Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT


This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of November 4, 2002, by and between FRANKLIN BANK CORP., a Delaware corporation (the "Company"), and FRIEDMAN, BILLINGS, RAMSEY & CO., INC., a Delaware corporation ("FBR"), for the benefit of FBR and purchasers of the Company's Class A Common Stock, par value $.01 per share ("Common Stock") as participants ("Participants") in the private placement by the Company of 8,000,000 shares of Common Stock and their respective direct and indirect transferees.


This Agreement is made pursuant to the Purchase/Placement Agreement (the "Purchase/Placement Agreement"), dated October 29, 2002, by and between the Company and FBR. In order to induce FBR to enter into the Purchase/Placement Agreement, the Company has agreed to provide the registration rights provided for in this Agreement to FBR, the Participants and their direct and indirect transferees. The execution of this Agreement is a condition to the closing of the transactions contemplated by the Purchase/Placement Agreement.


The parties hereby agree as follows:


1. DEFINITIONS


As used in this Agreement, the following terms shall have the following meanings:


ACCREDITED INVESTOR SHARES: Shares initially resold by FBR to institutional "accredited investors" (within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) promulgated under the Securities Act) and Shares initially sold by the Company to individual "accredited investors" (within the meaning of Rule 501(a)(4), (5) or (6) promulgated under the Securities Act) as Participants.


AFFILIATE: As to any specified Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such other Person and (ii) any executive officer, director, trustee or general partner of such Person.


BUSINESS DAY: With respect to any act to be performed hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York or other applicable place where such act is to occur are authorized or obligated by applicable law, regulation or executive order to close.


CLOSING DATE: November 4, 2002 or such other time or date as FBR and the Company may agree.


COMMISSION: The Securities and Exchange Commission.


COMMON STOCK: As defined in the preamble.


COMPANY: As defined in the preamble.


CONTROLLING PERSON: As defined in Section 6(a) hereof.


END OF SUSPENSION NOTICE: As defined in Section 5(b) hereof.


EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant thereto.


HOLDER: Each record owner of any Registrable Shares from time to time, including FBR and its Affiliates.


INDEMNIFIED PARTY: As defined in Section 6(c) hereof.


INDEMNIFYING PARTY: As defined in Section 6(c) hereof.


INITIAL PURCHASER: As defined in the preamble.


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IPO REGISTRATION STATEMENT: As defined in Section 2 hereof.


LIABILITIES: As defined in Section 6(a) hereof.


LIQUIDATED DAMAGES: As defined in Section 5(d) hereof.


NASD: The National Association of Securities Dealers, Inc.


OFFERING MEMORANDUM: The Offering Memorandum of the Company dated October 29, 2002 pursuant to which the Shares are offered and sold.


PARTICIPANTS: As defined in the preamble.


PERSON: An individual, partnership, corporation, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity.


PROCEEDING: An action, claim, suit or proceeding (including without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Person subject thereto, threatened.


PROSPECTUS: The prospectus included in any Registration Statement, including any preliminary prospectus, and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus.


PURCHASER INDEMNITEE: As defined in Section 6(a) hereof.


PURCHASE/PLACEMENT AGREEMENT: As defined in the preamble.


REGISTRABLE SHARES: The Rule 144A Shares, the Accredited Investor Shares and the Regulation S Shares, upon original issuance thereof and at all times subsequent thereto, including upon the transfer thereof by the original Holder or any subsequent Holder and any shares or other securities issued in respect of such Shares by reason of or in connection with any exchange for or replacement of such Shares or any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock, until, in the case of any such Rule 144A Share, Accredited Investor Share or Regulation S Share, the earliest to occur of (i) the date on which it has been registered effectively pursuant to the Securities Act and disposed of in accordance with the Registration Statement relating to it, (ii) the date on which either it is distributed to the public pursuant to Rule 144 or is saleable pursuant to Rule 144(k) promulgated by the Commission pursuant to the Securities Act or (iii) the date on which it is sold to the Company.


REGISTRATION DEFAULT: As defined in Section 5(d) hereof.


REGISTRATION EXPENSES: Any and all expenses incident to the performance of or compliance with this Agreement, including, without limitation: (i) all Commission, securities exchange, NASD registration, listing, inclusion and filing fees, (ii) all fees and expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including, without limitation, any registration, listing and filing fees and reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with the rules of the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements, certificates and any other documents relating to the performance under and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on any securities exchange or The Nasdaq Stock Market pursuant to Section 4(n) of this Agreement, (v) the fees and disbursements of counsel for the Company and of the independent public accountants (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), and reasonable fees and disbursements of one counsel for the selling Holders and (vi) any fees and disbursements customarily paid in issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement), but excluding brokers' or underwriters' discounts and commissions, if any, relating to the sale or disposition of Registrable Shares by a Holder.


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REGISTRATION STATEMENT: Any registration statement of the Company that covers the resale of Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement.


REGULATION S: Regulation S (Rules 901-904) promulgated by the Commission under the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such regulation.


REGULATION S SHARES: Shares initially resold by FBR to "non-U.S. persons" (in accordance with Regulation S) in an "offshore transaction" (in accordance with Regulation S).


RULE 144: Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 144A: Rule 144A promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 144A SHARES: Shares initially resold by FBR to "qualified institutional buyers" (as such term is defined in Rule 144A).


RULE 158: Rule 158 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 174: Rule 174 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 415: Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 424: Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


RULE 429: Rule 429 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.


SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission pursuant thereto.


SHARES: The shares of Common Stock being offered and sold pursuant to the terms and conditions of the Purchase/Placement Agreement.


SHELF REGISTRATION STATEMENT: As defined in Section 2 hereof.


SUSPENSION EVENT: As defined in Section 5(b) hereof.


SUSPENSION NOTICE: As defined in Section 5(b) hereof.


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UNDERWRITTEN OFFERING: A sale of securities of the Company on a firm-commitment basis to an underwriter or underwriters for reoffering to the public.


2. REGISTRATION RIGHTS


As set forth in Section 4 hereof, the Company agrees to file with the Commission within two hundred eighty five (285) days and to cause to be declared effective by the Commission as soon as practicable thereafter, but in any event within three hundred sixty five (365) days of the Closing Date, either (i) a Registration Statement on Form S-1 or such other form under the Securities Act providing for the initial public offering of shares of Common Stock (an "IPO Registration Statement"), which IPO Registration Statement will provide for the resale by the Holders of any and all Registrable Shares (subject to Section 2(a)(ii) hereof) or (ii) subject to Section 2(b) hereof, a shelf Registration Statement on Form S-1 or such other form under the Securities Act then available to the Company providing for the resale pursuant to Rule 415 from time to time by the Holders of any and all Registrable Shares (a "Shelf Registration Statement").


(a) IPO REGISTRATION. If the Company files an IPO Registration
Statement, the Company will notify each Holder of the proposed filing and
afford each Holder of Registrable Shares an opportunity to include in such
IPO Registration Statement all or any part of the Registrable Shares then
held by such Holder. Each Holder desiring to include in any such IPO
Registration Statement all or part of the Registrable Shares held by such
Holder shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company of the number of Registrable
Securities such Holder wishes to include in such IPO Registration Statement
and complete, sign and return the selling stockholder questionnaire
included with the notice.


(i) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any IPO Registration Statement initiated
by it prior to its effectiveness whether or not any Holder has elected
to include Registrable Shares in such registration.


(ii) UNDERWRITING. If an IPO Registration Statement is for an
Underwritten Offering, then the Company shall so advise the Holders of
Registrable Shares. In such event, the right of any such Holder's
Registrable Shares to be included in a registration pursuant to this
Section 2(a) shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Shares
in the underwriting to the extent provided herein. All Holders proposing
to distribute their Registrable Shares through such underwriting shall
enter into an underwriting agreement in customary form with the
representatives of underwriters selected for such underwriting and
complete and execute any questionnaires, powers of attorney,
indemnities, securities escrow agreements and other documents reasonably
required under the terms of such underwriting, and furnish to the
Company such information as the Company may reasonably request in
writing for inclusion in the Registration Statement; provided, however,
that no Holder shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other
than representations, warranties or agreements regarding such Holder and
such Holder's intended method of distribution and any other
representation required by law. Notwithstanding any other provision of
this Agreement, if the representatives of the underwriters determine in
good faith that marketing factors require a limitation on the number of
shares to be underwritten, then the representatives of the underwriters
may exclude shares (including Registrable Shares) from the registration,
and the underwriting shall be allocated among the Company and all
Holders pro rata on the basis of Registrable Shares offered for such
registration by the Company and each Holder electing to participate in
such registration. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by notice to
the Company and the underwriter, delivered at least two (2) Business
Days prior to the effective date of the Registration Statement. Any
Registrable Shares excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.


(iii) HOLD-BACK AGREEMENT. By electing to include Registrable
Shares in any registration pursuant to this Section 2(a), the Holder of
the Registrable Shares shall be deemed to have agreed not to effect any
public sale or distribution of securities of the Company of the same or
similar class or classes of the securities included in the Registration
Statement or any


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securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 or Rule 144A under the
Securities Act, during such periods as reasonably requested (but in no
event for a period longer than thirty (30) days prior to and one hundred
eighty (180) days following the effective date of the IPO Registration
Statement) by the representatives of the underwriters, if an
Underwritten Offering, or by the Company in any other registration.


(iv) REGISTRABLE SHARES NOT SOLD UNDER IPO REGISTRATION
STATEMENT. If (w) the Company terminates or withdraws the IPO
Registration Statement prior to its effectiveness or the distribution of
all Registrable Shares, if any, registered thereunder, (x) the
underwriters exercise their right pursuant to Section 2(a)(ii) of this
Agreement to exclude any Registrable Shares from the IPO Registration
Statement, (y) any Holder elects to withdraw or not to include any
Registrable


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Shares in the IPO Registration Statement, or (z) any Registrable Shares
are otherwise not registered under and distributed pursuant to the IPO
Registration Statement, then the Company shall file a Shelf Registration
Statement relating to any Registrable Shares not registered under and
distributed pursuant to an IPO Registration Statement as soon as
practicable, but in no event later than (a) in the case of the
withdrawal or abandonment of the offering pursuant to the IPO
Registration Statement, the date which is the later of two hundred
eighty five (285) days after the Closing Date or thirty (30) days after
the earlier of the withdrawal or abandonment of the offering pursuant to
the IPO Registration Statement or (b) the date one hundred eighty (180)
days after the consummation of the offering pursuant to the IPO
Registration Statement.


(b) SHELF REGISTRATION. If the Company elects to file a Shelf
Registration Statement or is otherwise required to file a Shelf
Registration Statement pursuant to this Section 2, it shall notify each
Holder of the proposed filing and afford each Holder an opportunity to
include in such Shelf Registration Statement all or any part of the
Registrable Shares then held by such Holder. Each Holder desiring to
include in any such Shelf Registration Statement all or part of the
Registrable Shares held by such Holder shall, within twenty (20) days after
receipt of the above-described notice from the Company, so notify the
Company of the number of Registrable Securities such Holder wishes to
include in such Shelf Registration Statement and complete, sign and return
the selling stockholder questionnaire included with the notice. The Company
shall cause the Shelf Registration Statement to be declared effective by
the Commission within three hundred sixty five (365) days after the Closing
Date or, in the case of a Shelf Registration Statement filed pursuant to
Section 2(a)(iv), within eighty (80) days after the filing thereof with the
Commission. Any Shelf Registration Statement shall provide for the resale
from time of time, and pursuant to any method or combination of methods
legally available (including, without limitation, an Underwritten Offering,
a direct sale to purchasers, a sale through brokers or agents, or a sale
over the internet) by the Holders of any and all Registrable Shares.


(c) EXPENSES. The Company shall pay all Registration Expenses in
connection with the registration of the Registrable Shares pursuant to this
Agreement. Each Holder participating in a registration pursuant to this
Section 2 shall bear such Holder's proportionate share (based on the total
number of Registrable Shares sold in such registration) of all discounts,
commissions or other amounts payable to underwriters or brokers in
connection with a registration of Registrable Shares pursuant to this
Agreement.


3. RULES 144 AND 144A REPORTING


With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Registrable Shares to the public without registration, the Company agrees to:


(a) make available adequate current public information, as defined in
Rule 144, at all times after the one year has elapsed from the date of this
Agreement and any Registrable Shares are not eligible for resale under Rule
144(k) promulgated by the Commission;


(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company under the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements);


(c) so long as a Holder owns any Registrable Shares, if the Company is
not required to file reports and other documents under the Securities Act
and the Exchange Act, it will make available other information as required
by, and so long as necessary to permit sales of Registrable Shares pursuant
to, Rule 144 or Rule 144A; and


(d) so long as a Holder owns any Registrable Shares, to furnish to the
Holder promptly upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time prior
to ninety (90) days after the effective date of the first Registration
Statement filed by the Company for an offering of its securities to the
general public), and of the Securities Act and the Exchange Act (at any
time after it has become subject to the reporting requirements of the
Exchange Act), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company, and take such
further actions, as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to sell any such
Registrable Shares without registration.


6 4. REGISTRATION PROCEDURES


In connection with the obligations of the Company with respect to any registration pursuant to this Agreement, the Company shall use its best efforts to effect or cause to be effected the registration of the Registrable Shares under the Securities Act to permit the sale of such Registrable Shares by the Holder or Holders in accordance with the Holder's or Holders' intended method or methods of distribution, and the Company shall:


(a) prepare and file with the Commission, as specified in this
Agreement, a Registration Statement, which Registration Statement shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the
Commission to be filed therewith, and use its best efforts to cause such
Registration Statement to become effective as soon as practicable after
filing and to remain effective, subject to Section 5 hereof, until the
earlier of (i) the date on which all such Registrable Shares are sold in
accordance with the intended distribution of such Shares, (ii) none of the
Shares are Registrable Shares or (iii) the first anniversary of the
effective date of such Registration Statement (subject to extension as
provided in Section 5(c) hereof), provided, however, that the Company shall
not be required to cause any IPO Registration Statement to remain effective
for any period longer than ninety (90) days following the effective date of
such IPO Registration Statement (subject to extension as provided in
Section 5 ...