Trust Company, and as
further amended by the Modification of Indenture dated as of March 30, 1995
among the Company, Columbus Bank and Trust Company and Synovus Trust Company,
as successor trustee (the "Trustee")(as so amended and modified, the
"Indenture"), and to be sold by the Company from time to time pursuant to the
above-referenced registration statement (the "Registration Statement").
We have reviewed the Company's Restated Articles of Incorporation and
amendments thereto, the Company's Bylaws and its corporate proceedings as
disclosed by its minute book, the Indenture and the form of Variable Rate
Subordinated Debenture, and have reviewed the Registration Statement. We
have examined such other documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereon and subject
to the satisfaction of the conditions described below, we are of the opinion
that:
<PAGE>
The Subordinated Debentures have been duly authorized and, when duly
executed, authenticated and delivered to and paid for by the purchasers
thereof, will be valid and binding obligations of the Company.
This opinion is subject to the satisfaction of the following conditions:
(a) The due execution, authentication and delivery of the
Subordinated Debentures in accordance with the terms of the Indenture and the
sale of the Subordinated Debentures by the Company in accordance with the
terms of the Indenture and in accordance with the authorization of its
Board of Directors; and
(b) The due execution, authentication and delivery of the
Subordinated Debentures to the purchasers thereof and their payment therefor.
We hereby consent to the filing of this opinion as an exhibit to the
above-mentioned Registration Statement and to the reference to our name under
the caption "Legal Opinion" in the Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<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
Year Ended
December 31
-------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income Before
Income Taxes. . . . . . . $ 8,418 $ 8,969 $10,319 $ 8,322 $ 6,177
Interest on
Indebtedness. . . . . . . 8,312 8,048 5,556 4,910 4,423
Portion of rents
representative of
the interest
factor. . . . . . . . . . 518 449 419 362 304
------- ------- ------- ------- -------
Earnings as
Adjusted . . . . . . $17,248 $17,466 $16,294 $13,594 $10,904
======= ======= ======= ======= =======
Interest on
Indebtedness. . . . . . . $ 8,312 $ 8,048 $ 5,556 $ 4,910 $ 4,423
Portion of rents
representative of
the interest
factor. . . . . . . . . . 518 449 419 362 304
------- ------- ------- ------- -------
Fixed Charges. . . . . . $ 8,830 $ 8,497 $ 5,975 $ 5,272 $ 4,727
======= ======= ======= ======= =======
Ratio of Earnings
to Fixed Charges. . . . . 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 26,
1998 included in the Company's Form 10-K and Annual Report for the year ended
December 31, 1997 and to all references to our Firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 24, 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>
