FEDERAL SIGNAL CORP /DE/, DEF 14A, 1996-03-08

FEDERAL SIGNAL CORP /DE/
DEF 14A, 1996-03-08
MOTOR VEHICLES & PASSENGER CAR BODIES

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<PAGE>
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 / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

/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, if other than the Registrant)

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)
or Item 22(a)(2) of Schedule 14A.

/ / $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 transaction applies:
45,373,181 shares eligible to vote on election of
directors and Stock Benefit Plan.
- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
Not applicable.
- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:
Not applicable.
- --------------------------------------------------------------------------------

(5) Total fee paid:
$125.00
- --------------------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
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.
- --------------------------------------------------------------------------------

<PAGE>

FEDERAL SIGNAL LOGO
1415 West 22nd Street
Oak Brook, Illinois 60521

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 17, 1996

To the Stockholders of
Federal Signal Corporation

The Annual Meeting of Shareholders of Federal Signal Corporation
("Federal") for the year 1996 will be held at the Chicago Marriott Hotel-Oak
Brook, 1401 West 22nd Street, Oak Brook, Illinois, on Wednesday, April 17, 1996,
at 11:00 a.m., local time, for the following purposes:

1. To elect two directors of Federal;

2. To consider and act on a proposal to approve the Federal Signal
Corporation Stock Benefit Plan as more fully described in the accompanying
proxy statement; and

3. 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 20, 1996,
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 Financial Statements and its Annual Report for the year
ended December 31, 1995 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 8, 1996

<PAGE>

FEDERAL SIGNAL LOGO
1415 West 22nd Street
Oak Brook, Illinois 60521

MAILING DATE
ON OR ABOUT
MARCH 8, 1996

------------------

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 17, 1996

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 Shareholders to be held on Wednesday, April 17,
1996, 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 20, 1996, will be entitled to vote at the meeting. At such
record date, there were outstanding 45,373,181 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.

<PAGE>

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS

The following table sets forth information as of December 31, 1995 (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................................ 263,166 (2) .58%
James A. Lovell, Jr., Director.................................. 28,679 (3) .06%
Thomas N. McGowen, Jr., Director................................ 34,666 .08%
Walter R. Peirson, Director..................................... 27,133 (3) .06%
Joseph J. Ross, Director and Executive Officer.................. 764,535 (3) 1.68%
Richard R. Thomas, Director..................................... 149,191 (3) .33%
Henry L. Dykema, Executive Officer.............................. 10,416 (3) .02%
Kim A. Wehrenberg, Executive Officer............................ 183,823 (3) .41%
Richard L. Ritz, Executive Officer.............................. 52,638 (3) .12%
Robert W. Racic, Executive Officer.............................. 42,080 (3) .09%
All Directors and Executive Officers as a group (11 persons).... 1,585,787 3.49%
</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) These figures include options shares exercisable within 60 days as follows:
Mr. Lovell, 14,025; Mr. Peirson, 5,368; Mr. Ross, 585,381; Mr. Thomas,
4,000; Mr. Dykema, 0; Mr. Wehrenberg, 98,399; Mr. Ritz, 30,472; and Mr.
Racic, 10,266. 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, 13,376; Mr.
Thomas, 0; Mr. Dykema, 10,000; Mr. Wehrenberg, 5,568; Mr. Ritz, 3,344 and
Mr. Racic, 1,627.

<PAGE>

ELECTION OF DIRECTORS

Federal's Board of Directors consists of six directors divided into three
classes with one class term expiring each year. Mr. J. Patrick Lannan, Jr. and
James A. Lovell, Jr. are nominated as a Class III directors for election at this
Annual Meeting for a term to expire at the 1999 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 nominees shall
not be available for election, the persons named in the proxy will vote the
proxies for such other persons as the Nominating Committee may nominate as
directors so as to provide a full board. The nominees receiving the highest
number of votes cast will be elected as directors.

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:
J. Patrick Lannan, Jr. ..... 57 1978 1996 Mr. Lannan is President and a
director of the Lannan Foundation for
the support of the visual arts,
literature and rural native American
communities.

James A. Lovell, Jr. ....... 67 1984 1996 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).
Continuing Directors:
Thomas N. McGowen, Jr. ..... 70 1974 1998 Mr. McGowen is an attorney. He is
also a director of Energy West
Corporation and Ribi Immunochem
Research, Inc.

Richard R. Thomas........... 62 1994 1998 Mr. Thomas retired in 1994 as
President of the Tool Group of
Federal Signal Corporation.

Joseph J. Ross.............. 50 1986 1997 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 and is a director of
Varlen Corporation.

Walter R. Peirson........... 69 1987 1997 Mr. Peirson retired in 1989 as
Executive Vice President and as a
director of Amoco Corporation (a
petroleum company) and he serves as a
director of Consolidated Natural Gas
Company.
</TABLE>

- ---------------
(1) The information contained in this table is based upon information furnished
to Federal by the individuals named above.

<PAGE>

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 1995, 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 one
meeting. The members of the Executive Committee are Thomas N. McGowen, Jr.,
Chairman, Joseph J. Ross and James A. Lovell, Jr. During 1995, the
Compensation/Stock Option Committee held four meetings; the Nominating Committee
held two meetings; the Audit Committee held three meetings; and the Pension
Committee met once. 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. Mr. Thomas also received $17,000 for
consulting for the Tool Group in 1995. 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.

<PAGE>

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 1995 fiscal year:

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(3)
- -------------------------------- ---- -------- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Ross.................. 1995 $348,000 $334,080 $ 0 0 $68,208
Chairman, President and Chief 1994 325,000 338,000 159,375 30,000 72,104
Executive Officer 1993 325,000 312,000 165,375 53,333 52,662

Henry L. Dykema................. 1995 182,500 95,813 258,750(2) 20,000 3,670
Vice President and 1994 0 0 0 0 0
Chief Financial Officer 1993 0 0 0 0 0

Kim A. Wehrenberg............... 1995 152,000 109,440 0 0 14,646
Vice President, General 1994 145,000 113,100 75,000 7,000 13,743
Counsel and Secretary 1993 140,000 100,800 61,425 6,667 10,469

Richard L. Ritz................. 1995 101,000 61,358 0 0 12,098
Vice President, Controller 1994 96,000 62,275 46,875 4,000 10,365
1993 90,000 54,000 35,438 13,333 12,672

Robert W. Racic................. 1995 99,000 57,544 0 0 4,500
Vice President, Treasurer 1994 96,000 61,452 20,625 1,000 3,146
1993 92,500 55,876 18,900 1,333 5,758
</TABLE>

- ---------------
(1) Stock awards generally vest 25% on each anniversary date after date of
grant. The number and aggregate value of unvested stock awards as of
December 31, 1995 were: for Mr. Ross 13,376 shares ($346,104), for Mr.
Dykema 10,000 shares ($258,750), for Mr. Wehrenberg 5,568 shares
($144,072), for Mr. Ritz 3,344 shares ($86,526) and for Mr. Racic 1,627
shares ($42,099). Dividends are paid at the regular rate to these people on
the unvested shares.

(2) Stock awards vest 25% on each anniversary date between the third and
seventh year after date of grant.

(3) 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 and auto allowance which break
out as follows, respectively, Mr. Ross $4,500, $16,577, $47,131, $0; Mr.
Dykema $2,053, $1,617, $0, $0; Mr. Wehrenberg $4,500, $4,146, $0, $6,000;
Mr. Ritz $4,500, $398, $0, $7,200; Mr. Racic $4,500, $0, $0, $0. Of these
officers who put part of their bonus into the Company's supplemental
savings plan, Mr. Wehrenberg invested $109,440, Mr. Ross invested $16,577
and Mr. Dykema invested $95,813 of their bonuses in Federal Signal stock.

<PAGE>

EMPLOYMENT AGREEMENTS

Federal has an employment agreement with Joseph J. Ross. The agreement
continues until the December 31 following the employee's 65th birthday subject
to earlier termination by either Federal or the employee. As of January 1, 1996,
termination salary under this agreement was $375,000 for Mr Ross and the annual
salary of Mr. Ross, which is approved by the Compensation Committee, is not set
by this employment agreement. In the discretion of the Board of Directors,
annual compensation may be increased during the term of the agreement. 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. Mr.
Ross and Mr. Wehrenberg have change of control agreements. 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 GRANT DATE VALUE
- -------------------------------------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
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............ 0 0% N/A N/A 0
Henry L. Dykema........... 20,000 48% $ 20.375 01/01/05 $ 148,330
Kim A. Wehrenberg......... 0 0% N/A N/A 0
Richard L. Ritz........... 0 0% N/A N/A 0
Robert W. Racic........... 0 0% N/A N/A 0
</TABLE>

- -------------------------
(1) No SARs were granted. These options become 25% exercisable on each
anniversary date between the third and seventh year after date of grant.

(2) The following assumptions were used under the Black-Scholes method:
volatility .22; risk free rate of return 7.9%; dividend yield 2.5%; exercise
period, 10 years.

<PAGE>

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......................... 7,028(3) $117,094 585,381 $ 10,677,556
29,400 176,099
Henry L. Dykema........................ 0 0 0 0
20,000 110,000
Kim A. Wehrenberg...................... 0 0 98,399 1,602,698
3,500 21,875
Richard L. Ritz........................ 0 0 30,472 510,872
15,333 88,747
Robert W. Racic........................ 0 0 10,226 140,807
1,667 3,125
</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 $25.875 on December 31, 1995.

(3) Mr. Ross has a stock option exercise loan totaling $71,454, including $4,412
of interest in 1995 at 7.61%. Such loans are available to all employees
participating in the Plan.

RETIREMENT PLANS

Federal's Retirement Plan provides retirement benefits for salaried and
hourly 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 1995. 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 individual Social

<PAGE>

Security benefits. Estimated credited years of service are as follows: Mr. Ross,
11.5, Mr. Dykema, 0; Mr. Wehrenberg, 8; Mr. Ritz, 10.5 and Mr. Racic, 21.75.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPENSATION APPROXIMATE ANNUAL STRAIGHT-LIFE ANNUITY
FOR THE FIVE CONSECUTIVE PENSION UPON RETIREMENT AT 65
CALENDAR YEARS OF THE LAST ------------------------------------------------------------------
TEN FOR WHICH COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
IS HIGHEST OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
---------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
300,000..................... $ 50,000 $ 75,000 $ 100,000 $ 125,000 $ 150,000
400,000..................... 66,667 100,000 133,334 166,167 200,000
500,000..................... 83,334 125,000 166,667 208,334 250,000
600,000..................... 100,000 150,000 200,000 250,000 300,000
700,000..................... 116,667 175,000 233,333 291,667 350,000
800,000..................... 133,333 200,000 266,667 333,334 400,000
</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, 1995 to Mr. Ross
is 3 1/4 years. The supplemental pension benefit for Mr. Ross makes up the
difference between his actual pension benefit and what it would have been with
30 years of service under the 1976 plan.

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 25% to
30% of their salary.

The Company's total return to shareholders has been 22% for the last five
years. 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 17% to $63 million, maintaining return on equity above 20%,
increasing net income by 11% and improving the Sign Group's profitability) and
the Company over the last several years, the Committee granted Mr. Ross a 7.8%
increase to $375,000 in his base salary for 1996. The Committee also approved an
average 1996 salary increase for the other four officers of 4.9%.

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, as well as on goals for growth of the Company. The
officers' bonus targets remain the same for 1996. Therefore, if the Company's
return on capital is the same as it was in 1995, the officers' bonuses will also
be about the same for 1996. The 1995, bonus target achievement was 89%. The
Company as a whole achieved its operating goals; however, earnings were
adversely affected by the resolution of a lawsuit related to sign a business
which was

<PAGE>

discontinued in 1989 and the officers' bonuses were reduced accordingly. The
other officers' bonuses generally constitute about 40% 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 seven years the total market value of
the Company has increased well over five-fold from about $200 million to more
than $1.1 billion of stockholder value. The Performance Graph on page 10 shows
that Federal has substantially out-performed the Standard & Poor Industrials 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 intends to grant the officers additional stock options
and restricted stock awards in 1996. The Committee subjectively determines the
number of shares to be granted and there is no mechanical relationship between
the number of options and restricted share awards to be granted, nor is there a
mechanical relationship to prior grants.

WALTER R. PEIRSON JAMES A. LOVELL, JR. THOMAS N. McGOWEN, JR.

<PAGE>
COMPARISON FOR FIVE YEAR CUMULATIVE TOTAL RETURN*
FOR FEDERAL SIGNAL CORPORATION

<TABLE>
<CAPTION>
90 91 92 93 94 95
<S> <C> <C> <C> <C> <C> <C>
FEDERAL SIGNAL
CORPORATION 100 144 162 217 215 279

S & P Industrials
Index 100 120 134 146 151 204

Dow Jones Industrial
Diversified Index 100 131 136 163 146 187
</TABLE>

Assumes $100 invested on December 31, 1990 in Federal Signal Corporation Common
Stock,
S & P Industrials Index and the Dow Jones Industrial - Diversified Index. *
Total return assumes reinvestment of dividends and is based on fiscal years
ending December 31.

APPROVAL OF THE STOCK BENEFIT PLAN

On December 8, 1995, Federal's Board of Directors unanimously approved and
adopted the Stock Benefit Plan (the "Plan"), as set forth as Exhibit A to this
Proxy Statement subject to approval by Federal's shareholders. The purpose of
the Plan is to secure for Federal and its shareholders the benefits of incentive
compensation of management personnel. Under the Plan, employees and directors
who are responsible for Federal's future growth and continued success have an
opportunity to participate in the appreciation of value of Federal's Common
Stock, which provides them with additional incentive to work for and contribute
to such appreciation. The Board of Directors believes that Federal's stock
benefit plans motivate employees to achieve the excellent return on investment
that Federal shareholders have received over the years.

The Omnibus Budget Reconciliation Act of 1993 (the "Tax Act") requires,
among other things, that company stock plans include a limit on the maximum
number of shares one person can receive under the plan in order to allow the
company to take a tax deduction for certain plan compensation. The Board of
Directors has determined that it is in Federal's best interest to terminate
Federal's 1988 Stock Benefit Plan which does not have this limitation, and
replace it with the new plan which complies with the Tax Act. Upon shareholder
approval of the new Plan, no further shares will be granted under the 1988 plan.
In addition, it has been Federal's practice to purchase treasury shares to cover
shares issued under the company's stock benefit plans

<PAGE>

to avoid dilution of shareholders' interests. Federal currently intends to
continue with this stock repurchase program to avoid shareholder dilution.

The Plan will be effective only upon approval by a majority of the
outstanding shares of Common Stock voting at the meeting.

A summary of the Plan is set forth below. For a more complete description
of the Stock Benefit Plan see Exhibit A.

1. COMMON STOCK SUBJECT TO THE PLAN. The Plan provides for the granting of
stock options, stock awards and stock award units, collectively referred to as
"Benefits," to eligible employees and directors of Federal and its subsidiaries.
As adopted by the Board of Directors, an aggregate of 1,000,000 shares of
Federal's treasury shares or authorized but unissued shares of Common Stock are
subject to the Plan.

2. ADMINISTRATION. The Committee (the "Committee") responsible for the
administration of the Plan will be the Compensation/Stock Option Committee of
the Board of Directors, or such other committee as may be designated by the
Board of Directors. The Committee has general authority and discretion in the
administration and interpretation of the Plan, subject to the express provisions
thereof. The Committee has discretion to determine the employees to whom, the
number of shares and the time or times at which Benefits may be granted. In
addition, the Committee may prescribe the terms and conditions applicable to
each grant of Benefits.

3. TERMS AND CONDITIONS OF BENEFITS. Benefits may be granted only to
directors of Federal or to key employees of Federal or its subsidiaries who have
administrative, managerial, supervisory, professional, scientific, engineering
or similar responsibilities.

4. OPTIONS. The purchase price of the shares of Common Stock subject to
options granted under the Plan is determined by the Committee, but shall not be
less than 100% of the fair market value on the date of the grant except for
director options or stock unit award options. Unless the Committee determines
otherwise, one-half of the total shares subject to an option shall become
exercisable cumulatively after the first and second anniversary dates following
the date of grant. No option granted under the Plan is transferable by the
optionee during his or her lifetime. Unless the Committee determines otherwise,
an option may be exercised only while the optionee is an employee of Federal or
its subsidiaries or, in the event of termination of employment otherwise than by
reason of death, within the period determined by the Committee (but not later
than the expiration of the term of the option). Upon the death of an optionee,
the optionee's personal representative or beneficiaries may exercise an option
to the extent exercisable by the optionee, within one year after the optionee's
death (but not later than the expiration of the term of the option). In the
event that any option expires or is terminated without being exercised, the
shares subject to such option (or the unexercised portion thereof) will again
become available for option under the plan.

5. ALTERNATIVE SETTLEMENT METHODS. The Plan authorizes the Committee to
permit an optionee to exercise an option by the election of an alternative
settlement method rather than by the purchase of shares of common stock at the
price set forth in the option. The alternative settlement methods allow the
optionee to receive cash or shares of Federal Common Stock or combination
thereof having an aggregate value equal to (a) the excess of the value of one
share of Common Stock over the purchase price set forth in the option times (b)
the number of shares as to which the option is exercised. The Committee may
include in any option granted under the Plan the right of the optionee to elect
an alternative settlement method upon exercise of the option. At the request of
the holder of any option granted under the Plan, which option does not include
the right to elect an alternative settlement method, the Committee is authorized
to permit the election of an alternative settlement method. In addition, at the
request of the holder of an option on the Common Stock of Federal, which option
is or was granted pursuant to any stock option or other similar plan previously
established, the Committee is authorized to permit the election of an
alternative settlement method. Any election of an alternative settlement method
involving the payment of cash must be approved by the Committee. An optionee may
make all or a portion of payment upon the exercise of an option through delivery
of Federal Common Stock. Any such delivered shares are valued at the New York
Stock Exchange closing price.

<PAGE>

6. DIRECTOR OPTIONS. Below-market options may be granted at a price equal
to the Common Stock's par value to directors of Federal in lieu of all or part
of their director's fees. The amount of a director's fees to be given up would
equal the option discount, i.e. difference between the Common stock's market
value and its par value on the date of grant. Alternative settlement rights are
not available for director's options.

7. STOCK AWARDS. Stock awards consist of the grant of shares of Common
Stock of Federal without any cash payment by the grantee thereof. Shares granted
as stock awards may not be sold, transferred, or otherwise disposed by the
grantee, except, unless otherwise determined by the Committee, such restriction
primarily lapses as to one-fourth of the shares granted as a stock award
cumulatively on each of the first four anniversary dates following the date of
grant.

8. STOCK UNIT AWARDS. The Committee is authorized to grant stock unit
awards such as below market options or performance units to be paid in Common
Stock, cash or other property as the Committee may deem appropriate. The
Committee shall determine the terms and conditions of any such awards.

9. AMENDMENT. The Plan may be amended by the Board of Directors, except
that without the affirmative vote of the holders of a majority of the voting
stock of Federal, the Board of Directors may not amend the Plan to extend the
period during which Benefits may be granted, to change the requirements as to
the class of employees eligible to receive Benefits, or to increase the maximum
number of shares on or for which Benefits may be granted (except as such number
of shares may be adjusted in the event of a recapitalization, stock dividend, or
similar event).

10. TAX CONSEQUENCES. Federal has not sought a ruling from the Internal
Revenue Service with respect to certain federal income tax consequences
pertaining to the adoption of the Plan and the Benefits granted thereunder.

No income will be realized by an optionee, and no amount will be deductible
by Federal, until the exercise of a nonincentive stock option granted under the
Plan. Upon the exercise of an option, whether by purchase of Common Stock or
election of an alternative settlement method, the optionee will realize ordinary
income, measured by the difference between the purchase price set forth in the
option and the fair market value of the Common Stock at the time of exercise;
such amount will be deductible by Federal for federal income tax purposes. The
discounted portion of directors' options will be treated as deferred
compensation and will be taxable to the optionee and deductible by Federal upon
the exercise of the option. For incentive stock options, no income is recognized
upon the grant or exercise of the option, and no amount is deductible by
Federal. If the Common Stock is sold less than one year after exercise, it will
be treated as a nonincentive stock option. If the Common Stock is sold more than
one year after exercise, it will be taxable to the optionee but will not be
deducible by Federal. With respect to shares granted as stock awards, no income
is realized by the recipient until such shares are transferable or are not
subject to a substantial risk of forfeiture, unless the recipient otherwise
elects to realize income at an earlier date. Income realized by a recipient of a
stock award will be taxed as ordinary income. Federal will receive a deduction
in an amount equal to the income realized by the recipient in the year such
income is realized by the recipient. The taxation of stock unit awards for both
the optionee and Federal will depend upon the specific terms and conditions
imposed by the Committee in making such grants.

RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO ADOPT THE FEDERAL SIGNAL CORPORATION STOCK BENEFIT PLAN.

ACCOUNTING INFORMATION

Ernst & Young has been selected by Federal to serve as its independent
public accountants for the fiscal year ending December 31, 1996. 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

<PAGE>

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 1997
Annual Meeting of Shareholders, stockholder proposals must be received by
Federal on or before November 22, 1996.

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.

<PAGE>

EXHIBIT A

FEDERAL SIGNAL CORPORATION

STOCK BENEFIT PLAN

1. PURPOSE OF THE PLAN.

The purpose of this Stock Benefit Plan (the "Plan") is to secure for
Federal Signal Corporation, a Delaware corporation (the "Corporation"), and its
stockholders the benefits of incentive compensation of the management personnel
of the Corporation and its subsidiaries and to ensure a tax deduction for the
Corporation for certain compensation under the Plan. By virtue of the benefits
available under the Plan, directors and employees who are responsible for the
future growth and continued success of the Corporation have an opportunity to
participate in the appreciation in the value of the stock of the Corporation
which furnishes them with an incentive to work for and contribute to such
appreciation through the growth and success of the Corporation. In addition, it
is generally recognized that incentive compensation programs aid in retaining
and encouraging key employees of ability and in recruiting additional able
employees.

2. SHARES SUBJECT TO THE PLAN.

An aggregate of 1,000,000 shares of Common Stock ($1.00 par value) of the
Corporation shall be subject to the Plan and such shares may be issued under the
Plan pursuant to Stock Options, Stock Awards or such other Stock Unit Awards
(collectively "Benefits") as the Committee, as defined below, in its discretion,
may determine and the total number of Benefit shares or units that can be
granted under the Plan shall not exceed 1,000,000 shares except as set forth in
the next paragraph. Such shares may be either authorized but unissued shares or
shares now or hereafter held in the treasury of the Corporation.

In the event that any option under the Plan expires or is terminated
without being exercised for any reason prior to the end of the period during
which options may be granted under the Plan, the shares theretofore subject to
such option, or the unexercised portion thereof, shall again become available
for grant under the Plan. In the event that any shares granted as stock awards
or stock unit awards expire, terminate or become the property of the Corporation
pursuant to the Plan, the number of such shares shall again become available for
granting as Benefits awards under the Plan.

3. ADMINISTRATION OF THE PLAN.

A. THE COMMITTEE.

The Plan shall be administered by the Compensation/Stock Option Committee
of the Board of Directors or such other committee as shall be designated by the
Board of Directors (the "Committee"). The Committee shall consist of not less
than two Directors of the Corporation, and shall be appointed by the Board of
Directors. Any decision or determination reduced to writing and signed by all
the members of the Committee shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee may appoint
a secretary (who need not be a member of the Committee) and may make such rules
and regulations for the conduct of its business as it shall deem advisable. No
member of the Committee shall be liable, in the absence of bad faith, for any
act or omission with respect to his or her service on the Committee. Service on
the Committee shall constitute service as a Director of the Corporation so that
members of the Committee shall be entitled to indemnification and reimbursement
as Directors of the Corporation.

B. AUTHORITY OF THE COMMITTEE.

Subject to the express provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to determine the employees to whom, and
the time or times at which, Benefits shall be granted and the number of shares
to be subject to each Benefit provided, however, no individual may receive more
than 100,000 of the shares per year under the Plan. In making such
determinations, the Committee may take into

A-1

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account the nature of the services rendered or expected to be rendered by the
respective employees, their present and potential contributions to the
Corporation's success, the anticipated number of years of effective service
remaining and such other factors as the Committee in its discretion shall deem
relevant. Subject to the express provisions of the Plan, the Committee shall
also have plenary authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
conditions of the respective Benefits (which terms and conditions need not be
the same in each case), to impose restrictions on any shares issued as or
pursuant to the Benefits and to determine the manner in which such restrictions
may be removed, and to make all other determinations deemed necessary or
advisable in administering the Plan. The Committee may specify in the original
terms of any Benefit or, if not so specified, shall determine whether any
authorized leave of absence or absence on military or governmental service or
for any other reason shall constitute a termination of employment for purposes
of the Plan. The Committee shall have the authority to issue shares of Common
Stock or pursuant to the Benefits and to determine the consideration received by
the Corporation for such Benefits granted pursuant to the Plan. The
determination of the Committee on the matters referred to in this paragraph
shall be conclusive.

C. GRANTING DATE.

The action of the Committee with respect to the granting of a Benefit shall
take place on such date as a majority of the members of the Committee at a
meeting shall make a determination with respect to the granting of a Benefit or,
in the absence of a meeting, on such date as a written designation covering such
Benefit shall have been authorized by all members of the Committee. The
effective date of the grant of a Benefit (the "Granting Date") shall be the date
specified by the Committee in its determination or designation relating to the
award of such Benefit, provided that the Committee may not designate a Granting
Date with respect to any Benefit which shall be earlier than the date on which
the granting of such Benefit shall have been approved by the Committee.

4. ELIGIBILITY.

Benefits may be granted to key employees (which term shall be deemed to
include officers) who on the Granting Date (or, with respect to Benefits that
are not incentive stock options, within 30 days thereafter in the instance of
newly hired employees) (i) are in the employ of the Corporation or one of its
then subsidiary corporations (the "subsidiaries"), as defined in Section 425 of
the Internal Revenue Code of 1954, as amended (the "Code"), and (ii) have
administrative, managerial, supervisory, professional, scientific, engineering
or similar responsibilities. Below market stock options may also be granted to
any Director of the Corporation in lieu of part or all of their Directors' fees
in accordance with Section 8 of this Plan.

5. TERMS AND CONDITIONS OF OPTIONS.

A. PURCHASE PRICE AND TERMS OF OPTIONS.

(i) The purchase price of the Common Stock under each option shall be
determined by the Committee, but for options granted under Section 5 of the
Plan, the price shall not be less than 100% of the fair market value of the
Common Stock, as determined by the Committee, on the Granting Date for such
option.

(ii) Options granted under this Plan may be either Incentive Stock Options
(as defined in Section 422A of the Code) or Non-Incentive Stock Options (i.e.,
options which are not within the Section 422A definition).

a. Incentive Stock Options: Subject to the minimum option price
specified in subparagraph 5(A)(i) hereof, the terms of each incentive stock
option granted under the Plan, which may be different in each case, shall
include those terms which are required by Section 422A of the Code, and
such other terms not inconsistent therewith as the Committee may determine.

b. Non-Incentive Stock Options: Subject to minimum option price
specified in subparagraph 5(A)(i) hereof, the terms of each stock option
granted under this Plan that is not an incentive stock option, which terms
may be different in each case, shall be determined by the Committee.

A-2

<PAGE>

B. TERM OF OPTIONS.

The term of each option granted under the Plan shall be for a period of ten
years unless otherwise determined by the Committee. Each option shall become
exercisable, unless otherwise determined by the Committee in its discretion,
with respect to one-half the number of shares subject thereto after the first
anniversary following the Granting Date, and shall be exercisable with respect
to all shares subject thereto after the second anniversary following the
Granting Date.

C. RESTRICTIONS ON TRANSFER AND EXERCISE.

(i) Except as hereinafter provided, no option granted pursuant to the Plan
may be exercised at any time unless the holder thereof is then an employee of
the Corporation or of a subsidiary. Options granted under the Plan shall not be
affected by any change of employment so long as the grantee continues to be an
employee of the Corporation or of a subsidiary. Retirement pursuant to the
Corporation's then prevailing retirement policies and plans shall be deemed to
be a termination of employment.

(ii) Unless the Committee determines otherwise, in the event of the
termination of employment of a grantee of an option (otherwise than by reason of
death), such option may be exercised (only to the extent that the employee was
entitled to do so at the termination of his employment) at any time within (1)
for options that are not incentive stock options, (a) two years after such
termination if such termination is due to disability (as defined in Section
105(d)(4) of the Code) or retirement unless, at the time of employment
termination, the Committee extends the period of exercise, (b) three months
after such termination in all other cases, unless such period shall be extended
by the Committee in its discretion; or (2) in the case of incentive stock
options, (a) one year after such termination if such termination is due to
disability (as defined in Section 105(d)(4) of the Code) or such lesser time as
the Committee may specify from time to time, or (b) three months after such
termination in all other cases unless such period shall be extended by the
Committee in its discretion. In no event shall an option be exercisable after
the expiration date of the option.

(iii) Unless the Committee determines otherwise, if a grantee shall die
while an employee of the Corporation or a subsidiary or within three months
after the termination of employment of the grantee, an option held by such
grantee may be exercised to the extent the option was exercisable by such
grantee at the date of death, by a legatee or legatees of such option under the
grantee's last will, or by the grantee's personal representative or
distributees, at any time within one year after the grantee's death, provided
that in no event shall the option be exercised after the expiration of the
period of the option.

(iv) No option granted under the Plan shall be transferable otherwise than
by will or the law of descent and distribution and an option may be exercised,
during the lifetime of the grantee thereof, only by the grantee thereof.

D. EXERCISE OF OPTIONS; ALTERNATIVE SETTLEMENT METHODS.

(i) Subject to the limitations set forth in the Plan and the original terms
of the option, any option granted and exercisable pursuant to the Plan may be
exercised in whole or in part from time to time. Except in the case of the
election of an alternative settlement method as hereinafter provided, payment
for shares of Common Stock purchased shall be made in full at the time that an
option, or any part thereof, is exercised. Unless the Committee determines
otherwise in its discretion, a grantee holding an option may make all or a
portion of payment upon exercise of an option through delivery of shares of
Common Stock of the Corporation. Any shares so delivered shall be valued at the
closing price on the New York Stock Exchange on the date of the exercise of the
option (or, if no such closing price is available, the value shall be determined
in such other manner as the Committee may deem appropriate).

(ii) The Committee, in its discretion, may provide that any option granted
pursuant to the Plan may, by its terms, confer upon the grantee the right to
elect any of the alternative settlement methods set forth in subparagraph (iv)
below.

(iii) The Committee may, in its discretion and at the request of a grantee
holding an option granted pursuant to the Plan that does not by its terms
include the right to elect any of such alternative settlement

A-3

<PAGE>

methods, permit the election of any of such alternative methods by the grantee.
The Committee, in its discretion, may at the request of the holder of an option
on the Common Stock of the Corporation, which option is exercisable at the time
of the request and which was granted pursuant to any stock option plan or other
similar plan heretofore established for the benefit of employees of the
Corporation, permit the election of any of such alternative methods by such
holder. The authority of the Committee to permit such elections of alternative
settlement methods shall not confer upon the grantee or holder of any option the
right to such an election.

(iv) The alternative settlement methods are: (a) cash equal to the excess
of the value of one share of Common Stock over the purchase price set forth in
the option times the number of shares as to which the option is exercised; (b)
the number of full shares of Common Stock having an aggregate value not greater
than the cash amount calculated under alternative (a); (c) any combination of
cash and full shares having an aggregate value not greater than the cash amount
calculated under alternative (a). Notwithstanding the other provisions of the
Plan, election of an alternative settlement method involving the receipt of cash
shall be subject to the approval of the Committee at the time of such election.
For purposes of determining an alternative settlement, the value per share of
Common Stock shall be the closing price on the New York Stock Exchange on the
date of the exercise of the option (or, if no such closing price is available,
the value shall be determined in such other manner as the Committee may deem
appropriate).

(v) In the event that an option granted or to be granted under the Plan is
not an incentive stock option under Section 422A of the Code, then the Committee
may, in its discretion, commit the Corporation to pay to the option holder, at
the time the taxes or an amount of cash equal to the amount of income tax
payable by the grantee as a result of the option exercise and as a result of
this tax reimbursement.

(vi) Exercise of an option in any manner, including an exercise involving
an election of an alternative settlement method, shall result in a decrease in
the number of shares which thereafter may be available for purposes of granting
options under the Plan by the number of shares as to which the option is
exercised.

E. MANNER OF EXERCISE.

An option shall be exercised by giving a written notice to the Secretary of
the Corporation stating the number of shares of Common Stock with respect to
which the option is being exercised and containing such other information as the
Secretary may request, including the election requesting authorization of an
alternative settlement method.

6. STOCK AWARDS.

A. AWARD OF SHARES.

Stock awards will consist of shares of Common Stock of the Corporation
issued to eligible officers.

B. RESTRICTIONS ON TRANSFER.

Stock awards shall be subject to such terms and conditions as the Committee
determines to be appropriate, including, without limitation, restrictions on the
sale or other disposition of such shares. Except as hereinafter provided, or
unless the Committee determines otherwise (either at the time of the grant of a
stock award or at any time thereafter), shares granted as stock awards pursuant
to the Plan shall not be sold, transferred, assigned or otherwise disposed of by
the grantee. In the event of termination of full time employment (including, but
not limited to, the retirement of the grantee) for any reason prior to the
termination date of any restrictions pertaining to the stock award, the shares
then subject to restrictions shall become the property of the Corporation,
provided, however, that the obligation not to dispose of shares acquired
pursuant to a stock award and the right of the Corporation to receive such
shares shall lapse, unless the Committee determines otherwise in its discretion,
as to one-fourth (or such other portion as the Committee shall establish in the
stock award) of the shares received in one stock award on each of the first four
anniversary dates following the Granting Date thereof (or on such other date(s)
as the Committee shall establish in the stock award), and provided further that
the Committee may determine (either at the time of

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<PAGE>

the grant of a stock award or at any time thereafter) that in the event a
grantee's employment is terminated on account of death, the permanent disability
of such grantee or upon such other conditions as the Committee may approve, all
restrictions remaining on shares granted to such grantee shall lapse and such
shares shall not become the property of the Corporation.

All restrictions applicable to any stock award shall apply to any shares
resulting from a stock dividend, stock split, or other distribution of shares of
the Corporation with respect to the stock award, effective as of the Granting
Date of such stock award.

All restrictions applicable to any stock award shall lapse (1) as to all
shares granted in such award, in the event any tender offer subject to Section
14(d) of the Securities Exchange Act of 1934, or any successor thereto, shall be
made for any of the outstanding Common Stock of the Corporation, or (2) as to
any securities, property, cash or combinations thereof received in exchange for
stock award shares pursuant to any merger, consolidation, liquidation or
dissolution of the Corporation.

7. STOCK UNIT AWARDS.

In order to enable the Corporation and Committee to respond quickly to
significant developments in applicable tax and other legislation and regulations
and interpretations thereof, and to trends in executive compensation practices,
the Committee shall also be authorized to grant to participants, either alone or
in addition to other Benefits granted under the Plan, awards of stock and other
awards that are valued in whole or in part by reference to, or are otherwise
based on Common Stock of the Corporation ("stock unit awards") such as phantom
stock, below market options, performance units, etc. Other stock unit awards may
be paid in Common Stock of the Corporation, cash or any other form of property
as the Committee shall determine.

The Committee shall determine the key employees to whom other stock unit
awards are to be made, the times at which such awards are to be made, the number
of shares to be granted pursuant to such awards and all other conditions of such
awards. The provisions of the stock unit awards need not be the same with
respect to each recipient. The participant shall not be permitted to sell,
assign, transfer, pledge, or otherwise encumber the shares prior to the later of
the date on which the shares are issued, or the date on which any applicable
restriction, performance or deferral period lapses. Stock (including securities
convertible into stock) granted pursuant to other stock unit awards may be
issued for no cash consideration or for such minimum consideration as may be
required by applicable law. Stock (including securities convertible into stock)
purchased pursuant to purchase rights granted pursuant to other stock unit
awards may be purchased for such consideration as the Committee shall determine
which price shall not be less than par value of such stock or other securities
on the date of grant.

8. DIRECTOR OPTIONS.

Directors of the Corporation may elect to receive below-market stock
options in lieu of part or all of their Director fees. Such options shall be
granted at a price of $1.00 (par value of the Common Stock) per share. The
number of shares to be granted shall be determined by dividing the amount of
Director fees (that the Director irrevocably elected to take in the form of
below market options instead of cash) by the fair market value of a share of
Common Stock on the date of grant after subtracting the $1.00 option price from
such fair market value. These options shall be 100% vested on the date of grant,
but shall not be exercisable until six months after the date of grant. The term
of these options shall be for ten years and they shall not be transferable
otherwise than by will or the laws of descent and distribution and may only be
exercised by the Director, his guardian or legal representative during the
Director's lifetime. Election of an alternative settlement method shall not be
available for these options.

9. STOCKHOLDER AND EMPLOYMENT RIGHTS.

A holder of an option shall have none of the rights of a stockholder with
respect to any of the shares subject to option until such shares shall be issued
upon the exercise of the option.

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<PAGE>

Subject to the other provisions of the Plan, upon the date of issuance of
certificates representing a stock award, the grantee shall have all the rights
of a stockholder including the right to receive dividends and to vote the
shares. However, the certificates representing such shares and any shares of the
Corporation issued with respect thereto or in exchange therefor shall be held by
the Corporation for account of the grantee and the grantee shall deliver to the
Corporation upon request a stock power or powers executed in blank, covering
such shares. As and when restrictions lapse, the certificates representing such
shares shall be released to the grantee.

Nothing in the Plan or in any Benefit granted pursuant to the Plan shall,
in the absence of an express provision to the contrary, confer on any individual
any right to be or to continue in the employ of the Corporation or any of its
subsidiaries or shall interfere in any way with the right of the Corporation or
any of its subsidiaries to terminate the employment of any individual at any
time.

10. ADJUSTMENTS IN COMMON STOCK.

The aggregate number of shares of Common Stock of the Corporation on which
Benefits may be granted hereunder, the number of shares thereof covered by each
outstanding Benefit, the price per share thereof in each such Benefit may all be
approximately adjusted, as the Board of Directors or the Committee may
determine, for any increase or decrease in the number of shares of Common Stock
of the Corporation resulting from a subdivision or consolidation of shares
whether through reorganization, recapitalization, stock split-up or combination
of shares, or the payment of a stock dividend or other increase or decrease in
such shares effected without receipt of consideration by the Corporation.

Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, any Benefit
granted hereunder shall pertain to and apply to the securities to which a holder
of the number of shares of Common Stock subject to the Benefit would have been
entitled pursuant to the merger or consolidation. Upon a dissolution of the
Corporation, or a merger or consolidation in which the Corporation is not the
surviving corporation, every Benefit outstanding hereunder shall terminate,
provided, however, that in the case of such dissolution, merger or
consolidation, then during the period thirty days prior to the record date of
such event, each holder of a Benefit granted pursuant to the Plan shall have a
right to exercise the Benefit, in whole or in part, notwithstanding any other
provision of the Plan or Benefit agreement.

11. AMENDMENT AND TERMINATION.

Unless the Plan shall theretofore have been terminated, the Plan shall
terminate on, and no Benefit shall be granted hereunder after, April 17, 2006,
provided that the Board of Directors of the Corporation may at any time prior to
that date terminate the Plan.

The Board of Directors shall have complete power and authority to amend the
Plan, provided, however, that except as expressly permitted in the Plan, the
Board of Directors shall not, without the affirmative vote of the holders of a
majority of the voting stock of the Corporation, increase the maximum number of
shares on which Benefits may be granted amend the formula for determination of
the purchase price of shares on which options may be granted, extend the period
during which Benefits may be granted, or amend the requirements as to the class
of employees eligible to receive Benefits.

No termination or amendment of the Plan may, without the consent of the
holder of any outstanding Benefit, adversely affect the rights of such holder or
grantee. The termination of the Plan shall not affect restrictions applicable to
any Benefits, outstanding or existing at the time of such termination.

12. EFFECTIVENESS OF THE PLAN.

The Plan shall become effective on adoption by the Board of Directors of
the Corporation, and approval by the holders of a majority of the voting stock
of the Corporation. Should such holders fail so to approve it, the Plan and all
actions taken thereunder shall be and become null and void. Any other provisions
of the Plan

A-6

<PAGE>

to the contrary notwithstanding, no Benefits granted under the Plan may be
exercised or vested until after such stockholder approval.

13. GOVERNMENT AND OTHER REGULATIONS.

The obligation of the Corporation to sell or deliver shares under Benefits
granted pursuant to the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies as may be
required.

A-7

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results (dollars in millions):
Net sales................... $ 816.1 $ 677.2 $ 565.2 $ 518.2 $ 466.9 $ 439.4 $398.4 $361.4 $305.8 $273.3 $264.5
Income before income
taxes (a)................. $ 77.3 $ 70.2 $ 58.8 $ 49.9 $ 45.6 $ 42.5 $ 34.6 $ 28.4 $ 23.8 $ 20.9 $ 16.3
Income from continuing
operations (a)(b)......... $ 51.6 $ 46.8 $ 39.8 $ 34.5 $ 31.0 $ 28.1 $ 22.1 $ 18.2 $ 14.5 $ 12.3 $ 11.9
Operating margin............ 11.8% 11.6% 11.3% 10.6% 10.8% 10.8% 10.6% 9.6% 8.6% 8.5% 7.2%
Return on average common
shareholders' equity
(a)....................... 22.0% 22.3% 21.0% 20.0% 20.0% 20.4% 18.7% 17.0% 14.5% 12.2% 13.3%
Common Stock Data
(per share) (c):
Income from continuing
operations................ $ 1.13 $ 1.02 $ 0.86 $ 0.75 $ 0.67 $ 0.61 $ 0.48 $ 0.40 $ 0.31 $ 0.26 $ 0.26
Cash dividends.............. $ 0.50 $ 0.42 $ 0.36 $ 0.31 $ 0.27 $ 0.22 $ 0.19 $ 0.16 $ 0.15 $ 0.15 $ 0.15
Market price range:
High...................... $25 7/8 $21 3/8 $21 $17 5/8 $15 1/4 $10 3/4 $7 1/8 $4 7/8 $4 7/8 $4 1/2 $3 3/4
Low....................... $19 5/8 $16 7/8 $15 3/4 $12 3/8 $ 9 1/4 $ 6 1/4 $4 1/4 $3 1/2 $2 7/8 $3 1/8 $2 5/8
Average common shares
outstanding (in
thousands)................ 45,859 45,957 46,293 46,128 46,126 46,038 46,103 45,639 47,137 46,767 45,335
Financial Position at Year-End
(dollars in millions):
Working capital (d)......... $ 48.8 $ 53.9 $ 52.8 $ 49.5 $ 44.9 $ 42.7 $ 63.8 $ 59.5 $ 53.9 $ 52.8 $ 58.2
Current ratio (d)........... 1.3 1.4 1.5 1.6 1.5 1.5 2.1 2.0 1.9 2.2 2.3
Total assets................ $ 620.0 $ 521.6 $ 405.7 $ 363.7 $ 341.2 $ 295.8 $271.3 $251.1 $233.3 $191.4 $187.4
Shareholders' equity........ $ 248.1 $ 220.3 $ 199.2 $ 179.0 $ 164.8 $ 146.4 $130.4 $115.5 $103.2 $102.4 $ 91.1
Debt to capitalization
ratio (d)................. 29% 22% 1% 2% 1% 2% 10% 18% 22% 4% 15%
Other (dollars in millions)
(e):
New business................ $ 780.5 $ 700.3 $ 584.2 $ 510.3 $ 462.7 $ 467.6 $429.9 $382.4 $328.3 $276.4 $274.6
Backlog..................... $ 251.4 $ 261.0 $ 221.8 $ 198.0 $ 203.2 $ 199.9 $171.7 $140.2 $119.2 $ 96.7 $ 93.6
Net cash provided by
operating activities...... $ 62.9 $ 53.8 $ 48.8 $ 40.2 $ 43.9 $ 48.3 $ 34.6 $ 22.5 $ 20.1 $ 22.7 $ 16.5
Net cash (used for)
investing activities...... $ (88.1) $ (96.9) $ (38.1) $ (26.9) $ (47.8) $ (14.7) $(24.1) $(20.8) $(37.7) $(12.8) $ (6.9)
Net cash provided by (used
for) financing
activities................ $ 29.9 $ 45.1 $ (10.3) $ (11.2) $ 2.5 $ (34.6) $ (8.9) $ (3.3) $ 17.8 $ (9.9) $ (9.4)
Capital expenditures........ $ 15.7 $ 11.1 $ 10.1 $ 8.8 $ 12.0 $ 8.3 $ 9.2 $ 7.3 $ 6.9 $ 6.3 $ 6.9
Depreciation................ $ 11.8 $ 10.3 $ 9.2 $ 8.7 $ 8.2 $ 7.8 $ 7.9 $ 7.1 $ 5.5 $ 5.2 $ 5.3
Employees................... 6,015 5,243 4,426 4,268 4,212 4,158 4,142 3,880 3,653 3,183 3,190
</TABLE>

- ---------------
(a) in 1995, includes the impact of a nonrecurring charge for a litigation
settlement of $6.7 million pre-tax, $4.2 million after-tax or $.09 per
share; in 1985, reflects pre-tax provisions to expense for nonrecurring
charges of $4.6 million

(b) in 1992, reflects net cumulative effects of accounting changes for
postretirement benefits and income taxes of $30,000; in 1985, reflects
cumulative effect of accounting change for investment tax credits of $2.2
million and after-tax provisions to expense for nonrecurring charges of $2.3
million

(c) reflects 10% stock dividends each paid in 1988 and 1989, 3-for-2 stock
splits in 1990, 1991 and 1992, and a 4-for-3 stock split distributed March
1, 1994

(d) manufacturing operations only

(e) continuing operations only

F-1

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Assets
Manufacturing activities:
Current assets
Cash and cash equivalents................................. $ 9,350,000 $ 4,605,000
Accounts receivable, net of allowances for doubtful
accounts of $3,058,000 and $2,848,000, respectively.... 122,913,000 107,985,000
Inventories--Note B....................................... 97,448,000 78,899,000
Prepaid expenses.......................................... 5,763,000 4,807,000
------------ ------------
Total current assets................................... 235,474,000 196,296,000
Properties and equipment--Note C............................ 78,454,000 72,838,000
Other assets
Intangible assets, net of accumulated amortization........ 146,774,000 115,306,000
Other deferred charges and assets......................... 11,722,000 9,972,000
------------ ------------
Total manufacturing assets............................. 472,424,000 394,412,000
------------ ------------
Financial services activities
Lease financing and other receivables, net of allowances for doubtful
accounts of $1,124,000 and $1,174,000, respectively, and net of unearned
finance revenue--
Note D.................................................... 147,535,000 127,188,000
------------ ------------
Total assets........................................... $619,959,000 $521,600,000
============ ============
Liabilities and Shareholders' Equity
Manufacturing activities:
Current liabilities
Short-term borrowings--Note E............................. $ 58,760,000 $ 25,222,000
Accounts payable.......................................... 53,277,000 44,918,000
Accrued liabilities
Compensation and withholding taxes..................... 20,949,000 19,032,000
Other.................................................. 49,559,000 45,943,000
Income taxes--Note F...................................... 4,115,000 7,263,000
------------ ------------
Total current liabilities.............................. 186,660,000 142,378,000
Other liabilities
Long-term borrowings--Note E.............................. 39,702,000 34,878,000
Deferred income taxes--Note F............................. 17,826,000 13,778,000
------------ ------------
Total manufacturing liabilities........................ 244,188,000 191,034,000
------------ ------------
Financial services activities--Borrowings--Note E.............. 127,690,000 110,252,000
------------ ------------
Total liabilities...................................... 371,878,000 301,286,000
------------ ------------
Shareholders' equity--Notes I and J
Common stock, $1 par value, 90,000,000 shares authorized,
45,832,000 and 45,767,000 shares issued, respectively..... 45,832,000 45,767,000
Capital in excess of par value.............................. 54,464,000 53,756,000
Retained earnings--Note E................................... 162,095,000 133,138,000
Treasury stock, 542,000 and 395,000 shares, respectively, at
cost...................................................... (10,949,000) (7,880,000)
Deferred stock awards....................................... (1,046,000) (1,688,000)
Foreign currency translation adjustment..................... (2,315,000) (2,779,000)
------------ ------------
Total shareholders' equity............................. 248,081,000 220,314,000
------------ ------------
Total liabilities and shareholders' equity............. $619,959,000 $521,600,000
============ ============
</TABLE>

See notes to consolidated financial statements.

F-2

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See notes to consolidated financial statements.

F-3

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income...................................... $ 51,610,000 $ 46,770,000 $ 39,780,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................... 11,806,000 10,302,000 9,215,000
Amortization............................... 4,085,000 3,971,000 2,824,000
Provision for doubtful accounts............ 1,716,000 1,809,000 2,710,000
Deferred income taxes...................... 2,454,000 3,544,000 (350,000)
Other, net................................. (1,578,000) 1,547,000 (4,668,000)
Changes in operating assets and liabilities
net of effects from acquisitions of
companies
Accounts receivable..................... (6,368,000) (20,050,000) (10,742,000)
Inventories............................. (6,837,000) (4,458,000) (400,000)
Prepaid expenses........................ (669,000) (108,000) (935,000)
Accounts payable........................ 3,676,000 5,217,000 5,193,000
Accrued liabilities..................... 4,454,000 2,713,000 3,378,000
Income taxes............................ (1,402,000) 2,505,000 2,746,000
------------ ----------- -----------
Net cash provided by operating
activities......................... 62,947,000 53,762,000 48,751,000
------------ ----------- -----------
Investing activities
Purchases of properties and equipment........... (15,701,000) (11,108,000) (10,139,000)
Principal extensions under lease financing
agreements................................... (119,833,000) (97,988,000) (70,470,000)
Principal collections under lease financing
agreements................................... 99,536,000 81,182,000 64,041,000
Payments for purchases of companies, net of cash
acquired..................................... (46,611,000) (69,563,000) (22,869,000)
Other, net...................................... (5,478,000) 613,000 1,378,000
------------ ----------- -----------
Net cash used for investing
activities......................... (88,087,000) (96,864,000) (38,059,000)
------------ ----------- -----------
Financing activities
Addition to short-term borrowings............... 50,970,000 59,699,000 2,542,000
Principal payments on long-term borrowings...... (3,595,000) (1,811,000) (1,002,000)
Principal extensions under long-term
borrowings................................... 8,018,000 15,000,000 5,080,000
Purchases of treasury stock..................... (4,130,000) (9,736,000) (1,778,000)
Cash dividends paid to shareholders............. (21,767,000) (18,462,000) (15,938,000)
Other, net...................................... 389,000 441,000 757,000
------------ ----------- -----------
Net cash provided by (used for)
financing activities............... 29,885,000 45,131,000 (10,339,000)
------------ ----------- -----------
Increase in cash and cash equivalents............. 4,745,000 2,029,000 353,000
Cash and cash equivalents at beginning of year.... 4,605,000 2,576,000 2,223,000
------------ ----------- -----------
Cash and cash equivalents at end of year.......... $ 9,350,000 $ 4,605,000 $ 2,576,000
============ =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Federal Signal Corporation and all of its subsidiaries.

CASH EQUIVALENTS: The company considers all highly liquid investments with
a maturity of three months or less, when purchased, to be cash equivalents.

INVENTORIES: Inventories are stated at the lower of cost or market. At
December 31, 1995 and 1994, approximately 55% and 60%, respectively, of the
company's inventories are costed using the LIFO (last-in, first-out) method. The
remaining portion of the company's inventories are costed using the FIFO
(first-in, first-out) method.

PROPERTIES AND DEPRECIATION: Properties and equipment are stated at cost.
Depreciation, for financial reporting purposes, is computed principally on the
straight-line method over the estimated useful lives of the assets.

INTANGIBLE ASSETS: Intangible assets principally consist of costs in excess
of fair values of net assets acquired in purchase transactions and are generally
being amortized over forty years. Accumulated amortization aggregated
$12,718,000 and $9,469,000 at December 31, 1995 and 1994, respectively. The
company makes regular periodic assessments to determine if factors are present
which indicate that an impairment of intangibles may exist. If factors indicate
that an impairment may exist, the company makes an estimate of the related
future cash flows. The undiscounted cash flows, excluding interest, are compared
to the related book value including the intangibles. If such cash flows are less
than the book value, the company makes an estimate of the fair value of the
related business to determine the amount of impairment loss, if any, to be
recorded as a reduction of the recorded intangibles.

USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION: Substantially all of the company's sales are recorded
as products are shipped or services are rendered. The percentage-of-completion
method of accounting is used in certain instances for custom-manufactured
products where, due to the nature of specific orders, production and delivery
schedules exceed normal schedules.

INCOME PER SHARE: Income per share was computed on the basis of the
weighted average number of common and common equivalent shares (dilutive stock
options) outstanding during the year.

NOTE B--INVENTORIES

Inventories at December 31 are summarized as follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Finished goods...................................... $24,675,000 $20,054,000
Work in process..................................... 32,286,000 22,355,000
Raw materials....................................... 40,487,000 36,490,000
----------- -----------
Total inventories................................... $97,448,000 $78,899,000
=========== ===========
</TABLE>

If the first-in, first-out cost method, which approximates replacement
cost, had been used by the company, inventories would have aggregated
$106,934,000 and $88,093,000 at December 31, 1995 and 1994, respectively.

F-5

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE C--PROPERTIES AND EQUIPMENT

A comparative summary of properties and equipment at December 31 is as
follows:

<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Land.............................................. $ 5,703,000 $ 5,740,000
Buildings and improvements........................ 38,493,000 38,045,000
Machinery and equipment........................... 120,554,000 109,841,000
Accumulated depreciation.......................... (86,296,000) (80,788,000)
------------ ------------
Total properties and equipment.................... $ 78,454,000 $ 72,838,000
============ ============
</TABLE>

NOTE D--LEASE FINANCING AND OTHER RECEIVABLES

As an added service to its customers, the company is engaged in financial
services activities. These activities primarily consist of providing long-term
financing for certain customers of the company's sign and vehicle operations. A
substantial portion of the lease financing receivables of the Vehicle Group are
due from municipalities. Financing is provided through sales-type lease
contracts with terms which range typically as follows:

Sign-related leases......................................3-5 years
Vehicle-related leases...................................2-8 years

At the inception of the lease, the company records the product sales price
and related costs and expenses of the sale. Financing revenues are included in
income over the life of the lease. The amounts recorded as lease financing
receivables represent amounts equivalent to normal selling prices less
subsequent customer payments.

Lease financing and other receivables will become due as follows:
$46,654,000 in 1996, $28,167,000 in 1997, $22,996,000 in 1998, $17,339,000 in
1999, $11,133,000 in 2000 and $22,370,000 thereafter. At December 31, 1995 and
1994, unearned finance revenue on these leases aggregated $27,378,000 and
$21,347,000, respectively.

NOTE E--DEBT

Short-term borrowings at December 31 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial paper.................................. $ 26,779,000
Notes payable..................................... 157,040,000 $134,289,000
Current maturities of long-term debt.............. 2,631,000 1,185,000
------------ ------------
Total short-term borrowings....................... $186,450,000 $135,474,000
============ ============
</TABLE>

F-6

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Long-term borrowings at December 31 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
4.25% unsecured note payable in quarterly installments ending in
2001............................................................. $ 6,871,000
7.59% unsecured note payable in 2001 ($4,000,000) and 2002
($8,000,000)..................................................... 12,000,000 $12,000,000
7.99% unsecured note payable in 2004............................... 15,000,000 15,000,000
6.58% unsecured discounted notes payable in annual installments of
$1,000,000 ending in 2001........................................ 5,094,000 5,769,000
Other.............................................................. 3,368,000 3,294,000
----------- -----------
42,333,000 36,063,000
Less current maturities............................................ 2,631,000 1,185,000
----------- -----------
Total long-term borrowings......................................... $39,702,000 $34,878,000
=========== ===========
</TABLE>

Aggregate maturities of long-term debt amount to approximately $2,631,000
in 1996, $5,033,000 in 1997, $2,122,000 in 1998, $1,898,000 in 1999 and
$1,848,000 in 2000. The company believes that the fair values of borrowings are
not substantially different from recorded amounts.

The 7.59% and 7.99% notes contain various restrictions relating to
maintenance of minimum working capital, payments of cash dividends, purchases of
the company's stock, and principal and interest of any subordinated debt. All of
the company's retained earnings at December 31, 1995 were free of any
restrictions.

The company paid interest of $13,411,000 in 1995, $6,943,000 in 1994 and
$5,437,000 in 1993. Weighted average interest rates on short-term borrowings
were 5.6% and 5.8% at December 31, 1995 and 1994, respectively. See Note H
regarding the company's utilization of derivative financial instruments relating
to outstanding debt.

At December 31, 1995, the company had unused credit lines of $100,000,000,
which expire on June 20, 1998. Commitment fees, paid in lieu of compensating
balances, were insignificant.

NOTE F--INCOME TAXES

The provisions for income taxes consisted of the following:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT:
Federal and foreign................... $20,922,000 $17,775,000 $17,200,000
State and local....................... 2,293,000 2,092,000 1,946,000
----------- ----------- -----------
23,215,000 19,867,000 19,146,000
DEFERRED (CREDIT):
Federal and foreign................... 2,201,000 3,333,000 (226,000)
State and local....................... 253,000 211,000 (124,000)
----------- ----------- -----------
2,454,000 3,544,000 (350,000)
Enacted rate change effect on deferred
liabilities........................ 220,000
----------- ----------- -----------
Total income taxes...................... $25,669,000 $23,411,000 $19,016,000
=========== =========== ===========
</TABLE>

F-7

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Differences between the statutory federal income tax rate and the effective
income tax rate are summarized below:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. 2.1 2.1 2.0
Tax-exempt interest......................................... (2.8) (2.6) (3.0)
Enacted rate change effect on deferred liabilities.......... .4
Other, net.................................................. (1.1) (1.1) (2.1)
---- ---- ----
Effective income tax rate................................... 33.2% 33.4% 32.3%
==== ==== ====
</TABLE>

The company had net current deferred income tax benefits of $2,956,000 and
$1,362,000 recorded in the balance sheet at December 31, 1995 and 1994,
respectively. The company paid income taxes of $24,940,000 in 1995, $17,735,000
in 1994 and $16,938,000 in 1993.

Deferred tax liabilities (assets) comprised the following at December 31,
1995: Depreciation and amortization--$17,065,000; revenue recognized on lease
financing receivables and custom manufacturing contracts--$5,768,000; accrued
expenses deductible in future periods--$(8,844,000); and other $881,000.
Deferred tax liabilities (assets) comprised the following at December 31, 1994:
Depreciation and amortization--$14,296,000; revenue recognized on lease
financing receivables and custom manufacturing contracts--$8,143,000; accrued
expenses deductible in future periods--$(9,283,000); and other $(740,000).

NOTE G -- POSTRETIREMENT BENEFITS

The company and its subsidiaries sponsor a number of defined benefit
retirement plans covering certain of its salaried employees and hourly employees
not covered by plans under collective bargaining agreements. Benefits under
these plans are primarily based on final average compensation as defined within
the provisions of the individual plans. The company's policy is to contribute
amounts sufficient to meet the minimum funding requirements of applicable laws
and regulations. Plan assets consist principally of a broadly diversified
portfolio of equity securities, corporate and U.S. Government obligations and
guaranteed-return insurance contracts. The company also participates in several
multiemployer retirement plans which provide benefits to employees under certain
collective bargaining agreements.

Pension expense is summarized as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Company-sponsored plans
Service cost........................................ $ 1,452,000 $ 1,687,000 $ 1,511,000
Interest cost....................................... 2,864,000 2,437,000 2,290,000
Return on plan assets............................... (9,054,000) 581,000 (6,428,000)
Other amortization and deferral..................... 3,664,000 (5,521,000) 1,943,000
----------- ----------- -----------
(1,074,000) (816,000) (684,000)
Multiemployer plans................................... 465,000 337,000 561,000
----------- ----------- -----------
Total pension expense (credit)........................ $ (609,000) $ (479,000) $ (123,000)
=========== =========== ===========
</TABLE>

F-8

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following summarizes the funded status of the company-sponsored plans
at December 31, 1995 and 1994 and the major assumptions used to determine these
amounts.

<TABLE>
<CAPTION>
PLANS IN WHICH
--------------------------
PLAN ASSETS ABO EXCEEDS
EXCEED ABO PLAN ASSETS
----------- -----------
1995
--------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation......................................... $27,427,000 $5,214,000
Nonvested benefits................................................ 1,565,000 120,000
----------- ----------
Accumulated benefit obligation (ABO)................................ $28,992,000 $5,334,000
=========== ==========
Actuarial present value of projected benefit obligation............. $38,803,000 $5,334,000
Plan assets at market value......................................... 46,010,000 4,733,000
----------- ----------
Plan assets in excess of (less than) projected benefit obligation... 7,207,000 (601,000)
Unrecognized net obligation at January 1, 1995...................... (2,618,000) 379,000
Unrecognized net experience (gain) loss............................. (3,363,000) 387,000
----------- ----------
Net pension asset................................................... $ 1,226,000 $ 165,000
=========== ==========
</TABLE>

<TABLE>
<CAPTION>
1994
-----------
<S> <C>
Actuarial present value of:
Vested benefit obligation........................................ $21,904,000
Nonvested benefits............................................... 1,746,000
-----------
Accumulated benefit obligation..................................... $23,650,000
===========
Actuarial present value of projected benefit obligation............ $31,072,000
Plan assets at market value........................................ 43,318,000
-----------
Plan assets in excess of projected benefit obligation.............. 12,246,000
Unrecognized net obligation at January 1, 1994..................... (2,270,000)
Unrecognized net experience (gain)................................. (9,660,000)
-----------
Net pension asset.................................................. $ 316,000
===========
</TABLE>

The following significant assumptions were used in determining pension
costs for the years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 8.9% 7.6% 8.5%
Rate of increase in compensation levels..................... 5% 4% 5%
Expected long-term rate of return on plan assets............ 11% 11% 11%
</TABLE>

The weighted average discount rates used in determining the actuarial
present value of all pension obligations at December 31, 1995 and 1994 were 7.2%
and 8.9%, respectively.

The company also sponsors a number of defined contribution pension plans
covering a majority of its employees. Participation in the plans is at each
employee's election. Company contributions to these plans are based on a
percentage of employee contributions. The cost of these plans, including
acquisitions made during the three-year period ended December 31, 1995, was
$2,975,000 in 1995, $2,900,000 in 1994 and $2,160,000 in 1993.

The company also provides certain medical, dental and life benefits to
certain eligible retired employees. These benefits are funded when the claims
are incurred. Participants generally become eligible for these

F-9

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

benefits at age 60 after completing at least fifteen years of service. The plan
provides for the payment of specified percentages of medical and dental expenses
reduced by any deductible and payments made by other primary group coverage and
government programs. The corporation will continue to reduce the percentage of
the cost of benefits that it will pay since the company's future costs are
limited to 150% of the 1992 cost. Accumulated postretirement benefit liabilities
of $2,461,000 and $2,341,000 at December 31, 1995 and 1994, respectively, were
fully accrued. The net periodic postretirement benefit costs have not been
significant during the three-year period ended December 31, 1995.

NOTE H--DERIVATIVE FINANCIAL INSTRUMENTS

The company enters into agreements (derivative financial instruments) to
manage the risks associated with certain aspects of its business. The company
does not actively trade such instruments nor enter into such agreements for
speculative purposes. The company principally utilizes two types of derivative
financial instruments: 1) interest rate swaps to manage its interest rate risk,
and 2) foreign currency forward exchange contracts to manage risks associated
with sales and purchase commitments denominated in foreign currencies.

At December 31, 1995, the company had two agreements with financial
institutions to swap interest rates. One agreement, the purpose of which is to
convert variable rate short-term debt to a fixed rate, is based on a notional
amount of $125 million and expires in 1997. The company pays a fixed rate of
interest of 5.47% and receives the three-month London Interbank Offered Rate
(LIBOR). The other agreement is based on a notional amount of $10 million and
also expires in 1997. The agreement provides that the company will receive a
fixed rate of interest at 5.08% and will pay interest at the six-month LIBOR
with a maximum floating rate of 7.50% for the last twelve months of the
agreement. At December 31, 1994, the company had similar swap agreements on
notional amounts totalling $15 million. The differential between the amount
received and the amount paid is accrued as interest rates change and recognized
as an adjustment to interest expense; the related amount payable to or
receivable from the counterparties is included in accrued liabilities or other
assets. The estimated cost to terminate these agreements was $237,000 and
$500,000 at December 31, 1995 and 1994, respectively.

At December 31, 1995, the company had foreign currency forward exchange
contracts designated and effective as hedges which become due in various amounts
and at various dates through 1997 totalling $17,800,000. At December 31, 1994
such contracts totalled $3,000,000. All such contracts at December 31, 1995 and
1994 were for the purpose of hedging purchase or sales commitments. Unrealized
gains and losses on the forward exchange contracts are deferred and will be
recognized in income in the same period as the hedged transaction. The
differences between the contract values and the fair values were insignificant
at December 31, 1995 and 1994.

NOTE I--STOCK OPTIONS AND AWARDS

The company's stock benefit plan, approved by the company's shareholders,
authorizes the grant of up to 2,737,500 (as adjusted for subsequent stock splits
and dividends) benefit shares or units to key employees and directors until May
1998. This excludes shares which were issued under predecessor plans. Benefit
shares or units include stock options, both incentive and non-incentive, stock
awards and other stock units.

Stock options are primarily granted at the fair market value of the shares
on the date of grant and become exercisable one year after grant at a rate of
one-half annually and are exercisable in full on the second anniversary date.
All options and rights must be exercised within ten years from date of grant. At
the company's discretion, vested stock option holders are permitted to elect an
alternative settlement method in lieu of purchasing common stock at the option
price. The alternative settlement method permits the employee to receive,
without payment to the company, cash, shares of common stock or a combination
thereof equal to the excess of market value of common stock over the option
purchase price.

F-10

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25). Under APB 25, no
compensation expense is recognized when the exercise price of the stock options
equals the market price of the underlying stock on the date of grant.

Changes in outstanding shares under option during 1995 were as follows:

<TABLE>
<CAPTION>
OPTION OPTION
SHARES PRICE RANGE
--------- -------------
<S> <C> <C>
Outstanding at December 31, 1994..................... 1,815,132 $ 3.21-$20.63
Granted.............................................. 41,363 $20.13-$24.38
Canceled or expired.................................. (8,802) $11.17-$20.63
Exercised............................................ (55,666) $ 3.21-$20.38
--------- -------------
Outstanding at December 31, 1995..................... 1,792,027 $ 3.33-$24.38
========= =============
Exercisable at December 31, 1995..................... 1,615,212 $ 3.33-$20.63
========= =============
</TABLE>

Stock award shares are granted to employees at no cost. Awards primarily
vest at the rate of 25% annually commencing one year from the date of award,
provided the recipient is still employed by the company on the vesting date. The
cost of stock awards, based on the fair market value at the date of grant, is
being charged to expense over the four-year vesting period.

Available for future grant were 383,389 and 425,950 benefit shares or units
at December 31, 1995 and 1994, respectively.

NOTE J--SHAREHOLDERS' EQUITY

The company has 90,000,000 authorized shares of common stock, $1 par value
and 800,000 authorized and unissued shares of preference stock, $1 par value.

F-11

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The changes in shareholders' equity for each of the three years in the
period ended December 31, 1995 were as follows:

<TABLE>
<CAPTION>
FOREIGN
COMMON CAPITAL IN DEFERRED CURRENCY
STOCK EXCESS OF RETAINED TREASURY STOCK TRANSLATION
PAR VALUE PAR VALUE EARNINGS STOCK AWARDS ADJUSTMENT
----------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992--
34,478,000 shares issued........ $34,478,000 $ 71,422,000 $ 82,160,000 $ (5,227,000) $(1,941,000) $(1,912,000)
Net income........................ 39,780,000
Cash dividends declared........... (16,469,000)
Exercise of stock options:
Cash proceeds................... 86,000 438,000
Exchange of shares.............. 155,000 938,000 (1,093,000)
Stock awards granted.............. 30,000 659,000 (689,000)
Stock awards canceled............. (2,000) (57,000) 59,000
Tax benefits related to stock
compensation plans.............. 1,562,000
Retirement of treasury stock...... (81,000) (1,929,000) 2,010,000
Purchases of 99,000 shares of
treasury stock.................. (2,689,000)
4-for-3 stock split, 11,072,000
shares issued................... 11,072,000 (18,988,000) 7,916,000
Amortization of deferred stock
awards.......................... 856,000
Foreign currency translation
adjustment...................... (2,419,000)
Other............................. (917,000)
----------- ------------ ------------ ------------ ----------- -----------
Balance at December 31, 1993--
45,738,000 shares issued........ 45,738,000 54,045,000 105,471,000 -- (1,715,000) (4,331,000)
Net income........................ 46,770,000
Cash dividends declared........... (19,103,000)
Exercise of stock options:
Cash proceeds................... 67,000 393,000
Exchange of shares.............. 6,000 21,000 (27,000)
Stock awards granted.............. 43,000 770,000 (813,000)
Stock awards canceled............. (4,000) (59,000) 63,000
Tax benefits related to stock
compensation plans.............. 206,000
Retirement of treasury stock...... (12,000) (213,000) 225,000
Purchases of 466,000 shares of
treasury stock.................. (9,339,000)
Shares purchased subsequent to
December 31, 1993 used to effect
4-for-3 stock split............. (71,000) (1,387,000) 1,458,000
Amortization of deferred stock
awards.......................... 777,000
Foreign currency translation
adjustment...................... 1,552,000
Other............................. (20,000) (197,000)
----------- ------------ ------------ ------------ ----------- -----------
Balance at December 31, 1994--
45,767,000 shares issued........ 45,767,000 53,756,000 133,138,000 (7,880,000) (1,688,000) (2,779,000)
Net income........................ 51,610,000
Cash dividends declared........... (22,653,000)
Exercise of stock options:
Cash proceeds................... 42,000 312,000
Exchange of shares.............. 14,000 38,000 (52,000)
Stock awards granted.............. 10,000 192,000 (202,000)
Tax benefits related to stock
compensation plans.............. 247,000
Retirement of treasury stock...... (19,000) (437,000) 456,000
Purchases of 147,000 shares of
treasury stock.................. (3,068,000)
Amortization of deferred stock
awards.......................... 844,000
Foreign currency translation
adjustment...................... 464,000
Other............................. 18,000 356,000 (405,000)
----------- ------------ ------------ ------------ ----------- -----------
Balance at December 31, 1995--
45,832,000 shares issued........ $45,832,000 $ 54,464,000 $162,095,000 $(10,949,000) $(1,046,000) $(2,315,000)
=========== ============ ============ ============ =========== ===========
</TABLE>

F-12

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In June 1988, the company declared a dividend distribution of one preferred
share purchase right on each share of common stock outstanding on and after July
5, 1988. The rights are not exercisable until the rights distribution date,
defined as the earlier of: 1) the tenth day following a public announcement that
a person or group of affiliated or associated persons acquired or obtained the
right to acquire beneficial ownership of 20% or more of the outstanding common
stock or 2) the tenth day following the commencement or announcement of an
intention to make a tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a person or group of 30% or more of
such outstanding common shares. Each right, when exercisable, entitles the
holder to purchase from the company one one-hundredth of a share of Series A
Preferred stock of the company at a price of $90 per one one-hundredth of a
preferred share, subject to adjustment. The company is entitled to redeem the
rights at $.10 per right, payable in cash or common shares, at any time prior to
the expiration of twenty days following the public announcement that a 20%
position has been acquired. In the event that the company is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, proper provision will be made so
that each holder of a right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of a right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the exercise price of the
right. The rights expire on July 5, 1998 unless earlier redeemed by the company.
Until exercised, the holder of a right, as such, will have no rights as a
shareholder, including, without limitation, the right to vote or to receive
dividends.

NOTE K--ACQUISITIONS

During the three-year period ended December 31, 1995, the company made the
following acquisitions, principally all for cash. In August 1995, the company
acquired the net operating assets of Bronto Skylift Oy Ab ("Bronto"), a
Finland-based manufacturer of truck-mounted aerial access platforms for the fire
and industrial markets. In December 1995, the company acquired the assets of the
Target Tech brand of warning lights from Dominion Automotive Industries. Target
Tech, located in Kent, Washington, manufactures amber signaling products for
construction and access vehicles. In addition to Bronto and Target Tech, the
company also made some small Safety Products Group acquisitions during the year.
As a result of all the 1995 acquisitions, the company recorded approximately
$12.7 million of working capital, $25.5 million of fixed and other assets and
$33.3 million of costs in excess of fair values. The assigned values of these
acquisitions are based on preliminary estimates. In June 1994, the company
acquired the principal operating assets and assumed the principal operating
liabilities of Peabody Myers Corporation ("Vactor"). Vactor is an Illinois-based
manufacturer of municipal combination catch basin/sewer cleaning vacuum trucks.
In May 1994, the company acquired the principal operating assets and assumed the
principal operating liabilities of Justrite Manufacturing Company, an
Illinois-based manufacturer of safety equipment for the storage, transfer, use
and disposal of flammable and hazardous materials. As a result of the 1994
acquisitions, the company recorded approximately $9.9 million of working
capital, $10.3 million of fixed and other assets and $49.6 million of costs in
excess of fair values. In March 1993, the company acquired the outstanding
shares of Guzzler Manufacturing, Inc., an Alabama-based manufacturer of vacuum
loader vehicles. As a result of this acquisition, the company recorded
approximately $6.0 million of working capital, $6.1 million of fixed and other
assets, $.8 million of debt assumed and $12.7 million of costs in excess of fair
values.

All of the acquisitions in the three-year period ended December 31, 1995
have been accounted for as purchases. Accordingly, the results of operations of
the acquired companies have been included in the consolidated statements of
income from the effective dates of the acquisitions. Assuming the 1995 and 1994
acquisitions occurred on January 1, 1994, the company estimates that
consolidated net sales would have been increased 5% and 13% in 1995 and 1994,
respectively, while net income would have decreased 5% in 1995 and increased 3%
in 1994.

F-13

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE L -- LITIGATION SETTLEMENT

On December 29, 1995, the company settled a lawsuit with Duravision, Inc.
and Manufacturers Product Research Group of North America, Inc. for $6.7
million. As a result of the settlement, the company recorded a net after-tax
charge to income of $4.2 million, or $0.09 per share. The charge, included in
other income and expense, was recorded in the fourth quarter of 1995. The
resolution of this case will have no effect on the company's future operating
performance as it involved a discontinued product line. The company is actively
seeking recoveries from its original trial counsel.

NOTE M--SEGMENT INFORMATION

The principal activities of the company's primary industry segments are as
follows:

SAFETY PRODUCTS GROUP: The Safety Products Group produces: a variety of
visual and audible warning and signal devices; paging, local signaling, and
building security, parking and access control systems; and equipment for
storage, transfer, use and disposal of flammable and hazardous materials. The
group's products are sold primarily to industrial, municipal and government
customers.

SIGN GROUP: The Sign Group manufactures for sale or lease illuminated,
non-illuminated and electronic advertising sign displays primarily for
commercial and industrial markets. It also enters into contracts to provide
maintenance service for the signs it manufactures as well as for signs
manufactured by others.

TOOL GROUP: The Tool Group manufactures a variety of perishable tools which
include die components for the metal stamping industry, a large selection of
precision metal products for nonstamping needs and a line of precision cutting
and deep grooving tools. The group's products are sold predominately to
industrial markets.

VEHICLE GROUP: The Vehicle Group manufactures: chassis; fire trucks
including Class A pumpers, mini-pumpers and tankers; airport and other rescue
vehicles, aerial access platforms, ambulances and aerial ladder trucks; a
variety of self-propelled street cleaning vehicles; vacuum loader vehicles and
municipal catch basin/sewer cleaning vacuum trucks. The Vehicle Group sells
primarily to municipal customers, volunteer fire departments and government
customers.

Total revenue by business segment reflects sales to unaffiliated customers,
as reported in the company's consolidated statements of income. Operating income
includes all costs and expenses directly related to the segment involved. In
determining operating income, neither corporate nor interest expenses were
included. Business segment depreciation expense, identifiable assets and capital
expenditures relate to those assets that are utilized by the respective business
segment. Corporate assets consist principally of cash and cash equivalents,
notes and other receivables and fixed assets.

Foreign sales, including export and foreign operations, aggregated
$188,094,000 in 1995, $129,896,000 in 1994 and $113,210,000 in 1993. Export
sales aggregated $85,241,000 in 1995, $67,341,000 in 1994 and $59,324,000 in
1993.

F-14

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of the company's operations by geographic area for the three-year
period ended December 31, 1995 is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
UNITED STATES
Net sales........................................ $713,274,000 $614,673,000 $511,277,000
Operating income................................. 92,929,000 76,190,000 62,977,000
Identifiable assets.............................. 515,725,000 463,621,000 353,172,000

ALL FOREIGN (principally Europe, Canada and Japan)
Net sales........................................ $102,853,000 $ 62,555,000 $ 53,886,000
Operating income................................. 2,970,000 2,078,000 907,000
Identifiable assets.............................. 104,234,000 57,979,000 52,532,000
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales
Safety Products.................................. $160,669,000 $135,424,000 $104,927,000
Sign............................................. 71,170,000 66,090,000 58,550,000
Tool............................................. 131,776,000 121,657,000 111,879,000
Vehicle.......................................... 452,512,000 354,057,000 289,807,000
------------ ------------ ------------
Total net sales............................... $816,127,000 $677,228,000 $565,163,000
============ ============ ============
Operating income
Safety Products.................................. $ 28,931,000 $ 23,313,000 $ 16,159,000
Sign............................................. 6,131,000 3,988,000 1,169,000
Tool............................................. 28,454,000 23,475,000 23,273,000
Vehicle.......................................... 39,191,000 33,531,000 30,289,000
Corporate expense................................ (6,808,000) (6,039,000) (7,006,000)
------------ ------------ ------------
Total operating income........................ 95,899,000 78,268,000 63,884,000
Interest expense................................... (13,359,000) (8,499,000) (6,136,000)
Other income....................................... (5,261,000) 412,000 1,048,000
------------ ------------ ------------
Income before income taxes......................... $ 77,279,000 $ 70,181,000 $ 58,796,000
============ ============ ============
Depreciation
Safety Products.................................. $ 3,348,000 $ 2,693,000 $ 1,757,000
Sign............................................. 1,341,000 1,400,000 1,684,000
Tool............................................. 2,740,000 2,386,000 2,313,000
Vehicle.......................................... 4,336,000 3,772,000 3,412,000
Corporate........................................ 41,000 51,000 49,000
------------ ------------ ------------
Total depreciation............................ $ 11,806,000 $ 10,302,000 $ 9,215,000
============ ============ ============
</TABLE>

F-15

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Identifiable assets
Manufacturing activities
Safety Products............................... $124,765,000 $ 98,438,000 $ 51,092,000
Sign.......................................... 22,303,000 26,771,000 24,480,000
Tool.......................................... 71,312,000 66,729,000 62,035,000
Vehicle....................................... 244,581,000 192,436,000 142,158,000
Corporate..................................... 9,463,000 10,038,000 15,359,000
------------ ------------ ------------
Total manufacturing activities.............. 472,424,000 394,412,000 295,124,000
------------ ------------ ------------
Financial services activities
Sign.......................................... 18,715,000 13,836,000 17,282,000
Vehicle....................................... 128,820,000 113,352,000 93,298,000
------------ ------------ ------------
Total financial services activities......... 147,535,000 127,188,000 110,580,000
------------ ------------ ------------
Total identifiable assets..................... $619,959,000 $521,600,000 $405,704,000
============ ============ ============
Capital expenditures
Safety Products.................................. $ 3,173,000 $ 2,409,000 $ 2,675,000
Sign............................................. 1,454,000 1,218,000 988,000
Tool............................................. 7,104,000 4,200,000 2,614,000
Vehicle.......................................... 3,958,000 3,245,000 3,848,000
Corporate........................................ 12,000 36,000 14,000
------------ ------------ ------------
Total capital expenditures.................... $ 15,701,000 $ 11,108,000 $ 10,139,000
============ ============ ============
</TABLE>

NOTE N -- SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------------------------------------------------------------
1995 1994
------------------------------------------- -------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER DECEMBER
31 30 30 31 31 30 30 31
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $187,132 $199,355 $ 207,880 $221,760 $138,106 $164,001 $ 181,283 $193,838
Gross margin............. 56,863 61,297 62,813 67,382 42,891 51,751 55,415 59,677
Net income............... 10,793 14,479 14,629 11,709(a) 8,156 12,396 12,436 13,782
Per share data:
Net income............. .24 .32 .32 .26(a) .18 .27 .27 .30
Dividends paid......... .13 .13 .13 .13 .11 .11 .11 .11
Market price range
High................. 21 7/8 23 24 1/8 25 7/8 21 3/8 20 3/8 20 5/8 21
Low.................. 19 5/8 20 3/8 21 1/8 21 3/8 19 1/4 16 7/8 17 17 3/4
</TABLE>

- ---------------
(a) Includes after-tax charge for litigation settlement of $4.2 million or $.09
per share (see Note L).

F-16

<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
of Federal Signal Corporation

We have audited the accompanying consolidated balance sheets of Federal
Signal Corporation and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Federal Signal
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Chicago, Illinois
January 23, 1996

F-17

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW

CONSOLIDATED RESULTS OF OPERATIONS

Federal Signal Corporation again achieved record levels of net sales, net
income and earnings per share in 1995 despite a nonrecurring charge to earnings
of $4.2 million ($.09 per share) recorded in the fourth quarter relating to a
litigation settlement. Net sales increased to $816.1 million, 21% higher than
1994's $677.2 million. Operating income increased 23% from $78.3 million in 1994
to $95.9 million in 1995. Net income, which was adversely affected by the
nonrecurring charge, increased 10% to $51.6 million in 1995 from $46.8 million
in 1994. These increases follow 1994's increases of 20% in sales and 18% in net
income. Net income per share for 1995 increased 11% to $1.13 per share compared
to $1.02 in 1994 and $.86 per share in 1993.

The 1995 sales increase of 21% resulted from volume increases of 20%
(including 4% resulting from the acquisition of Bronto in August) and price
increases of 1%. Domestic sales increased 15% in 1995 while foreign sales
increased 45%. Excluding Bronto, foreign sales increased 22%. Foreign sales
accounted for 23% of the company's total sales in 1995 compared to 19% of total
sales in 1994.

The 1995 sales increases follow a 20% increase in sales in 1994. The
increase in sales in 1994 resulted from volume increases of 19% (including 8%
from the acquisitions of Justrite Manufacturing in May and Vactor Manufacturing
in June 1994) and price increases of 1%. Excluding the sales of Justrite and
Vactor in 1994, domestic sales were 12% above 1993 while foreign sales increased
8%.

Operating margins have increased from 10.8% in 1991 to 11.8% in 1995,
despite generally declining gross profit margins as the following table shows:

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
(PERCENT OF SALES)
<S> <C> <C> <C> <C> <C>
Net sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales..................................... 69.6 69.0 67.8 68.2 67.9
----- ----- ----- ----- -----
Gross profit margin............................... 30.4 31.0 32.2 31.8 32.1
Selling, general and administrative expenses...... 18.6 19.4 20.9 21.2 21.3
----- ----- ----- ----- -----
Operating margin.................................. 11.8% 11.6% 11.3% 10.6% 10.8%
===== ===== ===== ===== =====
</TABLE>

Gross profit margins have generally declined principally due to sales of
the Vehicle Group increasing faster than sales of the other groups. The Vehicle
Group normally experiences higher cost of sales percentages but lower operating
expense percentages than the other groups. This trend temporarily reversed in
1993 due to improving gross margins of three of the company's four groups, most
notably Safety Products and Sign. Due to the reorganization costs incurred in
1992 for newly acquired businesses and certain costs incurred at Ravo for
development and other operational changes, the percentage of selling, general
and administrative expenses did not decline in 1992 as rapidly as normally would
be expected. In 1993 through 1995, however, reductions in the percentage of
selling, general and administrative costs did occur. These reductions are a
result of: 1) higher sales with fixed costs being spread over those higher
sales, 2) the increasing percentage of Vehicle Group sales to total sales, and
3) operational improvements made, particularly in the Sign Group. All of the
company's groups continue to work toward reducing their costs.

Because of the varied nature of its operations, the company recognizes that
changes in operating income as a percentage of net sales on a consolidated basis
may sometimes distort its real operating performance. In order to monitor the
operating performance of its operations, the company utilizes various methods,
one of which is return on net assets. Return on net assets is defined as
operating income divided by the identifiable net assets (total assets of a
business unit less its accounts payable and accrued liabilities).

The company acquires businesses which meet the company's growth and other
strategic objectives. In large part as a result of intangible assets arising
from acquisitions, it is anticipated that businesses acquired will not generate
the same levels of returns as the company's other businesses for some time
following their

F-18

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW--(CONTINUED)

respective acquisition. However, the company's strategies include making
constant improvements in all of its businesses. The company has improved its
return on net assets of its existing businesses over the years by increasing
operating margins and net asset turnover. In 1995, the company's manufacturing
operations again achieved a strong return on net assets. The 28% achieved in
1995 compares favorably to the 29% achieved by its manufacturing operations in
1994 when considering that the reduction occurred due to the impact of recent
acquisitions. Excluding recent acquisitions, the company's return increased by
1% in 1995 over 1994.

Interest expense increased $4.9 million in 1995 following an increase of
$2.4 million in 1994. The increase in 1995 was the result of substantially
increased borrowings caused largely by three factors: 1) approximately $31
million incurred due to acquisitions of companies for cash during the first nine
months of 1995, 2) a $20.3 million increase in financial services assets which
occurred during the year, and 3) additional repurchases of the company's common
stock. In addition, weighted average interest rates on short-term borrowings
experienced in 1995 were 6.0% compared to 4.5% in 1994. Interest expense
increased $2.4 million in 1994 principally due to higher interest rates,
increased borrowings required to fund the purchases of Justrite Manufacturing
and Vactor Manufacturing and increases in financial services assets in 1994.

The company's effective tax rate of 33.2% in 1995 decreased from the 1994
rate of 33.4% and increased from the 1993 of 32.3%. The decrease in 1995 results
from tax-exempt interest income becoming a higher percentage of the company's
total income. The increase in 1994 was largely due to: 1) the fact that the 1993
rate included the impact of favorable tax return audit results, and 2)
tax-exempt interest income was a lower percentage of the company's total income.

At the end of 1995, the company changed its assumptions for discount rates
used in determining the actuarial present values of accumulated and projected
benefit obligations for its postretirement plans from 8.9% to 7.2%. This
decrease resulted from the lower interest rate environment being experienced at
the end of 1995. The company also reduced its projected rate of increase in
compensation and increased its projected rate of return on plan assets each by
1% to be more in line with its long-term expectations. The company expects that
the changes in assumptions will not have a significant impact on 1996 results of
operations.

Certain of the company's businesses are susceptible to the influences of
seasonal buying or delivery patterns. The company's businesses which tend to
have lower sales in the first calendar quarter compared to other quarters as a
result of these influences are signage, street sweeping, outdoor warning, other
municipal emergency signal products, parking systems and aerial access platform
manufacturing operations.

GROUP OPERATIONS

Domestic markets were generally stronger in 1995 for all four of the
company's groups. As mentioned previously, foreign sales increased 22%
(excluding acquisitions) in 1995. The Safety Products and Vehicle groups
achieved much higher foreign sales in 1995. For the third year in a row, all
four groups achieved increases in both sales and earnings.

Safety Products

Safety Products Group sales increased 19% in 1995 resulting from increased
sales at Signal Products and VAMA and the full-year impact of Justrite (acquired
in May 1994). Domestic sales were up 18% while foreign sales increased 19%.
Earnings increased 24% in 1995. For the ninth consecutive year, the Safety
Products Group's operating margin increased. Cost reductions, the impact of
recent new product sales, and increased penetration of foreign markets
contributed to the group's improved results. The group's return on net
manufacturing assets was 32% in 1995 compared to 33% in 1994. As noted earlier,
the company's strategy includes the acquisition of companies which may not
initially produce returns at levels of its existing businesses. Excluding the
dilutive impact of Justrite which was acquired in mid-1994, the group's return
on net manufacturing assets increased from 44% in 1994 to 45% in 1995.

F-19

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW--(CONTINUED)

Sign

The Sign Group achieved a sales increase of 8% with operating profits
increasing 54% from $4.0 million in 1994 to $6.1 million in 1995. The group made
substantial internal improvements in 1995 and improved its profitability
significantly over that of recent years. The group's operating margin improved
in 1995 for the fourth year in a row. The increase in profitability resulted not
only from the higher sales level achieved but also from productivity gains
brought about by improved plant operations and business processes. As a result
of these improvements, the group's return on net manufacturing assets increased
from 17% in 1994 to 26% in 1995.

Tool

In 1995, the Tool Group achieved an 8% increase in sales and a 21% increase
in income. Domestic sales increased 6% in 1995 while foreign sales increased
18%. The group's results in 1994 were adversely affected by the impacts of
nonrecurring charges associated with the move of certain die components
operations and the revaluation of certain carbide inventories. The group's die
components and precision parts business and cutting tool business both improved
strongly in 1995. Favorable growth in domestic markets, improved efficiencies
and plant utilization and strong foreign sales all contributed to the group's
results. As a result, the group's return on net manufacturing assets improved
from 43% in 1994 to 49% in 1995.

Vehicle

Earnings for the Vehicle Group increased 17% in 1995 on a sales increase of
28%. Excluding the effects of Bronto which was acquired in August 1995, sales
would have increased approximately 20% while earnings would have increased about
14%. Domestic sales increased 18% in 1995 and foreign sales increased 62% (26%
excluding Bronto). All of the group's businesses achieved strong foreign sales
gains in 1995. The group's return on net manufacturing assets declined from 22%
in 1994 to 18% in 1995. The principal cause of the decline was the effect of the
acquisition of Bronto in mid-1995 and the full year effect of Vactor in 1995
which was purchased in mid-1994. Excluding the impacts of these businesses, the
return on net manufacturing assets remained about even in 1995 compared to 1994.

FINANCIAL SERVICES ACTIVITIES

The company maintains a large investment ($147.5 million at December 31,
1995) in lease financing and other receivables which are generated principally
by its vehicle operations with the balance generated by its sign operations.
These assets continued to be conservatively leveraged in accordance with the
company's stated financial objectives for these assets for the five-year period
ending December 31, 1995 (see further discussion in Financial Position and Cash
Flow).

Financial services assets have repayment terms generally ranging from two
to eight years. The increases in these assets resulted from increasing sales of
the Vehicle Group as well as continuing greater acceptance by customers of the
benefits of using the company as their source of financing vehicle purchases.

FINANCIAL POSITION AND CASH FLOW

The company emphasizes generating strong cash flows from operations. During
1995, cash flow from operations increased to a level of $62.9 million compared
to $53.8 million in 1994 and $48.8 million in 1993. The increase in cash flow
from operations during this period is largely attributable to increases in sales
as well as the improvement in the company's operating margin. As expected, the
company's operating working capital (accounts receivable, inventory and accounts
payable) as a percent of sales did not change significantly during the
three-year period ending 1995. Nevertheless, the company expects further
improvement in its operating

F-20

<PAGE>

FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW--(CONTINUED)

cash flow as it continues to focus aggressively on its efficiencies and costs as
well as its working capital management.

During the 1991-1995 period, the company has utilized its strong cash flows
from operations to: 1) fund in whole or in part strategic acquisitions of
companies operating in markets related to those already served by the company;
2) purchase increasing amounts of equipment principally to provide for further
cost reductions and increased productive capacity for the future as well as
tooling for new products; 3) increase its investment in financial services
activities; 4) pay increasing amounts in cash dividends to shareholders; and 5)
repurchase a small percentage of its outstanding common stock each year.

Cash flows for the five-year period ending December 31, 1995 are summarized
as follows:

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash provided by (used for):
Operating activities................ $ 62.9 $ 53.8 $ 48.8 $ 40.2 $ 43.9
Investing activities................ (88.1) (96.9) (38.1) (26.9) (47.8)
Financing activities................ 29.9 45.1 (10.3) (11.2) 2.5
</TABLE>

In order to show the distinct characteristics of the company's investment
in its manufacturing activities and its investment in its financial services
activities, the company has presented separately these investments and their
related liabilities. Each of these two types of activities are supported by
different percentages of debt and equity.

One of the company's financial objectives is to maintain a strong financial
position. The company defines its goal as normally having a debt to
capitalization ratio of 30% or less for its manufacturing operations. At
December 31, 1995 and 1994, the company's debt to capitalization ratios of its
manufacturing operations were 29% and 22%, respectively. The increase in this
ratio occurred largely due to the 1995 acquisitions of Bronto and Target Tech
for cash. The company also believes that its financial assets, due to their
overall quality, are capable of sustaining a leverage ratio of 87%. At December
31, 1995 and 1994, the company's debt to capitalization ratios for its financial
services activities were 87%. The company intends to maintain this leverage for
its financial activities in the future and at the same time fulfill its
financial objective with respect to its manufacturing debt to capitalization
ratio. These intentions are consistent with its investment grade credit rating
obtained in connection with its commercial paper program.

As indicated earlier, substantial effort is focused on improving the
utilization of the company's working capital. The company's current ratio for
its manufacturing operations was 1.3 at December 31, 1995 and 1.4 at December
31, 1994. These ratios are slightly lower than those in prior years as a result
of reduced working capital needs for receivables and inventories and improved
management of cash disbursements as well as increased short-term debt. The
company anticipates that its financial resources and major sources of liquidity,
including cash flow from operations, will continue to be adequate to meet its
operating and capital needs in addition to its financial commitments.

F-21

<PAGE>

PROXY FEDERAL SIGNAL CORPORATION PROXY
1415 W. 22ND STREET, OAK BROOK, ILLINOIS 60521

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 17, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Joseph J. Ross 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 1996
Annual Meeting of Stockholders to be held at the Chicago Marriott Hotel -- Oak
Brook, 1401 West 22nd Street on Wednesday, April 17, 1996 at 11:00 a.m., and at
all adjournments 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 come before the meeting.

UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2.

/ / Check here for address change
New Address: _________________

------------------------------

(Continued and TO BE SIGNED on the reverse side.)

<PAGE>

FEDERAL SIGNAL CORPORATION
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 AND FOR PROPOSAL 2.

1. ELECTION OF DIRECTORS FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
Nominees: James A.
Lovell Jr. and / / / / / / _____________________________
J. Patrick Lannan, Jr.

2. Approving the Stock FOR AGAINST ABSTAIN
Benefit Plan. / / / / / /

PLEASE VOTE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Date: ___________________________, 1996

Signature(s) __________________________

---------------------------------------
Please sign exactly as name appears hereon.
Joint owners should each sign. Where
applicable, indicate official position or
representative capacity.
</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 9350
<SECURITIES> 0
<RECEIVABLES> 125971
<ALLOWANCES> 3058 <F1>
<INVENTORY> 97448
<CURRENT-ASSETS> 235474 <F1>
<PP&E> 164750
<DEPRECIATION> 86296
<TOTAL-ASSETS> 619959
<CURRENT-LIABILITIES> 186660 <F1>
<BONDS> 39702
0
0
<COMMON> 45832
<OTHER-SE> 202249
<TOTAL-LIABILITY-AND-EQUITY> 619959
<SALES> 816127
<TOTAL-REVENUES> 816127
<CGS> 567772
<TOTAL-COSTS> 567772
<OTHER-EXPENSES> 5261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13359
<INCOME-PRETAX> 77279
<INCOME-TAX> 25669
<INCOME-CONTINUING> 51610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51610
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.12
<FN>
<F1>MANUFACTURING OPERATIONS ONLY
</FN>

</TABLE>