Rule 424(b)(2)
SEC File #333-34442
1st FRANKLIN FINANCIAL CORPORATION
INVESTMENTS
WEEK OF SEPTEMBER 21, 2000 THRU SEPTEMBER 27, 2000
VARIABLE RATE SUBORDINATED DEBENTURES
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Effective Interest Interest Minimum
Yield (a) Rate (b) Adjustment (c) Amount
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5.91 5.75 1 Month $500
5.91 5.75 3 Months $500
7.25 7.00 6 Months $500
8.06 7.75 1 Year $500
8.33 8.00 2 Years $500
8.33 8.00 4 Years $500
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(a) Compounded daily based on a 365 year year.
(b) Interest is earned daily and will be payable at
anytime at the holder's request.
(c) At the end of this period, interest rate will be
adjusted to a new rate or the holder may redeem
without penalty. Redemptions at any other time
subject to interest penalty.
For a Prospectus, write or call 1st FRANKLIN FINANCIAL,
P.O. Box 880, Toccoa, Georgia 30577, (706) 886-7571 or
1-800-282-0709. Offer is made only by the Prospectus.
PROSPECTUS SUPPLEMENT dated as of August 17, 2000
(1) INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE on page 2 of the
Prospectus is hereby changed to read in its entirely, as changed, as
follows:
"The Company incorporates herein by reference the following documents:
(a) The Company's Annual Report on Form 10-K dated as of December 31,
1999 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, 1999 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;
(v) Management's Discussion and Analysis of Financial Condition
and Results of Operations furnished as required by Item 303
of Regulation S-K."
(c) The Company's Quarterly Report on Form 10-Q dated as of March 31,
2000 filed pursuant to Section 15(d) of the Exchange Act with the
Commission.
(d) The Company's Quarterly Report on Form 10-Q dated as of June 30,
2000 and the quarterly report to security holders, included therein,
which is delivered with this Prospectus.
Any statement in the documents incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospecuts and
the Registration Statement of which it is a part to the extent that a
statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as
modified or superseded, to constitute a part of this Prospectus or the
Registration Statement of which it is a part.
(2) APPENDIX I on page 11 of the Prospectus is hereby changed to read in its
entirety, as changed, as follows:
"Appendix I to Prospectus
Information as of June 30, 2000
1. Ratio of Earnings to Fixed Charges (page 3):
June 30 December
------- ------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
1.99 2.00 1.94 1.72 1.95 2.06
==== ==== ==== ==== ==== ====
2. Unused borrowings under Credit Agreement (page 6): $ 18,270,000
3. Amount of Debentures
outstanding under Indenture (page 7): $ 37,769,102
4. Senior Debt outstanding (page 8): $114,337,767
A more current Appendix I, if appropriate, will be attached to the
cover page of the Prospectus as a supplement. If attached, that supplement
Appendix I supersedes this information."
1st FRANKLIN FINANCIAL CORPORATION
PROSPECTUS dated April 25, 2000
$20,000,000 VARIABLE RATE SUBORDINATED DEBENTURES
_________________________________________________
1st Franklin Financial Corporation will issue the Variable Rate Subordinated
Debentures (the "Debentures") in varying minimum purchase amounts that we
will establish each Thursday, on a weekly basis. For each respective purchase
amount, we 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
we sell during that period. At the end of each interest adjustment period,
the interest rate will automatically adjust to the then current rate. All
other provisions will remain unchanged for the entire term of the Debenture.
We will publish the established features weekly in a newspaper of general
circulation and, in addition, you can obtain the established features from
our web site at http://www.1ffc.com or from our executive offices 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.
We may redeem the Debentures. upon at least 30 days written notice, at any
time prior to maturity for a redemption 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, we may, at our option,
redeem such holders'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 the holder may redeem his or her
Debenture 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.
Investing in our Debentures involves risk. See "Risk
Factors" beginning on page 3 for a description of these
risks.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. 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. We will sell them at face value through our executive officers.
(b) Before deduction of the Company's expenses, estimated at $36,880.
<PAGE>
AVAILABLE INFORMATION
1st Franklin Financial Corporation is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth St.,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices or the
public reference offices thereof located at 7 World Trade Center, 13th Floor,
New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, copies of such material may be obtained from
the Public Reference Section of the Commission at 450 Fifth St., N.W.,
Washington, D.C. 20549 at the rates prescribed by the Commission. 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 for the year ended December
31, 1999 and filed pursuant to Section 15(d) of the Exchange Act with
the Commission.
(b) From the Company's annual report to security holders for the year
ended December 31,1999, 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 Form 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. Each of these reports for the current year
are also available on the Company's web site at hppt://www.1ffc.com.
-2-
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In that event, you may lose part or all of your
investment.
We are subject to many laws and government regulations, and any changes in
these laws or regulations may materially and adversely affect our financial
condition and our business operations.
Our operations 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 we obtain and maintain certain licenses and
qualifications, limit the interest rates, fees and other charges we are
allowed to charge, limit or prescribe other terms of our loans, require
specified disclosures to borrowers, govern the sale and terms of insurance
products that we offer and the insurers for which we act as agent, and define
our rights to repossess and sell collateral. Although we believe that we are
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 our compliance
therewith more difficult or expensive, restrict our ability to originate
loans, further limit or restrict the amount of interest and other charges we
earn under such loans, or otherwise adversely affect our financial condition
or business operations.
An increase in the interest we pay on our debt and borrowings can materially
and adversely affect our net interest margin.
The loans we make in the ordinary course of our 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 our fixed and variable rate securities
(including the securities offered hereby), we may experience a decrease in
our net interest margin because increased interest costs cannot be passed on
to all of our loan customers. Net interest margin represents the difference
between the amount that we earn on loans and investments and the amount that
we pay on debt securities and other borrowings. An increase in prevailing
interest rates could adversely affect our net interest margin.
A decrease in the sale of our debt securities or an increase in requests for
the redemption of the securities sold hereby may have a material adverse
affect on our liquidity and financial condition.
Our liquidity depends on the sale of our debt securities, the continued
availability of unused bank credit from our lenders and the collection of our
receivables. Numerous investment alternatives have caused investors to
evaluate more critically their investment opportunities. The securities
offered hereby will have interest rates and redemption terms which we believe
will generate sufficient sales of debt securities to meet our liquidity
requirements. Although all of our debt securities are subject to redemption
prior to maturity at the option of the holder thereof, we are 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 our
experience, we do not anticipate that redemptions will have a material
adverse effect on our liquidity. However, there can be no assurance that we
will not experience unanticipated declines in sales of securities or
increases in redemption requests, either of which could have a material
adverse effect on our liquidity or financial condition.
We rely on credit agreements with banks to meet our redemption obligations and
fund a portion of our general operations. If we are unable to continue to
borrow under these credit agreements, or if we are unable to collect our
receivables, we may not be able to meet our obligations under the securities
offered hereunder.
We have a Credit Agreement with three major banks under which we may make
borrowings in order to meet the redemption requests of our security holders
-3-
and our other liquidity and operating requirements. The Credit Agreement
provides for maximum borrowings of $21,000,000 or 70% of the net finance
receivables, whichever is less. Borrowings are on an unsecured basis at 1/4%
above the prime rate of interest. In addition, there is a commitment fee of
5/8% of the available line less average borrowings and an agent's fee of 1/8%
of the total line. The Credit Agreement has a commitment termination date of
June 30 in any year in which written notice of termination is given by the
banks. If written notice is given in accordance with the agreement, the
outstanding balance of the loans shall be paid in full on the date which is
three and one half years after the commitment termination date. The banks
also may terminate the agreement upon the violation of any of the financial
ratio requirements or covenants contained in the agreement or in June of any
calendar year if our financial condition 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.
We have 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 and
has a commitment termination date of July 1 in any year in which notice of
termination is given by the bank. There can be no assurances that either of
our Credit Agreements will continue to be available to us at their present
amounts, or at all, because each is subject to periodic reviews by the
lenders, which take into account our profitability, economic conditions and
other lending criteria. We believe the available borrowings under the two
aforementioned Credit Agreements will be adequate to meet the our presently
anticipated funding needs for the foreseeable future.
Our liquidity is dependent, among other things, on the collection of our
receivables. We continually monitor the delinquency status of its receivables
and promptly institute collection efforts on each delinquent account.
Delinquencies of our consumer finance receivables are likely to be affected
by general economic conditions. Although current economic conditions have not
had a material adverse effect on our ability to collect our receivables, no
assurances can be given regarding future economic conditions or their effect
on our ability to collect our receivables.
If one or more of the sources of funds discussed above are significantly
curtailed for any reason, our ability to meet our obligations, including our
obligations with respect to the securities offered hereby, could be adversely
affected.
The Debentures are general and unsecured and are subordinate to our Senior
Debt, and the holders of Senior Debt have priority over the Debenture holders
to recover their investment in the event of our bankruptcy or dissolution.
The Debentures will be general, unsecured obligations of 1ST Franklin
Financial Corporation and subordinated in right of payment to all of our
Senior Debt (as defined in "Description of Variable Rate Subordinated
Debentures - Subordination"). We are not limited in the amount of additional
Senior Debt or secured obligations we may incur. 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 1st Franklin Financial Corporation or to
our creditors, as such, or to our property, or in the event of any proceeding
for voluntary liquidation, dissolution or other winding up of 1st Franklin
Financial Corporation, whether or not involving insolvency or bankruptcy,
then the holders of Senior Debt will 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 ability of our customers to repay their obligations to us depends on their
continued financial stability; therefore, a recession or economic downturn
which adversely affects the financial resources of our customers may have a
materially adverse effect on our collections and profitability.
Because our business consists mainly of the making of loans to individuals who
depend on their earnings to make their repayments, our continued profitable
operation 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.
-4-
In the event of a sustained recession or a significant downturn in business
with consequent unemployment or continued increases in the number of personal
bankruptcies among our typical customer base, which events are beyond our
control, we could experience increased credit losses and our collection
ratios and profitability could be adversely affected.
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
-5-
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 97 branch
offices in Georgia, 33 in Alabama, 22 in South Carolina, 13 in Mississippi,
11 in Louisiana and 2 in North Carolina. We fund our loan demand through a
combination of debt securities and a Credit Agreement with three 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 hereto sets forth the amount of unused
borrowings under the Credit Agreement as of December 31, 1999.
USE OF PROCEEDS
Net proceeds from sales of the securities offered hereby, after payment of
estimated expenses of $35,600, 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 involve known and unknown risks, uncertainties
and other factors 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. Such factors include the risks we face and that are
described in the "Risk Factors" section above and as otherwise described in
our Form 10-K and the other periodic reports that we file with the Commission
from time to time. If any of the events described in th "Risk Factors"
section and elsewhere in this prospectus occur, they could have an adverse
effect on the Company's business, financial condition and results of
operation. The Company is not obligated to update any forward-looking
statements.
-6-
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 the 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, either
in person or by mail. See "Redemption at Request of Holder Prior to
Maturity".
-7-
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 from the
Company's web site maintained at http://www.1ffc.com or directly from the
Company's executive offices in Toccoa, Georgia. Established features are also
set forth in Rule 424(b)(2) 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-
Extension After Maturity
------------------------
The maturity of a Series 1 Debenture will be automatically extended from the
original maturity date for a period equal to the original term of such
Series 1 Debenture unless the holder submits the Series 1 Debenture for
redemption within 15 days after its maturity or the Company tenders the
amount due the holder within 15 days after maturity. In the event of such an
extension, all provisions of the Series 1 Debenture will remain unchanged
with the exception of the interest rate which will be changed in accordance
with the interest adjustment provision. If the Company does not elect to
tender payment, it will notify the holder of this extension provision at
least 30 days prior to the maturity date.
Restrictions Upon the Company
-----------------------------
There are no restrictions in the Variable Rate Indenture against the issuance
of additional securities or the incurring of additional debt including Senior
Debt and secured obligations.
Modification of the Variable Rate Indenture
-------------------------------------------
The Variable Rate Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than two-thirds of the
outstanding principal amount of the Debentures, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Variable Rate Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of such
Debentures; provided, however, that no such supplemental indenture shall
change the fixed maturity of any Debenture, reduce the principal amount
thereof, reduce the rate, change the time of payment of interest thereon,
reduce the amount of Debentures whose holders must consent to an amendment,
or make any changes regarding the Variable Rate Indenture that relate to
waiver of default, the rights of holders to receive payments, and the
requirements of consent of the Debentureholders, without the consent of the
holder of each Debenture so affected.
The Company and the Trustee may amend the Variable Rate Indenture to allow
the issuance of additional amounts of a particular Series or additional
Series of Debentures without the consent of the Debentureholders. There are
no limitations as to the maximum amount of any increase or to the number of
increases which may be made. The Company may change the interest rates and
the maturities of the Debentures offered hereby and of any subsequent Series
which may be offered without entering into a supplemental indenture, provided
that no such change will affect any Debenture of any Series issued prior to
the date of change.
Events of Default and Notice Thereof
------------------------------------
An Event of Default is defined by the Variable Rate Indenture to mean any of
the following: (a) failure to pay principal upon any Debenture when the same
becomes due; (b) failure to pay interest upon any Debenture when the same
becomes due and the Default continues for 30 days; (c) failure, after notice
from the Trustee or from the holders of at least 25% in principal amount of
the Debentures of the affected Series, to observe or perform within 30 days
any of the covenants contained in the Variable Rate Indenture or Debentures;
or (d) the occurrence of certain events of bankruptcy, insolvency or
reorganization.
The Variable Rate Indenture provides that the Trustee shall, within 90 days
after the occurrence thereof, give the registered holders of the Debentures
notice of any existing default known to the Trustee, but, except in case of a
default in the payment of principal or interest, the Trustee may withhold
such notice if and for so long as the Trustee in good faith determines that
the withholding of such notice is in the interest of such holders.
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Rights on Default
-----------------
The Trustee by notice to the Company, or the holders of at least 25% in
principal amount of the Debentures of the affected Series, may declare the
principal of and accrued interest on all Debentures due upon the happening of
any of the Events of Default specified in the Variable Rate Indenture, but the
holders of a majority of the outstanding principal amount of such Debentures
may waive any default and rescind such declaration if the default is cured
within the 30 day period, except a default in the payment of the principal of
or interest on any Debenture or a default on Senior Debt. The holders of a
majority of the outstanding principal amount of the Debentures of the affected
Series may direct the time, method and place of conducting any proceeding for
any remedy available to, or exercising any power or trust conferred upon, the
Trustee, but the Trustee may decline to follow any direction that conflicts
with law, provisions of the Variable Rate Indenture, or is unduly prejudicial
to the rights of the other Debentureholders or would involve the Trustee in
personal liability. Holders may not institute any proceeding to enforce the
Variable Rate Indenture unless the Trustee refuses to act for 60 days after
request from the holders of at least 25% in principal amount of the Debentures
of the affected Series and during such 60 day period the holders of a majority
in principal amount do not give the Trustee a direction inconsistent with the
request, and tender to the Trustee of satisfactory indemnity. Nevertheless,
any holder may enforce the payment of the principal of and interest on the
holder's Debenture when due.
Concerning the Trustee
----------------------
The Trustee does not have any other business relationship with the Company.
The Trustee maintains its principal corporate trust office in Columbus,
Georgia.
Evidence to be Furnished Trustee
--------------------------------
The Variable Rate Indenture provides that, as evidence of compliance with the
conditions precedent provided for in the Variable Rate Indenture relating to
any action to be taken by the Trustee upon the application or demand of the
Company, the Company shall furnish to the Trustee an officer's certificate and
an opinion of counsel stating that all such conditions precedent have been
met. Within 120 days after the end of each fiscal year, the Company shall
file with the Trustee an officer's certificate stating whether or not, to the
best knowledge of the signers, the Company is in default in the performance of
any covenant, agreement or condition contained in the Variable Rate Indenture
and, if so, specifying each such default, and, with respect to each, the
action taken or proposed to be taken by the Company to remedy such default.
LEGAL OPINION
The validity of the securities offered hereby has been passed upon for the
Company by Jones, Day, Reavis & Pogue, Atlanta, Georgia.
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<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
Appendix I to Prospectus
Information as of December 31, 1999
1. Ratio of Earnings to Fixed Charges:
December 31
---------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
2.00 1.94 1.72 1.95 2.06
2. Unused borrowings under the $21,000,000 Credit
Agreement .............................................. $ 20,035,000
3. Debentures outstanding under Indenture ................. $ 35,246,639
4. Senior Debt (as defined under the caption "Description
of Variable Rate Subordinated Debentures -
Subordination") outstanding ......................... $113,889,641
A more current Appendix I, if appropriate, will be attached to the cover
page of this Prospectus as a supplement. If attached, that supplemental
Appendix I supersedes this information.
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking
offers to buy, the securities covered by this prospectus only in
jurisdictions where these ofers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any
sale of the securities covered hereby.
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
Forward-Looking Information . . . . . . . . . . . . . . 6
Description of Variable Rate Subordinated Debentures. . 7
Legal Opinion . . . . . . . . . . . . . . . . . . . . . 10
Appendix I. . . . . . . . . . . . . . . . . . . . . . . 11
$20,000,000
Variable Rate Subordinated Debentures -
Series 1
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