Document:

ESOP Loan Documents

 Exhibit 10.2 
 FORM OF 
 ESOP LOAN AGREEMENT 

THIS LOAN AGREEMENT (“Loan Agreement”) is made and entered into as of
            , 2011, by and between             , AS THE TRUSTEE FOR THE FRANKLIN FEDERAL SAVINGS BANK EMPLOYEE
STOCK OWNERSHIP PLAN TRUST (“Borrower”), a trust forming part of the Franklin Federal Savings Bank Employee Stock Ownership Plan (“ESOP”), and FRANKLIN FINANCIAL CORPORATION (“Lender”), a corporation
organized and existing under the laws of the Commonwealth of Virginia. 
 W I T N E S S E T H 

WHEREAS, the Borrower is authorized to purchase shares of common stock of Franklin Financial Corporation (“Common
Stock”), either directly from Franklin Financial Corporation or in open market purchases in an amount not to exceed             shares of Common Stock; and 

WHEREAS, the Borrower is authorized to borrow funds from the Lender for the purpose of financing authorized purchases of Common
Stock; and 
 WHEREAS, the Lender is willing to make a loan to the Borrower for such purpose. 

NOW, THEREFORE, the parties agree hereto as follows: 
 ARTICLE I 
 Definitions 

The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly
indicated by the context: 
 Business Day means any day other than a Saturday, Sunday or other day on which banks
are authorized or required to close under federal or local law or regulation. 
 Code means the Internal Revenue
Code of 1986, as amended (including the corresponding provisions of any succeeding law). 
 Default means an event
or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirements of notice or lapse of time.

 ERISA means the Employee Retirement Income Security Act of 1974, as amended (including the corresponding
provisions of any succeeding law). 
 Event of Default means an event or condition described in Article 5 of this
Loan Agreement. 
 Loan means the loan described in Section 2.1 of this Loan Agreement. 

Loan Documents means, collectively, the Loan Agreement, the Promissory Note and the Pledge Agreement and all other
documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents. 

  
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 Pledge Agreement means the agreement described in Section 2.8(a) of this
Loan Agreement. 
 Principal Amount means the face amount of the Promissory Note, determined as set forth in
Section 2.1(c) of this Loan Agreement. 
 Promissory Note means the promissory note described in
Section 2.3 of this Loan Agreement. 
 Register means the register described in Section 2.9 of this Loan
Agreement. 
 ARTICLE II 
 The Loan; Principal Amount; 
 Interest; Security; Indemnification

 Section 2.1 The Loan; Principal Amount. 

(a) The Lender hereby agrees to lend to the Borrower such amount, and at such time, as shall be determined under this Section 2.1;
provided, however, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed the greater of
(i)                      or (ii) the aggregate amount paid by the Borrower to purchase up to
                     shares of Common Stock. 
 (b) Subject to the limitations of Section 2.1(a), the Borrower shall determine the amounts borrowed under this Loan Agreement, and the time at which such borrowings are effected. Each such
determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be furnished to the Lender by notice from the Borrower. The Lender
shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender’s receipt of such notice; provided, however, that the Lender shall have no
obligation to disburse funds pursuant to this Agreement following the occurrence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured. 

(c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of: 

 

	 	(i)	the aggregate amount disbursed by the Lender pursuant to Section 2.1(b) on or before such date; over 

 

	 	(ii)	the aggregate amount of any repayments of such amounts made before such date. 

 The Lender shall maintain on the Register a record of, and shall record in the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the
Principal Amount. 

  
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 Section 2.2 Interest. 

(a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing with the first disbursement of funds
under this Loan Agreement and continuing until the Principal Amount shall be paid in full, at the rate of five percent (5%) per annum. Interest payable under this Agreement shall be computed on the basis of a year of 365 days and actual days
elapsed (including the first day but excluding the last) occurring during the period to which the computation relates. 
 (b)
Accrued interest on the Principal Amount shall be payable by the Borrower on the dates set forth in Schedule I to the Promissory Note. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds. 

(c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make
payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws applicable to the
Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt
thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest. 

Section 2.3 Promissory Note. 
 The Loan shall be evidenced by the Promissory Note of the Borrower attached hereto as an exhibit payable to the order of the lender in the Principal Amount and otherwise duly completed. 

Section 2.4 Payment of Trust Loan. 
 The Principal Amount of the Loan shall be repaid in accordance with Schedule I to the Promissory Note on the dates specified therein until fully paid. 

Section 2.5 Prepayment. 
 The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; provided, however, that the Borrower shall give notice to the Lender of any such prepayment; and
provided, further, that any partial prepayment of the Loan shall be in an amount not less than $1,000. Any such prepayment shall be: (a) permanent and irrevocable; (b) accompanied by all accrued interest through the date of such
prepayment; (c) made without premium or penalty; and (d) applied on the inverse order of the maturity of the installment thereof unless the Lender and the Borrower agree to apply such prepayments in some other order. 

Section 2.6 Method of Payments. 
 (a) All payments of principal and interest payable hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified in or pursuant to
this Loan Agreement for notices to the Lender, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary
herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be
made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which payment is in fact made. 

  
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 (b) Notwithstanding anything to the contrary contained in this Loan Agreement or the
Promissory Note, the Borrower shall not be obligated to make any payment, repayment or pre-payment on the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of Section 4975(e)(7)
of the Code or qualified under Section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under Section 501(a) of the Code or if such act or failure to act would cause the Borrower to engage in any “prohibited
transaction” as such term is defined in the Section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by Section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in
Section 406 of ERISA and the regulations promulgated thereunder which is not exempted by Section 408(b) of ERISA and the regulations promulgated thereunder; provided, however, that in each case, the Borrower, may act or refrain from acting
pursuant to this Section 2.6(b) on the basis of an opinion of counsel, and any opinion of such counsel. The Borrower may consult with counsel, and any opinion of such counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of counsel. Nothing contained in this Section 2.6(b) shall be construed as imposing a duty on the Borrower to consult with counsel. Any
obligation of the Borrower to make any payment, repayment or prepayment on the Promissory Note or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this Section 2.6(b) shall be considered a
binding obligation of the Borrower, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this Section 2.6(b) shall be construed as
providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance). 
 Section 2.7 Use of Proceeds of Loan. 
 The entire proceeds of
the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever. 
 Section 2.8
Security. 
 (a) In order to secure the due payment and performance by the Borrower of all of its obligations under
this Loan Agreement, simultaneously with the execution and delivery of this Loan Agreement by the Borrower, the Borrower shall: 
  

	 	(i)	pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock
purchased with the Principal Amount, by the execution and delivery to the lender of the Pledge Agreement attached hereto as an exhibit; and 

  

	 	(ii)	execute and deliver, or cause to be executed and delivered, such other agreement, instruments and documents as the Lender may reasonably require in order to effect the
purposes of the Pledge Agreement and this Loan Agreement. 

 (b) The Lender shall release from encumbrance under
the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or repayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral determined pursuant to the applicable provisions of the ESOP.

  
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 Section 2.9 Registration of the Promissory Note. 

(a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of transfer
and exchange of the Promissory Note. Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a
new instrument to the new holder. The old Promissory Note so surrendered shall be canceled by the Lender and returned to the Borrower after such cancellation. 
 (b) Any new Promissory Note issued pursuant to Section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or exchanged so that there
will not be any loss or gain of interest on the note surrender. Such new Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the
Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest
theretofore paid. 
 ARTICLE III 
 Representations and Warranties of the Borrower 
 The Borrower hereby
represents and warrants to the Lender as follows: 
 Section 3.1 Power, Authority, Consents. 

The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and Pledge Agreement, all of which
have been duly authorized by all necessary and proper corporate or other action. 
 Section 3.2 Due Execution,
Validity, Enforceability. 
 Each of the Loan Documents, including, without limitation, this Loan Agreement, the
Promissory Note and the Pledge Agreement, has been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms. 

Section 3.3 Properties, Priority of Liens. 
 The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien.

 Section 3.4 No Defaults, Compliance with Laws. 

The Borrower is not in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or
judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected. 

Section 3.5 Purchase of Common Stock. 
 Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable title to all of the Common Stock so purchased, free
and clear of any liens, other than a pledge to the Lender of the 

  
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Common Stock so purchased pursuant to the Pledge Agreement. Neither the execution and delivery of the Loan Documents nor the performance of any obligation thereunder violates any provisions of
law or conflicts with or results in a breach of or creates (with or without the giving of notice of lapse of time, or both) a default under any agreement to which the Borrower is a party or by which it is bound or any of its properties is affected.
No consent of any federal, state, or local governmental authority, agency, or other regulatory body, the absence of which could have a materially adverse effect on the Borrower or the Trustee, is or was required to be obtained in connection with the
execution, delivery, or performance of the Loan Documents and the transaction contemplated therein or in connection therewith, including without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of
the Loan pursuant thereto. 
 Section 3.6 ESOP; Contributions. 

The ESOP is intended to qualify as an “employee stock ownership plan” as defined in Section 4975(e)(7) of the Code. The
ESOP provides that the ESOP sponsor may make contributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note; provided, however, that no such contributions shall be
required if they would adversely affect the qualification of the ESOP under Section 401(a) of the Code. 

Section 3.7 Trustees. 
 The trustees of the ESOP have been duly appointed by the ESOP sponsor. 

Section 3.8 Compliance with Laws; Actions. 
 Neither the execution and delivery by the Borrower of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the lender, constitutes
a violation of any provision of any law or any regulation, order, writ, injunction or decree of any court or governmental instrumentality, or an event of default under any agreement, to which the Borrower is a party, to which the Borrower is bound
or to which the Borrower is subject, which violation or event of default would have a material adverse effect on the Borrower. There is no action or proceeding pending or threatened against either the ESOP or the Borrower before any court or
administrative agency. 
 ARTICLE IV 
 Representations and Warranties of the Lender 
 The Lender hereby represents
and warrants to the Borrower as follows: 
 Section 4.1 Power, Authority, Consents. 

The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the
Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice
by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement. 

  
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 Section 4.2 Due Execution, Validity, Enforceability. 

This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender, and each constitutes a valid and legally
binding obligation of the Lender, enforceable in accordance with its terms. 
 ARTICLE V 

Events of Default 
 Section 5.1 Events of Default under Loan Agreement. 
 Each of
the following events shall constitute an “Event of Default” hereunder: 
 (a) Failure to make any payment or mandatory
prepayment of principal of the Promissory Note when due, or failure to make any payment of interest on the Promissory Note not later than five (5) Business Days after the date when due. 

(b) Failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan
Documents, including, without limitation, the Promissory Note and the Pledge Agreement. 
 (c) Any representation or warranty
made in writing to the Lender in any of the Loan Documents, or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered.

 Section 5.2 Lender’s Rights Upon Event of Default. 

If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower
other than: (a) contributions (other than contributions of Common Stock) that are made by the ESOP sponsor to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such
contributions and (b) “Eligible Collateral” (as defined in the Pledge Agreement); provided, however, that: (i) the value of the Borrower’s assets transferred to the Lender following an Event of Default in satisfaction of the
due and unpaid amount of the Loan shall not exceed the amount in default; (ii) the Borrower’s assets shall be transferred to the Lender following an Event of Default only to the extent of the failure of the Borrower to meet the payment
schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement.

 ARTICLE VI 
 Miscellaneous Provisions 
 Section 6.1 Reserved

 Section 6.2 Payments. 
 All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the
amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note
“Paid” and return it to the Borrower. 

  
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 Section 6.3 Survival. 

All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note.

 Section 6.4 Modifications, Consents and Waivers; Entire Agreement. 

No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge
Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is
sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar
or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof. 

Section 6.5 Remedies Cumulative. 
 Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised
from time to time. No failure on the part of the Lender or the holder of the Promissory Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any
other or future exercise thereof or the exercise of any other right. The due payment and performance of the obligations under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the
Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or
proceeding instituted by the Lender for payment or performance of such obligations. 
 Section 6.6 Further
Assurances; Compliance with Covenants. 
 At any time and from time to time, upon the request of the Lender, the Borrower
shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably request in order to fully effect the terms of this Loan
Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan. 

Section 6.7 Notices. 
 Except as otherwise specifically provided for herein, all notice, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter (delivered by hand or
commercial messenger service or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex or telecopier
addressed as follows: 
  

	 	(a)	If to the Borrower: 

  

	 	(b)	If to the Lender: 

  
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 Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is
delivered by hand or by commercial messenger service, or sent by telex, or telecopier, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as
aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the
party to whom it is addressed. 
 Section 6.8 Counterparts. 

This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document.

 Section 6.9 Construction; Governing Law. 

The headings used in the table of contents and in this Loan Agreement are for convenience only and shall not be deemed to constitute a
part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement of an Article or section
shall be to an Article or section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with,
the laws of the Commonwealth of Virginia. 
 Section 6.10 Severability. 

Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable
law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provisions in this Loan Agreement in any jurisdiction. Each of the covenants,
agreements and conditions contained in this Loan Agreement are independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other. The Borrower shall not take any action the effect of which shall
constitute a breach or violation of any provision of this Loan Agreement. 
 Section 6.11 Binding Effect: No
Assignment or Delegation. 
 This Loan Agreement shall be binding upon and inure to the benefit of the Borrower and its
successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation
without such consent shall be void. 
 IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be executed as of the
date first written above. 

  
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	FRANKLIN FEDERAL SAVINGS BANK EMPLOYEE STOCK OWNERSHIP PLAN TRUST
	
	  

	                           
             , as Trustee
	
	FRANKLIN FINANCIAL CORPORATION
		
	By:	 	  

		 	Richard T. Wheeler, Jr.
		 	Chairman, President and Chief Executive Officer

  
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 FORM OF 
 PLEDGE AGREEMENT 
 THIS PLEDGE AGREEMENT (“Pledge
Agreement”) is made as of             , 2011, by and between             , AS TRUSTEE FOR THE FRANKLIN
FEDERAL SAVINGS BANK EMPLOYEE STOCK OWNERSHIP PLAN TRUST (“Pledgor”), and FRANKLIN FINANCIAL CORPORATION (“Pledgee”). 
 W I T N E S S E T H 
 WHEREAS, this Pledge Agreement is being
executed and delivered to the Pledgee pursuant to the terms of a Loan Agreement (“Loan Agreement”), by and between the Pledgor and the Pledgee. 
 NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree as follows: 

Section 1. Definitions. The following definitions shall apply for purposes of this Pledge Agreement, except to the extent
that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement: 

Collateral shall mean the Pledged Shares and, subject to Section 5 hereof, and to the extent permitted by applicable
law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights. 
 ESOP shall mean the
Franklin Federal Savings Bank Employee Stock Ownership Plan. 
 Event of Default shall mean an event so defined in
the Loan Agreement. 
 Liabilities shall mean all amounts the Pledgor owes the Pledgee under the Loan Agreement
and the Promissory Note entered into on             , 2011 and all amendments thereto. 
 Pledged Shares shall mean all the Shares of Common Stock of Franklin Financial Corporation purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant
to the Loan Agreement, but excluding any such shares previously released pursuant to Section 4 of this Pledge Agreement. 

Section 2. Pledge. To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the
Pledgee, and grants to the Pledgee, a security interest in, and lien upon, the Collateral. 

 Section 3. Representations and Warranties of the Pledgor. The Pledgor
represents, warrants, and covenants to the Pledgee as follows: 
 (a) the execution, delivery and performance of this Pledge
Agreement and the pledging of the Collateral hereunder do not and will not conflict with, result in a violation of, or constitute a default under, any agreement binding upon the Pledgor; 

(b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except
the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the rights of all others; 

(c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms;

 (d) the Pledgor shall, from time to time, upon request of the Pledgee, promptly deliver to the Pledgee such stock powers,
proxies, and similar documents, satisfactory in form and substance to the Pledgee, with respect to the Collateral as the Pledgee may reasonably request; and 
 (e) subject to the first sentence of Section 4(b) of this Pledge Agreement, the Pledgor shall not, so long as any Liabilities are outstanding, sell, assign, exchange, pledge or otherwise transfer or
encumber any of its rights in and to any of the Collateral. 
 Section 4. Eligible Collateral. 

(a) As used herein the term “Eligible Collateral” shall mean the amount of Collateral which has an aggregate fair market value
equal to the amount by which the Pledgor is in default or such lesser amount of Collateral as may be required pursuant to Section 13 of this Pledge Agreement. 
 (b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations Section 54.4975-7(b)(8), as the same may be from time to time
amended or supplemented, and the applicable provisions of the ESOP. Subject to the Treasury Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of
the Eligible Collateral in the name of the Pledgee or its nominee, without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due
and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or due to become due thereunder,
(ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and
(iii) take control of any proceeds of the Eligible Collateral. 

  
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 Section 5. Delivery. 

(a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) either (A) certificates for the Pledged
Shares, each certificate duly signed in blank by the Pledgor or accompanied by a stock transfer power duly signed in blank by the Pledgor and each such certificate accompanied by all required documentary or stock transfer tax stamps, or (B) if
the Trustee does not yet have possession of the Pledged Shares, an assignment by the Pledgor of all the Pledgor’s rights to and interest in the Pledged Shares, and (ii) an irrevocable proxy, in form and substance satisfactory to the
Pledgee, signed by the Pledgor with respect to the Pledged Shares. 
 (b) Subject to the provisions of Section 6 of this
Pledge Agreement, the Pledgor shall (i) be entitled to exercise any and all voting and other rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and (ii) be
entitled to receive any and all cash dividends or other distributions paid in respect of the Collateral. 
 Section 6.
Events of Default. 
 (a) If a Default or Event Default shall be existing, in addition to the rights it may have under the
Loan Agreement, the Promissory Note, and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Collateral, from time to time, any rights and remedies available to it under the
Uniform Commercial Code as in effect from time to time in the Commonwealth of Virginia or otherwise available to it, and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsement,
assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposition of any of the Eligible Collateral shall be given by the Pledgee to the
Pledgor at least three (3) business days before such disposition. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are
in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in Section 1 hereof. 

(b) In any sale of any of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby
authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel if necessary in order to avoid violation of applicable law (including, without limitation, compliance with such procedures as may
restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the
distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not
result in such sale’s being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Eligible
Collateral is sold in compliance with any such limitation or restriction. 

  
 3 

 Section 7. Payment in Full. Upon the payment in full of all outstanding
Liabilities, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to the Pledge
Agreement. 
 Section 8. No Waiver. No failure or delay on the part of the Pledgee in exercising any right or remedy
hereunder or under any other document which confers or grants any rights to the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any such rights or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy of the Pledgee. 
 Section 9. Binding Effect; No
Assignment or Delegation. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective successors and assigns, except that the Pledgor may not assign or transfer its rights hereunder
without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person
or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee. 
 Section 10. Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia applicable to agreements to be performed wholly
within the Commonwealth of Virginia. 
 Section 11. Notices. All notices, requests, instructions or documents
hereunder shall be in writing and delivered personally or sent by United States mail, registered or certified, return receipt requested, with proper postage prepaid as follows: 

 

	 	(a)	If to the Pledgee: 

  

	 	(b)	If to the Pledgor: 

 or at such other address as
either of the parties may designate by written notice to the other party. If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made, and, if delivered by mail,
the date on which such notice, request, instruction, or document is deposited in the mail shall be the date of delivery. Each notice, request, instruction or document shall bear the date on which it is delivered. 

Section 12. Interpretation. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision herein shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions hereof. 

  
 4 

 Section 13. Construction. All provisions hereof shall be construed so as to
maintain (a) the ESOP as a tax-qualified, leveraged employee stock ownership plan under Section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), (b) the ESOP Trust as exempt from taxation
under Section 501(a) of the Code, and (c) the loan as an exempt loan under Section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation Section 2550.408b-3. 

[SIGNATURE PAGE TO FOLLOW] 

  
 5 

 IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the parties
hereto as of the day and year first above written. 
  

			
	FRANKLIN FEDERAL SAVINGS BANK
	EMPLOYEE STOCK OWNERSHIP PLAN TRUST
	
	  
                                  
       ,as Trustee

	
	FRANKLIN FINANCIAL CORPORATION
		
	By:	 	  

		 	Richard T. Wheeler, Jr.
		 	Chairman, President and Chief Executive Officer

  
 6 

 FORM OF 
 PROMISSORY NOTE 
 FOR VALUE RECEIVED, the undersigned,
                    , AS TRUSTEE FOR THE FRANKLIN FEDERAL SAVINGS BANK EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the “Borrower”),
hereby promises to pay to the order of FRANKLIN FINANCIAL CORPORATION (the “Lender”)                     (the “Principal
Amount”) payable in accordance with the Loan Agreement made and entered into between the Borrower and the Lender of even date herewith (“Loan Agreement”) pursuant to which this Promissory Note is issued. 

The Principal Amount of this Promissory Note shall be payable in accordance with the schedule attached hereto (“Schedule I”).

 This Promissory Note shall bear interest at the rate per annum set forth or established under the Loan Agreement, such
interest to be payable in accordance with Schedule I. 
 Anything herein to the contrary notwithstanding, the obligation of the
Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws
applicable to the Lender limiting rates on interest which may be charged or collected by the Lender. Any such payments on interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower
to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest
shall not bear interest. 
 Payments of both principal and interest on this Promissory Note are to be made at the principal
office of the Lender or such other place as the holder hereof shall designate to the Borrower in writing, in lawful money of the United States of America in immediately available funds. 

Failure to make any payments of principal on this Promissory Note when due, or failure to make any payment of interest on this Promissory
Note not later than five (5) Business Days after the date when due, shall constitute a default hereunder, whereupon the principal amount of accrued interest on this Promissory Note shall immediately become due and payable in accordance with the
terms of the Loan Agreement. 
 This Promissory Note is secured by a Pledge Agreement between the Borrower and the Lender of
even date herewith and is entitled to the benefits thereof. 
  

	
	 FRANKLIN FEDERAL SAVINGS BANK
 EMPLOYEE STOCK OWNERSHIP PLAN TRUST

	
	  

	                             
           , as TrusteeEmployment Agreement

 Exhibit 10.3 
 FORM OF 
 FRANKLIN FINANCIAL CORPORATION 

EMPLOYMENT AGREEMENT 
 THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of [date], by and among FRANKLIN FINANCIAL CORPORATION, a Virginia corporation (the “Corporation”)
and
                                        
                                     (the
“Executive”). 
 WHEREAS, the Executive serves in positions of substantial responsibility with the Corporation;
and 
 WHEREAS, the Corporation wishes to set forth the terms of the Executive’s continued employment in these
positions; and 
 WHEREAS, the Executive is willing and desires to serve in these positions with the Corporation.

 NOW THEREFORE, in consideration of these premises, the mutual covenants contained herein, and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows. 
 ARTICLE 1

 EMPLOYMENT 
 1.1 Employment. The Corporation hereby employs the Executive to serve as [title] of the Corporation according to the terms and conditions of this Agreement and for the period
stated in Section 1.3 of this Agreement. The Executive hereby accepts employment according to the terms and conditions of this Agreement and for the period stated in Section 1.3 of this Agreement. 

1.2 Responsibilities and Duties. 
 (a) As [title], the Executive shall perform all duties and have all powers associated with these positions, as set forth in any job description provided to the Executive by the Corporation
or as may be set forth in the bylaws of the Corporation. The Executive shall report directly to the [CEO, or in the case of the CEO, the board of directors]. 
 (b) During the period of his employment hereunder, except for reasonable periods of absence occasioned by illness, reasonable vacation periods, and other reasonable leaves of absence approved by the board
of directors of the Corporation, the Executive will devote all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and duties directed by the board of directors.
Notwithstanding the preceding sentence, subject to the approval of the board of directors, the Executive may serve as a member of the board of directors of business, community and charitable organizations, provided that in each case the service
shall not materially interfere with the performance of his duties under this Agreement, adversely affect the reputation of the Corporation or any other affiliates of the Corporation, or present any conflict of interest. Nothing in this
Section 1.2 shall prevent the Executive from managing personal investments and affairs, provided that doing so also does not interfere with the proper performance of the Executive’s duties and responsibilities under this Agreement.

 1.3 Term. 

(a) The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this
Agreement (the “Effective Date”) and continuing for thirty-six (36) full months thereafter, plus (ii) any and all extensions of the initial term made pursuant to this Section 1.3. 

(b) Commencing as of the first anniversary of the Effective Date and continuing as of each anniversary of the Effective Date thereafter,
the disinterested members of the board of directors of the Corporation may extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes thirty-six (36) full months from the applicable anniversary
of the Effective Date, unless the Executive elects not to extend the term of this Agreement by giving written notice at least thirty (30) days prior to the applicable anniversary date. 

(c) The disinterested members of the board of directors of the Corporation will review the Agreement and the Executive’s performance
annually for purposes of determining whether to extend the Agreement term and will include the rationale and results of its review in the minutes of the meetings. The board of directors of the Corporation will notify the Executive no earlier than
sixty (60) days and no later than thirty (30) days prior to the applicable anniversary date whether it has determined to extend the Agreement. 
 (d) Nothing in this Agreement shall mandate or prohibit a continuation of the Executive’s employment following the expiration of the term of this Agreement, upon such terms and conditions as the
Corporation and the Executive may mutually agree. 
 [For CEO] 

1.4 Service on the Boards of Directors. The Executive serves as a member of the board of directors of the
Corporation. The board of directors of the Corporation shall undertake every lawful effort to ensure that the Executive continues throughout the term of his employment to be elected or reelected as a director of the Corporation. Notwithstanding
anything in this Agreement to the contrary, unless otherwise agreed to by the parties, the Executive shall be deemed to have resigned as a director of the Corporation effective immediately after termination of the Executive’s employment under
Article 3 of this Agreement, regardless of whether the Executive submits a formal, written resignation as director. 

ARTICLE 2 

COMPENSATION AND BENEFITS 
 2.1 Base Salary and Bonus and Incentive Compensation. 
 (a) In
consideration of the Executive’s performance of the obligations under this Agreement, the Corporation shall pay or cause to be paid to the Executive a salary at the annual rate of not less than $[amount], payable according to its regular
payroll practices. During the period of this Agreement, the Executive’s Base Salary shall be reviewed at least annually by the compensation committee designated by the board of directors of the Corporation. Any increase in Base Salary will
become the “Base Salary” for purposes of this Agreement. 
 (b) The Executive shall be entitled to incentive
compensation in accordance with any program established by the Corporation or as otherwise provided to the Executive at the discretion of the Corporation. 

  
 2 

 2.2 Benefit Plans and Perquisites. For as long as the Executive is employed by
the Corporation, the Executive shall be eligible (x) to participate in any and all officer or employee compensation, incentive compensation and benefit plans in effect from time to time, including without limitation plans providing retirement,
medical, dental, disability, and group life benefits and including stock-based compensation, incentive, or bonus plans existing on the date of this Agreement or adopted after the date of this Agreement, provided that the Executive satisfies the
eligibility requirements for any of the plans or benefits, and (y) to receive any and all other fringe and other benefits provided from time to time, including the specific items described in (a)-(d) below. 

(a) Reimbursement of business expenses. The Executive shall be entitled to reimbursement for all reasonable business
expenses incurred while performing his obligations under this Agreement, including but not limited to all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of the Corporation. Expenses
will be reimbursed if they are submitted in accordance with the Corporation’s policies and procedures. 
 (b)
Facilities. The Corporation will furnish the Executive with the working facilities and staff customary for executive officers with the comparable titles and duties of the Executive as set forth in Sections 1.1 and 1.2 of this Agreement
and as are necessary for the Executive to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Corporation, or at such other site or sites customary for such offices. 

2.3 Vacation; Leave. The Executive shall be entitled to sick leave and paid annual vacation (of at least four weeks of
vacation) in accordance with policies established from time to time by the Corporation. In addition to paid vacations and other leave, the board of directors may grant the Executive a leave or leaves of absence, with or without pay, at such time or
times and upon such terms and conditions as the board of directors of the Corporation may determine. 
 2.4
Insurance. The Corporation shall maintain or cause to be maintained director and officer liability insurance covering the Executive throughout the term of this Agreement. 

ARTICLE 3 

EMPLOYMENT TERMINATION 
 3.1 Termination of Employment. 
 (a) Death. The
Executive’s employment shall terminate automatically at the Executive’s death. If the Executive dies in active service to the Corporation, the Executive’s estate shall receive any sums that would have otherwise been due to the
Executive as Base Salary and reimbursement of expenses through the Executive’s last day of employment. 
 (b)
Disability. By delivery of written notice thirty (30) days in advance to the Executive, the Corporation may terminate the Executive’s employment if the Executive is disabled. For purposes of this Agreement the Executive shall
be considered “disabled” if an independent physician selected by the Corporation and reasonably acceptable to the Executive or the Executive’s legal representative determines that, because of illness or accident, the Executive is
unable to perform the Executive’s duties and will be unable to perform the Executive’s duties for a period of ninety (90) consecutive days. The Executive shall not be considered disabled, however, if the Executive returns to work on a
full-time basis within thirty (30) days after the Corporation gives notice of termination due to disability. If the Executive is terminated by Franklin Federal Savings Bank (the “Bank”) because of disability, the Executive’s
employment with the Corporation shall also terminate at the same time. During the period of incapacity leading up to the termination of the Executive’s employment under this provision, and for the then

  
 3 

 
remaining term of the Agreement, the Corporation shall continue to pay the full Base Salary at the rate then in effect and pay or provide the Executive with all perquisites and other compensation
and benefits contemplated by this Agreement or otherwise, provided that the amount of the payments by the Corporation to the Executive under this Section 3.1(b) shall be reduced by the sum of the amounts, if any, payable to the Executive for
the same period under any disability benefit plan covering the Executive. 
 3.2 Involuntary Termination with
Cause. The Corporation may terminate the Executive’s employment for Cause. If the Executive’s employment terminates for Cause, the Executive shall receive the Base Salary through the date on which the termination of employment
becomes effective and reimbursement of expenses to which the Executive is entitled when termination becomes effective. Notwithstanding anything to the contrary in this Agreement, if the Executive is terminated for Cause by the Bank, the Executive
shall be deemed also to have been terminated for Cause by the Corporation. The Executive shall not be deemed to have been terminated for Cause under this Agreement unless and until there is delivered to the Executive a copy of a resolution adopted
at a meeting of the board of directors called and held for the purpose, which resolution shall (x) contain findings that the Executive has committed an act constituting Cause, and (y) specify the particulars thereof. The resolution of the
board of directors shall be deemed to have been duly adopted if and only if it is adopted by the affirmative vote of a majority of the directors of the Corporation then in office, excluding the Executive. Notice of the meeting and the proposed
termination for Cause shall be given to the Executive a reasonable time before the meeting of the board of directors. The Executive and the Executive’s counsel (if the Executive chooses to have counsel present) shall have a reasonable
opportunity to be heard by the board of directors at the meeting. For purposes of this Agreement “Cause” means any of the following: 
 (1) a material act of dishonesty in performing Executive’s duties on behalf of the Corporation; 
 (2) a willful misconduct that in the judgment of the board of directors will likely cause economic damage to the Corporation or its affiliates or injury to the business reputation of the Corporation or
its affiliates ; 
 (3) incompetence (in determining incompetence, the acts or omissions shall be measured
against standards generally prevailing in the savings institutions industry); 
 (4) a breach of fiduciary duty
involving personal profit; 
 (5) the intentional failure to perform stated duties under this Agreement after
written notice thereof from the board of directors of the Corporation; 
 (6) a willful violation of any law,
rule or regulation (other than minor or routine traffic violations or similar offenses) that reflects adversely on the reputation of the Corporation or its affiliates, any felony conviction, any violation of law involving moral turpitude, or any
violation of a final cease-and-desist order; or 
 (7) a material breach by the Executive of any provision of
this Agreement. 
 No act, or failure to act, on the Executive’s part shall be considered “willful” unless he has acted, or
failed to act, with an absence of good faith and without reasonable belief that his action or failure to act was in the best interest of the Corporation. 

  
 4 

 3.3 Voluntary Termination by the Executive Without Good Reason. In addition to
his other rights to terminate his employment under this Agreement, the Executive may voluntarily terminate employment during the term of this Agreement upon at least ninety (90) days prior written notice to the board of directors of the
Corporation. Upon the Executive’s voluntary termination, he will receive only his compensation and vested rights and benefits to the date of his termination of employment. Following his voluntary termination of employment under this
Section 3.3, the Executive will be subject to the restrictions set forth in Article 7. 
 3.4 Involuntary Termination
Without Cause and Voluntary Termination with Good Reason. With written notice to the Executive at least thirty (30) days in advance, the Corporation may terminate the Executive’s employment without Cause. Termination shall take
effect at the end of the notice period. With advance written notice to the Corporation as provided in clause (y), the Executive may terminate employment for Good Reason. If the Executive’s employment terminates involuntarily without Cause or
voluntarily but with Good Reason, the Executive shall be entitled to the benefits specified in Article 4 of this Agreement. For purposes of this Agreement, a voluntary termination by the Executive shall be considered a voluntary termination with
Good Reason if the conditions stated in both clauses (x) and (y) of this Section 3.4 are satisfied: 
 (x) a
voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if any of the following occur without the Executive’s written consent, and the term Good Reason shall mean the occurrence of any of the
following without the Executive’s written consent: 
 (1) a failure to reelect or reappoint the Executive as
President and Chief Executive Officer of the Corporation (provided, however, that a change in the Executive’s position consented to in writing by the Executive in connection with succession planning of the Corporation, shall not be deemed a
Good Reason); 
 (2) a material change in the Executive’s position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in Sections 1.1 and 1.2 of this Agreement (provided, however, that a reduction in duties and responsibilities consented to in writing by the Executive in connection with
succession planning of the Corporation, shall not be deemed a Good Reason); 
 (3) a liquidation or dissolution
of the Corporation or the Bank, other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of the Executive; 
 (4) a material reduction in Executive’s Base Salary or benefits required to be provided hereunder (other than a reduction that is generally applicable to the Corporation’s executive employees or
a reduction or elimination of the Executive’s benefits under one or more benefit plans maintained by the Corporation as part of a good faith, overall reduction or elimination of such plans or benefits applicable to all participants in a manner
that does not discriminate against the Executive (except as such discrimination may be necessary to comply with applicable law)); 
 (5) a relocation of the Executive’s principal place of employment by more than twenty-five (25) miles from its location as of the date of this Agreement; or 

(6) a material breach of this Agreement by the Corporation. 

  
 5 

 (y) the Executive must give notice to the Corporation of the existence of one or more of the
conditions described in clause (x) within sixty (60) days after the initial existence of the condition, and the Corporation shall have thirty (30) days thereafter to remedy the condition. In addition, the Executive’s voluntary
termination because of the existence of one or more of the conditions described in clause (x) must occur within six (6) months after the initial existence of the condition. 

ARTICLE 4 

SEVERANCE COMPENSATION 
 4.1 Cash Severance after Termination Without Cause or Termination for Good Reason. 
 (a) Subject to the possibility that cash severance after employment termination might be delayed under Section 4.1(b), if the Executive’s employment terminates involuntarily but without Cause or
if the Executive voluntarily terminates employment with Good Reason, the Executive shall for the unexpired term of this Agreement and in accordance with the Corporation’s regular pay practices, continue to receive the Base Salary in effect at
the Executive’s termination of employment. However, the Corporation and the Executive acknowledge and agree that the severance benefits under this Section 4.1 shall not be payable if severance benefits are payable or shall have been paid
to the Executive under Article 5 of this Agreement. 
 (b) If when employment termination occurs the
Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the cash severance payment under Section 4.1(a) would be considered deferred
compensation under Section 409A of the Code, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Executive’s continued Base Salary under Section 4.1(a)
for the first six months after employment termination shall be paid to the Executive in a single lump sum without interest on the first day of the seventh (7th) month after the month in which the Executive’s employment terminates and all remaining payments shall be
made as originally scheduled. References in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Section 409A of the Code. 

4.2 Post-Termination Insurance Coverage. 
 (a) If the Executive’s employment terminates involuntarily but without Cause or voluntarily but with Good Reason, or because of disability, the Corporation shall continue or cause to be continued at
the Corporation’s expense medical and life insurance benefits for the Executive and any of his dependents covered at the time of his termination. The medical insurance benefits shall continue until the first to occur of (w) the
Executive’s return to employment with the Corporation or another employer, (x) the Executive’s attainment of age 65, (y) the Executive’s death, or (z) the end of the term remaining under this Agreement when the
Executive’s employment terminates. 
 (b) If (x) under the terms of the applicable policy or
policies for the insurance benefits specified in Section 4.2(a) it is not possible to continue coverage for the Executive and his dependents, or (y) when employment termination occurs the Executive is a “specified employee”
within the meaning of Section 409A of the Code, if any of the continued insurance coverage benefits specified in Section 4.2(a) would be considered deferred compensation under Section 409A of the Code, and finally, if an exemption
from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that particular insurance benefit, the Corporation shall pay to the Executive in a single lump sum an amount in cash equal to the present value of
the Corporation’s projected cost to maintain that particular insurance benefit (and associated income tax gross-up benefit, if applicable) had the Executive’s employment not terminated, assuming continued coverage for 36 months. The
lump-sum payment shall be made thirty (30) days after employment termination or, if Section 4.1(b) applies, on the first day of the seventh (7th) month after the month in which the Executive’s employment terminates. 

  
 6 

 ARTICLE 5 
 CHANGE IN CONTROL BENEFITS 
 5.1 Change in Control Benefits.
If a Change in Control occurs during the term of this Agreement and, thereafter, the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Corporation shall
make or cause to be made a lump-sum payment to the Executive in an amount in cash equal to three (3) times the Executive’s average annual compensation. For this purpose, average annual compensation means the Executive’s taxable income
reported by the Corporation (or any affiliate of the Corporation) for the five (5) calendar years immediately preceding the calendar year in which the Change in Control occurs. The payment required under this paragraph is payable no later than
five (5) business days after the Executive’s termination of employment. If the Executive receives payment under Section 5.1, the Executive shall not be entitled to any additional severance benefits under Section 4.1 of this
Agreement. In addition to the cash severance benefit provided for under this Section 5.1, the Corporation shall provide the Executive with the post-termination insurance coverage described in Section 4.2(a) of this Agreement, subject to
the provisions of Section 4.2(b) of this Agreement. 
 5.2 Change in Control Defined. For purposes of this
Agreement “Change in Control” means a change in control as defined in Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including: 

(a) Change in ownership: a change in ownership of the Corporation occurs on the date any one person or group accumulates
ownership of Corporation stock constituting more than 50% of the total fair market value or total voting power of Corporation stock; 
 (b) Change in effective control: (x) any one person or more than one person acting as a group acquires within a 12-month period ownership of Corporation stock possessing 30% or more of
the total voting power of Corporation stock, or (y) a majority of the Corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed in advance by a majority of the
Corporation’s board of directors; or 
 (c) Change in ownership of a substantial portion of assets: a change
in ownership of a substantial portion of the Corporation’s assets occurs if in a 12-month period any one person or more than one person acting as a group acquires from the Corporation assets having a total gross fair market value equal to or
exceeding 40% of the total gross fair market value of all of the Corporation’s assets immediately before the acquisition or acquisitions. For this purpose, gross fair market value means the value of the Corporation’s assets, or the value
of the assets being disposed of, determined without regard to any liabilities associated with the assets. 
 5.3 Potential
Limitation of Benefits Under Certain Circumstances. Notwithstanding any other provisions of this Agreement, in the event that (x) the aggregate payments or benefits to be made or afforded to the Executive under this Agreement or
otherwise, which are deemed to be parachute payments as defined in Section 280G of the Code or any successor thereof (the “Termination Benefits”) would be deemed to include an “excess parachute payment” under
Section 280G of the Code; and (y) if such Termination Benefits were reduced to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times the
Executive’s “base amount,” as determined in accordance with Section 280G of the Code and the Non-Triggering Amount less the product of the marginal rate of any applicable state and federal income tax and the Non-Triggering Amount
would be greater than the aggregate value of the Termination Benefits (without such reduction) minus (1) the amount of tax required to be paid by the Executive thereon by Section 4999 of the Code and

  
 7 

 
further minus (2) the product of the Termination Benefits and the marginal rate of any applicable state and federal income tax, then the Termination Benefits shall be reduced to the
Non-Triggering Amount. The allocation of the reduction required hereby among the Termination Benefits shall be determined by the Executive. The Corporation’s independent public accountants will determine the value of any reduction in the
payments and benefits; the Corporation will pay for the accountants’ opinion. The Corporation may request, and the Executive has the right to demand that, a ruling from the IRS as to whether any disputed payments and benefits have adverse tax
consequences. The Corporation will promptly prepare and file the request for a ruling from the IRS, but in no event will the Corporation make this filing later than thirty (30) days from the date of the accountant’s opinion referred to
above. The request will be subject to the Executive’s approval prior to filing; the Executive shall not unreasonably withhold his approval. The Corporation and the Executive agree to be bound by any ruling received from the IRS and to make
appropriate payments to each other to reflect any IRS rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained in this Agreement shall result in a reduction of any payments
or benefits to which the Executive may be entitled upon termination of employment other than pursuant to Sections 4 and 5 hereof, or a reduction in the payments and benefits specified, below zero. 

ARTICLE 6 

CONFIDENTIALITY AND CREATIVE WORK 
 6.1 Non-disclosure. The Executive covenants and agrees not to reveal to any person, firm, or corporation any confidential information of any nature concerning the Corporation or its
business, or anything connected therewith. As used in this Article 6 the term “confidential information” means all of the Corporation’s and the Corporation’s affiliates’ confidential and proprietary information and trade
secrets in existence on the date hereof or existing at any time during the term of this Agreement, including but not limited to: 
 (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information; 

(b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other
technical information; 
 (c) the whole or any portion or phase of any marketing or sales information, sales records, customer
lists, prices, sales projections, or other sales information; and 
 (d) trade secrets, as defined from time to time by the laws
of Virginia. 
 This Section 6.1 does not prohibit disclosure required by an order of a court having jurisdiction or a
subpoena from an appropriate governmental agency or disclosure made by the Executive in the ordinary course of business and within the scope of the Executive’s authority. 
 6.2 Return of Materials. The Executive agrees to immediately deliver or return to the Corporation upon termination, upon expiration of this Agreement, or as soon thereafter as possible, all
written information and any other similar items furnished by the Corporation or prepared by the Executive in connection with the Executive’s services hereunder and to immediately delete all electronically stored data of the Corporation
maintained on the Executive’s personal computers and to return all Corporation-provided computers or communication devices (i.e., laptop, Blackberry, PDA, etc.). The Executive will retain no copies thereof after termination of this Agreement or
termination of the Executive’s employment. 

  
 8 

 6.3 Creative Work. The Executive agrees that all creative work and work
product, including but not limited to all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by the Executive during the term of this Agreement, regardless of when or where such work or work
product was produced, constitutes work made for hire, all rights of which are owned by the Corporation. The Executive hereby assigns to the Corporation all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent,
or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws. 
 6.4 Affiliates’ Confidential Information is Covered; Confidentiality Obligation Survives Termination. For purposes of this Agreement, the term “affiliate” of the Corporation
includes any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control of the Corporation. The rights and obligations set forth in this Article 6 shall survive termination of this
Agreement. 
 6.5 Injunctive Relief. The Executive acknowledges that it is impossible to measure in money the
damages that will accrue to the Corporation if the Executive fails to observe the obligations imposed by this Article 6. Accordingly, if the Corporation institutes an action to enforce the provisions hereof, the Executive hereby waives the claim or
defense that an adequate remedy at law is available to the Corporation, and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. The confidentiality and remedies provisions of this Article 6
shall be in addition to and shall not be deemed to supersede or restrict, limit, or impair the Corporation’s rights under applicable state or federal statute or regulation dealing with or providing a remedy for the wrongful disclosure, misuse,
or misappropriation of trade secrets or proprietary or confidential information. 
 ARTICLE 7 

COMPETITION AFTER EMPLOYMENT TERMINATION 
 7.1 Covenant Not to Solicit Employees. The Executive agrees not to, directly or indirectly, solicit or employ the services of any officer or employee of the Corporation (including an
individual who was an officer or employee of the Corporation during the one year period following the Executive’s termination) for one year after the Executive’s employment termination. 

7.2 Covenant Not to Compete. 
 (a) The Executive covenants and agrees not to compete directly or indirectly with the Corporation for one year after the Executive’s involuntary termination without cause or voluntary termination for
Good Reason. For purposes of this Section 7.2: 
  

	 	(1)	the term compete means: 

  

	 	(i)	providing financial products or services on behalf of any financial institution for any person residing in the territory, 

 

	 	(ii)	assisting (other than through the performance of ministerial or clerical duties) any financial institution in providing financial products or services to any person
residing in the territory, or 

  

	 	(iii)	inducing or attempting to induce any person who was a customer of the Corporation at the date of the Executive’s employment termination to seek financial products
or services from another financial institution. 

  
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	 	(2)	the words directly or indirectly mean: 

  

	 	(i)	acting as a consultant, officer, director, independent contractor, or employee of any financial institution in competition with the Corporation in the territory, or

  

	 	(ii)	communicating to such financial institution the names or addresses or any financial information concerning any person who was a customer of the Corporation when the
Executive’s employment terminated. 

  

	 	(3)	the term customer means any person to whom the Corporation is providing financial products or services on the date of the Executive’s employment termination
or within one year thereafter. 

  

	 	(4)	the term financial institution means any bank, savings association, or bank or savings association holding company, or any other institution, the business of
which is engaging in activities that are financial in nature or incidental to such financial activities as described in Section 4(k) of the Bank Holding Company Act of 1956, other than the Corporation or any of its affiliated corporations.

  

	 	(5)	financial product or service means any product or service that a financial institution or a financial holding company could offer by engaging in any activity
that is financial in nature or incidental to such a financial activity under Section 4(k) of the Bank Holding Company Act of 1956 and that is offered by the Corporation or an affiliate on the date of the Executive’s employment termination,
including but not limited to banking activities and activities that are closely related and a proper incident to banking. 

  

	 	(6)	the term person means any individual or individuals, corporation, partnership, fiduciary or association. 

 

	 	(7)	the term territory means the area within a 30-mile radius of any office of the Corporation at the date of the Executive’s employment termination.

 (b) If any provision of this Article 7 or any word, phrase, clause, sentence or other portion thereof
(including, without limitation, the geographical and temporal restrictions contained therein) is held to be unenforceable or invalid for any reason, the unenforceable or invalid provision or portion shall be modified or deleted so that the
provisions hereof, as modified, are legal and enforceable to the fullest extent permitted under applicable law. 
 (c) The
Executive acknowledges that the Corporation’s willingness to enter into this Agreement and to make the payments contemplated by Articles 3 and 4 of this Agreement is conditioned on the Executive’s acceptance of the covenants set forth in
Articles 6 and 7 of this Agreement and that the Corporation would not have entered into this Agreement without such covenants in force. 
 7.3 Injunctive and Other Relief. Because of the unique character of the services to be rendered by the Executive hereunder, the Executive understands that the Corporation would not have an
adequate remedy at law for the material breach or threatened breach by the Executive of any one or more of the Executive’s covenants in this Article 7. Accordingly, the Executive agrees that the Corporation’s remedies for a breach of this
Article 7 include, but are not limited to, (x) forfeiture of any money 

  
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representing accrued salary, contingent payments, or other fringe benefits (including any amount payable pursuant to Article 4) due and payable to the Executive during the period of any breach by
the Executive, and (y) a suit in equity by the Corporation to enjoin the Executive from the breach or threatened breach of such covenants. The Executive hereby waives the claim or defense that an adequate remedy at law is available to the
Corporation and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. Nothing herein shall be construed to prohibit the Corporation from pursuing any other or additional remedies for the
breach or threatened breach. 
 7.4 Article 7 Survives Termination But Is Void After a Change in Control. The
rights and obligations set forth in this Article 7 shall survive termination of this Agreement. However, Article 7 shall become null and void effective immediately upon a Change in Control. 

ARTICLE 8 

MISCELLANEOUS 
 8.1 Successors and Assigns. 
 (a) This Agreement shall be binding
upon the Corporation and any successor to the Corporation, including any persons acquiring directly or indirectly all or substantially all of the business or assets of the Corporation by purchase, merger, consolidation, reorganization, or otherwise,
but this Agreement and the Corporation’s obligations under this Agreement are not otherwise assignable, transferable, or delegable by the Corporation. By agreement in form and substance satisfactory to the Executive, the Corporation shall
require any successor to all or substantially all of the business or assets of the Corporation expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Corporation would be required to perform had no
succession occurred. 
 (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees, and legatees. 
 (c) Without written consent
of the other parties, no party shall assign, transfer, or delegate this Agreement or any rights or obligations under this Agreement, except as expressly provided herein. Without limiting the generality or effect of the foregoing, the
Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by the Executive’s will or by the laws of descent and distribution.
If the Executive attempts an assignment or transfer that is contrary to this Section 8.1, the Corporation shall have no liability to pay any amount to the assignee or transferee. 

8.2 Governing Law, Jurisdiction and Forum. This Agreement shall be construed under and governed by the internal laws of the
State of Virginia, without giving effect to any conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than Virginia. By entering into this Agreement, the Executive acknowledges that the Executive
is subject to the jurisdiction of both the federal and state courts in Virginia. 
 8.3 Entire Agreement. This
Agreement sets forth the entire agreement of the parties concerning the employment of the Executive by the Corporation. Any oral or written statements, representations, agreements, or understandings made or entered into prior to or contemporaneously
with the execution of this Agreement are hereby rescinded, revoked, and rendered null and void by the parties. 
 8.4
Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid. Unless otherwise changed by notice, notice shall be 

  
 11 

 
properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Corporation at the time of the delivery of such notice, and properly addressed to
the Corporation if addressed to the boards of directors of the Corporation at the Corporation’s executive offices. 

8.5 Severability. If there is a conflict between any provision of this Agreement and any statute, regulation, or judicial
precedent, the latter shall prevail, but the affected provisions of this Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of law. If any provisions of this Agreement is held by a court of
competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the remainder of this Agreement shall continue in full force and effect unless that would clearly be contrary to the intentions of the parties or would
result in an injustice. 
 8.6 Captions and Counterparts. The captions in this Agreement are solely for
convenience. The captions do not define, limit, or describe the scope or intent of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one
and the same instrument. 
 8.7 No Duty to Mitigate. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment. Moreover, provided the Executive is not in breach of any obligation under Articles 6 and 7 of this Agreement, the amount of any payment provided for in this Agreement shall not
be reduced by any compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after employment termination. 

8.8 Amendment and Waiver. This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any
manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not be construed to be a waiver of any such provision, nor affect
the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. 

8.9 Compliance with Internal Revenue Code Section 409A. The Corporation and the Executive intend that their exercise
of authority or discretion under this Agreement shall comply with Section 409A of the Code. If any provision of this Agreement does not satisfy the requirements of Section 409A of the Code, the provision shall nevertheless be applied in a
manner consistent with those requirements. If any provision of this Agreement would subject the Executive to additional tax or interest under Section 409A of the Code, the Corporation shall reform the provision. However, the Corporation shall
maintain to the maximum extent practicable the original intent of the applicable provision without subjecting the Executive to additional tax or interest, and the Corporation shall not be required to incur any additional compensation expense as a
result of the reformed provision. 
 8.10 Source of Payments. Notwithstanding any provision in this Agreement to
the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by the Executive under an employment agreement in effect between the Executive and the Bank, the payments and benefits paid by the Bank
will be subtracted from any amount or benefit due simultaneously to the Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by the Executive on activities
related to the Corporation and the Bank, respectively, as determined by the Corporation and the Bank. 
 [Signature Page to
Follow] 

  
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 IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the
date first written above. 
  

	
	FRANKLIN FINANCIAL CORPORATION
	
	  
	[Name]
	For the Board of Directors
	
	  
	Executive

  
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