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Exhibit 4.1




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TABLE OF CONTENTS
 PageARTICLE I ISSUANCE OF SECURITIES
    
    
    1SECTION 1.1
    
    Issuance of Notes; Principal Amount; Maturity
    
    
    1SECTION 1.2
    
    Interest
    
    
    2ARTICLE II DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
    
    
    3SECTION 2.1
    
    Definitions
    
    
    3ARTICLE III SECURITY FORMS
    
    
    9SECTION 3.1
    
    Form Generally
    
    
    9SECTION 3.2
    
    Form of Note
    
    
    9SECTION 3.3
    
    Form of Certificate of Authentication
    
    
    22SECTION 3.4
    
    Form of Conversion Notice
    
    
    22SECTION 3.5
    
    Form of Assignment
    
    
    23ARTICLE IV REMEDIES
    
    
    24SECTION 4.1
    
    Events of Default
    
    
    24SECTION 4.2
    
    Acceleration of Maturity; Rescission and Annulment
    
    
    25ARTICLE V CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
    
    
    27SECTION 5.1
    
    Company May Consolidate, Etc. Only on Certain Terms
    
    
    27SECTION 5.2
    
    Successor Substituted
    
    
    28SECTION 5.3
    
    Indenture Article VIII
    
    
    28ARTICLE VI CERTAIN COVENANTS
    
    
    28SECTION 6.1
    
    Commission and Other Reports
    
    
    28ARTICLE VII REDEMPTION OF SECURITIES
    
    
    29SECTION 7.1
    
    Right of Redemption
    
    
    29SECTION 7.2
    
    Conversion Arrangement on Call for Redemption
    
    
    29ARTICLE VIII CONVERSION OF THE SECURITIES
    
    
    30SECTION 8.1
    
    Conversion Privilege
    
    
    30SECTION 8.2
    
    Conversion Procedure
    
    
    33SECTION 8.3
    
    Taxes on Conversion
    
    
    35SECTION 8.4
    
    Company to Provide Stock
    
    
    35SECTION 8.5
    
    Adjustment of Conversion Price
    
    
    35SECTION 8.6
    
    No Adjustment
    
    
    40SECTION 8.7
    
    Equivalent Adjustments
    
    
    40SECTION 8.8
    
    Adjustment for Tax Purposes
    
    
    40SECTION 8.9
    
    Notice of Adjustment
    
    
    41SECTION 8.10
    
    Notice of Certain Transactions
    
    
    41




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PageSECTION 8.11
    
    Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege
    
    
    42SECTION 8.12
    
    Trustees Disclaimer
    
    
    43SECTION 8.13
    
    Voluntary Reduction
    
    
    43SECTION 8.14
    
    Conversion Value of Notes Tendered
    
    
    43SECTION 8.15
    
    Physical Settlement Election
    
    
    44SECTION 8.16
    
    Simultaneous Adjustments
    
    
    45ARTICLE IX REPURCHASES OF NOTES AT OPTION OF HOLDER ON SPECIFIED DATES
    
    
    45SECTION 9.1
    
    Repurchase of Notes at Option of the Holder on Specified Dates
    
    
    45SECTION 9.2
    
    Effect of Repurchase Notice
    
    
    48SECTION 9.3
    
    Deposit of Repurchase Price
    
    
    49SECTION 9.4
    
    Notes Repurchased in Part
    
    
    49SECTION 9.5
    
    Covenant to Comply with Notes Laws upon Repurchase of Notes
    
    
    49SECTION 9.6
    
    Repayment to the Company
    
    
    50ARTICLE X REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER
    
    
    50SECTION 10.1
    
    Right to Require Repurchase Upon a Fundamental Change
    
    
    50SECTION 10.2
    
    Notices; Method of Exercising Repurchase Right, Etc
    
    
    50SECTION 10.3
    
    Certain Definitions
    
    
    53ARTICLE XI SUPPLEMENTAL INDENTURES
    
    
    54SECTION 11.1
    
    Supplemental Indentures Without Consent of Holders of Notes
    
    
    54SECTION 11.2
    
    Supplemental Indentures with Consent of Holders of Notes
    
    
    55ARTICLE XII MEETINGS OF HOLDERS OF NOTES
    
    
    57SECTION 12.1
    
    Purposes for Which Meetings May Be Called
    
    
    57SECTION 12.2
    
    Call, Notice and Place of Meetings
    
    
    57SECTION 12.3
    
    Persons Entitled to Vote at Meetings
    
    
    57SECTION 12.4
    
    Quorum; Action
    
    
    57SECTION 12.5
    
    Determination of Voting Rights; Conduct and Adjournment of Meetings
    
    
    58SECTION 12.6
    
    Counting Votes and Recording Action of Meetings
    
    
    59ARTICLE XIII WAIVER OF PAST DEFAULTS
    
    
    59SECTION 13.01
    
    Waiver of Past Defaults.
    
    
    59SCHEDULE A
    
    
    1
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SECTION 1.1
    
    Issuance of Notes; Principal Amount; Maturity.
  1




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SECTION 1.2
    
    Interest.
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SECTION 2.1
    
    Definitions.
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provided
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provided further
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provided
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SECTION 3.1
    
    Form Generally.
       SECTION 3.2
    
    Form of Note.
  FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUE DATE OF THIS NOTE IS APRIL 18,
2007. THE COMPANY AGREES TO PROVIDE PROMPTLY TO THE HOLDER OF THIS NOTE, UPON WRITTEN REQUEST, THE
ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD AND
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PROJECTED PAYMENT SCHEDULE. ANY SUCH WRITTEN REQUEST SHOULD BE SENT TO THE COMPANY AT THE
FOLLOWING ADDRESS: FRANKLIN BANK CORP., 9800 RICHMOND AVENUE, SUITE 680, HOUSTON, TEXAS 77042,
ATTENTION: TREASURER.
 [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:
 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE
TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR
ALL PURPOSES.
 UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED
FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
 [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY FOR WHICH THE
DEPOSITORY TRUST COMPANY IS TO BE THE DEPOSITARY:
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (DTC), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
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No. ______
    
    $______
  if this Note is a Global Security, then insert 
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FRANKLIN BANK CORP.By:Name:Title:    
 By:Authorized Signatory
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provided
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THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
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TEN COM
    
    as tenant in common
    
    UNIF GIFT MIN ACT
    
    ______ Custodian ______TEN ENT
    
    as tenants by the entireties (Cust)
    
    
    
    (Cust)                (Minor)JT TEN
    
    as joint tenants with right of
survivorship and not as tenants in
common
    
    
    
    under Uniform Gifts to Minors
Act ______(State)
  20




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Dated:Signature(s)Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.Signature GuaranteedPrincipal amount to be repurchased (at least
U.S.$1,000 or an integral multiple of $1,000
in excess thereof): _________Remaining aggregate principal amount following such
repurchase (not less than U.S.$1,000):_________
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Dated:
 THE BANK OF NEW YORK TRUST COMPANY, N.A.
as TrusteeBy:Authorized Signatory   provided
 Dated:Signature(s)If shares or Notes are to be registered in the
name of a Person other than the Holder, please
print such Persons name and address:(Name)(Address)
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Social Security or other Identification 
Number, if any[Signature Guaranteed]
  1.
    
    Principal amount to be converted: U.S.$ _________2.
    
    Principal amount and denomination of Notes
representing unconverted aggregate principal amount to be issued:Amount: U.S.$_________       Denominations:
U.S.$_________
 provided
   Dated:Signature(s)Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant to
Rule 17Ad-15 under the Securities Exchange Act
of 1934.Signature Guaranteed
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 provided provided further
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 provided
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SECTION 8.11
    
    Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on
Conversion Privilege.
  42




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provided
   
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REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER
  provided provided, however
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provided, however
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provided, however
    
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FRANKLIN BANK CORP.By:
    
    /s/ Anthony J. NocellaName: Anthony J. NocellaTitle: President and Chief Executive OfficerTHE BANK OF NEW YORK TRUSTCOMPANY, N.A., as TrusteeBy:
    
    /s/ Mauri J. CowenName: Mauri J. CowenTitle: Vice President




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Share PriceEffective Date
    
    $15.70
    
    $18.00
    
    $20.00
    
    $22.00
    
    $24.00
    
    $26.00
    
    $30.00
    
    $50.00
    
    $78.50April 18, 2007
    
    
    18.240
    
    
    
    18.000
    
    
    
    15.788
    
    
    
    14.329
    
    
    
    12.454
    
    
    
    11.542
    
    
    
    9.718
    
    
    
    5.406
    
    
    
    1.021May 1, 2008
    
    
    18.240
    
    
    
    17.406
    
    
    
    14.876
    
    
    
    12.454
    
    
    
    11.359
    
    
    
    10.447
    
    
    
    8.806
    
    
    
    4.859
    
    
    
    0.868May 1, 2009
    
    
    18.240
    
    
    
    16.687
    
    
    
    12.454
    
    
    
    10.630
    
    
    
    8.806
    
    
    
    8.076
    
    
    
    6.672
    
    
    
    3.035
    
    
    
    0.691May 1, 2010
    
    
    18.240
    
    
    
    15.862
    
    
    
    11.182
    
    
    
    9.900
    
    
    
    8.259
    
    
    
    6.672
    
    
    
    3.947
    
    
    
    2.123
    
    
    
    0.492May 1, 2011
    
    
    18.240
    
    
    
    15.077
    
    
    
    9.718
    
    
    
    7.894
    
    
    
    5.771
    
    
    
    4.494
    
    
    
    3.035
    
    
    
    1.728
    
    
    
    0.261May 1, 2012
    
    
    18.240
    
    
    
    13.781
    
    
    
    7.829
    
    
    
    4.859
    
    
    
    3.035
    
    
    
    2.123
    
    
    
    0.730
    
    
    
    0.000
    
    
    
    0.000
 SCHEDULE A-1