<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FEDERAL SIGNAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FEDERAL SIGNAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
45,668,169 shares eligible to vote on election of directors.
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
Not applicable.
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not applicable.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not applicable.
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Not applicable.
- --------------------------------------------------------------------------------
(3) Filing party:
Not applicable.
- --------------------------------------------------------------------------------
(4) Date filed:
Not applicable.
- --------------------------------------------------------------------------------
- -------------------------
1Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE> 2
[PASTEUP LOGO]
1415 West 22nd Street
Oak Brook, Illinois 60521
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 1994
To the Stockholders of
Federal Signal Corporation
The Annual Meeting of Stockholders of Federal Signal Corporation
("Federal") for the year 1994 will be held at the Chicago Marriott Hotel-Oak
Brook, 1401 West 22nd Street, Oak Brook, Illinois, on Monday, April 18, 1994, at
11:00 a.m., local time, for the following purposes:
1. To elect three directors of Federal;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business, February 22, 1994,
as the record date for determining the holders of Common Stock of Federal
entitled to notice of and to vote at the meeting or any adjournment thereof.
A copy of Federal's Annual Report for the year ended December 31, 1993 and
a proxy statement accompany this notice.
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE
SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
NO POSTAGE IS REQUIRED IF THE PROXY IS MAILED IN THE UNITED STATES.
By order of the Board of Directors
KIM A. WEHRENBERG
Secretary
March 7, 1994
<PAGE> 3
[PASTE UP LOGO]
1415 West 22nd Street
Oak Brook, Illinois 60521
MAILING DATE
ON OR ABOUT
MARCH 7, 1994
------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 1994
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Federal Signal Corporation ("Federal") for
use at the Annual Meeting of Stockholders to be held on Monday, April 18, 1994,
and any adjournment thereof. Costs of solicitation will be borne by Federal.
Following the original solicitation of proxies by mail, certain officers and
regular employees of Federal may solicit proxies by correspondence, telephone,
telegraph, or in person, but without extra compensation. Federal will reimburse
brokers and other nominee holders for their reasonable expenses incurred in
forwarding the proxy materials to the beneficial owners.
Each proxy solicited herewith will be voted as to each matter as the
stockholder directs thereon, but in the absence of such directions it will be
voted for the nominees specified herein. Any proxy solicited herewith may be
revoked by the stockholder at any time prior to the voting thereof, but a
revocation will not be effective until satisfactory evidence thereof has been
received by the Secretary of Federal.
VOTING SECURITIES
The holders of record of the Common Stock of Federal at the close of
business on February 22, 1994, will be entitled to vote at the meeting. At such
record date, there were outstanding 45,668,169 shares of Common Stock. A
majority of the outstanding shares will constitute a quorum at the meeting.
Abstentions and broker non-votes are counted to determine if a quorum is
present. Abstentions are counted as votes cast, whereas broker non-votes are not
counted as votes cast for determining whether a proposition has been approved.
Each stockholder of record will be entitled to one vote for each share of Common
Stock standing in the name of the holder on the books of Federal on the record
date.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth information as of December 31, 1993 (unless
otherwise noted) with respect to (i) any person who is known to Federal to be
the beneficial owner of more than 5% of Federal's Common Stock, which is
Federal's only class of outstanding voting securities, and (ii) each director,
and all directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- ----------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Beneficial Owner of More than 5% of Federal's Common Stock: None
Each Director and Five Executive Officers and Executive Officers
and Directors as a Group:(1)
J. Patrick Lannan, Jr., Director............................ 300,475 (2) .66%
James A. Lovell, Jr., Director.............................. 20,235 (4) .04%
Thomas N. McGowen, Jr., Director............................ 33,333 .07%
Walter R. Peirson, Director................................. 24,360 (4) .05%
Joseph J. Ross, Director and Executive Officer.............. 656,887 (4) 1.44%
Roger B. Parsons, Executive Officer......................... 205,064 (3)(4) .45%
Richard G. Gibb, Executive Officer.......................... 154,085 (4) .34%
Theodore S. Fries, Executive Officer........................ 148,643 (4) .32%
Charles R. Campbell, Executive Officer...................... 118,907 (4) .26%
All Directors and Executive Officers as a group (16
persons)................................................... 2,268,976 4.97%
</TABLE>
- ---------------
(1) The information contained in this table is based upon information furnished
to Federal by the individuals named above. Except as set forth in the
following footnotes, each director claims sole voting and investment power
with respect to these shares.
(2) This figure includes 18,240 shares owned by Mr. Lannan's wife. Mr. Lannan
disclaims beneficial ownership with respect to these shares. It also
includes 18,848 shares for which he shares voting and investment power.
(3) This figure includes 65,444 shares held by family members; beneficial
ownership is disclaimed.
(4) These figures include options shares exercisable within 60 days as follows:
Mr. Lovell, 10,791; Mr. Peirson, 2,595; Mr. Ross, 480,476; Mr. Parsons,
15,167; Mr. Gibb, 23,251; Mr. Fries, 48,400; and Mr. Campbell, 22,000.
These figures also include stock award shares pursuant to Federal's Stock
Benefit Plan which are subject to certain restrictions under the plan as
follows: Mr. Lovell, 0; Mr. Peirson, 0; Mr. Ross, 36,834; Mr. Parsons,
13,393; Mr. Gibb, 15,427; Mr. Fries, 17,151 and Mr. Campbell, 8,017.
2
<PAGE> 5
ELECTION OF DIRECTORS
Federal's Board of Directors consists of five directors divided into three
classes with one class term expiring each year. Mr. James A. Lovell, Jr. is
nominated as a Class III director for election at this Annual Meeting for a term
to expire at the 1996 Annual Meeting or until his successor is elected and
qualified and Mr. Joseph J. Ross and Mr. Walter R. Peirson are nominated as
Class I directors for election at this Annual Meeting for terms to expire at the
1997 Annual Meeting, or until their successors are elected and qualified.
The accompanying proxy card permits a stockholder to direct whether his or
her shares are to be voted for, or withheld from the vote for the nominees. Each
proxy will be voted as the stockholder directs thereon; however, if no such
direction is given, it is the present intention of the persons named in the
proxy card to vote such proxies for the election of the above-named nominees as
directors. If on account of death or unforeseen contingencies the nominee shall
not be available for election, the persons named in the proxy will vote the
proxies for such other person as the Nominating Committee may nominate as a
director so as to provide a full board. The Nominee receiving the highest number
of votes cast will be elected as a director.
Information regarding the nominees for election and the directors
continuing in office is set forth below:
<TABLE>
<CAPTION>
YEAR FIRST YEAR PRESENT PRINCIPAL OCCUPATION
BECAME TERM OR EMPLOYMENT FOR
NAME AGE DIRECTOR EXPIRES LAST FIVE YEARS(1)
- ---------------------------- ---- ---------- ------------ ---------------------------------------
<S> <C> <C> <C> <C>
Nominees:
James A. Lovell, Jr. ....... 65 1984 1994 Mr. Lovell is President of Lovell
Communications (a consulting company).
He retired in 1990 as Executive Vice
President, Corporate Staff and as a
director of Centel Corporation (a
telecommunications company).
Joseph J. Ross.............. 48 1986 1994 Mr. Ross is Chairman, President and
Chief Executive Officer of Federal. He
has served as President and Chief
Executive Officer since December, 1987
and also became Chairman in February,
1990.
Walter R. Peirson........... 67 1987 1995 Mr. Peirson retired in 1989 as
Executive Vice President and as a
director of Amoco Corporation (a
petroleum company). He serves as a
director of American National
Corporation, American National Bank and
Trust Company of Chicago and
Consolidated Natural Gas Company.
Continuing Directors:
Thomas N. McGowen, Jr. ..... 68 1974 1995 Mr. McGowen is an attorney. He is also
a director of Energy West Corporation
and Ribi Immunochem Research, Inc.
J. Patrick Lannan, Jr. ..... 55 1978 1996 Mr. Lannan is President and a director
of the Lannan Foundation for the
support of the arts.
</TABLE>
- ---------------
(1) The information contained in this table is based upon information furnished
to Federal by the individuals named above.
3
<PAGE> 6
BOARD OF DIRECTORS AND COMMITTEES
Pursuant to its by-laws, Federal has established standing audit,
nominating, compensation/stock option, pension and executive committees.
The Audit Committee reviews and recommends to the Board of Directors
internal accounting and financial controls, auditing practices and procedures
and accounting principles to be employed in the preparation of Federal's
financial statements and the review of financial statements by independent
public accountants. The Audit Committee also makes recommendations concerning
the engagement of independent public accountants to audit the annual financial
statements and the scope of the audit to be undertaken by such accountants. In
addition, the Audit Committee considers the performance of non-audit services by
such accountants, including the effect which the performance of such non-audit
services may have upon the independence of the accountants. The by-laws prohibit
a director who is also an employee of Federal from serving on the Audit
Committee. The members of the Audit Committee are James A. Lovell, Jr.,
Chairman, J. Patrick Lannan, Jr. and Walter R. Peirson.
The Nominating Committee evaluates and recommends to the Board of Directors
candidates for election or re-election as directors. No determination has been
made regarding the consideration of or procedure for the recommendation of
nominees by stockholders. The members of the Nominating Committee are Joseph J.
Ross, Chairman, and Thomas N. McGowen, Jr.
The Compensation/Stock Option Committee reviews and recommends to the Board
of Directors policies, practices and procedures relating to compensation of
managerial employees and the establishment and administration of employee
benefit plans. The members of the Compensation/Stock Option Committee are Walter
R. Peirson, Chairman, James A. Lovell, Jr. and Thomas N. McGowen, Jr.
The Pension Committee reviews and recommends to the Board of Directors
policies, practices and procedures relating to Federal's various pension,
savings and similar retirement plans and programs and to the investment of the
funds associated with these plans. The members of the Pension Committee are J.
Patrick Lannan, Jr., Chairman, and Joseph J. Ross.
During 1993, the Board of Directors held a total of five meetings and the
Executive Committee of the Board, which generally exercises the power and
authority of the Board in the intervals between full board meetings, held no
meetings. The members of the Executive Committee are Thomas N. McGowen, Jr.,
Chairman, Joseph J. Ross and James A. Lovell, Jr. During 1993, the
Compensation/Stock Option Committee held five meetings; the Nominating Committee
held one meeting; the Audit Committee held one meeting; and the Pension
Committee met twice. No director attended less than 75% of the meetings of the
Board and of each committee of which he was a member.
As compensation for services to Federal, each director who is not also an
officer of Federal receives director's fees at a current annual rate of $20,000.
In addition, each such director receives additional fees for serving on
committees of the Board as follows: Executive Committee chairman--$5,000, other
members--$2,500; Audit or Compensation/Stock Option Committee chairman--$3,500,
other members--$2,500; Pension Committee chairman--$3,500; and Nominating
Committee members--$2,500. Directors are also reimbursed for their expenses
relating to attendance at meetings. Directors may receive options in lieu of
director's fees, as described in the stock option section of this proxy
statement. Directors who retire as a director of Federal after attaining age 68
and meeting years of service requirements are eligible for a director retirement
benefit. The maximum benefit is $15,000 per year for ten years if the director
retires after age 70.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following is the Summary Compensation Table for the Chief Executive
Officer and four other top executive officers of Federal for compensation earned
during the 1993 fiscal year:
THE FOLLOWING SHARE NUMBERS AND PER SHARE PRICES WERE ADJUSTED FOR THE 4
FOR 3 STOCK SPLIT DISTRIBUTED MARCH 1, 1994 TO ALL SHAREHOLDERS.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------------
ANNUAL COMPENSATION RESTRICTED NUMBER
NAME AND ---------------------------- STOCK OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) OPTIONS COMPENSATION(2)
- --------------------------------- ---- -------- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Ross................... 1993 $325,000 $312,000 $ 165,375 53,333 $52,662
Chairman, President 1992 295,500 265,950 144,375 40,000 43,166
and Chief Executive Officer 1991 277,500 258,297 268,375 50,000
Charles R. Campbell.............. 1993 185,000 161,936 61,425 9,333 9,780
Senior Vice President, Chief 1992 182,000 141,334 -- -- 6,866
Financial and Admin. Officer 1991 177,000 144,158 59,150 10,000
Theodore S. Fries................ 1993 175,000 101,675 70,875 -- 7,817
President, Emergency One, Inc. 1992 165,000 113,046 61,875 13,333 6,866
(a Subsidiary) 1991 155,000 173,548 136,000 26,000
Roger B. Parsons................. 1993 143,000 106,857 47,250 -- 2,159
President, Elgin Sweeper Company 1992 137,000 50,947 37,125 8,000 1,847
(a Subsidiary) 1991 130,000 106,428 120,075 25,000
Richard G. Gibb.................. 1993 135,000 109,738 70,875 6,667 7,041
President, Signal Division 1992 126,000 126,236 51,563 13,333 6,866
1991 120,000 125,960 120,075 25,000
</TABLE>
- ---------------
(1) Stock awards vest 25% on each June 30 after date of grant or in some cases
0% until four years after date of grant and then they are 100% vested. The
number and aggregate value of unvested stock awards as of December 31, 1993
were: for Mr. Ross 36,834 shares ($773,500), for Mr. Campbell 8,017 shares
($168,364), for Mr. Fries 17,151 shares ($360,164), for Mr. Gibb 15,427
shares ($323,960) and for Mr. Parsons 13,393 shares ($281,260). Dividends
are paid at the regular rate to these people on the unvested shares.
(2) This compensation consists of the Company matching contribution under
Federal's 401(k) savings plan in which most employees participate and
supplemental savings and retirement plans which break out as follows,
respectively, Mr. Ross $7,095, $11,187, $34,400; Mr. Campbell $7,075,
$2,705, $0; Mr. Fries $7,075, $742, $0; Mr. Parsons $2,159, $0, $0; Mr.
Gibb $4,295, $2,746, $0. These officers put part of their bonus into the
Company's supplemental savings plan. Mr. Ross invested $192,850 of his
bonus in Federal Signal stock, Mr. Campbell invested $2,705, Mr. Fries
invested $742 and Mr. Gibb invested $91,532 of his bonus in Federal Signal
stock.
5
<PAGE> 8
EMPLOYMENT AGREEMENTS
Federal has employment agreements with Charles R. Campbell and Joseph J.
Ross. The agreements continue until the December 31 following the employee's
65th birthday subject to earlier termination by either Federal or the employee.
As of January 1, 1994, termination salary under these agreements is $325,000 for
Mr. Ross and $186,000 for Mr. Campbell and the annual salaries of Messrs. Ross
and Campbell, which are approved by the Compensation Committee, are not set by
these employment agreements. In the discretion of the Board of Directors, annual
compensation may be increased during the terms of the agreements. If terminated
by Federal under circumstances not involving cause, Federal would be obligated
to pay in monthly installments an amount equal to the then applicable salary for
one year (or, if less, the amount of minimum salary payable through the December
31 following such employee's 65th birthday). In the event of death prior to
termination of employment, the employee's estate is entitled to receive in
monthly installments an amount equal to one year's minimum compensation. In the
event Federal is subject to a "change of control" (as specifically defined), the
agreements permit the employee to elect to terminate employment during a
specified period and to receive termination payments calculated as if Federal
had terminated employment without cause, except that such payment shall be based
on three years' W-2 compensation rather than one. Upon termination of employment
for any reason, each employee is obligated not to engage in specified
competitive activities for a period of three years.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL GRANT DATE VALUE
SECURITIES OPTIONS EXERCISE -----------------------
UNDERLYING GRANTED TO OR GRANT DATE PRESENT
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION VALUE $ BASED ON
NAME GRANTED(#)(1) FISCAL YEAR ($/SH.) DATE BLACK-SCHOLES METHOD(2)
- -------------------------- ------------- ------------ ---------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Joseph J. Ross............ 53,333 24.5% $20.15 12/02/03 $ 349,440
Charles R. Campbell....... 9,333 4.3% 17.34 3/26/03 53,076
Theodore S. Fries......... -- -- N/A N/A 0
Richard G. Gibb........... 6,667 3.1% 20.15 12/02/03 43,680
Roger B. Parsons.......... -- -- N/A N/A 0
</TABLE>
- ---------------
(1) No SARs were granted. These options become 50% and 100% exercisable one year
and two years after date of grant, respectively except for 24,000 of Ross'
shares which become 20% exercisable per year and Campbell's become
exercisable 2,666 on the first anniversary date of the grant and 2,667 and
4,000 exercisable on December 11, 1994 and 1995, respectively.
(2) The following assumptions were used under the Black-Scholes method:
volatility .198; risk free rate of return 7%; dividend yield 2.5%; exercise
period, 10 years.
6
<PAGE> 9
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
------------- ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------------------------- --------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Joseph J. Ross......................... 0 $ 0 480,476 $7,629,868
111,333 434,251
Charles R. Campbell.................... 0 0 22,000 213,625
9,333 34,125
Theodore S. Fries...................... 30,548 471,089 48,400 602,150
29,333 207,876
Richard G. Gibb........................ 0 0 23,251 245,447
36,000 408,125
Roger B. Parsons....................... 0 0 15,167 138,500
25,333 185,751
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise, minus the exercise or
base price.
(2) "Spread" calculated by subtracting the exercise or base price from the
closing stock price of $20.99 on December 31, 1993.
RETIREMENT PLANS
Federal's Retirement Plan for Salaried Employees provides retirement
benefits for salaried employees including officers. Contributions are made on an
actuarial group basis, and no specific amount of contributions is set aside for
any individual participant. Under the method of computing the annual
contribution, the Internal Revenue Service's full funding limitation prohibits a
contribution to the plan for 1993. The following table sets forth the
approximate annual pension benefit based on years of service and compensation,
but does not reflect dollar limitations under the Internal Revenue Code, as
amended, which limits the annual benefits which may be paid from a tax qualified
retirement plan. For employees covered by Federal's supplemental pension plan,
amounts in excess of such limitations will be paid from the general funds of
Federal, pursuant to the terms of such plan. The amount of pension benefits is
reduced by one-half of the amount of available
7
<PAGE> 10
individual Social Security benefits. Estimated credited years of service are as
follows: Mr. Ross, 10; Mr. Campbell, 8; Mr. Fries, 10; Mr. Gibb, 10 and Mr.
Parsons, 0.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION
FOR THE FIVE
CONSECUTIVE
CALENDAR YEARS OF THE APPROXIMATE ANNUAL STRAIGHT-LIFE ANNUITY
LAST PENSION UPON RETIREMENT AT 65
TEN FOR WHICH ---------------------------------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
IS HIGHEST OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
300,000................ $ 50,000 $ 75,000 $ 100,000 $ 125,000 $ 150,000 $ 175,000
400,000................ 66,667 100,000 133,334 166,167 200,000 233,334
500,000................ 83,334 125,000 166,667 208,334 250,000 291,667
600,000................ 100,000 150,000 200,000 250,000 300,000 350,000
700,000................ 116,667 175,000 233,333 291,667 350,000 408,334
800,000................ 133,333 200,000 266,667 333,334 400,000 466,667
</TABLE>
For purposes of the Retirement Plan, an employee's compensation is his
Annual Compensation as set forth in the Summary Compensation Table.
Pursuant to Federal's supplemental pension plan, various officers of
Federal are entitled to pension supplements which have the effect of assuring
that, regardless of their actual years of service, if they remain in the
employment of Federal until age 65, they will receive benefits as if they had
been continuously employed by Federal since their thirty-fourth birthday. Giving
effect to such pension supplements, the additional years of service credited
under Federal's Supplemental Retirement Plan as of December 31, 1993 to certain
of the officers named above would be as follows: Mr. Ross--3 1/4 years and Mr.
Campbell--11 2/3 years. The supplemental pension benefit for Messrs. Ross and
Campbell makes up the difference between their actual pension benefit and what
it would have been with 30 years of service.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of three
independent outside directors. The Committee meets without the Chief Executive
Officer present to evaluate his performance and establish his compensation.
Compensation for Federal's executive officers consists of three major
components: salary, bonus and stock options/awards. The officers' compensation
is based on the individual's skill level, years of experience, job duties and
the individual's and Company's performance. The Committee uses its subjective
evaluation of these factors, without a mechanical weighting, to determine the
officers' salary and level of participation in the bonus plan; Mr. Ross
participates at 40% of his salary and the other officers participate at 35% of
their salary.
The Company's total return to shareholders has been 34% and 40% for the
last year and last five years, respectively. Based on the excellent performance
of Mr. Ross and the entire management team (among other items, this excellent
performance included increasing cash flow from operations from $40 million to
$49 million, increasing return on equity from 20.0% to 21.0%, increasing net
income by 15% and returning the Sign division to profitability) and the Company
over the last several years, the Committee granted Mr. Ross 53,333 shares of
stock options and 9,333 award shares; however, Mr. Ross received no increase in
his base salary for 1994. In the opinion of the Committee, the granting of
options and awards rather than increasing base salary further emphasizes the
relationship between Mr. Ross' performance and the interests of all
shareholders. The Committee also approved an average 1994 salary increase for
the other four officers of less than 1%. It should
8
<PAGE> 11
be noted that these increases in salary are substantially below the increases in
the Company's performance, i.e., 9% increase in sales, 15% increase in income
and a 34% total return to shareholders.
The officers' bonuses are tied directly to company performance. Bonus
targets are established for the officers based on their level of responsibility.
The amount of bonus to which an officer is entitled is based on Federal's
pre-tax profits (before extraordinary items, interest on long-term debt and
bonus payments) as a percentage of Federal's average stockholders' equity plus
average long-term debt. For divisional and subsidiary officers, the calculation
is primarily based on that operating unit's profits as a percentage of average
net investment (total assets less accounts payable and accrued liabilities). The
officers' bonus targets remain the same for 1994. Therefore, if the Company's
profitability is the same as it was in 1993, the officers' bonuses will also be
about the same for 1994. In 1993, bonus target achievement was as follows:
Messrs. Ross and Campbell 101%; Mr. Fries, 85%; Mr. Gibb, 95%; Mr. Parsons, 81%.
The Company as a whole achieved its performance goals; however, Messrs. Fries,
Gibb and Parsons all had their bonuses reduced largely because the foreign
operations for which they were responsible did not achieve their goals because
of depressed foreign markets. Their U.S. operations exceeded their goals except
for Mr. Fries' operations which achieved 85% of their goal. Mr. Ross elected to
invest $192,850 of his bonus in Federal Signal stock which is held in the
Company's Supplemental Savings Plan. The other officers' bonuses generally
constitute about half of their cash compensation.
The third major component of the officers' compensation consists of stock
options and awards. This is long-term compensation which provides value to the
officers based on the increased market value of the Company for all
stockholders. For example, over the last five years the total market value of
the Company has increased from about $197 million to more than $960 million of
stockholder value. The Performance Graph on page 10 shows that Federal has
substantially out-performed the Standard & Poor 400 and companies comparable to
Federal. In view of this performance, and to give the officers even greater
incentive to continue to increase shareholder value, the Compensation Committee
granted the officers the stock options and restricted stock awards set forth in
the Summary Compensation Table on page 5. The Committee subjectively determines
the number of shares granted and there is no mechanical relationship between the
number of options and restricted share awards granted, nor is there a mechanical
relationship to prior grants.
WALTER R. PEIRSON JAMES A. LOVELL, JR. THOMAS N. McGOWEN, JR.
9
<PAGE> 12
COMPARISON FOR FIVE YEAR CUMULATIVE TOTAL RETURN*
FOR FEDERAL SIGNAL CORPORATION
<TABLE>
<CAPTION>
DOW JONES
FEDERAL SIG- INDUSTRIAL
MEASUREMENT PERIOD NAL CORPORA- S & P 400 DIVERSIFIED
(FISCAL YEAR COVERED) TION INDEX INDEX
<S> <C> <C> <C>
1988 100 100 100
1989 170 129 126
1990 248 128 117
1991 357 168 145
1992 402 171 168
1993 539 187 206
</TABLE>
INDEBTEDNESS OF MANAGEMENT
On November 16, 1984, the Board of Directors of Federal adopted an
Executive Loan Program under which loans were made available for the general
purpose of encouraging executives of Federal to increase and/or maintain their
ownership of Federal stock through means other than the stock option program.
All loans are subject to the approval of the Board of Directors and are
repayable on demand at the direction of the Compensation/Stock Option Committee.
The interest rate on each loan is determined by the Committee with the intention
being to charge no interest in most cases. The maximum amount of loans
authorized to be outstanding at any given time is $500,000. There are currently
no loans outstanding under this program.
ACCOUNTING INFORMATION
Ernst & Young has been selected by Federal to serve as its independent
public accountants for the fiscal year ending December 31, 1994. A
representative of that firm will be present at the Annual Meeting with the
opportunity to make a statement if he desires to do so and to respond to
questions of stockholders. The appointment of the auditors is approved annually
by the Board of Directors based upon the recommendation of the Audit Committee.
FUTURE STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy statement for the 1995
Annual Meeting of Stockholders, stockholder proposals must be received by
Federal on or before November 23, 1994.
10
<PAGE> 13
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the meeting. If any
other proper business should be presented to the meeting, the proxies will be
voted in respect thereof in accordance with the discretion and judgment of the
person or persons voting the proxies.
By order of the Board of Directors
Kim A. Wehrenberg
Secretary
Federal Signal Corporation
IMPORTANT -- PLEASE SIGN AND RETURN YOUR PROXY CARD.
11
<PAGE> 14
PROXY FEDERAL SIGNAL CORPORATION PROXY
1415 W. 22nd Street, Oak Brook, Illinois 60521
Proxy for Annual Meeting of Stockholders on April 18, 1994
This Proxy is Solicited on Behalf of the Board of Directors
Thomas N. McGowan, Jr. and Kim A Wehrenberg, or either of them, with full power
of substitution, are hereby authorized to vote the shares of Common Stock of
Federal Signal Corporation which the undersigned is entitled to vote at the
1994 Annual Meeting of Stockholders to be held at the Chicago Marriott Hotel --
Oak Brook, 1401 West 22nd Street on Monday, April 18, 1994 at 11:00 a.m., and
at all adjourments thereof as indicated on this card for the proposal described
in the Notice and Proxy Statement for such meeting and in their discretion on
other matters which may properly come before the meeting.
Unless otherwise instructed, this Proxy will be voted FOR the nominees listed
in Proposal 1.
[ ] Check here for address
change.
New Address:
----------------
----------------------------
----------------------------
(Continued and to be signed on reverse side.)
<PAGE> 15
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
This Proxy will be voted in accordance
with specifications made. If no choices
are indicated, this Proxy will be voted
FOR the nominees listed in Proposal 1. FOR ALL
EXCEPT
1. Election of Directors-- NOMINEE(S)
Nominees: James A. Lovell, Jr., FOR WITHHELD WRITTEN BELOW
Joseph J. Ross and Walter R. Peirson. / / / / / /
------------------------
Please vote, sign, date and
return this Proxy Card
promptly using the enclosed
envelope.
Dated:
-------------------,1994
Signature(s)
--------------------
--------------------------------
Please sign exactly as name
appears hereon. Joint owners
should each sign where
applicable, indicate official
position or representative
capacity.
