FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 7, 2001
To Our Shareholders:
The Annual Meeting of shareholders of Friedman, Billings, Ramsey Group, Inc.
(the "Company") will be held at the Park Hyatt Washington Hotel, 1201 24th St.
N.W., Washington, D.C., on Thursday, June 7, 2001, at 10:00 a.m., to vote on
the following:
1. The election of the six directors of the Company;
2. The approval of the FBR Key Employee Incentive Plan;
3. The approval of the FBR Non-Employee Director Stock Compensation Plan;
4. The ratification of the appointment of Arthur Andersen LLP as the
Company's independent auditors for 2001; and
5. The transaction of such other business as may properly come before the
meeting.
The Record Date for the meeting, used to determine which shareholders are
entitled to vote at the meeting and receive these materials, is April 12,
2001. This Notice, the attached Proxy Statement and the enclosed form of proxy
for the meeting are first being sent to shareholders on or about April 30,
2001. A list of shareholders will be available at the meeting and for ten days
prior to the meeting at the Company's offices, 1001 Nineteenth Street North,
18th Floor, Arlington, Virginia 22209.
By Order of the Board of Directors,
Mary A. Sheehan
Corporate Secretary
April 30, 2001
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
----------------
PROXY STATEMENT
----------------
GENERAL
The Board of Directors of Friedman, Billings, Ramsey Group, Inc., a Virginia
corporation (the "Company") is soliciting proxies to be used at your Annual
Meeting to vote on the matters described in the Notice of Annual Meeting. The
term "FBR", as used herein, refers to the Company and its predecessors, which
were first formed in 1989.
VOTING AND OUTSTANDING SHARES
Holders of record of Class A Common Stock and holders of record of Class B
Common Stock on April 12, 2001, the Record Date, may vote at the Annual
Meeting. On the Record Date, 17,006,941 shares of Class A Common Stock and
32,450,529 shares of Class B Common Stock were outstanding and entitled to
vote at the Annual Meeting. No other voting securities of the Company were
outstanding. Each shareholder is entitled to one vote for each share of Class
A Common Stock and to three votes for each share of Class B Common Stock held
on the Record Date. Holders of Class A Common Stock and Class B Common Stock
vote together without regard to class on the matters that will come before the
Annual Meeting.
The expenses of preparing, printing and assembling the materials used in the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, the Company may utilize the
services of certain of its officers and employees (who will receive no
compensation therefor in addition to their regular salaries) to solicit
proxies personally and by mail, telephone and telegraph from brokerage houses
and other stockholders. Also, the Company has retained D.F. King & Co., Inc.
to aid in the solicitation of proxies. D.F. King & Co., Inc. will receive a
fee of $5,500 and reimbursement of out-of-pocket expenses, all of which will
be paid by the Company. The Company will also reimburse banks, brokers and
other nominees in whose names shares are registered for out-of-pocket expenses
incurred by them to furnish this Proxy Statement and related materials
concerning the Annual Meeting to beneficial owners.
If you return your executed proxy in time to permit its review and count,
your shares will be voted as you direct. You can specify whether shares
represented by the proxy are to be voted for the election of all nominees for
director or are to be withheld from some or all of them. You also can specify
approval, disapproval or abstention as to the Key Employee Incentive Plan and
the Non-Employee Director Stock Compensation Plan and as to the selection of
independent auditors.
If your proxy card does not specify how you want to vote your shares, they
will be voted "for" the election of all nominees for director, "for" the
approval of the Key Employee Incentive Plan, "for" the approval of the Non-
Employee Director Stock Compensation Plan, and "for" ratification of the
selection of Arthur Andersen LLP as independent auditors.
You may revoke your proxy at any time before it is exercised by written
notice to the Corporate Secretary, by timely submission of a properly executed
later-dated proxy or by voting in person at the Annual Meeting.
A majority of the votes entitled to be cast on a matter, represented in
person or by proxy, constitutes a quorum for action on that matter. The
election of directors requires a plurality of the votes cast by the shares
entitled to vote on the election of directors at the Annual Meeting. The
approval of the Key Employee Incentive Plan and the Non-Employee Director
Stock Compensation Plan and the ratification of the selection of independent
auditors each requires a majority of the votes that could be cast by the
shares that are present in person or represented by proxy at the Annual
Meeting.
The total number of votes that could be cast at the Annual Meeting is the
sum of votes cast and abstentions. Abstentions are counted as "shares present"
at the Annual Meeting for purposes of determining the presence of a quorum and
have the effect of a vote "against" any matter as to which they are specified.
Proxies submitted by brokers that do not indicate a vote for any of the items
(so-called "broker non-votes") are not considered "shares present" and will
not affect the outcome of the vote.
The Company does not know of any other matter to be presented at the Annual
Meeting. Under the Company's Bylaws, no business other than that stated in the
Notice of Annual Meeting of Shareholders may be transacted at the Annual
Meeting. If any other matter is presented at the Annual Meeting on which a
vote properly may be taken, the shares represented by proxies in the
accompanying form will be voted in accordance with the judgment of the person
or persons voting those shares.
2
SECURITY OWNERSHIP
Security Ownership of Management
The information below shows, as of April 12, 2001, the number of shares of
Class A and Class B Common Stock beneficially owned by each director and
director nominee, by the Chairman and Co-Chief Executive Officer and the next
four highest compensated executive officers ("Named Executive Officers"), and
by the directors and executive officers of the Company as a group.
Each share of Class B Common Stock has three votes.
The following table shows the shares of Class A Common Stock and Class B
Common Stock, and shares of Class A Common Stock underlying options
exercisable within 60 days, in which the Named Executive Officers and
directors have the sole economic interest and provides the same information
for all executive officers and directors as a group.
Shares
Acquirable Percent
Shares of Percent of Shares of Percent of within 60 of All
Class A Class A Class B Class B Days Common
Common Stock Common Stock Common Stock Common Stock (all Class A) Stock
Name ------------ ------------ ------------ ------------ ------------ -------
Emanuel J. Friedman..... 1,000,000 5.88% 9,517,100 29.33% -- 21.26%
Chairman and Co-Chief
Executive Officer
Eric F. Billings........ 450,000 2.65% 8,119,140 25.02% -- 17.33%
Vice Chairman and Co-
Chief Executive Officer
W. Russell Ramsey....... -- -- 5,854,829 18.04% -- 11.83%
President and Co-Chief
Executive Officer
Robert S. Smith......... 8,865 * -- -- 109,166 *
Chief Operating Officer
Kurt R. Harrington...... 13,450 * -- -- 37,574 *
Chief Financial Officer
Daniel J. Altobello..... -- -- -- -- 10,000 *
Director
Wallace L. Timmeny...... 3,000 * -- -- 29,000 *
Director
Mark R. Warner.......... -- -- -- -- 29,000 *
Director
All executive officers
and directors as a
group
(9 persons)............ 1,484,523 8.73% 23,491,069 72.39% 223,406 50.72%
--------
* Less than one percent
3
Security Ownership of Certain Beneficial Owners
The table below is based on information available to the Company, including
shareholder filings with the Securities and Exchange Commission ("SEC"), and
shows beneficial ownership of more than 5 percent of the Company's Class A
Common Stock as of December 31, 2000.
Percent
Sole Shared Sole Shared Percent of All
Title of Voting Voting Investment Investment of Common
Class Beneficial Owner Power Power Power Power Class Stock
-------- ------------------------------- --------- --------- ---------- ---------- ------- -------
Class A PNC Investment Corp. (1) 2,428,086 -- 2,428,086 -- 14.74% 4.92%
Common Stock 222 Delaware Avenue
Wilmington, DE 19899
Class A West Highland Capital, Inc. (2) -- 2,450,000 -- 2,450,000 14.88% 4.96%
Common Stock 300 Drake's Landing Road
Suite 290
Greenbrae, CA 94904
Class A Dimensional Fund Advisers, Inc. 1,011,500 -- 1,011,500 -- 6.14% 2.05%
Common Stock 1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
--------
(1) PNC Investment Corp. is a wholly-owned subsidiary of PNC Holding, LLC, a
wholly-owned subsidiary of The PNC Financial Services Group, Inc. (PNC).
As described in the Company's Annual Report on Form 10-K, the Company and
PNC have a strategic business relationship with respect to selected
capital markets and related activities.
(2) West Highland Capital, Inc. is a registered investment adviser whose
clients have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the reported securities.
Beneficial ownership of these securities is shared among West Highland
Capital, Inc., its controlling person and its client accounts.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of ownership and changes in
ownership of the Company's securities with the SEC. During 2000, all of the
Company's directors and executive officers filed all reports required by
Section 16(a) on a timely basis.
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors recommends a vote "for" the nominees named in this
proposal.
Six directors will be elected at the Annual Meeting. All current board
members have been nominated for reelection. More information on the nominees
is provided below. This information has been given to the Company by the
nominees. Each director elected at the Annual Meeting will serve until the
next annual meeting of the shareholders or until earlier retirement,
resignation or removal.
If unforeseen circumstances (for example, death or disability) make it
necessary for the Board of Directors to substitute another person for any of
the nominees, your shares will be voted for that other person.
Emanuel J. Friedman
Mr. Friedman, age 55, is Chairman and Co-Chief Executive Officer of the
Company. Since co-founding FBR in 1989 he has continuously served as a
director. He served as Chairman and Chief Executive Officer from
4
1989 to 1999 when he assumed his current position. He serves as a director of
FBR Asset Investment Corporation. He also manages FBR Ashton, Limited
Partnership and FBR Private Equity Fund, L.P. Mr. Friedman founded the
Friedman, Billings, Ramsey Foundation, a charitable foundation, in 1993 and
currently serves as a director. Mr. Friedman entered the securities industry
in 1973 when he joined Legg Mason Wood Walker & Co., Incorporated, and from
1985 until 1989 he was Senior Vice President in the institutional sales group
at Johnston, Lemon & Co., Incorporated, a Washington, D.C. brokerage firm.
Eric F. Billings
Mr. Billings, age 48, is Vice Chairman and Co-Chief Executive Officer of the
Company. Since co-founding FBR in 1989, he has continuously served as a
director. He served as Vice Chairman and Chief Operating Officer from 1989 to
1999 when he assumed his current position. He serves as Chairman and Chief
Executive Officer and as a director of FBR Asset Investment Corporation. He
also manages FBR Weston, Limited Partnership. Mr. Billings entered the
securities industry in 1982 when he joined Legg Mason Wood Walker & Co., Inc.,
and from 1984 until 1989 served as Senior Vice President in the institutional
sales group at Johnston, Lemon & Co., Incorporated, a Washington, D.C.
brokerage firm.
W. Russell Ramsey
Mr. Ramsey, age 41, is President and Co-Chief Executive Officer of the
Company. Since co-founding FBR in 1989, he has continuously served as a
director. He served as President and Secretary from 1989 to 1999 when he
assumed his current position. Prior to co-founding FBR, Mr. Ramsey served as
Vice President in the institutional sales group at Johnston, Lemon & Co.,
Incorporated, a Washington, D.C. brokerage firm. In February 2001, the Company
announced that Mr. Ramsey would begin focusing primarily on a new technology
investment business, in which the Company will be a substantial investor.
While he takes on this new effort, Mr. Ramsey will continue as President and
Co-Chief Executive Officer of the Company for a transition period expected to
last through the end of the year.
Daniel J. Altobello
Mr. Altobello, age 60, has served as a director of the Company since June
26, 2000. Since October 1, 2000, Mr. Altobello has been a private investor and
active board member of several companies. From September 1995 until October
2000, Mr. Altobello was the Chairman of Onex Food Services, Inc., the parent
corporation of Caterair International, Inc. and LSG/SKY Chefs, and the largest
airline catering company in the world. From 1989 to 1995, Mr. Altobello served
as Chairman, President and Chief Executive Officer of Caterair International
Corporation. From 1979 to 1989, he held various managerial positions with the
food service management and in-flight catering divisions of Marriott
Corporation, including Executive Vice President of Marriott Corporation and
President, Marriott Airport Operations Group. Mr. Altobello began his
management career at Georgetown University, including service as Vice
President, Administrative Services. He is a member of the Board of Directors
of American Management Systems, Inc., Sodexho Marriott Services, Colorado
Prime Foods, Care First, Inc. of which he is non-executive chairman, Care
First of Maryland, Inc., MESA Air Group, World Airways, Inc., First Union
Realty Trust, an advisory director of Thayer Capital Partners, and a trustee
of Loyola Foundation, Inc., Mt. Holyoke College, Suburban Hospital Foundation,
Inc., of which he is Chairman, and the Woodstock Theological Center at
Georgetown University.
Wallace L. Timmeny
Mr. Timmeny, age 63, has served as a director of the Company since December
29, 1997. Mr. Timmeny is a partner in the Washington, D.C. office of Dechert
Price & Rhoads, a law firm, which he joined in 1996. From 1984 to 1996, Mr.
Timmeny was a partner in the law firm of McGuire, Woods, Battle & Boothe, LLP
in Washington, D.C. Mr. Timmeny is a past chairman of the Executive Council of
the Securities Law Committee of the Federal Bar Association. Mr. Timmeny has
served as an adjunct professor at American University School of Law, George
Mason University School of Law and Georgetown University School of Law. From
1965 to 1979,
5
Mr. Timmeny was an attorney with the SEC, and ultimately the Deputy Director
of the Division of Enforcement of the SEC. Mr. Timmeny and his law firm have
provided and are expected to continue to provide legal services to the
Company.
Mark R. Warner
Mr. Warner, age 46, has served as a director of the Company since December
29, 1997. For more than nine years, Mr. Warner has served as a partner of
Columbia Capital, a venture capital firm specializing in communications and
information technologies. In 1996, Mr. Warner was the Democratic candidate in
the race for U.S. Senate from Virginia. Mr. Warner was Chairman of the
Democratic Party of Virginia from 1993 to 1995. Mr. Warner currently serves on
the Executive Board of Directors of the Northern Virginia Business Roundtable,
and he was founding Chairman of the Virginia Health Care Foundation. Mr.
Warner also serves on the Boards of the George Washington University, Virginia
Union University and the Virginia Foundation for Independent Colleges.
THE BOARD OF DIRECTORS
Meetings
The Board of Directors held 5 meetings during 2000. Each of the incumbent
directors attended at least 75% of the total number of meetings of the Board and
Board Committees on which they serve.
Committees
The Board has three standing committees: the Executive Committee, the Audit
Committee and the Compensation Committee. The members of the Executive
Committee are Mr. Friedman, Mr. Billings and Mr. Ramsey. The Committee has
authority to act on behalf of the full Board to the full extent permitted by
law. The Executive Committee held no meetings in 2000.
The members of the Audit Committee are Mr. Timmeny, who serves as Chairman
of the Committee, Mr. Altobello and Mr. Warner. The Audit Committee assists
the Board of Directors in monitoring the Company's financial reporting
process, and the independence and performance of the Company's independent
auditors. The Board has concluded that each member of the Audit Committee is
an "independent" director as defined by the New York Stock Exchange. The Audit
Committee held 3 meetings in 2000. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is attached as
Exhibit A to this Proxy Statement.
The members of the Compensation Committee are Mr. Warner, who serves as
Chairman of the Committee, Mr. Altobello and Mr. Timmeny. The Compensation
Committee reviews the Company's compensation plans and makes recommendations
concerning those plans and concerning executive officer compensation. The
Compensation Committee held 3 meetings in 2000.
Relationships with Directors
In the ordinary course of business the Company and its subsidiaries may have
transactions with corporations or other entities in which its non-employee
directors have an interest or serve as executive officers. None of these
transactions exceeds 5% of the gross revenues of either the Company or the
other corporation or entity.
Mr. Timmeny and his law firm have, from time to time, provided legal advice
to the Company and its subsidiaries and are expected to continue to do so.
6
DIRECTOR AND MANAGEMENT COMPENSATION
Director Compensation
Each non-employee director receives an annual retainer of $25,000 for
service on the Company' Board, a fee of $1,000 for each in-person meeting of
the Company's Board or a Committee of the Board, and a fee of $500 for each
telephonic meeting of the Company's Board or a Committee of the Board. The
Chairman of the Audit Committee receives an additional annual retainer fee of
$5,000. Non-employee directors also receive an annual grant of options to
purchase 3,000 shares of Class A Common Stock pursuant to the terms of the
Non-Employee Director Stock Compensation Plan. No separate compensation is
paid to directors who are officers of the Company for their services as
directors.
Report On Executive Compensation
The following Report on Executive Compensation for fiscal year 2000 is
submitted by the Compensation Committee of the Board of Directors, which is
composed of Company's independent, non-employee directors, Mr. Warner,
Chairman, Mr. Altobello and Mr. Timmeny.
Compensation Paid to Executive Officers
In 2000, each of FBR's Executive Officers received a base salary and was
eligible to receive a cash bonus under the Key Employee Incentive Plan and
stock options under the FBR Stock and Annual Incentive Plan.
Base Salaries. Base salaries were set at a level such that a significant
amount of the total possible overall compensation of each Executive Officer
was at risk and determined by FBR's overall performance for the year. In the
case of the Chief Operating Officer and Chief Financial Officer, the bonus was
also determined by the individual's performance. The amount of each base
salary was based on competitive factors within FBR's industry and on the
contributions and performance of each Executive Officer.
Annual Bonuses. In 2000, the Compensation Committee established annual bonus
criteria for Messrs. Friedman, Billings and Ramsey, the Co-Chief Executive
Officers and the persons primarily responsible for the Company's revenue
producing activities. It was determined, therefore, that during 2000 the Co-
Chief Executive Officers would be eligible under the Key Employee Incentive
Plan to share in a bonus pool equal to up to 20% (as opposed to the 30% pool
provided by the FBR Stock and Annual Incentive Plan) of the Company's pre-tax
income (calculated before payment of their bonuses but after payment of all
other bonuses, including all other Executive Officer bonuses).
Annual bonuses paid under the Key Employee Incentive Plan to those Executive
Officers whose duties primarily involve non-revenue producing activities, such
as operations, finance and accounting were based on the individual
contributions and performance of each such Executive Officer within his
respective area of responsibility and on the overall performance of FBR. In
the case of the Chief Operating Officer, due to his duties involving cost
containment, his annual bonus was also based, in part, on the Company's pre-
tax net income.
Stock Options. Officers and employees of the Company who are responsible for
or contribute to the growth and profitability of the business of the Company
are eligible to be granted stock options under the FBR Stock and Annual
Incentive Plan. Stock options were not granted to the Co-Chief Executive
Officers due to the fact that they already own significant amounts of the
Company's common stock. Based on their performance, stock options were granted
to the other Executive Officers under the FBR Stock and Annual Incentive Plan
in order to tie a portion of the value of their compensation to the
performance of the Company's stock and to further align their interests with
those of shareholders.
Retirement Benefits. As part of its policy of maintaining a compensation
system that is incentive driven, the Company does not provide retirement
benefits for its Executive Officers, other than a defined contribution savings
plan available to all Company employees pursuant to Section 401(k) of the
Internal Revenue Code. During 2000, FBR did not match any employee
contributions made under that plan.
7
2000 Compensation Paid to the Co-Chief Executive Officers
The Company believes that a significant part of its success has been based
on the team management approach of the three Co-Chief Executive Officers who
are also the founders of FBR. Accordingly, the compensation plans for each of
the Co-Chief Executive Officers were the same.
In setting the salaries of the Co-Chief Executive Officers, the Compensation
Committee considered their historic contributions to the founding of FBR,
their central roles in the strategic plans that have formed the basis for
FBR's success and their leadership roles within FBR, as well as the policy of
placing a significant portion of their total possible compensation at risk
based on performance criteria. The base salaries of the Co-Chief Executive
Officers did not increase during the four-year period from 1997 through 2000.
The Co-Chief Executive Officers received an annual bonus for 2000 based on
the plan described above with regard to the annual bonus for the Executive
Officers.
2001 Bonus Plan for Co-Chief Executive Officers
For the year 2001, the Compensation Committee has put in place a new
compensation plan for the Company's Co-Chief Executive Officers that will base
the bonus or at risk portion of their compensation on their performance in
meeting targets for the following factors: revenue, return on equity, and net
income. In addition, a portion of the bonus compensation that they will be
eligible to receive will be in the form of long-term incentive compensation
tied to three-year performance targets for net income and total return to
shareholders.
Tax Considerations
Section 162(m) of the Internal Revenue Code (the "Code"), generally denies a
tax deduction to any publicly-held company for compensation paid to one of the
company's five most highly compensated executive officers which exceeds $1
million. Section 162(m) of the Code provides exemptions to this limitation on
deductions for compensation that meets certain "performance based" criteria or
that is paid pursuant to a plan which was in effect prior to a company's
initial public offering. To date, all compensation paid to the Company's five
highest paid Executive Officers has been paid pursuant to plans that are
exempt from the limitations of Section 162(m). The Company believes that the
primary purpose of executive compensation should be to motivate executives to
implement the Company's strategic plans in order to increase shareholder
value. To the extent that achieving that purpose is consistent with making
executive compensation tax deductible pursuant to Section 162 (m) of the Code,
it is the Company's intention to grant executive compensation that qualifies
for tax deductions.
Respectfully submitted,
Mark R. Warner, Chairman
Daniel J. Altobello
Wallace L. Timmeny
8
Summary Compensation Table
The following table shows the compensation for FBR's Chairman and Co-Chief
Executive Officer and the next four highest compensated executive officers in
the fiscal year ended December 31, 2000.
Annual Compensation Long-Term Compensation
------------------------------------------ -----------------------------
Name and Principal Other Annual Securities Underlying Options
Position Year Salary ($) Bonus ($) Compensation ($) Granted (#)
------------------ ---- ---------- --------- ---------------- -----------------------------
Emanuel J. Friedman..... 2000 600,000 1,853,741 -- --
Chairman, Co-Chief
Executive 1999 600,000 2,000,000 -- --
Officer and Director 1998 600,000 -- 652,510(1)(2) --
Eric F. Billings........ 2000 600,000 1,853,741 -- --
Vice Chairman, Co-Chief 1999 600,000 2,000,000 -- --
Executive Officer and
Director 1998 600,000 -- 658,714(1)(2) --
W. Russell Ramsey....... 2000 600,000 1,853,741 -- --
President, Co-Chief
Executive 1999 600,000 2,000,000 -- --
Officer and Director 1998 600,000 -- 626,339(1)(2) --
Robert S. Smith......... 2000 250,000 859,983 -- 207,970(3)
Chief Operating Officer 1999 250,000 277,000 -- 200,000
1998 150,000 150,000 -- 45,000
Kurt R. Harrington...... 2000 175,000 180,000 -- 15,000(3)
Chief Financial Officer
(4) 1999 125,000 70,000 -- 55,000
1998 100,000 75,000 -- 25,000
--------
(1) Compensation earned in 1997 pursuant to compensation programs existing
prior to the Company becoming public in 1997, but paid in 1998.
(2) Each of Messrs. Friedman, Billings, and Ramsey received a secured loan of
$2 million on September 30, 1998.
(3) Options awarded in January 2001 for performance during fiscal year 2000.
(4) Mr. Harrington was appointed Chief Financial Officer in January 2000.
During 1999, Mr. Harrington elected to receive 25,000 options in lieu of a
portion of his cash bonus.
9
Option Grants in Last Fiscal Year
Potential
Percent Realizable Value
of Total at Assumed Annual
Options Rates of Stock
Number of Granted Exercise Price
Securities to or Base Appreciation for
Name Underlying Employees Price Option Term (2)
---- Options in Fiscal Per Expiration -----------------
Granted (1) Year Share Date 5% 10%
---------- --------- -------- ------------ -------- --------
Emanuel J. Friedman..... -- -- -- -- -- --
Eric F. Billings........ -- -- -- -- -- --
W. Russell Ramsey....... -- -- -- -- -- --
Robert S. Smith......... 207,970 15% $6.125 Jan. 7, 2006 $351,932 $777,678
Kurt R. Harrington...... 15,000 1% $6.125 Jan. 7, 2006 $ 25,383 $ 56,091
--------
(1) Granted pursuant to the FBR Stock and Annual Incentive Plan. The options
will become exercisable ratably over three years. The options were awarded
in January 2001 for performance in fiscal year 2000.
(2) This disclosure is mandated by the Securities and Exchange Commission. The
values indicated do not represent a prediction by the Company of future
prices of the Company's stock.
Fiscal Year-End Option Values
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Name December 31, 2000(1) December 31, 2000(1)
---- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Emanuel J. Friedman......... -- -- -- --
Eric F. Billings............ -- -- -- --
W. Russell Ramsey........... -- -- -- --
Robert S. Smith............. 109,166 468,804 $70,383 $200,409
Kurt R. Harrington.......... 37,574 83,176 $25,120 $ 39,642
--------
(1) Includes options awarded in January 2001 for performance in fiscal year
2000.
Audit Committee Report
The following report is submitted by the Audit Committee of the Board of
Directors, which is composed of the Company's independent, non-employee
directors, Mr. Timmeny, Chairman, Mr. Altobello and Mr. Warner.
The Audit Committee assists the Board of Directors in monitoring the
Company's financial reporting process. Management has primary responsibility
for the financial statements and the reporting process, including the system
of internal controls. The independent auditors, Arthur Andersen LLP, are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the
United States.
In fulfilling its responsibilities, the Committee has reviewed and discussed
the audited financial statements contained in the 2000 Annual Report on SEC
Form 10-K with the Company's management and the independent auditors. The
Committee discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended. In addition, the Committee has discussed with the
independent auditors the auditors' independence from the Company and its
management including the matters in the written disclosures required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, and has considered the compatibility of non-audit services
with the auditors' independence.
10
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board, and the Board has approved, the inclusion of the
audited financial statements in the Company's Annual Report on SEC Form 10-K
for the year ended December 31, 2000, for filing with the Securities and
Exchange Commission.
Respectfully submitted,
Wallace L. Timmeny, Chair
Daniel J. Altobello
Mark R. Warner
Stock Performance Graph
The following graph compares the change in the cumulative total shareholder
return for the Company's Class A Common Stock with the comparable cumulative
return of two indexes: the Standard & Poors ("S&P") 500 Stock Index and the
FSA Mid-Cap Index published by Financial Service Analytics, Inc.
The Company's Class A Common Stock first began trading publicly on December
23, 1997, on the New York Stock Exchange. The graph, therefore, assumes $100
invested on December 23, 1997, in the Company's Class A Common Stock and $100
invested at the same time in each of the above mentioned indexes. The
comparison assumes that all dividends are reinvested.
Friedman Billing Ramsey Group
------------------------------------------
FBR FBR FSA S&P 500
Prices Indexed Mid-Cap Reinv
----------------------------------------------------------
12/23/97 20.50 100 100 100
Dec-97 17.94 88 103 104
Jan-98 14.94 73 88 105
Feb-98 14.94 73 97 112
Mar-98 16.75 82 101 118
Apr-98 18.81 92 108 119
May-98 15.69 77 103 117
Jun-98 14.44 70 102 122
Jul-98 13.25 65 97 121
Aug-98 6.38 31 66 103
Sep-98 5.31 26 70 110
Oct-98 5.13 25 73 119
Nov-98 6.00 29 82 129
Dec-98 6.50 32 76 133
Jan-99 6.38 31 72 139
Feb-99 5.81 28 69 134
Mar-99 6.69 33 76 140
Apr-99 14.88 73 90 145
May-99 10.44 51 89 142
Jun-99 11.88 58 97 150
Jul-99 8.75 43 88 145
Aug-99 6.88 34 84 144
Sep-99 6.94 34 83 140
Oct-99 5.19 25 82 149
Nov-99 5.94 29 78 152
Dec-99 7.88 38 79 161
11
ITEM 2.
APPROVE THE FBR KEY EMPLOYEE INCENTIVE PLAN.
The Board of Directors recommends a vote FOR the FBR Key Employee Incentive
Plan.
The FBR Key Employee Incentive Plan ("Key Employee Plan") is intended to
provide a vehicle for payment of annual cash or stock bonuses and Performance
Units to certain senior executives that are deductible as "performance-based
compensation" under Section 162(m) of the Code. Subject to certain exceptions,
Section 162(m) of the Code disallows the deduction of compensation paid to
certain senior officers by a publicly held corporation to the extent such
compensation exceeds $1 million in a taxable year. One exception provided by
Section 162(m) is for performance-based compensation, and the Key Employee
Plan is intended to comply with this exception.
The Board of Directors recommends that shareholders approve the Key Employee
Plan to provide the most tax efficient means available for compensation of
senior executives using annual cash or stock awards and Performance Units.
Description of the Key Employee Plan
The following summary of the material aspects of the Key Employee Plan is
qualified in its entirety by reference to the full text of the Key Employee
Plan, a copy of which is set forth as Exhibit B this Proxy Statement. Unless
otherwise specified, capitalized terms used in this discussion have the
meanings assigned to them in the Key Employee Plan.
The Key Employee Plan provides that awards may be made to key employees
("Participants") selected by the Committee. The Participants are intended
primarily to be covered employees as defined in Section 162(m) of the Internal
Revenue Code ("Code"). Section 162(m) defines the term "covered employee" as
any employee, who as of the close of the taxable year, is the chief executive
officer of the taxpayer (or is acting in such capacity) or whose total
compensation is required to be reported to shareholders under the Securities
Exchange Act of 1934 by reason of being among the four highest compensated
officers for the taxable year (other than the chief executive officer).
The Key Employee Plan is administered by the Compensation Committee of the
Board or a subcommittee of the Committee. Each member of the Committee must
meet the standards of independence necessary to be classified as an "outside
director" for purposes of Section 162(m) of the Code.
The Committee selects the key employees to be Participants for each Plan
Year, with recommendations from the chief executive officer of the Company. To
establish the Performance Goals for an award for a Plan Year, the Committee
may select among one or more of Performance Criteria. The Committee may select
different Performance Criteria and Performance Goals for different
Participants. The Committee must act within the required time frames under
Section 162(m) of the Code to select the Participants and establish the
Performance Goals for a Plan Year.
The Committee may chose from the following Performance Criteria: revenue,
revenue growth; earnings per share (including or excluding nonrecurring items
and/or extraordinary items); return on equity; stock price; net income
(including or excluding nonrecurring items and/or extraordinary items), cash
flow; cost reduction (or limits on cost increases); debt to capitalization;
debt to equity; earnings; earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization; free cash flow; return on
assets; return on capital employed; return on investment; or total return to
shareholders. The Performance Goals may relate to the Company or to a line of
business or subsidiary.
In addition to annual bonuses, the Plan allows the award of Performance
Units. A Performance Unit has a value equal to a share of the Company's common
stock. An award of Performance Units is subject to the
12
achievement of Performance Goals based on one or more Performance Criteria.
The Performance Goals may be measured based on performance for more than one
Plan Year. If the Performance Goals are met, a Performance Unit is paid in
cash.
The Committee may reduce the amount of an award or eliminate entirely
payment of an award upon the recommendation of the chief executive officer
(for officers other than the chief executive officer). In no event may the
amount paid to a Participant under an award for a Plan Year be in excess of
$15,000,000. Awards are not transferable. If a Participant dies and is
subsequently entitled to receive an award, the award will be paid to the
Participant's estate.
An award will be payable in common stock, cash or a combination of stock and
cash, or the Committee may reserve the right to determine the manner of
payment at the time the award is paid. Any payments in common stock will be
made under the FBR Stock and Annual Incentive Plan. The Committee may permit
Participants to elect to defer the payment of awards. The Key Employee Plan
will be unfunded, and Participants will be general creditors of the Company.
The Board may amend, modify or terminate the Key Employee Plan in any
respect at any time, except that no amendment may change the maximum benefits
payable without shareholder approval if required in order to comply with the
performance-based compensation exception under Section 162(m) of the Code. A
termination or amendment of the Key Employee Plan may not adversely affect the
rights of a Participant under an award previously granted without his or her
consent. The Key Employee Plan will remain in effect until terminated by the
Board. If required by Section 162(m) of the Code, the Key Employee Plan will
be periodically resubmitted to the Company's shareholders for approval.
A prior version of the Key Employee Plan has been in effect since 1997. If
the amended Key Employee Plan is approved by the shareholders, the first Plan
Year under the amended plan will be 2001. All of the Participants in the Key
Employee Plan for 2001 are shown in the table below. The bonus awards for 2001
will be based on the Performance Criteria of revenue, return on equity, and
net income. The maximum bonus amounts that may be payable to Participants for
2001 are shown in the table below. The Performance Units awarded for 2001 will
be based on the Performance Criteria of net income and total return to
shareholders. The target number of Performance Units is shown on the table
below. The maximum number of Performance Units is twice the target number.
New Plan Benefits
FBR Key Employee Incentive Plan
Maximum Annual Performance Units
Name and Position Bonus Payment At Target
----------------- -------------- -----------------
Emanuel J. Friedman...................... $2,400,000 110,000
Chairman and
Co-Chief Executive Officer
Eric F. Billings......................... $2,400,000 110,000
Vice Chairman and Co-Chief Executive
Officer
ITEM 3.
APPROVE THE FBR NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN.
The Board of Directors recommends a vote FOR the FBR Non-Employee Director
Stock Compensation Plan.
The purpose of the FBR Non-Employee Director Stock Compensation Plan (the
"Director Plan") is to encourage non-employee directors of the Company
("Directors") to increase their ownership of the Company's
13
Common Stock. The following summary of the material aspects of the Director
Plan is qualified in its entirety by reference to the full text of the
Director Plan, a copy of which is set forth as Exhibit C to this Proxy
Statement.
The Director Plan provides for the granting of stock options and for
Directors to have an election to receive a portion of their Board fees in the
form of restricted stock units ("Units"). Each Unit represents the right to
receive one share of Common Stock after vesting. The Plan also provides
Directors with an opportunity to elect to defer payment with respect to their
Units when they become vested and to defer the receipt of other Board fees.
A prior version of the Director Plan has been in effect since 1997 and
provided for the issuance of stock options. The restated Director Plan
continues the same provisions for stock options and is expanded to include the
provisions for restricted stock units.
The Board of Directors believes that substantial benefits would accrue to
the Company from the changes to the Director Plan. The Director Plan would
encourage Directors to elect to have up to 50% of their Board fees paid in the
form of Units, for the purpose of investing in the future performance of the
Company. In this way, the interests of the Directors would be aligned even
more closely with the proprietary interests of the Company's shareholders.
Eligibility
The Director Plan is open to members of the Board of Directors who are not
employees of the Company. The current eligible members are Daniel J.
Altobello, Wallace L. Timmeny, and Mark R. Warner. Each fiscal year
constitutes a "Plan Year."
Option Grants
When a new person first becomes a Director, the Director receives a grant of
a stock option ("Option") to purchase 10,000 shares of Common Stock. A
Director receives an additional Option to purchase 3,000 shares on the date
after each annual meeting of shareholders. The exercise price of the Options
is the Fair Market Value of the Common Stock on the grant date.
The Option can be exercised after the first anniversary of the grant date.
The Option generally remains exercisable for ten years after the grant date.
If a director ceases to serve on the Board, then the Option remains
exercisable for five years after the date his service ceases, but not beyond
the tenth anniversary of the date of grant.
Purchase of Restricted Stock Units with Fees
If approved by shareholders, the restated Director Plan would allow
Directors to elect to have up to 50% of their Board fees for each Plan Year
paid in the form of Units rather than in cash. The remaining portion of the
Director's fees would be paid in cash.
Price of Units
To encourage Directors to participate in the Plan, the Company provides the
Units at a discount from the current market price of the Common Stock.
Directors may use up to 50% of their Board fees to "purchase" Units at a
discounted price. With respect to the first two Plan Years, beginning January
1, 2001, the price of a Unit would be 67% of market price. During the third
and fourth Plan Years, the price of a Unit would be 75% of market price. For
each subsequent Plan Year, the price of a Unit would be 80% of market price.
The discounted price would be based upon the closing price of a share of the
Common Stock as reported for New York Stock Exchange composite transactions on
the prior day.
Vesting Of Units
The Units would vest three years after a purchase if the Director remains a
member of the Board at that date. The Units would also vest if the Director
ceases to be on the Board due to death, disability or Involuntary
14
Termination. If a Director voluntarily terminates or is terminated for cause,
the Director would vest in the lesser of the deferred fee amount or the
current value of the Common Stock.
The Director would receive a share of unrestricted Common Stock following
the vesting of a Unit unless the Director has previously elected to defer
receipt of the Unit (see below).
If there is a "Change in Control" of the Company (as defined in the Director
Plan), then, all Units would vest and the number of shares of Common Stock
represented by such Units would be distributed to the Directors.
Deferral Provisions
A Director would be able to defer receipt of Units when vested or of his or
her cash Board fees. A holder of Units may, while still a Director, elect to
defer his or her receipt of Common Stock in payment for vested Units.
Commencement of payment of the Common Stock may be deferred until either (1)
the calendar year following the date of termination of service as a Director,
or (2) any earlier year more than three years after the fees are earned.
However, payments must begin within ten years after the fees are earned.
Payments must be completed no later than ten years after the calendar year
following the date of termination of service as a Director.
A Director could also elect to defer the receipt of cash Board fees. The
deferral would have to be made before the start of a Plan Year. The cash fees
would be deferred to a deemed investment account as selected by the Director
from permissible deemed investments selected by the Board. The deemed
investments may include Company Common Stock. The Director could elect to
receive the deferred amount (with earnings or losses) over a period of up to
10 years. Deferred amounts could be paid in a lump sum or installments as
elected by the Director.
Additional Information Concerning the Director Plan
Units are not transferable and confer upon their holders none of the voting
and other rights of shareholders of the Company. A holder of Units and a
Director who defers receipt of Common Stock or fees would have the status of a
general unsecured creditor of the Company with respect to his or her right to
receive benefits under the Plan.
Up to 200,000 shares of Common Stock may be distributed under the Director
Plan. This includes 68,000 shares that are subject to previously issued
Options under the existing plan. Such shares may be authorized and unissued
shares or shares purchased on the open market by the Company. The number of
shares of Common Stock would be adjusted in the event of stock splits, stock
dividends, recapitalizations, mergers, or similar changes affecting the Common
Stock.
The Board of Directors may amend or terminate the Director Plan at any time.
No amendment or termination of the Plan may adversely affect a Director's
rights with respect to any Options or Units previously credited to his or her
account or deferred Common Stock or cash, except with the written consent of
such holder.
Federal Income Tax Consequences
A Director generally is not required to recognize income on the grant of an
Option. Instead, ordinary income generally is required to be recognized on the
date the Option is exercised. In general, the amount of ordinary income
required to be recognized is an amount equal to the excess, if any, of the
fair market value of the Common Stock on the exercise date over the exercise
price.
The Director Plan is designed taking into account provisions of the Internal
Revenue Code under which compensation paid in the form of restricted stock
units does not constitute income for tax purposes when the Units are issued.
Under those provisions of the Code, Directors would have taxable income when
their Units have vested and shares of Common Stock are issued to the Director
in substitution for the vested Units. The amount of taxable income is equal to
the then market value of the Common Stock issued to the Director.
15
If a Director subsequently sells any Common Stock he or she acquired under
the Plan, the Director would realize capital gain (or loss) to the extent the
sales price exceeds (or is less than) the fair market value of the shares on
the day he or she received the shares. The capital gain (or loss) would be
long-term if the Director holds the shares for more than one year, and would
be short-term otherwise.
If the Director defers the receipt of the Common Stock or cash fees, the
Director would be taxable at the time when the Common Stock or fees are
received. The Director is taxable on the fair market value of the Common Stock
at the time of receipt.
Subject to applicable limitations, the Company is allowed a deduction equal
to the amount of income taxable to the Director. The Company's deduction is
available at the time of each issuance of Common Stock under the Director Plan
whether through vesting of a Unit or exercise of an Option. The Company's
deduction at that time would equal the amount of the Director's taxable
income.
Options Granted
The following table sets forth information, to the extent presently
determinable, with respect to the options that will be credited under the
Director Plan during the Plan Year ending December 31, 2001. Because the
existing Director Plan provides for option grants, these options would be
granted regardless of shareholder approval. Because the Units would be issued
based on deferral elections by Directors, the number of Units to be issued is
not currently determinable.
New Plan Benefits
FBR Non-Employee Director Stock Compensation Plan
Name and Position Number of Options
----------------- -----------------
Daniel J. Altobello.............................. 3,000
Director
Wallace L. Timmeny............................... 3,000
Director
Mark R. Warner................................... 3,000
Director
ITEM 4.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors recommends a vote FOR ratification of the appointment
of Arthur Anderson LLP.
The Board of Directors has selected the firm of Arthur Anderson LLP to audit
the Company's consolidated financial statements for 2001, and recommends to
the shareholders ratification of the appointment of Arthur Anderson LLP as
independent auditors for 2001. If this resolution is defeated, the Board of
Directors will reconsider its selection. A representative of Arthur Anderson
LLP will be present at the Annual Meeting, will have the opportunity to make a
statement if he desires to do so and will be available to respond to
appropriate questions.
Audit Fees. The aggregate fees billed for professional services rendered to
the Company by Arthur Andersen LLP during 2000 in connection with the audit of
the Company's financial statements for 2000 and the reviews of the financial
statements included in the Company's Forms 10-Q for 2000 were $421,800. This
amount includes fees related to the Company and its consolidated and non-
consolidated subsidiaries and investments.
16
Financial Information Systems Design and Implementation Fees. During 2000,
no professional services were rendered to the Company by Arthur Andersen LLP
relating to financial information systems design and implementation.
All Other Fees. The aggregate fees billed for all other professional
services rendered to the Company by Arthur Andersen LLP during 2000, which
services related to tax compliance and tax consulting, were $174,985. This
amount includes fees related to the Company and its consolidated and non-
consolidated subsidiaries and investments.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors does not know of any matters that will be brought
before the meeting other than those specifically set forth in the notice
thereof. If any other matter properly comes before the meeting, it is intended
that the persons named in and acting under the enclosed form of proxy or their
substitutes will vote thereon in accordance with their best judgement.
ANNUAL REPORT TO SHAREHOLDERS
The Company's 2000 Annual Report to Shareholders is enclosed with this Proxy
Statement.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
A shareholder who wishes to introduce a proposal for consideration at the
Company's 2001 Annual Meeting may seek to have that proposal included in the
Company's proxy statement pursuant to U.S. Securities and Exchange Commission
("SEC") Rule 14a-8. To qualify for this, the proposal must be received at the
Company's principal executive offices not later than December 31, 2001 and
must satisfy the other requirements of Rule 14a-8. The submission of a
shareholder proposal does not guarantee that it will be included.
A shareholder may otherwise propose business for consideration or nominate
persons for election to the Board of Directors in compliance with applicable
state law and the Company's Bylaws. The Company's Bylaws provide that any such
proposals or nominations for the Company's 2002 Annual Meeting must be
received by the Company no earlier than February 7, 2002, and no later than
March 9, 2002. Any such notice must satisfy the other requirements with
respect to such proposals and nominations contained in the Company's Bylaws.
If a shareholder fails to meet these deadlines or fails to comply with the
requirements of SEC Rule 14a-4, the Company may exercise discretionary voting
authority under proxies it solicits to vote on any such proposal.
17
EXHIBIT A
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. MEMBERSHIP
The Audit Committee shall be comprised of three or more directors appointed
by the Board of Directors, one of whom shall be designated by the Board as
Chairman. Each member of the Audit Committee shall be an "independent"
director within the New York Stock Exchange definition of "independence" as
determined by the Board. Each member of the Audit Committee must be
financially literate, and at least one member shall have accounting or related
financial management expertise, as such qualifications are interpreted by the
Board in its business judgment.
II. MEETINGS
The Audit Committee shall meet as often as may be deemed necessary or
appropriate in its judgment, generally at least three times each year, either
in person or telephonically. The Audit Committee shall meet in executive
session with the independent auditors at least annually. The Audit Committee
shall report to the full Board of Directors with respect to its meetings. The
majority of the members of the Audit Committee shall constitute a quorum.
III. DUTIES AND RESPONSIBILITIES
The Audit Committee is appointed to assist the Board of Directors in
monitoring the Company's financial reporting process, and the independence and
performance of the Company's independent auditors. Specifically, the Audit
Committee shall:
Independent Auditor
1. Recommend to the Board of Directors the appointment of the independent
auditor, which firm is ultimately accountable to the Audit Committee and
the Board.
2. Review the written statement from the independent auditor, provided
pursuant to Independent Standard Boards Standard No. 1, concerning any
relationships that may adversely affect the independence of the auditor and
discuss such statement with the auditor.
3. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
Financial Reporting Processes
4. Review with management and the independent auditor the results of any
significant matters identified by the independent auditor as a result of
its interim review procedures with respect to the Company's quarterly
financial statements. If so designated by the Audit Committee, the
Committee Chairman may perform this responsibility on behalf of the Audit
Committee.
5. Meet with the independent auditor prior to the audit to review its audit
procedures, including the scope, fees and timing of the audit.
6. Review with the independent auditor and management the annual audited
financial statements, including major issues regarding accounting and
auditing principles and practices, as well as the adequacy of internal
controls that could significantly affect the Company's financial
statements.
A-1
7. Review with the independent auditor the results of the annual audit
examination and any management letter provided by the auditor and the
Company's response to that letter.
8. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
9. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
10. Review with the Company's Chief Legal Officer legal matters that may have
a material impact on the financial statements, and any significant reports
or inquiries received from regulators or governmental agencies.
11. Meet at least annually with the Chief Financial Officer and the
independent auditor in separate executive sessions.
12. Meet at least annually with the internal auditor in executive session. The
internal auditor shall report directly to the Audit Committee.
13. Review with the independent auditor the Company's overall accounting and
financial controls.
Other Matters
14. Review and reassess the adequacy of this Audit Committee Charter annually
and recommend any proposed changes to the Board for approval.
15. Prepare the report of the Audit Committee required by the rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
16. Be available to the independent auditor during the year, as may be
requested by the independent auditor.
IV. GENERAL
The Audit Committee shall have the authority to retain special legal,
accounting or other
consultants to advise the Committee. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultant to, the Committee.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations,
or to assure compliance with laws, regulations, the Company's Compliance and
Supervisory Procedures Manual or the Company's Employee Handbook.
A-2
EXHIBIT B
FBR KEY EMPLOYEE INCENTIVE PLAN
(amended and restated as of January 1, 2001)
1. Purpose. The purpose of the FBR Key Employee Incentive Plan (the "Plan")
is to promote the financial interests and growth of Friedman, Billings, Ramsey
Group, Inc. (the "Company") and its subsidiaries, by (i) attracting and
retaining employees possessing outstanding ability; and (ii) motivating such
employees by means of performance-related incentives.
2. Definitions. The following definitions are applicable to the Plan:
(a) "Award" means the grant of a Bonus or the grant of a Performance Unit.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus" means a cash payment under Section 5.
(d) "Committee" means the Compensation Committee of the Board or its
successor, provided that, if any member of the Compensation Committee does not
qualify as an outside director for purposes of Code Section 162(m), the
remaining members of the Compensation Committee (but not less than two
members) shall be constituted as a subcommittee of the Compensation Committee
to act as the Committee for purposes of the Plan.
(e) "Common Stock" means the Class A common stock, par value $0.01 per
share, of the Company.
(f) "Participant", means each key employee of the Company and its
subsidiaries who is selected by the Committee to participate in the Plan.
(g) "Performance Criteria" means one or more of the following criteria:
revenue, revenue growth; earnings per share (including or excluding
nonrecurring items and/or extraordinary items); return on equity; stock price;
net income (including or excluding nonrecurring items and/or extraordinary
items), cash flow; cost reduction (or limits on cost increases); debt to
capitalization; debt to equity; earnings; earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization; free cash
flow; return on assets; return on capital employed; return on investment; or
total return to shareholders.
(h) "Performance Goal" means an objectively determinable Performance Goal
established by the Committee with respect to an Award that relates to one or
more Performance Criteria.
(i) "Performance Units" means a unit with a value equal to a share of
Common Stock.
(j) "Plan Year" means the fiscal year of the Company.
3. Administration. The Plan shall be administered by the Committee. The Plan
shall be granted and administered to comply with the requirements of Internal
Revenue Code section 162(m). Subject to the express provisions of the Plan,
the Committee shall have authority to:
(i) select the Participants who will receive Awards under the Plan;
(ii) determine the size of the Awards to be made under the Plan
subject to Section 7 hereof; and
(iii) establish from time to time regulations for the administration
of the Plan, interpret the Plan, and make all determinations deemed
necessary or advisable for the administration of the Plan.
4. Participation. Participants in the Plan shall be selected for each Plan
Year by the Committee from those key employees of the Company and its
subsidiaries who have contributed, or have the capacity for contributing, in a
substantial measure to the successful performance of the Company and/or its
subsidiaries and
B-1
lines of business for that Plan Year. The Committee shall receive the
recommendation of the Company's chief executive officer for Participants other
than the chief executive officer. No such employee shall at any time have a
right to be selected as a Participant in the Plan for any Plan Year, to be
entitled automatically to an Award, nor, having been selected as a Participant
for one Plan Year, to be a Participant in any other Plan Year.
5. Performance Goals for Bonuses.
(a) The Committee shall establish Performance Goals and target Bonuses for
each Participant. Any Award shall be made not later than 90 days after the
start of the period for which the Award relates and shall be made prior to the
completion of 25% of such period. The Company's chief executive officer shall
make recommendations for Performance Goals and target Bonuses for Participants
other than the chief executive officer. The Committee may vary the Performance
Criteria, Performance Goals and weightings from Participant to Participant,
Award to Award, and Plan Year to Plan Year.
(b) The Performance Goals for a Plan Year shall be selected by the
Committee from the Performance Criteria. Such Performance Goals may relate to
the Company or to its lines of business or subsidiaries. As determined by the
Committee, any Performance Goal shall be calculated in accordance with the
Company's public financial statements, generally accepted accounting
principles, or under a methodology established by the Committee that is
consistently applied. The Committee shall have the power and complete
discretion to determine the methodology for the calculation of Performance
Goals.
(c) All calculations of actual payments under a Bonus Award shall be made
by the Committee and the Committee shall certify after the end of the Plan
Year the extent, if any, to which the Performance Goals have been met. Except
as provided in Section 8(b) below, Bonus Awards earned under the Plan shall be
paid as promptly as practicable after certification of the Bonus by the
Committee. Bonuses will be paid in cash, Common Stock or both, as determined
by the Committee.
6. Performance Units.
(a) Performance Units may be awarded either alone or in addition to other
Awards under the Plan. The Committee shall determine the time when Performance
Units shall be awarded, the number of Performance Units to be awarded to any
Participant, the duration of the Award cycle and other terms and conditions of
the Award.
(b) The Committee shall establish Performance Goals and the number of
Performance Units for each Award. Any Award shall be made not later than 90
days after the start of the period for which the Award relates and shall be
made prior to the completion of 25% of such period. The Committee may vary the
Performance Criteria, Performance Goals and weightings from Participant to
Participant, Award to Award, and Plan Year to Plan Year.
(c) The Performance Goals may be for one or more Plan Years and shall be
selected by the Committee from the Performance Criteria. Such Performance
Goals may relate to the Company or to its lines of business or subsidiaries.
As determined by the Committee, any Performance Goal shall be calculated in
accordance with the Company's public financial statements, generally accepted
accounting principles, or under a methodology established by the Committee
that is consistently applied. The Committee shall have the power and complete
discretion to determine the methodology for the calculation of Performance
Goals.
(d) At the expiration of the Award cycle for a Performance Unit, the
Committee shall determine the number of Performance Units that have been
earned. The Participant shall then be entitled to a cash payment equal to the
fair market value of the Common Stock equal to the number of Performance Units
earned.
7. Awards. The maximum annual Bonus payable to a Participant for a Plan Year
plus the value of Performance Units awarded in a Plan Year to the Participant
shall not exceed $15,000,000. Upon recommendation of the Company's chief
executive officer for Participants other than the chief executive officer, the
Committee in its discretion may reduce or eliminate Awards earned by any
Participant in any Plan Year.
B-2
8. Additional Payment Provisions.
(a) All payments made in Common Stock under the Plan shall be made through
the shares of Common Stock reserved under the FBR Stock and Annual Incentive
Plan.
(b) Subject to such terms and conditions as the Committee may determine,
the Committee may provide that the Participant may make a prior election to
defer the payment of a Bonus or payment of Performance Units. The deferral may
include a deferral that provides the opportunity to receive Common Stock or
stock equivalents under other plans or programs of the Company. The Committee
shall have the right to require that payment of all or any portion of an
earned Award be deferred until such time or times as the Committee, in its
discretion, shall determine.
9. Termination of Employment. Awards for Participants who terminate
employment prior to the end of a Plan Year or an Award cycle for Performance
Units shall be paid on a pro rata basis, unless the Committee exercises its
discretion to pay a smaller amount.
10. No Rights to Awards or Employment. No employee of the Company or its
subsidiaries or any other person shall have any claim or right to be granted
an Award under this Plan. Neither the Plan nor any action taken thereunder
shall be construed as giving any employee any right to be retained in the
employ of the Company or its subsidiaries.
11. Withholding Tax. The Company shall deduct from all amounts paid any
Federal, state or local taxes required by law to be withheld with respect to
such payments.
12. Discretion of Committee. Any decision made or action taken by the
Committee arising out of or in connection with the construction,
administration, interpretation and effect of the Plan shall be within the
absolute discretion of the Committee, and shall be conclusive and binding upon
all persons.
13. Absence of Liability. No member of the Board or of the Committee nor any
officer of the Company or any subsidiary of the Company shall be liable for
any act or action hereunder, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee, or, except in
circumstances involving his bad faith, for anything done or omitted to be done
by himself.
14. No Segregation of Cash. The Company shall not be required to segregate
any cash or any other assets which may at any time be represented by Awards
credited to a Participant and the Plan shall constitute an "unfunded" plan of
the Company. To the extent any person acquires any rights to receive payments
hereunder from the Company, such rights shall be no greater than those of an
unsecured creditor.
15. Inalienability of Benefits and Interests.
(a) Except as expressly provided by the Committee and subsection (b) of
this Section 15, no benefit payable under or interest in the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action shall be void.
(b) The provisions of subsection (a) of this Section 15 shall not apply to
an assignment of a payment due after the death of the Participant by the
deceased Participant's legal representative or beneficiary if such assignment
is made for the purposes of settling the affairs of such deceased Participant.
16. Amendment or Termination. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time; provided that to the extent required
by Code Section 162(m), no change shall be made that changes the maximum
potential benefits for Participants under the Plan, unless such change is
authorized by the shareholders of the Company. To the extent required by Code
Section 162(m), the Plan shall be periodically resubmitted to the shareholders
of the Company for reapproval. A termination or amendment of the Plan shall
not, without the consent of the Participant, adversely affect a Participant's
rights under an Award previously granted.
17. Effective Date. The Plan was originally effective as of January 1, 1998.
The amended and restated Plan is effective as of January 1, 2001.
18. Governing Law. This Plan shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference to principles
of conflict of laws.
B-3
EXHIBIT C
FBR NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
(as amended and restated as of January 1, 2001)
1. Purpose. The purposes of the Plan are to assist the Company in (1)
promoting a greater identity of interests between the Company's non-employee
directors and its shareholders, and (2) attracting and retaining directors by
affording them an opportunity to share in the future successes of the Company.
2. Definitions
(a) "Applicable Percentage" is 67% from January 1, 2001 until December 31,
2002, 75% from January 1, 2003 until December 31, 2004, and 80% after December
31, 2004.
(b) "Award" shall mean an award of Stock Options as contemplated by
Section 7, or an award of Restricted Stock Units as contemplated by Section 8.
(c) "Award Date" shall mean the date on which a Restricted Stock Unit is
issued in lieu of a Fee that would otherwise be payable to the Non-Employee
Director.
(d) "Beneficiary" shall mean a Beneficiary or Beneficiaries designated by
the Non-Employee Director under Section 11.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Control" shall mean the happening of any of the following
events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
50% or more of either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this definition, or (v) any acquisition by
Emanuel Friedman, Eric Billings or W. Russell Ramsey (the "Founders") or
any entity that is controlled by one or more of the Founders (the "Founder
Affiliates");
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company or the acquisition of
assets or stock of another corporation (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
C-1
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
will beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination or the Founders or Founder Affiliates) will
beneficially own, directly or indirectly, 50% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination will have been members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations thereunder.
(h) "Committee" shall mean the Compensation Committee or any other
Committee of the Board designated by the Board to administer the Plan that
shall consist of at least two members appointed from time to time by the
Board. Each Committee member must qualify as a "non-employee director" as
defined in Reg. (S)240.16b-3(b)(3) (or any successor rule) of the Exchange
Act.
(i) "Common Stock" shall mean the Class A common stock, $.01 par value, of
the Company.
(j) "Company" shall mean Friedman, Billings, Ramsey Group, Inc., a
Virginia corporation.
(k) "Cost" shall mean the Applicable Percentage of the Fair Market Value
of a share of Common Stock on the Award Date.
(l) "Deferral Period" shall mean a period of time (expressed in whole
months) beginning on the Award Date and lasting at least 36 months. The Non-
Employee Director shall elect the Deferral Period.
(m) "Fair Market Value" shall mean, as of any given date, the closing
price of the Common Stock reported in the Wall Street Journal for the day
prior to such date, or if the Common Stock was not traded on the New York
Stock Exchange on such day, then for the last preceding day on which the
Common Stock was traded. If there is no regular public trading market for the
Common Stock, Fair Market Value shall be determined by such other source as
the Committee may select.
(n) "Fees" shall mean the annual retainer fee and meeting fees for a Non-
Employee Director in connection with his or her service on the Board for any
Plan Year.
(o) "Involuntary Termination" shall mean a Director's termination of Board
membership other than his voluntary termination, his failure to stand for
reelection, or a termination for cause (as determined under Section 15).
(p) "Non-Employee Director" shall mean each member of the Board who is not
an employee of the Company.
C-2
(q) "Plan" shall mean the Friedman, Billings, Ramsey Group, Inc. Non-
Employee Director Stock Compensation Plan.
(r) "Plan Year" shall mean the fiscal year of the Company.
(s) "Restricted Stock Unit" or "RSU" shall mean a bookkeeping entry
representing the right to receive a share of Common Stock (or a cash payment
equal to the Fair Market Value of a share of Common Stock) at some future
date.
(t) "Stock Option" shall mean a stock option that does not qualify under
Code Section 422.
3. Eligibility. Each Non-Employee Director shall be eligible to participate
in the Plan. Any Non-Employee Director who becomes an employee of the Company
shall not be entitled to additional Stock Options or Awards under the Plan,
but shall retain all Options and Awards granted pursuant to the terms of the
Plan prior to the date that the Non-Employee Director becomes an employee of
the Company.
4. Shares Subject to the Plan. The maximum number of shares of Common Stock
that shall be reserved and available for use under the Plan shall be 200,000,
subject to adjustment pursuant to Section 16. The shares issued under the Plan
may be authorized and unissued shares or may be treasury shares or both.
5. Duration of Plan. Unless earlier terminated pursuant to Section 13, this
Plan shall automatically terminate on, and no grants, awards or elections may
be made after, December 31, 2010, other than the exercise of outstanding Stock
Options and the payment of Restricted Stock Units for Fees earned prior to
such date.
6. Administration. The Plan shall be administered by the Board or any
committee thereof so designated by the Board (the "Committee"), which shall
have full authority to construe and interpret the Plan, to establish, amend
and rescind rules and regulations relating to the Plan, and to take all such
actions and make all such determinations in connection with the Plan as it may
deem necessary or desirable.
7. Stock Options
(a) Initial Grants. Each person who first becomes a Non-Employee Director
shall be granted a Stock Option to purchase 10,000 shares of Common Stock as
of the date such person is elected or appointed to the Board; provided, that
no such grant shall be made to a Non-Employee Director who received an option
grant as an employee of the Company during the two-year period immediately
preceding such election or appointment to the Board.
(b) Annual Grants. A Stock Option to purchase 3,000 shares of Common Stock
shall be granted to each Non-Employee Director automatically on the first
business day following the Company's Annual Meeting of Shareholders for such
year. Grants under this Section 7(b) shall be in addition to any grants of
Stock Options under Section 7(a).
(c) Option Price. Options granted under Sections 7(a) or 7(b) shall be
exercisable at a price per share equal to Fair Market Value on the grant date.
(d) Exercisability. A Stock Option shall vest and become exercisable on
the first anniversary of the grant date. In the event a Non-Employee
Director's membership on the Board terminates before a Stock Option has vested
(other than for "cause" as described in Section 15), then any such unvested
Stock Option granted to such Non-Employee Director shall be vested.
(e) Term. Subject to the remaining provisions of this subsection (e), each
vested Stock Option shall remain exercisable for ten years after the date of
grant. In the event a Non-Employee Director's membership on the Board
terminates for reasons other than "cause", each vested Stock Option shall
remain exercisable until the earlier of the fifth anniversary of the date of
termination of the Non-Employee Director's membership on the Board or the
tenth anniversary of the date of the grant. If a Non-Employee Director's
membership on the Board
C-3
is terminated for "cause", any unvested Stock Option then held by the Non-
Employee Director shall be canceled as described in Section 15. In no event
may a Stock Option be exercised after the tenth anniversary of the date of
grant.
(f) Pro Rata Grants. In the event that the number of shares of Common
Stock available for future grant under the Plan is insufficient to make all
automatic grants required to be made on such date, then all Non-Employee
Directors entitled to a grant on such date shall share ratably in the number
of Stock Options on shares available for grant under the Plan.
8. Purchases of Restricted Stock Units
(a) Each Non-Employee Director shall be entitled to elect to receive up to
50% of his Fees as an award of RSUs. RSUs shall be awarded to Non-Employee
Directors based on the Cost of Common Stock. To receive an RSU, a Non-Employee
Director shall complete an election form. The election form shall provide that
the Non-Employee Director elects to receive RSUs in lieu of a specified
portion of his Fees. Such portion may be expressed as a specified percentage
of up to 50% (in whole percentages) of the actual Fees. Each election form
shall specify a Deferral Period with respect to the RSUs to which it pertains.
The Company must receive election forms prior to the first day of the Plan
Year for which such Fees will be paid, except that an initial election may be
made for the portion of the 2001 Plan Year following the Company's 2001 annual
meeting of shareholders.
(b) The Company shall issue RSUs on each Award Date to each Non-Employee
Director who has made an election. Each Non-Employee Director shall be
credited with a whole number of RSUs determined by dividing (i) the amount of
the Fees to be received as an award of RSUs under Section 8(a) by (ii) the
Cost of a share of Common Stock on the Award Date. No fractional RSU will be
credited and the amount equivalent in value to the fractional RSU will be paid
to the Non-Employee Director in cash.
(c) On each election, a Non-Employee Director shall elect a Deferral
Period that shall be at least 36 months after the Award Date but not more than
10 years after the Award Date, and shall in no event extend past the date the
Non-Employee Director ceases to be a member of the Board.
(d) A holder of RSUs shall not be entitled to voting rights on any Shares
to which the RSUs relate. The fair market value of an RSU on any date shall be
deemed to be the Fair Market Value of a share of Common Stock on that date.
9. Vesting and Payment of Restricted Stock Units
(a) A Non-Employee Director shall be fully vested in each RSU 36 months
after the Award Date pertaining to that RSU provided that the Non-Employee
Director has remained a Director for that entire 36-month period. In the event
that a Non-Employee Director dies or becomes disabled (as determined by the
Committee) before the end of the 36-month period after the Award Date of any
RSU, but while still a Director, the Non-Employee Director shall become fully
vested in all his RSUs at that time. In the event that Non-Employee Director
ceases to be a Director following a Change in Control before the end of the
36-month period after the Award Date of any RSU, the Non-Employee Director
shall become fully vested in all RSUs.
(b) With respect to each vested RSU, the Company shall issue to the Non-
Employee Director one share of Common Stock as soon as practicable after the
end of the Deferral Period or, if earlier, the date the Non-Employee Director
ceases to a member of the Board.
(c) If a Non-Employee Director ceases to be a member of the Board for
reasons other than death, disability, or Involuntarily Termination, the Non-
Employee Director's nonvested RSUs shall be canceled, and he shall receive as
soon as practicable after his ceasing to be a member of the Board a cash
payment equal to the lesser of:
(i) an amount equal to the number of those RSUs awarded on each Award
Date multiplied by the respective Cost of those RSUs; or
C-4
(ii) an amount equal to the number of those RSUs multiplied by the
aggregate Fair Market Value of those RSUs on the date of the Non-Employee
Director's ceasing to be a member of the Board.
(d) Subject to Section 9(a), if a Non-Employee Director's membership on
the Board terminates as a result of an Involuntary Termination, the Non-
Employee Director's nonvested RSUs shall be cancelled and he shall receive
payment as soon as practicable following his Involuntary Termination as
described below:
(i) The number of nonvested RSUs awarded on each Award Date shall be
multiplied by a fraction, the numerator of which is the number of full
months since the Award Date and the denominator of which is 36; and the
Non-Employee Director shall receive the resulting number of such RSUs in
shares of Common Stock.
(ii) With respect to the Non-Employee Director's remaining nonvested
RSUs, the Non-Employee Director shall receive cash in an amount equal to
the lesser of (A) the number of such RSUs awarded on each Award Date
multiplied by the respective Cost of those RSUs or (B) the number of those
RSUs multiplied by the Fair Market Value of those RSUs on the date of the
Non-Employee Director's termination of Board membership.
(e) The Committee shall have complete discretion to determine the reasons
for a Non-Employee Director's termination of membership on the Board including
whether the same results from Involuntary Termination or disability and the
Committee's determination shall be final and binding on all parties and not
subject to review or challenge by any Non-Employee Director or other person.
10. Deferrals of Fees.
(a) A Non-Employee Director may elect to defer the payment of some or all
of the Fees payable to a Non-Employee Director by completing a deferral
election. A deferral election shall pertain to all Fees payable during a Plan
Year. A deferral election must be in writing and be delivered prior to the
start of the Plan Year to which it pertains, except that an initial deferral
election may be made for the portion of the 2001 Plan Year following the
Company's 2001 annual meeting of shareholders. A deferral election must
specify the applicable amount or percentage of Fees that the Non-Employee
Director wishes to defer. A deferral election may be made for a single Plan
Year or may be made applicable to all future Plan Years until revoked. A
deferral election shall be irrevocable in respect to the Plan Year to which it
pertains. A revocation of a deferral election for a future Plan Year must be
in writing and shall be effective as of the first day of the next Plan Year
after the revocation is made.
(b) The Board shall establish one or more permissible deemed investments
for the deferred Fees, which may include Company Common Stock. A Non-Employee
Director may select from the permissible deemed investments under such
procedures as are established by the Board. With respect to all amounts for
which a deferral election is made, the Company shall credit an equal deemed
amount to the Non-Employee Director's fee deferral account when the Fees
otherwise would have been payable to the Non-Employee Director. Deemed
earnings and losses shall be credited to the fee deferral account established
for the Non-Employee Director based on the selected deemed investments. The
Board shall establish the method or methods for crediting earnings and losses
to fee deferral accounts, in its discretion.
(c) For purposes of the Plan, a fee deferral account means a bookkeeping
record on the books of the Company established for each Non-Employee Director
who makes a fee deferral. A fee deferral account shall be established only for
purposes of measuring the Company's obligation to the Non-Employee Director
and not to segregate assets or to identify assets that may be used to satisfy
the obligation.
(d) A deferral election shall provide for payment of the Non-Employee
Director's fee deferral account at a future date or dates elected by the Non-
Employee Director. Payments of the fee deferral account must commence no later
than the first Plan Year after the Non-Employee Director ceases to be a member
of the Board. Payments of the fee deferral account shall be made over a period
of up to 10 years and shall be made no more frequently than annually. In
absence of an effective election, the fee deferral account will be paid in a
lump sum in the first
C-5
Plan Year after the Non-Employee Director ceases to be a member of the Board.
In addition, the Non-Employee Director may elect to receive payment of the fee
deferral account in a single lump sum payment upon the occurrence of a Change
in Control in lieu of any other form that would otherwise be payable pursuant
to a prior election. The single lump sum payment shall be paid in cash as soon
as practicable after the Change in Control occurs. Except for an election made
at the time of the Non-Employee Director's first deferral election which shall
be immediately effective, any election by the Non-Employee Director as to the
date or form of payment shall be effective six months after it is made.
(e) To the extent of undistributed amounts in a Non-Employee Director's
fee deferral account at the Non-Employee Director's death, the Non-Employee
Director's beneficiary shall continue to receive payments in the form elected
by the Non-Employee Director unless, within 30 days of the Non-Employee
Director's death, the beneficiary elects to take a lump sum payment. The lump
sum payment shall be paid in cash as soon as practicable after such election
is received by the Company. In addition, a beneficiary may elect to receive
the balance of any unpaid benefit in a single lump sum payment upon the
occurrence of a Change in Control in lieu of the benefit that would otherwise
be payable. The single lump sum payment shall be paid in cash as soon as
practicable after the Change in Control occurs.
11. Designation of Beneficiary. A Non-Employee Director may designate one or
more Beneficiaries to receive any payments or shares of Common Stock payable
in the event of his death. A designation of Beneficiary shall apply to a
specified percentage of a Non-Employee Director's entire interest in the Plan.
Such designation, or any change therein, must be in writing and shall be
effective upon receipt by the Company. If there is no effective designation of
Beneficiary, or if no Beneficiary survives the Non-Employee Director, the Non-
Employee Director's estate shall be deemed to be the Beneficiary.
12. Transferability. No Stock Option shall be transferable by the optionee
other than (i) by will or by the laws of descent and distribution, or, in the
Committee's discretion, pursuant to a written beneficiary designation, (ii)
pursuant to a qualified domestic relations order, as defined in the Code or
(iii) in the Committee's discretion, pursuant to a gift to such optionee's
immediate family members directly or indirectly, or by means of a trust,
partnership or limited liability company. All Stock Options shall be
exercisable, subject to the terms of this Plan, only by the optionee,
guardian, legal representative or beneficiary of the optionee, or permitted
transferee, it being understood that the terms "holder" and "optionee" include
any such guardian, legal representative, beneficiary, or transferee. No
Restricted Stock Unit shall be transferable by the optionee other than by will
or by the laws of descent and distribution, or, in the Committee's discretion,
pursuant to a written beneficiary designation.
13. Amendment and Termination. The Board may amend, alter, or discontinue the
Plan, but no amendment, alteration or discontinuation shall be made which
would impair the rights of a Non-Employee Director under any Award theretofore
granted without such person's consent. In addition, no such amendment shall be
made without the approval of the Company's shareholders to the extent such
approval is required by law or agreement. The Committee may amend the terms of
any Stock Option or other Award theretofore granted, prospectively or
retroactively, but no such amendment shall impair the rights of any holder
without the holder's consent. Subject to the above provisions, the Board shall
have authority to amend the Plan to take into account changes in law and tax
and accounting rules as well as other developments, and to grant Awards which
qualify for beneficial treatment under such rules without stockholder
approval.
14. Effect of Change in Control. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control, any Stock Options
outstanding and not then exercisable or vested and any Restricted Stock Units
not then vested as of the date such Change in Control is determined to have
occurred, shall become fully exercisable and vested.
15. Effect of Termination for Cause. If a Non-Employee Director incurs a
termination of membership on the Board for cause, such Non-Employee Director's
unvested Stock Options and unvested Restricted Stock Units shall be
automatically canceled immediately and he shall receive a cash payment as
described in Section 9(c).
C-6
Unless otherwise determined by the Board, for purposes of the Plan "cause"
shall mean (i) the conviction of the Non-Employee Director for commission of a
felony under Federal law or the law in the state in which such action
occurred, or (ii) dishonesty in the course of fulfilling the Non-Employee
Director's duties as a director.
16. Adjustments Upon Changes in Capitalization. In the event of any change in
corporate capitalization, such as a stock split or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Section
368 of the Code) or any partial or complete liquidation of the Company, the
Committee or Board may make such substitution or adjustments in the aggregate
number and class of shares reserved for issuance under the Plan, the number
and kind of shares subject to Stock Options or Restricted Stock Units in the
number, kind and option price of shares subject to other outstanding Awards
granted under the Plan and/or such other equitable substitution or adjustments
as it may determine to be appropriate in its sole discretion; provided,
however, that the number of shares subject to any Award shall always be a
whole number.
17. Effectiveness of Plan. The Plan originally became effective on December
23, 1997. The restated Plan is effective as of January 1, 2001, subject to
approval of the Company's shareholders.
C-7
--------------------------------------------------------------------------------
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS JUNE 7, 2001
The undersigned hereby appoints Kurt R. Harrington, William J. Ginivan and
Mary A. Sheehan as Proxies, with full power to act without the others and each
with power of substitution, and hereby authorizes them to represent and to vote,
as designated on this card, all shares of Common Stock of FRIEDMAN, BILLINGS,
RAMSEY GROUP, INC. (the "Company") held of record by the undersigned on April
12, 2001, at the Annual Meeting of Shareholders to be held on June 7, 2001 or
any adjournment thereof.
(continued and to be signed on other side)
-------------
SEE REVERSE
SIDE
-------------
\/ Please Detach and Mail in the Envelope Provided \/
--------------------------------------------------------------------------------
Please mark your
A [X] vote as in this
example.
WITHHOLD
AUTHORITY to vote
FOR for all nominees
1. Election of
Directors [ ] [ ] Nominees: Emanuel J. Friedman
Eric F. Billings
W. Russell Ramsey
FOR all nominees listed (except as marked to the Daniel J. Altobello
contrary below.) Wallace L. Timmeny
Mark R. Warner
------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposed to approve the FBR Key Employee [ ] [ ] [ ]
Incentive Plan.
3. Proposal to approve the FBR Non-Employee [ ] [ ] [ ]
Director Stock Compensation Plan.
4. Proposal to ratify the selection of Arthur [ ] [ ] [ ]
Andersen LLP to serve as the Company's
independent auditors for fiscal 2001.
5. In their discretion, upon such other [ ] [ ] [ ]
business as may properly come before the
Annual Meeting or any postponement or
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION. THIS PROXY WILL BE VOTED FOR THE SIX NOMINEES FOR
ELECTION, AND FOR PROPOSALS 2,3 AND 4. STOCKHOLDERS ARE
URGED TO MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN
THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED
WITHIN THE UNITED STATES.
Signature: Date:
---------------------------------------- --------------------
NOTE: Please sign exactly as name or names appear on stock certificate (as
indicated hereon). When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If the signature is by a corporation,
sign the full corporate name by a duly authorized officer.
--------------------------------------------------------------------------------