THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Franklin Bank Corp. (FBTX)

4/3/2006 Proxy Information

Ranieri & Co., Inc. We were a party to a nonexclusive consulting agreement with Ranieri & Co., Inc., or Ranieri & Co., a company controlled by Mr. Ranieri, dated November 4, 2002 that expired November 4, 2005. Pursuant to the consulting agreement, Ranieri & Co. provided, among other services, strategic planning advice and guidance, asset and liability management advice, and other strategic advice. In exchange for such services, Ranieri & Co. received a fee of $500,000 per year. Ranieri & Co. also was originally granted a ten-year, irrevocable option to purchase an aggregate of 570,000 shares of our common stock exercisable at $10.00 per share, which became exercisable in full as a result of the completion of our initial public offering. We granted this option to Ranieri & Co. under a stock option agreement, dated as of November 4, 2002, in partial consideration for the services to be provided by Ranieri & Co. to us under the consulting agreement.

The stock option agreement provides that the option may be exercised in whole or in part at any time during the ten-year period beginning on the date of the agreement, by sending us a written notice to that effect. Any purchase of shares under the option is subject to compliance with the applicable regulations of the Securities and Exchange Commission, the Texas Department of Savings and Mortgage Lending, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation and the receipt of any applicable regulatory approvals. The type and number of shares or securities subject to the option, and the exercise price, are subject to adjustment in the event of any change in our common stock by reason of a stock dividend, split-up, merger, recapitalization, combination, exchange of shares, or similar transaction. The stock option agreement provides that the option may not be sold, transferred, pledged or hypothecated unless we have been supplied with evidence reasonably satisfactory to us that such disposition is not in violation of the Securities Act of 1933. In addition, the option and the right to purchase the underlying shares may be transferred only to one or more persons, each of whom on the date of transfer is an employee, officer, director, member, partner, stockholder or other equity interest holder of the option holder or its “affiliates” (defined to mean any person or entity who controls, is controlled by, or is under common control with, the holder). Upon any such transfer, the transferee will be entitled to all of the benefits, and subject to all of the limitations, of Ranieri & Co., as the original holder of the option, and will be treated for all purposes as such original holder.

On June 10, 2003, Ranieri & Co. transferred 552,900 of its options to certain equity holders and employees of Ranieri & Co. and Hyperion BK2 Ventures L.P., or Hyperion Ventures, which was controlled by Mr. Ranieri, and certain of our directors and officers, at a price of $1.52 per option share. See “Ownership of Common Stock” above. Following these transfers by Ranieri & Co., we entered into new option agreements with each of the transferees of the options with substantially the same terms as the Ranieri & Co. stock option agreement.

The consulting agreement, as amended by letter agreement dated December 15, 2003, required that Ranieri & Co. perform its services in conformity with the highest business, trade and professional standards and utilizing the degree of skill, care and supervision necessary to ensure that services are performed in a timely fashion and in accordance with the professional standards customary in the industry.

Loans. Since the beginning of the last fiscal year, certain of the Company’s executive officers and members of their immediate family have been indebted to the bank under mortgage loans made in the ordinary course of business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with unaffiliated persons and do not involve more than normal risk of collectibility for credit transactions or present other unfavorable features.

Directors and Officers. Mr. Perro is the Chief Financial Officer and a Managing Director and Vice President of Ranieri & Co. Kristina Dillon, our Vice President — Administration, is the daughter of Mr. Nocella.

3/25/2005 Proxy Information

Ranieri & Co., Inc. We are a party to a three-year, nonexclusive consulting agreement with Ranieri & Co., Inc., or Ranieri & Co., a company controlled by Mr. Ranieri, dated November 4, 2002, pursuant to which Ranieri & Co. provides, among other services, strategic planning advice and guidance, asset and liability management advice, and other strategic advice. In exchange for such services, Ranieri & Co. receives a fee of $500,000 per year, payable ratably on a monthly basis. Ranieri & Co. also was originally granted a ten-year, irrevocable option to purchase an aggregate of 570,000 shares of our common stock exercisable at $10.00 per share, which became exercisable in full as a result of the completion of our initial public offering. We granted this option to Ranieri & Co. under a stock option agreement, dated as of November 4, 2002, in partial consideration for the services to be provided by Ranieri & Co. to us under the consulting agreement.

The stock option agreement provides that the option may be exercised in whole or in part at any time during the ten-year period beginning on the date of the agreement, by sending us a written notice to that effect. Any purchase of shares under the option is subject to compliance with the applicable regulations of the Securities and Exchange Commission, the Texas Savings and Loan Department, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation and the receipt of any applicable regulatory approvals. The type and number of shares or securities subject to the option, and the exercise price, are subject to adjustment in the event of any change in our common stock by reason of a stock dividend, split-up, merger, recapitalization, combination, exchange of shares, or similar transaction. The stock option agreement provides that the option may not be sold, transferred, pledged or hypothecated unless we have been supplied with evidence reasonably satisfactory to us that such disposition is not in violation of the Securities Act of 1933. In addition, the option and the right to purchase the underlying shares may be transferred only to one or more persons, each of whom on the date of transfer is an employee, officer, director, member, partner, stockholder or other equity interest holder of the option holder or its “affiliates” (defined to mean any person or entity who controls, is controlled by, or is under common control with, the holder). Upon any such transfer, the transferee will be entitled to all of the benefits, and subject to all of the limitations, of Ranieri & Co., as the original holder of the option, and will be treated for all purposes as such original holder.

On June 10, 2003, Ranieri & Co. transferred 552,900 of its options to certain equity holders and employees of Ranieri & Co. and Hyperion BK2 Ventures L.P., or Hyperion Ventures, which was controlled by Mr. Ranieri, and certain of our directors and officers, at a price of $1.52 per option share. See “Ownership of Common Stock” above. Mr. Ranieri has the right to purchase from these transferees at the same price up to two-thirds of the total options transferred by Ranieri & Co. (other than those held by Mr. Ranieri) or any shares issued pursuant to such options, if such repurchase right is exercised on or prior to April 9, 2004, and thereafter and prior to April 9, 2005 up to one-third of the total options transferred (other than those held by Mr. Ranieri) or any shares issued pursuant to such options. Following these transfers by Ranieri & Co., we entered into new option agreements with each of the transferees of the options with substantially the same terms as the Ranieri & Co. stock option agreement.

The consulting agreement, as amended by letter agreement dated December 15, 2003, requires that Ranieri & Co. perform its services in conformity with the highest business, trade and professional standards and utilizing the degree of skill, care and supervision necessary to ensure that services are performed in a timely fashion and in accordance with the professional standards customary in the industry. We may terminate the agreement at any time if we determine that the services provided by Ranieri & Co. do not satisfy the performance standards contained in the agreement. Upon termination by us, Ranieri & Co. will forfeit its right to all fees, except to the extent the fees have been previously paid (or accrued and not paid). If a change of control occurs, as defined in the agreement, the consulting agreement will be cancelled and we will be obligated to pay to Ranieri & Co. all cash fees and expenses due through the date of the change of control. The December 15, 2003 letter agreement also amended the stock option agreement to provide that the termination of the consulting agreement will not result in the forfeiture of any portion of the option.

Agreement and Plan of Reorganization. We acquired the Bank on April 9, 2002 pursuant to the terms of the Agreement and Plan of Reorganization, dated as of October 3, 2001, as amended, by and among Franklin Bank Corp. (formerly BK2 Inc.), BK2 Bank, S.S.B., and the Bank. In this reorganization agreement we have agreed for a limited period of time to certain restrictions on our activities, which are discussed below.

The reorganization agreement requires, for a three-year period after the closing of the acquisition, that we include in our recommended slate of nominees for election to our Board of Directors two persons who were serving as directors of the Bank at the time the acquisition was completed. Messrs. Rhodes and Selman were elected and serve on our Board of Directors pursuant to that requirement.

Directors and Officers. Mr. Perro is the Chief Financial Officer and a Managing Director and Vice President of Ranieri & Co. Kristina Dillon, our Vice President — Administration, is the daughter of Mr. Nocella.