Execution Version

RETIREMENT AGREEMENT

This RETIREMENT AGREEMENT (this “Agreement ”), dated as of December 21, 2008, is
hereby entered into by and between FBR Capital Markets Corporation, a Virginia
corporation with its principal place of business at 1001 19th Street North,
Arlington, VA 22909 (the “Company ”), and Eric F. Billings, an individual
residing at the address set forth on the signature page hereof (the “Executive
”).

WHEREAS, the Executive currently serves as the Chairman of the Board of
Directors of the Company (the “Board ”) and as the Company’s Chief Executive
Officer; and

WHEREAS, the Executive desires to resign as the Company’s Chief Executive
Officer (but will continue Board membership) as of the Effective Date (as
defined below), and the Company desires to provide to the Executive certain
payments and benefits in exchange for the Executive’s entering into certain
covenants as hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations herein and for other good and valuable consideration, the parties
hereto, intending to be legally bound, hereby agree as follows:

1.      Voluntary Resignation as CEO. This Agreement shall be effective as of
January 1, 2009 (the “ Effective Date ”). On the Effective Date, the Executive
agrees that he shall voluntarily resign as the Company’s Chief Executive Officer
and shall cease to be an officer or employee of the Company or any of its
affiliates in any capacity. As of the Effective Date, the Executive shall
continue to serve as the Chairman of the Company’s Board.

2.     

Retirement Benefits .

(a)      Vested Deferred Compensation. Subject to the Executive’s compliance
with the covenants set forth in Sections 3(b) through and including 3(d) of this
Agreement, the Company shall pay the Executive in respect of each of 2009, 2010,
2011, 2012 and 2013 an amount, in cash, equal to $1,000,000 (one million U.S.
dollars) (collectively, the “Deferred Compensation Payments ”). At the Effective
Date, the Company will establish a deferred compensation account in the
Director’s name (the “ Deferred Compensation Account”). The Deferred
Compensation Payments shall be payable to the Executive on the December 31 (or
the last business day of such calendar year) of each of 2009, 2010, 2011, 2012
and 2013, provided that in the event of a termination of the Executive’s
services to the Company due to his death, any unpaid portion of the Deferred
Compensation Account shall be paid to his estate in a lump sum within 30 days of
such death.

(b)     

Welfare Benefits . The Company shall provide the Executive, his spouse and his
eligible dependents set forth on Schedule 1 to this Agreement at the Company’s
sole cost with health benefits through the fifth (5th) anniversary of the
Effective Date (such five-year period, the “Benefits Continuation Period ”) , at
the Company’s sole discretion, either (i) under a fully insured Company health
benefit plan or (ii ) as reimbursement (on a non-tax able basis) of the health
insurance premiums incurred by the Executive or the Company during the Benefits
Continuation Period under a private health insurance program or arrangement,
chosen by the Company, in each case providing benefits that are no less
favorable than those which the Executive received from the Company immediately
prior to the Effective Date. After the Benefits Continuation Period, the
Executive shall have access to participation in the Company’s health plans at
his sole expense, to the extent permitted by applicable law. Notwithstanding the
foregoing, the Company shall in no event be required to provide, or reimburse
the cost of, any benefits otherwise described in this Section 2(b) after such
time as the Executive, his spouse or any eligible dependent, as applicable,
becomes entitled to receive benefits of the same or substantially similar type
from another recipient of the Executive’s services (including self-employment
after the Effective Date).

(c)     

Outstanding Equity Awards . As of the Effective Date, the Company shall waive
the continued employment requirements with respect to vesting for the following
equity grants: (i) 266,667 performance-based restricted stock units (originally
granted February 20, 2008, as amended August 20, 2008); (ii) 266,667 time-vested
restricted stock units (originally granted February 20, 2008, as amended August
20, 2008); (iii) 533,333 stock options (originally granted February 20, 2008, as
amended August 20, 2008); (iv) 243,000 stock options granted on August 16, 2006
and (v) 15,689 shares of restricted stock granted on July 25, 2007
(collectively, the “Equity Grants”). Other than as specifically set forth in the
preceding sentence, there shall be no other change in, or acceleration of, the
vesting terms of the Equity Grants, which shall continue to vest pursuant to
their existing schedule subject to the Executive’s compliance with the
restrictive covenants set forth in Sections 3(b) through and including 3(d) of
this Agreement (unless the Equity Grants vest earlier pursuant to the terms of
the underlying award agreements or plans as in effect on the date hereof).

(d)      Office and Secretarial Support . While serving on the Board through
December 31, 2011, the Company shall provide the Executive with appropriate
office space and secretarial support.

(e)      No Other Remuneration . The Executive shall not be entitled to any
remuneration under this Agreement except as set forth in this Section 2.

3.      Restrictive Covenants . The Executive acknowledges and agrees that (i)
the Executive’s past and future service with the Company has given him and will
give him access to the confidential affairs and proprietary information of the
Company, (ii) the payments and benefits under this Agreement are in
consideration of the covenants and agreements contained in this Section 3 and
are essential to the business and goodwill of the Company, and (iii) the Company
would not have entered into this Agreement but for the covenants and agreements
that the Executive is making as set forth in this Section 3. Accordingly, the
Executive agrees as follows:

(a)      Confidentiality . During and after the period of the Executive’s
service with the Company and its controlled affiliates, the Executive shall keep
secret and retain in strictest confidence, except in connection with the
business and affairs of the Company and its controlled affiliates and as
otherwise required by law, all confidential matters relating to the business and
affairs of the Company and its controlled affiliates learned by the Executive
heretofore or hereafter directly or indirectly from the Company or any of its
controlled affiliates (the “Confidential Company Information ”), and shall not
disclose such Confidential Company Information to anyone outside of the Company
except as required by law or with the Company’s express written consent and
except for Confidential Company Information which is, at the time of receipt, or
thereafter becomes, publicly known through no wrongful act of the Executive.

(b)     

Non-competition. During the period beginning on the date of this Agreement and
ending on the earlier of (1) December 31, 2013 or (2) the third anniversary of
the date the Executive ceases to serve on the Board for any reason (the
“Restrict e d Period”), the Executive shall not, without the express written
consent of the Company, directly or indirectly, anywhere in the United States or
any other country where the Company does business as of the date hereof, own an
interest in, join, operate, control or participate in, be connected as an owner,
officer, executive, employee, partner, member, manager, shareholder, or
principal of or with, or otherwise aid or assist in any manner whatsoever, any
individual, corporation or entity that competes with the activities of the
Company or its subsidiaries and controlled affiliates, including in the capital
markets, money management, financial advisory and/or institutional sales and
trading businesses (a “Competitive Activity”). Notwithstanding the foregoing,
the Executive may (i) own up to one percent (1%) of the outstanding stock of a
publicly held corporation which is or is affiliated with an entity or person
that is in competition with the Company or its subsidiaries or (ii) be an
officer, executive, employee, partner, member, manager, shareholder, or
principal of or with a hedge fund, mutual fund, side-by-side fund or a
third-party asset management firm (the exceptions set forth in clauses (i) and
(ii), the “ Permitted Activities”). In the event that the Executive provides
notice to the Company that he will engage in a Competitive Activity in respect
of money management that is not already a Permitted Activity, and engages in
such activity, notwithstanding anything to the contrary in this Agreement (or
any other agreement by and between the Executive and the Company), the Company
shall have no remedies against the Executive other than the right to cease
making the payments and providing the benefits to him under Section 2 of this
Agreement and Section 3 of the Director Agreement between the Company and the
Director, dated as of the date of this Agreement (the “Director Agreement ”). If
the Executive’s service on the Board ceases for any reason during the
twelve-month period immediately following a Change in Control (as defined
below), then the restrictions described in this Section 3(b) shall continue to
apply until the earlier of (i) one (1) year following the date that the
Executive’s service with the Company ceases or (ii) the end of the Restricted
Period. “ Change in Control” shall have the meaning set forth under the
Company’s 2006 Long-Term Incentive Plan (the “LTIP ”) as in effect on the date
hereof; provided, however, that for purposes of this Section 3(b), a Change in
Control shall not include any transaction involving (1) the sale to a third
party by Friedman, Billings, Ramsey Group, Inc. (“ FBR Group”) of any of the
Company’s Outstanding Company Voting Stock or Outstanding Company Voting
Securities (as each term is defined in the LTIP) or (2) the sale of FBR Group to
a third party, unless either of such transactions also involves the sale,
exchange or conversion of all of the Company’s Outstanding Company Voting Stock
or Outstanding Company Voting Securities. For the avoidance of doubt, the
Executive’s engagement in activities for, or on behalf of, Friedman Billings
Ramsey Group Inc.’s businesses as of the date hereof shall in no event be
considered a violation of this Section 3(b).

(c)     

Customer Non-solicitation . During the Restricted Period, the Executive shall
not, whether for his own account or for the account of any other person, firm,
corporation or other business organization, intentionally interfere with the
Company’s or any of its controlled affiliates’ relationships with, or endeavor
to entice away from the Company or any of its controlled affiliates, any person
who during the Restricted Period is, or within the one year preceding was, a
customer or client of the Company or any of its controlled affiliates, nor shall
the Executive aid or assist in any manner whatsoever any person, firm,
corporation or other business in doing any of the things described in this
Section 3(c).

(d)     

Employee Non-solicitation . During the period beginning on the date of this
Agreement and ending on the fifth anniversary of the date the Executive ceases
to serve on the Board for any reason, the Executive shall not, without the
Company’s prior written consent, directly or indirectly, knowingly (i) solicit
or encourage to leave the employment or other service of the Company, or any of
its controlled affiliates, any employee or independent contractor thereof, (ii)
hire or partner with in any way to engage in a Competitive Activity (on behalf
of the Executive or any other person or entity), whether as an employee or as an
independent contractor, any current Company employee or any employee who has
left the employment of the Company, or any of its controlled affiliates, within
the twelve-month period which follows the termination of such employee’s
employment with the Company and its controlled affiliates, or (iii) aid or
assist in any manner whatsoever any person, firm, corporation or other business
in doing any of the things described in this Section 3(d); provided that
solicitations incidental to general advertising or other general solicitations
in the ordinary course not specifically targeted at such persons shall not be
considered a violation of this Section 3 ( d).

(e)     

Rights and Remedies upon Breach. The Executive acknowledges and agrees that any
breach by him of any of the provisions of Sections 3(b) through and including
3(d) (the “Restrictive Covenants”) would result in irreparable injury and damage
for which money damages would not provide an adequate remedy. Therefore, if the
Executive breaches, or threatens to commit a breach of, any of the Restrictive
Covenants, the Company and its controlled affiliates, in addition to, and not in
lieu of, any other rights and remedies available to the Company and its
controlled affiliates under law or in equity (including, without limitation, the
recovery of damages), shall have the right and remedy to have the Restrictive
Covenants specifically enforced by any court having equity jurisdiction,
including, without limitation, the right to an entry against the Executive of
restraining orders and injunctions (preliminary, mandatory, temporary and
permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants.

4.      Non-Disparagement . The Executive agrees that he shall not (except as
reasonably required by law), from and after the Effective Date, make any
statement, orally or in writing, nor take any action, that (i) in any way could
reasonably be expected to disparage the Company or the business reputation of
any officer, executive , director, partner, manager, member, principal,
employee, representative or agent of the Company, or which foreseeably could or
reasonably could be expected to harm the business reputation or goodwill of any
of those persons or entities, or (ii) in any way, directly or indirectly, could
knowingly cause, encourage or condone the making of such statements or the
taking of such actions by anyone else. The Company agrees that neither it, nor
any member of the Company’s E xecutive Committee or member of the Board
(collectively, the “Company Parties”) shall or shall instruct another person or
entity to (except as reasonably required by law), from and after the Effective
Date, make any statement, orally or in writing, or take any action, that (x) in
any way could reasonably be expected to disparage the business reputation of the
Executive or any entity with which he is associated, or which foreseeably could
or reasonably could be expected to harm the business reputation or goodwill of
the Executive or any entity with which he is associated, or (y) in any way,
directly or indirectly, could knowingly cause, encourage or condone the making
of such statements or the taking of such actions by anyone else. The Executive
and the Company each acknowledge that if he or any of the Company Parties
breaches, or threatens to commit a breach of, this Section 4, the other party,
in addition to, and not in lieu of, any other rights and remedies available to
the it under law or in equity (including, without limitation, the recovery of
damages), shall have the right and remedy to have the provisions of this Section
4 specifically enforced by any court having equity jurisdiction, including,
without limitation, the right to an entry against such other party of
restraining orders and injunctions (preliminary, mandatory, temporary and
permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants. Notwithstanding anything in this Section 4 which
may be to the contrary, no truthful statement of fact (for clarity, as
distinguished from an opinion) will be deemed to violate this Section 4.

5.     

Severability. The Executive acknowledges and agrees that (i) he has had an
opportunity to seek advice of counsel in connection with this Agreement, and has
had the advice and representation of competent counsel in this matter, and
(ii) the Restrictive Covenants are reasonable in geographical and temporal scope
and in all other respects. If it is determined that any of the provisions of
this Agreement, including, without limitation, any of the Restrictive Covenants,
or any part thereof, is invalid or unenforceable, the remainder of the
provisions of this Agreement shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.

6.     

Duration and Scope of Covenants. If any court or other decision-maker of
competent jurisdiction determines that any of the Executive’s covenants
contained in this Agreement, including, without limitation, the Restrictive
Covenants, or any part thereof, is unenforceable because of the duration or
geographical scope of such provision, then, after such determination has become
final and unappealable, the duration or scope of such provision, as the case may
be, shall be reduced so that such provision becomes enforceable and, in its
reduced form, such provision shall then be enforceable and shall be enforced.

7.     

Section 409A . Th is Agreement is intended to comply with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A ”)
or an exemption and shall in all respects be administered in accordance with
Section 409A. Each payment under this Agreement shall be treated as a separate
payment for purposes of Section 409A. In no event may the Executive, directly or
indirectly, designate the calendar year of any payment to be made under this
Agreement. All reimbursements and in-kind benefits provided under this Agreement
shall be made or provided in accordance with the requirements of Section 409A.
If (i) the Executive is a “specified employee” (as defined in Section 409A) at
the time his service with the Company terminates, (ii) the payment constitutes
deferred compensation that is subject to Section 409A, and (iii) the payment is
due on account of the Executive ’s separation from service (with the meaning of
Section 409A) for a reason other than the Executive’s death or because the
Executive is “disabled” (within the meaning of Section 409A), then such payments
shall be made, together with interest at the applicable federal rate, on first
business day of the seventh (7th) month after the Executive ’s “separation from
service”.

8.     

Enforceability; Jurisdiction; Arbitration. Any controversy or claim arising out
of or relating to this Agreement or the breach of this Agreement (other than a
controversy or claim arising under Section 3, and to the extent necessary for
the Company or its affiliates, where applicable, to avail itself of the rights
and remedies referred to in Section 3(e)) that is not resolved by the Executive
and the Company (or its affiliates, where applicable) shall be submitted to
arbitration in the Washington, D.C. area in accordance with Virginia law and the
procedures of the American Arbitration Association. The determination of the
arbitrator(s) shall be conclusive and binding on the Company (or its affiliates,
where applicable) and the Executive and judgment may be entered on the
arbitrator(s)’ award in any court having jurisdiction.

9.     

Notices. Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, sent by facsimile or electronic
transmission, or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally, or sent by
facsimile or electronic transmission or, if mailed, five days after the date of
deposit in the United States mails as follows:

If to the Company, to:

FBR Capital Markets Corporation
1001 19th Street North
Arlington, VA 22209
Attention: General Counsel

If to the Executive, at the address last set forth on the records of the
Company.

Any such person may by written notice given in accordance with this Section 9 to
the other parties hereto designate another address or person for receipt by such
person of notices hereunder.

10.      Entire Agreement . This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements, written or oral, with respect thereto. No prior or contemporaneous
agreements were reached or entered between the parties, other than the Director
Agreement.

11.     

Waivers and Amendments. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.

12.     

Governing Law . This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia without regard to any principles
of conflicts of law which could cause the application of the laws of any
jurisdiction other than the Commonwealth of Virginia.

13.     

Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs (in the case of the
Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred, subject to Section 3(b) pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the assets of the
Company; provided, however , that the assignee or transferee is the successor to
all or substantially all of the assets of the Company and such assignee or
transferee assumes the liabilities, obligations and duties of the Company, as
contained in this Agreement, either contractually or as a matter of law.

14.     

Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original
but all such counterparts together shall constitute one and the same instrument.
Each counterpart may consist of two copies hereof each signed by one of the
parties hereto.

15.     

Survival. For the avoidance of doubt, the provisions of Sections 3, 4, 5 and 6
of this Agreement and the other provisions necessary to effectuate the survival
of such provisions shall survive any termination of the Executive’s services to
the Company as a member of the Board and/or a termination of the Director
Agreement.

16.     

Headings. The headings in this Agreement are for reference only and shall not
affect the interpretation of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first written above.

FBR CAPITAL MARKETS CORPORATION

/s/ Arthur J. Reimers

By: Arthur J. Reimers, Lead Director
 

EXECUTIVE

/s/ Eric F. Billings

By:     Eric F. Billings

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Schedule 1

Executive’s Eligible Dependents

Marianne P. Billings (wife)

Alicia P. Billings (daughter)