FEDERAL SIGNAL CORP /DE/ - Proxy Solicitation & Information Statement 2007

DEF 14A 1 c13150ddef14a.htm DEFINITIVE PROXY STATEMENT def14a PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12

FEDERAL SIGNAL CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box): — þ	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(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):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
o	Fee paid previously with preliminary materials.
o	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:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:

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1415 West 22nd Street

Oak Brook, Illinois 60523

Notice of Annual Meeting of Stockholders

To Be Held on April 24, 2007

To the Stockholders of

Federal Signal Corporation:

The Annual Meeting of Stockholders of Federal Signal Corporation for the year 2007 will be held at the Embassy Suites Hotel, 707 E. Butterfield Road, Lombard, Illinois on Tuesday, April 24, 2007, at 3:30 p.m., local time, for the following purposes:

1.	To elect three (3) Class II directors;
2.	To elect one (1) Class III director;
3.	To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2007; and
4.	To transact such other business that may properly come before
the meeting or any adjournment(s) of such meeting.

The Board of Directors has fixed the close of business on February 26, 2007 as the record date for the meeting. This means that if you owned shares of our common stock on that date, you are entitled to receive this notice, and to vote at the meeting or any adjournment(s) of the meeting.

A copy of our financial statements, our Annual Report to our stockholders for the year ended December 31, 2006, and a proxy statement and proxy card accompany this notice.

YOUR VOTE IS IMPORTANT! You are urged to vote as promptly as possible in one of the following ways:

| | Use the toll-free telephone number shown on your proxy
card; |
| --- | --- |
| | Go to the website address shown on your proxy card and vote
via the Internet; or |
| | Mark, sign, date and promptly return the enclosed proxy card
in the postage-paid envelope. Any proxy may be revoked at any
time prior to its exercise at the annual meeting. |

Instructions for voting are contained on the enclosed proxy card.

By order of the Board of Directors,

Jennifer L. Sherman Corporate Secretary

March 23, 2007

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TOC

TABLE OF CONTENTS

| GENERAL
INFORMATION | 1 |
| --- | --- |
| SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS | 3 |
| PROPOSALS 1
AND 2 ELECTION OF DIRECTORS | 4 |
| INFORMATION
CONCERNING THE BOARD OF DIRECTORS | 6 |
| CORPORATE
GOVERNANCE, BUSINESS CONDUCT, AND CODE OF ETHICS | 10 |
| COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION | 10 |
| CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 10 |
| COMPENSATION
DISCUSSION AND ANALYSIS | 11 |
| COMPENSATION AND
BENEFITS COMMITTEE REPORT | 20 |
| EXECUTIVE
COMPENSATION IN THE LAST FISCAL YEAR | 21 |
| SUMMARY
COMPENSATION TABLE | 21 |
| GRANTS OF
PLAN-BASED AWARDS | 23 |
| ADDITIONAL
INFORMATION ABOUT THE COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS | 23 |
| OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR-END | 25 |
| OPTION EXERCISES
AND STOCK VESTED | 26 |
| POST RETIREMENT
BENEFITS | 26 |
| PENSION BENEFITS
TABLE | 26 |
| NON-QUALIFIED
DEFERRED COMPENSATION TABLE | 27 |
| OTHER POTENTIAL
POST-EMPLOYMENT PAYMENTS | 27 |
| AUDIT COMMITTEE
REPORT | 36 |
| ACCOUNTING
INFORMATION | 37 |
| PROPOSAL 3
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG
LLP | 37 |
| SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 38 |
| EQUITY COMPENSATION
PLAN INFORMATION | 38 |
| FUTURE STOCKHOLDER
PROPOSALS | 38 |
| OTHER
BUSINESS | 38 |

/TOC

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1415 West 22nd Street

Oak Brook, Illinois 60523

callerid=999 iwidth=455 length=96

Proxy Statement for Annual Meeting of Stockholders To Be Held on April 24, 2007

GENERAL INFORMATION

The Board of Directors of Federal Signal Corporation is furnishing this proxy statement to you in order to solicit your proxy for use at the Annual Meeting of Stockholders to be held at the Embassy Suites Hotel, 707 E. Butterfield Road, Lombard, Illinois on Tuesday, April 24, 2007 at 3:30 p.m., local time, and any adjournment(s) of such meeting. The purpose of the Annual Meeting of Stockholders is:

1.	To elect three (3) Class II directors;
2.	To elect one (1) Class III director;
3.	To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2007; and
4.	To transact any other business that may properly come before the
meeting or any adjournment(s) of such meeting.

This proxy statement, the notice of Annual Meeting and the accompanying proxy card were first mailed to stockholders on or about March 23, 2007.

By completing the enclosed proxy card, you can direct how your shares are to be voted at the Annual Meeting (for example, you can direct that your shares are to be voted for or withheld from the vote for each nominee for director). Each proxy will be voted as you direct on the proxy card. If you do not complete the voting directions on the proxy card (or with respect to any particular proposal), the persons named in the proxy card will vote your shares for each proposal (or the undirected proposal, as the case may be).

Solicitation Costs

We will bear the costs of solicitation of proxies for the Annual Meeting. Following the original solicitation of proxies by mail, certain of our officers and regular employees may solicit proxies by correspondence, telephone, e-mail, or in person, but will not receive any extra compensation for such solicitation work. We will reimburse brokers and other nominee holders for their reasonable expenses incurred in forwarding the proxy materials to the beneficial owners.

Voting Securities

You will be entitled to vote at the meeting only if you held shares of our common stock of record at the close of business on February 26, 2007. You will be entitled to one vote for each share of common stock that you held in your name as of the record date. On the record date, there were 47,964,022 shares of common stock issued and outstanding.

A majority of the outstanding shares, present in person or by proxy, will constitute a quorum at the meeting. For purposes of determining if a quorum is present, we will count all proxies designated as withholding authority to vote for a nominee or nominees or abstaining from any proposal as shares represented at the meeting, but we will not count broker non-votes as being present at the meeting. A broker non-vote occurs when a nominee (such as

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a broker) holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. We will count abstentions as votes cast, but we will disregard broker non-votes for the purpose of determining whether a proposition has been approved.

Our By-Laws require a plurality of the votes cast for the election of directors, which means that in the election of Class II directors the three nominees with the highest vote totals will be elected as Class II directors, and in the election of the Class III director the nominee with the highest vote total will be elected as a Class III director. As a result, designations on your proxy card that you are withholding authority for a nominee or nominees, and broker non-votes with respect to shares held for your benefit will not have an effect on the results of the vote for the election of directors. The proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2007 will require the affirmative vote of a majority of the votes cast upon this proposal at the Annual Meeting. Because this proposal requires a majority of the votes cast for approval, an abstention will have the effect of a vote cast against the proposal.

Revocability of Proxy

You may revoke your proxy at any time before it is voted by filing a written notice of revocation or a later-dated proxy card with our Corporate Secretary, or by attending the Annual Meeting and voting your shares in person. Attendance alone at the Annual Meeting will not revoke a proxy.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of February 26, 2007 with respect to beneficial ownership of our common stock by:

| | each person known by us to be the beneficial owner of more than
five percent of our common stock, which is our only class of
outstanding voting securities; |
| --- | --- |
| | each of our directors and director nominees; |
| | each of our executive officers named in the Summary Compensation
Table; and |
| | all directors and executive officers as a group. |

	Amount and — Nature of	Outstanding
	Beneficial	Common
Name	Ownership(1)	Stock(2)
Beneficial Owners of More Than
Five Percent of our Common Stock:
Franklin Mutual Advisers, LLC	4,351,725	(3)	9.07 %
101 John F. Kennedy Parkway Short Hills, NJ 07078
Dimensional Fund Advisors
L.P.	2,526,867	(4)	5.27 %
1299 Ocean Avenue Santa Monica, CA 90401
Each Director and Named Executive
Officer and Directors and all Executive Officers as a Group:
(5,6)
James C. Janning, Director	41,145		*
Charles R. Campbell, Director	59,333		*
Robert M. Gerrity, Director	17,203		*
James E. Goodwin, Director	5,337		*
Robert S. Hamada, Director	16,336		*
Paul W. Jones, Director	43,548		*
John F. McCartney, Director	12,076		*
Brenda L. Reichelderfer, Director	683		*
Robert D. Welding
Director, President and CEO	525,508		1.10 %
Stephanie K. Kushner
Vice President and CFO	157,395		*
Marc F. Gustafson
President, Fire Rescue Group	72,986		*
David R. McConnaughey
President, Safety and Security Systems Group	32,251		*
Mark D. Weber
President, Environmental Solutions Group(7)	90,595		*
Stephen C. Buck Former
President, Safety Products Group(8)	231,139		*
All Directors and Executive
Officers as a Group (21 persons)	1,533,593		3.20 %

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(1) Totals include shares subject to stock options exercisable within 60 days of February 26, 2007, as follows: Mr. Janning, 23,895; Mr. Campbell, 24,416; Mr. Gerrity, 9,916; Mr. Goodwin, 1,298; Mr. Hamada, 9,916; Mr. Jones, 24,416; Mr. McCartney, 1,595; Ms. Reichelderfer, 0; Mr. Welding, 279,899; Ms. Kushner, 107,945; Mr. Gustafson, 31,045; Mr. McConnaughey, 5,000; Mr. Weber, 48,650; and Mr. Buck, 131,250; and all directors and executive officers as a group, 815,768. Totals also include shares of restricted stock awarded pursuant to our benefit plans which are subject to certain restrictions under the plans, as follows: Mr. Janning, 4,537; Mr. Campbell, 1,870; Mr. Gerrity, 1,870; Mr. Goodwin, 1,255; Mr. Hamada, 1,870; Mr. Jones, 1,870; Mr. McCartney, 1,460; Ms. Reichelderfer, 263; Mr. Welding, 147,700; Ms. Kushner, 32,875; Mr. Gustafson, 35,800; Mr. McConnaughey, 27,100; Mr. Weber, 26,875; and Mr. Buck, 0. Totals also include shares held in our 401(k) plan, as follows: Mr. Welding, 409; Ms. Kushner, 848; Mr. Gustafson, 624; Mr. McConnaughey, 0; Mr. Weber, 6,194; and Mr. Buck, 0. Totals do not include shares held in our Rabbi Trust, as follows:

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| | Mr. Hamada, 2,667; Ms. Kushner, 7,446; Mr. Weber,
251; and all directors and executive officers as a group, 10,364. |
| --- | --- |
| (2) | Based upon 47,964,022 shares of common stock issued and
outstanding as of February 26, 2007 and, for each director
or executive officer or the group, the number of shares subject
to stock options exercisable by such director or executive
officer or the group within 60 days of February 26,
2007. The use of * denotes percentages of less than
1%. |
| (3) | Based on a Schedule 13G/A filed on January 31, 2007,
with the Securities and Exchange Commission, in which the
stockholder reported that as of December 31, 2006, it had
sole voting and dispositive power over all these shares in its
capacity as an investment adviser to investment companies
registered under the Investment Company Act of 1940 and other
managed accounts. Franklin Mutual Advisers, LLC disclaims
beneficial ownership of these shares. |
| (4) | Based on a Schedule 13G filed on February 9, 2007,
with the Securities and Exchange Commission, in which the
stockholder reported that as of December 31, 2006, it had
sole voting and dispositive power over all these shares in its
capacity as an investment adviser to investment companies
registered under the Investment Company Act of 1940 and other
managed accounts. Dimensional Fund Advisors L.P. disclaims
beneficial ownership of these shares. |
| (5) | The information contained in this portion of the table is based
upon information furnished to us by the named individuals above
and from our own records. Except as set forth in the following
footnotes, each director and officer claims sole voting and
investment power with respect to the shares listed beside his or
her name. |
| (6) | All of our directors and officers use our Company address which
is 1415 W. 22nd Street, Suite 1100, Oak Brook, IL
60523. |
| (7) | Includes 582 shares held by Mr. Webers wife. |
| (8) | Includes 33,289 shares held by Mr. Bucks wife
and children and 3,207 shares held as collateral on a home
equity loan. Mr. Buck ceased being an executive officer on
March 6, 2006. |

PROPOSALS 1 AND 2 ELECTION OF DIRECTORS

Our Companys Board of Directors consists of nine directors divided into three classes. Each class is elected for a term of three years, and the classes together are staggered so that one class term expires each year. Existing directors are granted the power to fill a vacancy that occurs on the Board, and any director so elected is entitled to serve until the next regularly scheduled annual meeting of stockholders. Brenda L. Reichelderfer was elected to the Board in October 2006 as a Class III director to fill a vacancy on the Board. As such, pursuant to our Companys Corporate Governance Guidelines, Ms. Reichelderfer is being submitted by the Board of Directors for election at this Annual Meeting, which constitutes the first regularly scheduled annual meeting of stockholders following her appointment to the Board.

John F. McCartney, Robert M. Gerrity, and Robert S. Hamada are each nominated as a Class II director for election at this Annual Meeting for a term of three years to expire at the 2010 Annual Meeting or until his successor is elected and qualified. At its December 2006 meeting, the Board of Directors granted a waiver from the age 68 restriction on standing for reelection to Messrs. Gerrity and Hamada due to the desire for continuity and the specialized skill sets and business experiences these individuals contribute to the Board. The Board of Directors recommends a vote for the election of Messrs. McCartney, Gerrity, and Hamada as Class II directors. Ms. Reichelderfer is nominated as a Class III director for election at this Annual Meeting for a term of one year to expire at the 2008 Annual Meeting or until her successor is elected and qualified. The Board of Directors recommends a vote for the election of Ms. Reichelderfer.

If on account of death or unforeseen contingencies a nominee is not available for election, the persons named in the proxy will vote the proxy for such other person(s) as the Nominating and Governance Committee may nominate as directors so as to provide a full board. In the election of the three Class II directors, the nominees receiving the highest number of votes cast will be elected as Class II directors. In the election of the Class III director, the nominee receiving the highest number of votes cast will be elected as a Class III director.

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Information regarding the nominees for election and the directors continuing in office is set forth below:

		Year First — Became	Year Present — Term	Principal Occupation — or Employment for
Name	Age	Director	Expires	Last Five Years(1)
Class II
Nominees:
John F. McCartney	54	2005	2007	Mr. McCartney is currently
Chairman of Westcon Group, Inc., a specialty distributor of
networking and communications equipment. Mr. McCartney is
also the Chairman of A.M. Castle & Co., a specialty
steel products distributor that is traded on the American Stock
Exchange (AMEX:CAS). Mr. McCartney was the Vice-Chairman of
Datatec Limited, a technology holding company, from 1998 to
2004. Mr. McCartney also serves on the Board of Directors
of Huron Consulting Group Inc., a financial consulting company
that is traded on the NASDAQ (NASDAQ:HURN).
Robert M. Gerrity	69	2003	2007	Mr. Gerrity is a director and a
principal in Gerrity Partners, a consulting business. He is also
Chairman of the Industrial Products Group of Glencoe Capital, a
private equity firm. He is a director of Standard Motor
Products, Inc., an auto parts company that is traded on the New
York Stock Exchange (NYSE:SMP); Rimrock Corporation, a supplier
of automation products and integration services; and Polyair
Inter Pack Inc., a manufacturer and distributor of protective
packaging products that is traded on the Toronto Stock Exchange
(PRK:TO).
Robert S. Hamada	69	2003	2007	Mr. Hamada is the Edward Eagle
Brown Distinguished Service Professor of Finance Emeritus and
Dean Emeritus, University of Chicago Graduate School of
Business, following his retirement in 2003. Mr. Hamada is
also a consultant for Hamada Management Consulting. He is
currently a director of A.M. Castle & Co., a specialty
steel products distributor that is traded on the American Stock
Exchange (AMEX:CAS).
Class III
Nominee:
Brenda L. Reichelderfer	48	2006	2007	Ms. Reichelderfer has served as a
Senior Vice President (since 2001) and Chief Technology Officer
(since 2005) of ITT Corporation, a global engineering and
manufacturing company that is traded on the New York Stock
Exchange (NYSE:ITT).
Continuing Directors:
Class I
Directors:
James E. Goodwin	62	2005	2009	Mr. Goodwin is currently an
independent business consultant. From March 1998 to October
2001, Mr. Goodwin served as Chairman and Chief Executive
Officer of United Airlines that is traded on the NASDAQ
(NASDAQ:UAUA). Mr. Goodwin is also a member of the Board of
Directors of AAR Corp., a manufacturer of products for the
aviation/aerospace industry that is traded on the New York Stock
Exchange (NYSE:AIR); DBS Communications; and First Chicago
Bank & Trust.

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		Year First — Became	Year Present — Term	Principal Occupation — or Employment for
Name	Age	Director	Expires	Last Five Years(1)
James C. Janning	59	1999	2009	Mr. Janning is Group President of
Harbour Group, a diversified holding company, and has held
various executive positions at Harbour Group since 1987.
Mr. Janning is also a director of Menasha Corporation,
which assists businesses with packaging and product promotions.
He is also a director and Chairman of Menasha Forest Products
Corporation, which provides forest management and logging
services to timberland owners.
Robert D. Welding	58	2003	2009	Mr. Welding was appointed
President and Chief Executive Officer of our Company and elected
to the Board of Directors in December 2003. Prior to joining our
Company, Mr. Welding was Executive Vice President of
BorgWarner Inc., a U.S. automotive parts supplier, that is
traded on the New York Stock Exchange (NYSE:BWA) and Group
President of its Driveline Group automotive parts businesses.
Class III
Directors:
Charles R. Campbell	67	1998	2008	Mr. Campbell is a retired
consultant in The Everest Group, a management consulting firm.
He was a partner in The Everest Group from 1997 to 2004.
Paul W. Jones	58	1998	2008	Mr. Jones is Chairman, Chief
Executive Officer and a director of A.O. Smith Corporation, a
manufacturer of water heating systems and electric motors, that
is traded on the New York Stock Exchange (NYSE:AOS).
Mr. Jones was President and Chief Operating Officer of A.O.
Smith Corporation from January 2004 until January 2006.
Mr. Jones retired in November 2002 as Chairman, President
and Chief Executive Officer of U.S. Can Corporation, a
manufacturer of steel and plastic containers that is traded on
the New York Stock Exchange (NYSE:BLL), positions he had held
since April 1998. Mr. Jones is also a director of Bucyrus
International, Inc., a manufacturer of farm and construction
machinery that is traded on the NASDAQ (NASDAQ:BUCY).

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

INFORMATION CONCERNING THE BOARD OF DIRECTORS

Independence of Members of the Board of Directors

The Board of Directors has determined that all of our directors, except Robert D. Welding, qualify as independent directors. In making this determination, the Board of Directors considered the rules of the New York Stock Exchange and the Securities and Exchange Commission, and reviewed information provided by the directors in questionnaires and other certifications concerning the relationships that we may have with each director (including each directors immediate family members and other associates), including any charitable contributions that we may have made in the past and/or continue to make to organizations with which such director is affiliated.

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Meetings of the Board of Directors and Committees

During 2006, our Board of Directors held a total of seven meetings. The Compensation and Benefits Committee held six meetings; the Nominating and Governance Committee held five meetings; the Audit Committee held eight meetings; and the Executive Committee held one meeting. Our By-Laws require each director to regularly attend meetings of the Board of Directors and of all Board Committees upon which the director serves. Each director attended at least 75 percent of the meetings of the Board and of each Committee of which he or she was a member. In addition, all of our directors attended our 2006 Annual Meeting of Stockholders.

Committees of the Board of Directors

Pursuant to our By-Laws, we have established standing Audit, Nominating and Governance, Compensation and Benefits, and Executive Committees.

Audit Committee. The Audit Committee of the Board of Directors is responsible for monitoring:

	the integrity of our financial statements;
	the qualifications and independence of our independent
registered public accounting firm;
	the performance of our internal audit function and independent
registered public accounting firm; and
	our compliance with legal and regulatory requirements, including
our Code of Business Conduct for all employees and Code of
Ethics for the Chief Executive Officer and senior financial
officers.

In fulfilling its role, the Audit Committee reviews the design and operation of internal control processes and the manner in which we control our major financial risk exposures. The Audit Committee has direct and regular access to our financial executives, including the internal auditor, the Chief Financial Officer, and the independent registered public accounting firm. The Audit Committee has the sole authority to appoint or replace our independent registered public accounting firm, and is directly responsible for overseeing the work of and determining the appropriate compensation for our independent registered public accounting firm. In addition, the Audit Committee considers and approves the performance of non-audit services by our independent registered public accounting firm, taking into consideration the effect that the performance of these services may have upon the independence of the independent registered public accounting firm.

Our By-Laws prohibit a director who is also an employee of our Company from serving on the Audit Committee. The Board of Directors has determined that all of the members of the Audit Committee are independent as defined under the applicable New York Stock Exchange and Securities and Exchange Commission rules. The members of the Audit Committee are Charles R. Campbell (Chairman), Robert M. Gerrity, James E. Goodwin, and Robert S. Hamada. The Board of Directors has determined that Mr. Campbell qualifies as an audit committee financial expert as defined by the Securities and Exchange Commission. None of the Audit Committee members serves on more than three public companies audit committees (including our Company).

The Board of Directors has adopted a Charter for the Audit Committee to comply with the requirements of the New York Stock Exchange and the Sarbanes-Oxley Act of 2002, a copy of which is available on our website at http://www.federalsignal.com.

Nominating and Governance Committee. The Nominating and Governance Committee is responsible for recommending guidelines to the Board of Directors for corporate governance, including the structure and function of our Board of Directors, its Committees and the management of our Company, as well as identification and recommendation to the Board of Directors of candidates to be elected as directors.

Stockholders can nominate candidates for election as directors at stockholder meetings by giving at least 30 days advance written notice to our Corporate Secretary along with the following information with respect to the nominee: name, age, business and residence addresses, principal occupation or employment, the number of shares of our common stock beneficially owned by the stockholder(s) nominating such nominee, and a consent by the nominee to serve as a director if elected that would be required for a nominee under the Securities and Exchange Commission rules. The Committee has not adopted any specific procedures for considering the recommendation of

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director nominees by stockholders, but will consider stockholder nominees for new directorship on the same basis as other nominees.

The Committee has set no specific minimum qualification for a nominee to the Board of Directors, but in evaluating a candidate the Committee considers the current make-up of the Board of Directors, the skills and business experience of the particular nominee, and the potential value the nominee would add to the Board of Directors. The Board of Directors has determined that all of the members of our Nominating and Governance Committee are independent as defined under the applicable New York Stock Exchange rules. The members of the Nominating and Governance Committee are Robert S. Hamada (Chairman), James C. Janning, Robert M. Gerrity, and Brenda L. Reichelderfer. Ms. Reichelderfer was appointed to the Nominating and Governance Committee effective December 12, 2006.

The Board of Directors has adopted a Charter for the Nominating and Governance Committee to comply with the requirements of the New York Stock Exchange and the Sarbanes-Oxley Act of 2002, a copy of which is available on our website at http://www.federalsignal.com.

Compensation and Benefits Committee. The Compensation and Benefits Committee is responsible for the establishment and oversight of our Companys compensation and benefits philosophy. With respect to our executive officers, the Committee has the authority to establish the objectives of compensation, to determine the components of compensation, and to establish and evaluate performance goals. The Board of Directors has determined that all of the members of our Compensation and Benefits Committee are independent as defined under the applicable New York Stock Exchange rules. The members of the Compensation and Benefits Committee are John F. McCartney (Chairman), Charles R. Campbell, and Paul W. Jones. Mr. Jones resigned the position of Chairman on December 11, 2006, and Mr. McCartney became Chairman on December 12, 2006.

Executive Committee. The Executive Committee generally exercises the power and authority of the Board in the intervals between full Board meetings. The members of the Executive Committee are Robert D. Welding (Chairman), Robert S. Hamada, John F. McCartney, Charles R. Campbell and James C. Janning. Mr. Jones resigned from the Executive Committee on December 12, 2006, and Mr. McCartney joined the Executive Committee on December 12, 2006.

The Board of Directors has adopted a Charter for the Compensation and Benefits Committee to comply with the requirements of the New York Stock Exchange and the Sarbanes-Oxley Act of 2002, a copy of which is available on our website at http://www.federalsignal.com.

Director Compensation in the Last Fiscal Year

The following table sets forth information concerning compensation earned by our non-employee directors in fiscal year 2006. Mr. Weldings compensation for 2006 is disclosed in the Summary Compensation Table for executive officers because he is a named executive officer for purposes of this proxy statement and does not receive additional compensation for his service as a director:

	Fees Earned — or Paid	Stock Awards	Option Awards	All Other
Name	in Cash ($)(1)	($)(2)	($)(3)	Compensation ($)	Total ($)
James C. Janning	$97,750	$33,009	$23,256		$154,015
Charles R. Campbell	$66,000	$10,413	$20,402		$96,815
Robert M. Gerrity	$60,000	$10,413	$23,882		$94,295
James E. Goodwin	$55,000	$6,248	$15,463		$76,711
Robert S. Hamada	$66,000	$10,413	$23,882		$100,295
Paul W. Jones	$56,750	$10,413	$20,402		$87,565
John F. McCartney	$52,250	$7,163	$17,049		$76,462
Brenda L. Reichelderfer	$13,500	$256	$2,044		$15,800

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| (1) | Includes the following share amounts which were awarded in lieu
of fees: Mr. Gerrity, 1,879 shares received in lieu of
$29,750 in cash fees; Mr. Goodwin, 1,707 shares
received in lieu of $27,500 in cash fees; Mr. Hamada,
2,048 shares received in lieu of $33,000 in cash fees;
Mr. McCartney, 3,244 shares received in lieu of the
entire amount of his cash fees of $52,250;
Ms. Reichelderfer, 420 shares received in lieu of
$6,750 in cash fees. |
| --- | --- |
| (2) | Reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31,
2006 in accordance with SFAS FAS 123(R) and includes
amounts from awards granted in and prior to 2006. The following
awards were granted to the directors on April 25, 2006:
1,312 restricted stock award shares to Mr. Janning; 1,050
restricted stock award shares to each of Mr. Campbell,
Mr. Gerrity, Mr. Goodwin, Mr. Hamada,
Mr. Jones, and Mr. McCartney. Ms. Reichelderfer
was granted 263 restricted stock award shares on
October 24, 2006. As of December 31, 2006 each
director had the following aggregate number of unvested
restricted shares: Mr. Janning, 4,537 shares;
Mr. Campbell, 1,870 shares; Mr. Gerrity,
1,870 shares; Mr. Goodwin, 1,255 shares;
Mr. Hamada, 1,870 shares; Mr. Jones,
1,870 shares; Mr. McCartney, 1,460 shares;
Ms. Reichelderfer, 263 shares. |
| (3) | Reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31,
2006 in accordance with SFAS FAS 123(R), and includes
amounts from awards granted in and prior to 2006. The following
options were granted to the directors on April 25, 2006 at
an exercise price of $19.05: 3,671 stock option award shares to
Mr. Janning; 2,397 stock option award shares to each of
Mr. Campbell, Mr. Gerrity, Mr. Goodwin,
Mr. Hamada, Mr. Jones, and Mr. McCartney.
Ms. Reichelderfer received two awards on October 24,
2006 of 5,000 and 900 stock option shares, respectively. As of
December 31, 2006, each director had the following number
of options outstanding: Mr. Janning, 32,177;
Mr. Campbell, 31,842; Mr. Gerrity, 17,342;
Mr. Goodwin, 8,893; Mr. Hamada, 17,342;
Mr. Jones, 31,842; Mr. McCartney, 9,785;
Ms. Reichelderfer, 5,909. |

Additional Information About Director Compensation

In 2006, directors (other than the Chairman of the Board) who are not officers of our Company were entitled to receive an annual retainer of $40,000, a $1,000 fee for each Board meeting attended in person and $500 for each Board meeting attended by telephone. Non-employee directors also are entitled to receive the following annual retainers for Committee membership: Audit: Chairman $12,000, Member $9,000; Compensation and Benefits: Chairman $9,000, Member $6,000; Nominating and Governance: Chairman $9,000, Member $6,000; Executive: $2,000. Directors were also reimbursed for their expenses relating to attendance at meetings. Upon election, each non-employee director receives an initial stock option grant to purchase 5,000 shares of our common stock. Pursuant to our director stock ownership program, each non-employee director who does not own shares of our common stock equal in value to at least three times the annual retainer paid to non-employee directors is required to receive at least 50% of annual fees earned in any given year in stock awards.

For 2006, the total equity compensation to each non-employee director was comprised of equity awards equivalent to approximately $40,000, which amount was split equally between stock awards and stock options. The stock awards and stock options have a three year pro-rata vesting schedule. Except for Ms. Reichelderfer, the stock award portion of the equity award was awarded on the date of our 2006 Annual Meeting of Stockholders, April 25, 2006, and each award value has been calculated based on the closing price of our common stock on such date, which was $19.05 per share. For 2006, the stock award portion of the equity award to each non-employee director was 1,050 shares of common stock. The stock option portion of the equity award was comprised of a stock option grant of 2,937 shares of common stock having a value of approximately $20,000 based on a Black-Scholes calculated value, in accordance with the requirements of SFAS 123(R). The options have an exercise price equal to $19.05 per share, the closing market price of the common stock on April 25, 2006. Because Ms. Reichelderfer was appointed to the Board in 2006, she received equity awards pro-rata in proportion to the number of days served on the Board during 2006. The awards to Ms. Reichelderfer were made on October 24, 2006 when the closing price of our common stock on such date was $15.50 per share.

For his service as Chairman of the Board in 2006, Mr. Janning was entitled to receive an annual retainer of $70,000, a $2,000 meeting fee for each Board meeting attended in person, $500 for each Board meeting attended by telephone, and a per diem fee for the other time spent on Company business of $2,500 (up to a maximum of $150,000 per year). For 2006, the Chairman received a total of $97,750 in fees consisting of the $70,000 retainer,

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Committee membership fees of $8,000, $11,000 in meeting fees, and total per diem fees of $8,750. The Chairman also received an additional $10,000 of equity compensation, which amount was split equally between stock awards and stock options. The stock option portion of the equity award was made on April 25, 2006 and was comprised of a stock option grant for the number of shares of common stock having a value of approximately $25,000, based on a Black-Scholes calculated value, with an exercise price equal to the closing market price of the common stock on April 25, 2006. This amounted to a stock award of 1,312 shares of common stock, and a stock option grant of 3,671 shares of common stock with an exercise price of $19.05 per share.

CORPORATE GOVERNANCE, BUSINESS CONDUCT, AND CODE OF ETHICS

We are committed to good corporate governance. We believe that the foundation of our corporate governance is the independence of our directors, responsible corporate citizenship, and a commitment to the interests of our stockholders. In accordance with the requirements of the New York Stock Exchange and the Sarbanes-Oxley Act of 2002, our Board of Directors has adopted Corporate Governance Guidelines as well as charters for the Nominating and Governance Committee, the Compensation and Benefits Committee and the Audit Committee. These guidelines and charters, as well as the Business Conduct Policy and the Code of Ethics, are available for review on our website. In addition, the guidelines and charters are available in print to any stockholder who requests them in writing from our Corporate Secretary at the address provided below. We timely submitted our annual certification by the Chief Executive Officer to the New York Stock Exchange within 30 days of our Annual Meeting of Stockholders in 2006. The certification stated our compliance with the New York Stock Exchanges corporate governance listing standards without qualification.

The non-employee directors of the Board meet regularly in executive session without management. The Chairman of the Board of Directors acts as the presiding director of such executive sessions. Directors may be contacted as a group, by Committee or individually, and the presiding director or the non-employee directors as a group may be contacted on an anonymous and/or confidential basis by addressing a letter to Federal Signal Corporation, 1415 West 22nd Street, Suite 1100, Oak Brook, IL 60523, Attn: Corporate Secretary. All such letters will be forwarded to the directors. We encourage our directors to attend the Annual Meeting of Stockholders. All of our directors attended the 2006 Annual Meeting of Stockholders.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

There were no compensation committee interlocks or insider participation on the part of the members of our Compensation and Benefits Committee. The members and functions of the Compensation and Benefits Committee are set forth above under Committees of the Board of Directors.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

During the year ended December 31, 2006, it was determined that none of our directors, nominees for director, or executive officers engaged in a transaction with us in which such director, nominee for director or executive officer had a direct or indirect material interest which required disclosure under applicable Securities and Exchange Commission rules.

We maintain various policies and procedures relating to the review, approval or ratification of transactions in which our Company is a participant and in which any of our directors, executive officers, 10% stockholders (if any) or their family members have a direct or indirect material interest. Our Company Policy for Business Conduct, which is available on our website at http://www.federalsignal.com, prohibits our directors and employees, including our executive officers, and in some cases, their family members, from engaging in specified activities without prior written consent. These activities typically relate to situations where a director, executive officer or employee, and in some cases, an immediate family member, may have significant financial or business interests in another company competing with or doing business with our Company, or who stands to benefit in some way from such a relationship or activity.

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Each year, we require our directors and executive officers to complete a questionnaire which identifies, among other things, any transactions or potential transactions with the Company in which a director or an executive officer or one of their family members or associated entities has an interest. We also require that directors and executive officers notify our Corporate Secretary of any changes during the course of the year to the information provided in the annual questionnaire as soon as possible. In addition, the Audit Committee of our Board of Directors, pursuant to its charter and our Company Policy for Business Conduct, has responsibility for reviewing and approving, ratifying or making recommendations to our Board of Directors regarding related person transactions.

We believe that the foregoing policies and procedures collectively ensure that all related person transactions requiring disclosure under applicable Securities and Exchange Commission rules are appropriately reviewed.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and Objectives

Our executive compensation and benefits programs are designed to drive and reinforce our business goals and strategies for success in the marketplace and to enable growth. As a key component of our executive compensation system, we have adopted a value-based management philosophy designed to develop a culture that emphasizes entrepreneurship, innovation and creativity, and rewards managers and employees who think and act like owners. This program also encourages collaboration and the maximization of long-term shareholder value, which in turn supports the attraction, motivation, and retention of the best global talent. Our executive compensation philosophy can be summarized as follows:

| | To attract, motivate, and retain highly experienced executives
who are vital to our short and long-term success, profitability,
and growth; |
| --- | --- |
| | To create alignment between compensation and business
performance by rewarding executives for the achievement of
strategic and tactical goals that successfully drive growth in
shareholder value for our Company; |
| | To differentiate executive rewards based on actual performance;
and |
| | To provide targeted compensation levels that are consistent with
the 50th percentile of competitive market practice for base
salary, the 50th percentile for annual incentives, and the
50th percentile for long-term incentives. |

Role of our Compensation and Benefits Committee

Our Compensation and Benefits Committee establishes and oversees our general compensation and benefits program, and approves compensation and benefits for our executive officers. Specifically, our Compensation and Benefits Committee is charged in its charter with the authority and responsibility to:

| | Establish the philosophy and set the broad objectives of our
executive compensation program to ensure that the compensation
program complies with and promotes our goals and objectives; |
| --- | --- |
| | Determine the various elements of the executive compensation
program, including base salary, annual incentive awards,
long-term incentive compensation, benefits and perquisites; |
| | Establish performance goals for the Chief Executive Officer and
oversee the establishment of performance goals for the other
executive officers and for each business unit; |
| | Evaluate annually each executive officers performance in
light of the goals established with respect to the officer for
the most recently completed year; and, |
| | Establish each executive officers compensation levels for
the following year, based upon the executive officers
performance, our financial results and relative shareholder
return, the value of compensation paid to a comparable executive
officer at comparable companies, the awards given to the
executive officer in past years, and our capacity to fund the
compensation. |

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The Chief Executive Officer annually reviews the performance of each executive officer. Recommendations based on these reviews, including those with respect to base salary adjustments, annual incentives and long-term incentives, are presented to the Committee. The Committee can exercise its discretion in modifying any recommended adjustments or awards to these executive officers. The compensation of the Chief Executive Officer is determined by the Committee, meeting in executive session without the Chief Executive Officer present.

Benchmarks for Executive Compensation

Compensation levels for our executives are compared to the compensation paid to executives at the group of peer companies specified below. We use market data from these peer companies to benchmark targeted compensation levels by position for base salary, annual cash incentives, long-term equity incentives and total compensation.

The market for experienced talent is highly competitive. We aim to attract and retain the most highly qualified executives to manage our business functions. In doing so, we draw upon a pool of talent that is highly sought after by both large and established companies. We draw upon a market that is global in scope. We recognize that we must satisfy the financial requirements of our candidates through competitive compensation practices. We also compete for talent on the basis of our vision of future growth and success, our culture and our Company values. In order to succeed in attracting the best global talent, the Committee has engaged Hewitt Associates, an outside global Human Resources consulting firm, to conduct regular reviews of our total compensation programs for our Chief Executive Officer and other key executives. Hewitt Associates provides the Committee with relevant market data and alternatives to consider when making compensation decisions for our Chief Executive Officer as well as other executive officers. In making compensation decisions, the Committee compares each element of compensation against a peer group of publicly traded and privately held manufacturing companies. The comparator group, which is periodically updated by the Committee, consists of companies against which we believe we compete for talent in the marketplace. The companies currently comprising the comparator group are:

A.O. Smith Corporation	Metaldyne Corporation
Ametek, Inc.	Milacron Inc.
Borg Warner Inc.	Oshkosh Truck Company
Briggs &
Stratton Corporation	PACCAR Inc.
Caterpillar Inc.	Parker Hannifin
Corporation
Cooper Industries,
Inc.	Robert Bosch
Corporation
Cummins, Inc.	Sauer-Danfoss Inc.
Deere &
Company	Spartan Motors, Inc.
Dover Corporation	SPS Technologies, Inc.
Easton Corporation	Teleflex Incorporated
Emerson Electric
Company	Tennant Company
The Gates Rubber
Company	Thomas &
Betts Corporation
Hubbell Inc.	Thyssen Krupp Budd
Company
Illinois Tool Works,
Inc.	The Timken Company
International Truck
and Engine	Valmont Industries,
Inc.
Johnson Controls,
Inc.	Woodward Industries,
Inc.
Kennametal Inc.	Worthington
Industries, Inc.

Because of the large variance in size among the companies comprising the comparator group, regression analysis is used to adjust the compensation data for differences in revenues. This adjusted data is used as the basis of comparison between our Company and the companies in the comparator group.

We may also use published survey data to supplement the determination of competitive levels of compensation in the marketplace.

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Elements of Executive Compensation

Our value-based compensation program consists of five components: base salary, annual cash incentives, long-term equity incentives, retirement and health and welfare benefits, and perquisites. Our programs balance individual, business unit and Company-wide goals and achievements.

Base Salaries

Base salary levels for our executive officers and our Chief Executive Officer are determined primarily on external market data and on the individual performance of each executive officer during the previous year. Base salaries are targeted to be at the 50th percentile of competitive market data and, effective January, 2007, actual base salaries for named executive officers range from 97% to 119% of individual targets. In addition to the executives individual performance, the Committee also considers the following factors in setting base salaries and in recommending annual base salary adjustments: the executives current base salary relative to the targeted level, the executives level of responsibility, the executives prior experience, the executives breadth of knowledge, and other internal equity issues.

Annual Cash Incentives

Since the beginning of 2005, annual cash incentive payments have been based exclusively on objective measures of financial performance that relate to the year-over-year increase in Economic Value. We believe that Economic Value is the best single financial measure that is directly tied to the creation of shareholder value because it encompasses both earnings growth and efficient use of capital. Economic Value is the net amount of value earned or lost on an investment after deducting the cost of holding that investment. The underlying rationale for adopting an Economic Value system for annual cash incentive compensation is to align management and employee interests with the interests of stockholders.

Economic Value is calculated by using three key inputs:

| | Cost of Capital, which is the return required to
appropriately compensate investors for investing in our Company.
We use a single Cost of Capital for all operating units and for
the consolidated Company, which is based on a weighted average
of the after-tax cost of our debt and our stockholders
expected return on equity. When the Economic Value incentive
plan was adopted at the beginning of 2005, we determined that
our Cost of Capital was 9%. |
| --- | --- |
| | Average Capital Employed, which is the investment made by
stockholders and debt holders of our Company in the operations
of the business. For our Company and its operating units, the
capital that is included in the calculation of Average Capital
Employed includes the aggregate value of certain assets
(principally accounts receivable, inventories, fixed assets,
goodwill and other intangibles, and assets held for sale) less
the sum of certain non-interest bearing liabilities (principally
accounts payable, customer deposits and other non-interest
bearing liabilities). Average Capital Employed is calculated as
a simple average of the capital employed at each month end in a
year. |
| | Net Operating Profit after Tax, which is the after-tax
operating profit of our Company or a particular operating unit.
It is calculated by adding operating income and non-operating
income and subtracting from this sum non-operating expense and
income tax. |

Economic Value is calculated by subtracting a Capital Charge from Net Operating Profit after Tax. The Capital Charge is derived by multiplying the Cost of Capital by the Average Capital Employed.

Our annual incentive program focuses our executives on maximizing long-term shareholder value and encourages decision making that supports year-over-year growth in the Economic Value of the particular unit in which an executive works and the Company as a whole. In 2004, the Company retained Shareholder Value Advisors, a financial and compensation consulting firm, to assist in developing Economic Value improvement goals for the Company and for each of the key operating units of the Company. The goals were established for the three-year period beginning in 2005.

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The targeted Economic Value improvement goals were established based on the estimated improvement needed to give investors a cost of capital return on the market value of the Company or business unit. The target setting analysis assumed that the Economic Value improvement from the restructuring initiatives announced in 2004 was already reflected in the stock price and would not provide any additional return. The Economic Value improvement value multiples (the estimated investor wealth gains per $1 of Economic Value improvement) used in deriving the improvement goals were based on statistical models of peer company data. Target incentive compensation awards for all executive officers are set at 100% of the Economic Value improvement goal for the business unit or the Company, with threshold set at 50% of the target goals and maximum set at 200% of the target goals.

The incentive compensation for Mr. Welding and Ms. Kushner is based on the achievement of Economic Value goals which have been set for our Company as a whole. Mr. McConnaughey, Mr. Gustafson and Mr. Weber, each of whom are Group presidents, have threshold, target and maximum Economic Value goals for their respective Groups and for our Company as a whole, with their aggregate annual incentive award weighted at 80% for achievement of their individual Group goals and 20% for our Company goals. This weighting encourages executives to collaborate across Groups and functions in order to achieve business objectives at the enterprise level as well as in their own Groups.

The achievement of the threshold, target and maximum Economic Value goals will result in a cash incentive award equal to a pre-set percentage of the executives base salary or the salary mid-point (50th percentile of market) of similar positions at our comparator group companies, whichever is greater. The target percentages of base salary or salary mid-point to be paid out upon the achievement of various levels of Economic Value are determined based on competitive market data for each executive position. Economic Value results that fall in between the threshold, target and maximum goals will be extrapolated from those points to determine the actual cash incentive award for the executive. In 2006, the target annual cash incentive percentage for Mr. Welding was 75%, and the target annual cash incentive for all other named officers was 50%. In 2007, based on market data collected from our comparator group, Mr. Weldings target annual cash incentive percentage was increased to 85% and for all other named officers the target annual cash incentive percentage was increased to 55%.

In order to support the achievement of long-term goals, executives are given the opportunity to carry forward the unmet portion of their maximum annual incentive opportunity. One-half of the difference between the maximum opportunity and the actual incentive earned for a particular year can be re-earned over each of the next two years if the related operating unit achieves an Economic Value amount for the subsequent year that is at or above target for that year and the result is at or above the relative level of Economic Value attained by the operating unit during the initial year. Any carry forward opportunity that is not earned in either of the two immediately subsequent years will be forfeited by the executive officer.

Long-Term Equity Incentives

Equity ownership plays a key role in aligning the interests of executives with our stockholders. A further purpose of our long-term incentive plan is to provide a means through which our Company may attract the best talent to become our employees, to encourage our employees to engage in the business strategy and success of our Company, and to provide a retention tool through vesting obligations for executives. In accordance with our continuing commitment to meet these objectives, the Committee generally grants stock options and restricted stock awards to executives on an annual basis under our long-term incentive plans. A combination of stock appreciation rights, performance shares or units, or other equity vehicles may also be used as deemed appropriate. In order to ensure continued ownership of the equity granted under the long-term incentive grants, we have instituted stock ownership guidelines for our executive officers as discussed below under the caption Stock Ownership Guidelines for Executive Officers.

The grant date value of the equity awards (based upon Black-Scholes or other widely accepted valuation models) under the long-term equity incentive program is targeted at the 50th percentile of the intrinsic value of long-term incentives paid to comparable executives at companies in the comparator group. In addition to competitive market practices, we consider the executives level of responsibility, prior experience, historical award data, and

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individual performance. As with the other components of compensation paid by us, these actual values of long-term incentives may be more or less than the targeted levels for a particular executive in a particular year.

Equity grants made in 2006 and in 2007 to executive officers were granted so that 50% of the grant date value of the long-term incentive award was in the form of stock options to motivate long-term decision making and to reward future business performance, and 50% of the grant date value was in the form of restricted stock shares to facilitate the desired levels of stock ownership and to promote executive retention.

Retirement and Health and Welfare Benefits

We recognize that our employees are the driving force behind the profitable growth of our Company and that our ability to sustain our success is dependant on each individuals well being. To that end we offer a competitive package of Company-sponsored health and welfare benefits to all employees that executive officers are eligible to participate in.

| | Retirement Plans: In January 2007, we
introduced the new Federal Signal Corporation Retirement Savings
Plan and the new Savings Restoration Plan. The Retirement
Savings Plan is a defined contribution plan that combines a
401(k) plan with a points-weighted Company contribution. Under
this plan, executives receive a Company-paid retirement
contribution based on their years of service, age and employee
status paid as a percentage between 1% and 4% of their eligible
compensation. Executives are also eligible to receive a Company
matching contribution of up to 50% of the first 6% of the
participants compensation that the participant voluntarily
determines to contribute to the plan. The non-qualified Savings
Restoration Plan restores Company contributions limited under
the Internal Revenue Code through a notional Company
contribution, a voluntary employee deferral, and notional
earnings from investments. Certain executives also continue to
participate in defined benefit plans that have been frozen for
age and service effective December 31, 2006, and will be
frozen for wage increases effective December 31, 2016.
Effective December 31, 2006, the profit sharing component
of the Federal Signal Corporation 401(k) Retirement
Plan Elgin Sweeper Company was terminated. For 2007
through 2009, executives who participated in our Federal Signal
Corporation 401(k) Retirement Plan Elgin Sweeper
Company or in our frozen defined benefit plan are eligible to
receive a supplemental transitional contribution to our new
Retirement Savings Plan equal to 1% to 2% of their salary. Based
upon their age and years of service as of December 31,
2006, each of Mr. Welding, Ms. Kushner and
Mr. Weber will be entitled to receive a supplemental
transitional contribution equal to 2% of their salary in 2007
through 2009. |
| --- | --- |
| | Health and Welfare Plans: Executives
participate in the same broad-based, market competitive health
and welfare plans (medical, prescription, dental, vision, life
and disability insurance) that are available to all employees. |

Perquisites and Other Personal Benefits

We provide executives with perquisites and other personal benefits that the Committee feels are reasonable and consistent with its overall compensation program to better enable us to attract and retain the best talent for key executive positions. The Committee periodically reviews the levels of perquisites provided. Perquisites currently provided include:

| | Vehicles or Vehicle Allowances: Executives
receive leased vehicle payments or a monthly vehicle allowance
benefit in an amount that is consistent with the
executives position and level in the organization, and
prevailing market practices. |
| --- | --- |
| | Health Medical Exam Reimbursement: Executives
are eligible to participate in an annual Executive Health Exam
as a means to promote wellness in our key executives. |
| | Additional Survivor Benefit: As President and
Chief Executive Officer, Mr. Welding receives an additional
survivor benefit agreed to at the time of his employment to
attract Mr. Welding to our Company. At
Mr. Weldings death (if he is then employed by our
Company), our Company will pay to Mr. Weldings estate
or his designated beneficiaries an amount equal to
Mr. Weldings annual base salary at the time of his
death. |

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The payment is a general obligation of our Company and is not funded by a life insurance policy issued by a third party.

| | Country Club Initiation and Membership Fees
Reimbursement: The Committee believes that as
Chief Executive Officer, it is appropriate to further
Mr. Weldings business entertainment and social
networking through membership in a country club in the Chicago,
Illinois metropolitan area. Mr. Welding received
reimbursement for country club initiation fees and continues to
receive reimbursement for membership dues. |
| --- | --- |
| | Relocation Reimbursement: Mr. McConnaughey was
hired by our Company during 2006 and, pursuant to our Executive
Relocation Reimbursement Program, was reimbursed for various
relocation expenses. Mr. Gustafson was also reimbursed for
relocation expenses for his move during 2005 and 2006. |
| | Tax Gross-Up Payments: In connection with the payment of a
signing bonus of $300,000 to Mr. McConnaughey upon the
commencement of his employment with our Company during 2006, we
agreed to pay the income taxes attributable to the payment of
the signing bonus. We also paid income taxes attributable to
certain of Mr. McConnaugheys relocation expenses
pursuant to the terms of our Executive Relocation Reimbursement
Program. |
| | Supplemental Savings and Investment Plan: In
years prior to 2005, executives were eligible to participate in
the Supplemental Savings and Investment Plan, a nonqualified
deferred compensation benefit that supplemented our defined
benefit plans. During 2007, balances remaining in this plan will
be transferred into the new Savings Restoration Plan. In March
of 2007, Ms. Kushners notional account in the new
Savings Restoration Plan was credited with additional amounts
discussed below to satisfy certain prior commitments that we
made to Ms. Kushner with respect to supplemental defined
benefits or retirement benefits. |

Setting Actual Compensation for the Named Executive Officers

The specific compensation decisions made for each of the named executives for 2006 and year-to-date in 2007 reflect our managements and our Committees assessments of performance relative to Company and business Group financial and operational measurements and individual performance objectives and comparisons against market benchmarks. Our compensation actions for our Chief Executive Officer and other named executive officers are summarized as follows:

Base Salary

In January 2006, the Committee set Mr. Weldings base salary at $686,700. This base salary represents a 9% increase from the prior years salary of $630,000. At the same time, the Committee set Ms. Kushners base salary at $317,750, which represents a 9% increase from her prior years base salary of $291,500, and Mr. Webers base salary at $262,260, a 15% increase from the prior years base salary of $228,000. These increases were awarded to recognize these executives accomplishments in 2005 and the low relative position of their individual 2005 base salaries versus competitive market benchmarks. Mr. Gustafsons 2006 base salary was set at $312,000, a 4% increase from the prior years base salary of $300,000. The Committee believed that Mr. Gustafsons 2005 base salary was at competitive benchmarks but awarded the salary increase in recognition of Mr. Gustafsons accomplishments in 2005. Mr. McConnaughey was hired by our Company on March 6, 2006, and pursuant to the negotiated terms of his employment offer was paid at an annual base salary rate of $320,000 during 2006.

Mr. Welding did not receive an increase in his base salary in 2007 based on the Committees review of external market data and the performance of our Company in 2006. In January 2007, the Committee set Ms. Kushners base salary at $330,460, a 4% increase from her prior years salary, and Mr. Gustafsons base salary at $321,360, a 3% increase from his 2006 base salary. The Committee believes that Ms. Kushners and Mr. Gustafsons individual salaries are competitive in the marketplace and the increase was awarded to recognize their individual accomplishments in 2006. Mr. Webers base salary for 2007 was increased to $288,475, a 10% increase from his 2006 base salary. This increase was awarded to recognize Mr. Webers accomplishments in 2006 and the low relative position of his 2006 base salary versus market benchmarks. Mr. McConnaughey did not receive an increase in base salary in 2007 based on the Committees review of external market data and the determination that Mr. McConnaugheys base salary is currently at 119% of his target market base salary.

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Annual Cash Incentive Payments

In February 2006, based on improvement in the Economic Value of our Company of $45 million in 2005, the Committee awarded Mr. Welding an incentive cash payment of $707,940 for 2005. This payment represented a payout of 112.4% of Mr. Weldings annual base salary for 2005, based upon the achievement of actual Economic Value at the Company level over the target Economic Value for the year. Mr. Weldings threshold incentive award was 37.5% of his annual base salary, his target incentive award level was 75% of his annual base salary and his maximum incentive award as a percentage of his annual base salary was 150%. Likewise, Ms. Kushner was awarded an incentive cash award of $218,874 for 2005 based upon the improvement in our Companys Economic Value, which represents 75.1% of her 2005 annual base salary. Ms. Kushners threshold incentive award was 25% of her annual base salary, her target incentive award was 50% of her annual base salary and her maximum incentive award as a percentage of her annual base salary was 100%. Both Mr. Weldings and Ms. Kushners annual incentive awards for 2005 represented achievement of an above target Economic Value for our Company during 2005.

In February 2006, based on the improvement in the Economic Value of the Fire Rescue Group of $21 million in 2005 and on the improvement of the Economic Value of our Company of $45 million in 2005, the Committee awarded Mr. Gustafson an incentive cash payment of $122,326 for 2005. This represents an annual cash incentive award equal to 40.8% of Mr. Gustafsons annual base salary for 2005. Mr. Gustafsons threshold incentive award as a percentage of his annual base salary was 25%, his target annual incentive award was 50% of his annual base salary and his maximum annual incentive award was 100% of his annual base salary. Mr. Gustafsons annual incentive opportunity was weighted 80% based upon the Economic Value of the Fire Rescue Group and 20% based upon the Economic Value of our Company as a whole. Mr. Gustafsons annual incentive award for 2005 represented achievement between threshold and target Economic Value for the Fire Rescue Group and above target Economic Value for our Company as a whole.

In February 2006, based on the improvement of the Economic Value of the Environmental Solutions Group of $7 million in 2005, and on the growth of the Economic Value of our Company of $45 million in 2005, the Committee awarded Mr. Weber an incentive cash payment of $80,510 for 2005. This represents an annual cash incentive equal to 35.2% of Mr. Webers annual base salary for 2005. Mr. Webers threshold annual incentive award as a percentage of his annual base salary was 25%, his target incentive award was 50% of annual base salary and his maximum annual incentive award was 100% of annual base salary. Mr. Webers annual incentive opportunity was weighted 80% based upon the Economic Value of the Environmental Solutions Group and 20% based upon the Economic Value of our Company as a whole. Mr. Webers annual incentive award for 2005 represented achievement between threshold and target Economic Value for the Environmental Solutions Group and above target Economic Value for our Company as a whole.

Mr. McConnaughey was not employed by our Company during 2005 and was therefore not eligible to receive an annual cash incentive award for that year.

In February 2007, based on the improvement of Economic Value of our Company of $9 million in 2006, the Committee awarded Mr. Welding an incentive cash payment of $611,291 for 2006. This award represented 89.0% of Mr. Weldings annual base salary for 2006, representing an above target achievement of Economic Value for our Company for 2006. Likewise, the Committee awarded Ms. Kushner an incentive cash payment of $188,996 for 2006 based upon the Economic Value of our Company, which represents an above target payout equal to 59.5% of her annual base salary for last year.

Based on the improvement of the Economic Value of the Safety and Security Systems Group of $3 million in 2006, and the improvement of Economic Value of our Company of $9 million in 2006, the Committee awarded Mr. McConnaughey an incentive cash payment of $242,301 in February 2007. This cash incentive award was equal to 75.7% of Mr. McConnaugheys base salary for 2006 and was prorated for the period from his employment with our Company on March 6, 2006 through the end of the year. Mr. McConnaugheys threshold annual incentive award as a percentage of his annual base salary was 25%, his target incentive award was 50% of his annual base salary and his maximum incentive award was 100% of his annual base salary. Mr. McConnaugheys annual incentive opportunity was weighted 80% based upon the Economic Value of the Safety and Security Systems Group and 20% based upon the Economic Value for our Company as a whole. Mr. McConnaugheys annual incentive award for

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2006 represents achievement above maximum Economic Value for the Safety and Security Systems Group and above target Economic Value of our Company as a whole.

Based on the improvement of Economic Value of the Fire Rescue Group of $3 million in 2006, and the improvement in Economic Value of our Company of $9 million in 2006, the Committee awarded Mr. Gustafson an incentive cash payment of $141,771 for 2006. This represented 45.4% of Mr. Gustafsons annual base salary for 2006, which means that the Fire Rescue Group achieved between threshold and target Economic Value for 2006 while our Company as a whole achieved Economic Value that was above target.

Based on the growth of Economic Value of the Environmental Solutions Group of $10 million in 2006, and the growth in Economic Value of our Company of $9 million in 2006, the Committee awarded Mr. Weber an incentive cash payment of $291,170 for 2006. This represented 111.0% of Mr. Webers annual base salary for 2006, representing an above target achievement of Economic Value for the Environmental Solutions Group and our Company as a whole. Mr. Weber was the only one of the named executive officers who also earned a 2005 carry forward amount for performance of his business Group during 2006.

Long-Term Equity Incentives

In February 2006, the Committee granted Mr. Welding, Ms. Kushner, Mr. Gustafson and Mr. Weber stock options for 117,300, 25,235, 25,235 and 19,550 shares of our common stock, respectively. Each of the options had an exercise price of $16.94, the low share price on the date of grant. The options vest in three equal annual installments on the first three anniversaries of the date of the grant. At the same meeting, the Committee also granted Mr. Welding, Ms. Kushner, Mr. Gustafson and Mr. Weber 48,600, 10,400, 10,400 and 8,100 shares of restricted stock, respectively. The restricted shares vest fully on the third anniversary of the date of the grant and are subject to forfeiture and cancellation if the executive officer terminates his or her employment with our Company and its subsidiaries prior to that time.

Mr. McConnaughey was not employed by our Company at the time of the February 2006 grants. Pursuant to his employment offer, on Mr. McConnaugheys date of hire, March 6, 2006, the Committee granted him stock options for 15,000 shares of our common stock, with an exercise price of $17.55 per share, the low price on the date of grant. Also, on Mr. McConnaugheys date of hire, the Committee granted Mr. McConnaughey 18,900 shares of restricted stock. The restricted shares vest fully on the third anniversary of the date of the grant and are subject to forfeiture and cancellation if Mr. McConnaughey terminates his employment with our Company and its subsidiaries prior to that time.

In February 2007, the Committee granted Mr. Welding, Ms. Kushner, Mr. McConnaughey, Mr. Gustafson and Mr. Weber stock options to purchase 79,900, 21,600, 18,600, 20,700 and 18,600 shares of our common stock, respectively. Each of these options has an exercise price of $16.10, the closing share price on the date of grant. We have changed our methodology for determining the exercise price for stock options after analysis of the guidance of the federal securities regulators during 2006. The Committee will now set the exercise price of all options that it grants at the closing price for our common stock, as reported by the New York Stock Exchange, on the date of the grant of the option. The options vest in three equal annual installments on the first three anniversaries of the date of the grant. At the same meeting, the Committee granted Mr. Welding, Ms. Kushner, Mr. McConnaughey, Mr. Gustafson and Mr. Weber 38,000, 10,200, 8,200, 9,800 and 8,800 shares of restricted stock, respectively. The restricted shares vest fully on the third anniversary of the date of the grant and are subject to forfeiture and cancellation if the executive officer terminates his or her employment with our Company and its subsidiaries prior to that time.

Perquisites and Other Benefits

Vehicles and Vehicle Allowances: In 2006, our Company paid on Mr. Weldings behalf leased vehicle payments totaling $11,876. Ms. Kushner received a vehicle allowance totaling $11,400, Mr. McConnaughey received a vehicle allowance totaling $9,500, Mr. Gustafson received a vehicle allowance totaling $11,400, and Mr. Weber received a vehicle allowance totaling $3,800.

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Health Medical Exam Reimbursement: In 2006, Ms. Kushner received an executive health exam valued at $2,375, which was paid for by our Company. The other named executives, while eligible, did not take advantage of the program.

Additional Survivor Benefits: Mr. Weldings estate or his beneficiaries will be eligible to receive a benefit in the amount of one years compensation at his annual rate effective at the date of his death if Mr. Welding is employed by our Company at the time of his death. This benefit is not funded by an insurance policy from a third party insurer so there was no cash outlay by our Company attributable to the benefit during 2006.

Country Club Initiation and Membership Fees Reimbursement: During 2006, Mr. Welding joined a country club and received reimbursement from our Company for certain country club initiation fees and membership dues. Mr. Welding received reimbursements in the aggregate amount of $46,151 during 2006, of which $42,500 represented the first of two payments of the original required initiation fee. The second payment of $42,500 will be made upon attainment of full membership status.

Relocation Reimbursement: Mr. McConnaughey was hired by our Company during 2006 and, pursuant to our Companys Executive Relocation Reimbursement Program, was reimbursed for various moving expenses in the aggregate amount of $113,171. Mr. Gustafson was also paid $36,000 during 2006 for relocation expenses associated with his move in 2005.

Tax Gross-Up Payments: In connection with the payment of Mr. McConnaugheys signing bonus of $300,000 upon the commencement of his employment with our Company, we also agreed to pay any income tax attributable to this bonus. The amount of this payment, including the income taxes attributable to the amounts paid by our Company on Mr. McConnaugheys behalf, amounted to $167,115. Mr. McConnaughey was also reimbursed for certain tax expenses associated with certain of his relocation expenses in the amount of $11,686.

Supplemental Savings and Investment Plan: In years prior to 2005, executives were eligible to participate in the Supplemental Savings and Investment Plan, a non-qualified deferred compensation benefit that supplemented our defined benefit plans. During 2007, balances remaining in this plan will be transferred into the new Savings Restoration Plan.

In connection with Ms. Kushners employment offer letter in 2002, we committed to payment of certain supplemental defined benefits or retirement benefits to Ms. Kushner upon her retirement after the age of 57. In full satisfaction of Ms. Kushners rights to such payments, we entered into an agreement with Ms. Kushner by which we agree to credit, as of March 1, 2007, Ms. Kushners notional account in the new Savings Restoration Plan in the aggregate amount of $308,472 and agree to make five additional payments in the aggregate amount of $77,480 on March 1 over the next five years, provided that Ms. Kushner is employed by our Company on such payment dates. In addition, in consideration of the fact that Ms. Kushner was not given the opportunity to make voluntary deferrals of compensation into the Supplemental Savings and Investment Plan during 2005 and 2006, we credited Ms. Kushners notional account, also as of March 1, 2007, with the additional amount of $15,798. None of these amounts were paid currently due to the fact that the Savings Restoration Plan is an unfunded, non-qualified defined contribution plan.

Stock Ownership Guidelines for Executive Officers

Our executive officers are required to own substantial holdings of our common stock while employed by us. Individual stock ownership targets are based on a multiple of between two and five times the executives base salary and executives generally have between three and five years from the date they become subject to the stock ownership guidelines to comply with the guidelines. We recognize both direct and indirect forms of ownership in achieving the requirements. Effective with the 2007 stock option and restricted stock awards made to the named executive officers, Mr. Welding will comply with requirements for stock ownership. Mr. McConnaughey has not met his requirements for stock ownership and has four years to comply. Ms. Kushner, Mr. Gustafson, and Mr. Weber have not met their requirements for stock ownership and have three years to comply.

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Impact of Accounting and Tax Treatment on Forms of Compensation Paid

Section 162(m) of the Internal Revenue Code provides that compensation in excess of $1 million paid to the chief executive officer and the other most highly compensated executive officers of a public company will generally be nondeductible for federal income tax purposes, subject to certain exceptions. The Committee intends to structure compensation arrangements in a manner that will avoid the deduction limitations imposed by Section 162(m) in appropriate circumstances. However, the Committee believes that it is important and necessary that the Committee retain the right and flexibility to provide and revise compensation arrangements, such as base salary and cash bonus incentive opportunities, that may not qualify under Section 162(m) if, in the Committees view, such arrangements are in the best interests of our Company and our shareholders.

COMPENSATION AND BENEFITS COMMITTEE REPORT

The responsibilities of the Compensation and Benefits Committee are provided in its Charter, which has been approved by our Board of Directors.

In fulfilling its oversight responsibilities with respect to the Compensation Disclosure and Analysis included in this Report, the Compensation and Benefits Committee, among other things, has:

| | reviewed and discussed the Compensation Disclosure and Analysis
with management; and |
| --- | --- |
| | following such review, the Compensation and Benefits Committee
approved the inclusion of such Compensation Disclosure and
Analysis in this proxy statement. |

SUBMITTED BY THE COMPENSATION AND BENEFITS COMMITTEE

JOHN F. MCCARTNEY, CHAIRMAN

CHARLES R. CAMPBELL PAUL W. JONES

Notwithstanding anything set forth in any of our previous filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this proxy statement, in whole or in part, the preceding report shall not be deemed incorporated by reference in any such filings.

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EXECUTIVE COMPENSATION IN THE LAST FISCAL YEAR

Summary Compensation Table

The following table sets forth information concerning compensation earned during the fiscal year ended December 31, 2006 for our Chief Executive Officer, the Chief Financial Officer, the three other most highly compensated executive officers of our Company, and one other individual who served as an executive officer during 2006 who would have been one of the three other most highly compensated executive officers of our Company but for the fact that he was not serving as an executive officer of our Company at December 31, 2006:

							Change in
							Pension Value
							and
						Non-Equity	Non-qualified	All
				Stock	Option	Incentive Plan	Deferred	Other
		Salary	Bonus	Awards	Awards	Compensation	Compensation	Compensation
Name and Principal Position	Year	($)	($)(1)	($)(2)	($)(3)	($)(4)	Earnings($)(5)	($)(6)	Total($)
Robert D. Welding President and Chief Executive Officer	2006	$ 686,700		743,459	620,391	611,291	23,018	74,827	2,759,686
Stephanie K. Kushner Vice President and Chief Financial Officer	2006	$ 317,750		173,987	150,088	188,996	133,618	25,257	989,696
David R. McConnaughey President, Safety and Securities Systems Group	2006	$ 263,183	$ 300,000	91,997	26,711	242,301		301,540	1,225,732
Marc F. Gustafson President, Fire Rescue Group	2006	$ 312,000		164,281	113,417	141,771		53,597	785,066
Mark D. Weber President, Environmental Solutions Group	2006	$ 262,260		140,856	97,371	291,170		13,647	805,304
Stephen C. Buck Former President, Safety Products Group	2006	$ 90,533		342,505	237,499		34,551	457,236	1,162,324

| (1) | Represents a signing bonus that Mr. McConnaughey received
upon commencement of employment on March 6, 2006. |
| --- | --- |
| (2) | The stock award values represent the dollar amount of
compensation cost recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2006, in
accordance with SFAS 123(R). These amounts include amounts
related to unvested restricted stock awards granted under our
long-term incentive plan, discussed in further detail on
page 18 under the heading Long-Term Equity
Incentives. Assumptions used in the calculation of this
amount for fiscal years ended December 31, 2004, 2005 and
2006 are included in Footnote 9 to our Companys
audited financial statements for the fiscal year ended
December 31, 2006, included in our Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
February 22, 2007. Assumptions used in the calculation of
this amount for the fiscal years ended December 31, 2002
and 2003, are included under the heading Stock-based
compensation plans in Note A Significant
Accounting Policies included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the
Securities and Exchange Commission on March 16, 2005. |
| (3) | The option award values represent the dollar amount of
compensation cost recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2006, in
accordance with SFAS 123(R). These amounts include amounts
related to unvested stock option grants awarded under our
long-term incentive plan, discussed in further detail on
page 18 under the heading Long-Term Equity
Incentives. Assumptions used in the calculation of this
amount for fiscal years ended December 31, 2004, 2005 and
2006 are included in Footnote 9 to our Companys
audited financial statements for the fiscal year ended
December 31, 2006, included in our Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
February 22, 2007. Assumptions used in the calculation of
this amount for the fiscal years ended |

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| | December 31, 2002 and 2003 are included under the heading
Stock-based compensation plans in
Note A Significant Accounting Policies included
in the Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the
Securities and Exchange Commission on March 16, 2005. |
| --- | --- |
| (4) | Reflects the cash awards to the named individuals under our
management incentive plan that is discussed in further detail
beginning on page 13 under the heading Annual Cash
Incentives. |
| (5) | Reflects the actuarial increase in the present value of the
named executive officers benefits under all pension plans,
including supplemental pension plans, established by our Company
determined using interest rate and mortality rate assumptions
consistent with those used in our Companys financial
statements, and includes amounts which the named executive
officer may not currently be entitled to receive because such
amounts are not vested. For Ms. Kushner, the amount
represents a $16,348 change in her benefits under our Retirement
Plan, and a $117,270 change in her benefits under our
Supplemental Retirement Plan. In 2006, none of the other named
executive officers participated in the Supplemental Retirement
Plan. Earnings on deferred compensation are not reflected in
this column because the return on earnings is calculated in the
same manner and at the same rate as earnings on externally
managed investments of salaried employees participating in the
tax-qualified 401(k) savings plan, and dividends on Company
stock are paid at the same rate as dividends paid to
shareholders. |
| (6) | All Other Compensation includes the following aggregate
perquisites and other items that equaled or exceeded $10,000: |

	Tax Gross-Ups — ($)	Severance	Auto Allowance	Relocation — ($)	401(k) Match	Other Perquisites
Name	(x)	($)	($)	(y)	($)	($)
Robert D. Welding			$ 11,876		$ 4,290	$ 58,661	(z)
Stephanie K. Kushner			$ 11,400		$ 6,600	$ 7,257
David R. McConnaughey	$ 178,801		$ 9,500	$ 113,171		$ 68
Marc F. Gustafson			$ 11,400	$ 36,000	$ 5,742	$ 455
Mark D. Weber			$ 3,800		$ 6,600	$ 3,247
Stephen C. Buck(v)		$ 457,236

| (v) | Does not include any perquisites because the aggregate was less
than $10,000. |
| --- | --- |
| (x) | Mr. McConnaughey received reimbursement for tax expenses
associated with relocation of $11,686, as well as those
attributable to the receipt of a signing bonus of $167,115. |
| (y) | Includes the following amounts paid out as reimbursement for
home purchase expenses: Mr. McConnaughey
$113,171; Mr. Gustafson $36,000. |
| (z) | Mr. Welding received $46,151 for country club membership
fees and dues, as well as a $10,000 Company match of his
charitable contribution to the United Way. |

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Grants of Plan-Based Awards

The following table sets forth information concerning grants of plan-based awards earned for the fiscal year ended December 31, 2006 for the named executive officers:

						All Other	All Other
						Stock	Option		Closing
			Estimated Possible Payouts Under			Awards:	Awards:	Exercise	Price of	Grant Date
			Non-Equity Incentive Plan Awards			Number	Number of	or Base	Stock on	Fair Value
			(1)(2)			of Shares	Securities	Price of	Date of	of Stock
		Board				of Stock	Underlying	Option	Option	and Option
	Grant	Approval	Threshold	Target	Maximum	or Units	Options	Awards	Grant	Awards
Name	Date	Date	($)	($)	($)	(#)	(#)	($/Sh)	($/Sh)	($/Sh)(3)
Robert D. Welding			$ 258,612	$ 517,223	$ 1,180,202
	2/8/06					48,600				$ 834,462
	2/8/06						117,300	$ 16.94	$ 17.17	$ 729,606
Stephanie K. Kushner			$ 79,956	$ 159,913	$ 364,888
	2/8/06					10,400				$ 178,568
	2/8/06						25,235	$ 16.94	$ 17.17	$ 156,962
David R. McConnaughey			$ 65,973	$ 131,945	$ 263,890
	3/6/06	2/22/06				18,900				$ 335,286
	3/6/06	2/8/06					15,000	$ 17.55	$ 17.74	$ 97,350
Marc F. Gustafson			$ 78,000	$ 176,087	$ 400,837
	2/8/06					10,400				$ 178,568
	2/8/06						25,235	$ 16.94	$ 17.17	$ 156,962
Mark D. Weber			$ 69,214	$ 164,564	$ 364,292
	2/8/06					8,100				$ 139,077
	2/8/06						19,550	$ 16.94	$ 17.17	$ 121,601
Stephen C. Buck	2/8/06					8,100				$ 139,077
	2/8/06						19,550	$ 16.94	$ 17.17	$ 121,601

| (1) | Annual incentive plan award payout is determined based
exclusively on objective measures of financial performance. For
each of Ms. Kushner, Mr. McConnaughey,
Mr. Gustafson and Mr. Weber, the target was 50% of
base salary. Mr. Welding was targeted at 75% of his base
salary. The threshold payout amount is 50% of the target amount,
if all incentive plan metrics are achieved at the threshold
performance level. If performance against the incentive plan
metrics is below the threshold, the payout is 0%. The maximum
payment is two times the target amount. |
| --- | --- |
| (2) | These payouts include potential carry forward amounts. |
| (3) | The grant date fair values are calculated based upon the
provision of SFAS 123(R). Shares in the form of restricted
stock are valued at the closing prices of our Companys
common stock on the date of the grant. The Black-Scholes model
is used to estimate the fair value of stock options, resulting
in an estimated value of $6.22 for options granted on
February 8, 2006, and $6.49 for options granted on
March 6, 2006. |

Additional Information About the Compensation Paid to the Named Executive Officers

Mr. Robert D. Welding Our Company has an employment agreement with Mr. Welding. The agreement continues until the December 31st following Mr. Weldings 65th birthday (currently 59), subject to earlier termination by our Company or Mr. Welding. Mr. Weldings annual salary is as approved by the Compensation and Benefits Committee, but may not be less than $600,000 or such higher minimum annual rate as determined by the Committee. At the discretion of our Board of Directors, Mr. Weldings annual compensation may be increased during the term of the agreement. In the event of his death prior to termination of employment, Mr. Weldings estate is entitled to receive in monthly installments an amount equal to one years minimum compensation. The agreement also provides that during Mr. Weldings employment and for a period of 36 months after termination of employment, he will not compete with us.

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Our Company has not entered into formal written employment agreements with any of the other named executive officers. However, pursuant to his employment offer letter issued upon his appointment as President of the Safety and Securities Systems Group, Mr. McConnaughey is entitled to an annual salary of at least $320,000, an annual cash bonus opportunity targeted at approximately 50% of his base salary, annual stock option and restricted stock grants as determined by the Compensation and Benefits Committee, car allowance and participation in our Companys standard benefit package including relocation benefits, health benefits, 401(k) plan and other benefits. Similarly, Mr. Gustafsons employment offer letter entitles him to a base salary of at least $300,000, an annual cash bonus opportunity targeted at approximately 50% of his base salary, annual stock option and restricted stock grants as determined by the Compensation and Benefits Committee, a car allowance and participation in our Companys standard benefits package including relocation benefits, health benefits, 401(k) plan and other benefits.

Mr. Stephen C. Buck resigned from our Company, effective April 24, 2006. Pursuant to an agreement entered into on May 5, 2006 with our Company, Mr. Buck received a severance payment of $457,236 which approximated his annual salary plus annual bonus. In addition, 42,183 unvested stock options and 21,825 unvested stock awards that Mr. Buck held at the date of termination were allowed immediate vesting. Mr. Buck can exercise the vested options within three years of his termination date. Mr. Buck was also provided executive outplacement services for twelve months following the date of termination, as well as subsidized COBRA coverage until the earlier of a) November 5, 2007 or b) the date he becomes eligible to receive other insurance coverage. Following his resignation, Mr. Buck will continue to be covered by our Supplemental Retirement Survivor and Disability Plan. Pursuant to this plan, upon his death his designated beneficiaries will be entitled to receive annual benefit payments of $34,760 for ten years. This benefit is a general obligation of our Company and has been substantially funded by a life insurance policy we obtained from a third party.

The exercise price for each option grant was the lowest sale price of our common stock on the date of grant. As explained in more detail in the Compensation Discussion and Analysis, we have changed our methodology for determining the exercise price for stock options during 2006, and will now set the exercise price of the option at the closing price for our common stock, as reported by the New York Stock Exchange, on the date of the grant of the option. The options granted in 2006 were granted under our 2005 Executive Incentive Compensation Plan, and vest in three equal annual installments on the first three anniversaries of the date of the grant. The restricted shares were granted under our 2005 Executive Incentive Compensation Plan, and vest fully on the third anniversary of the date of the grant and are subject to forfeiture and cancellation if the named executive officer terminates his or her employment with our Company and its subsidiaries prior to that time.

Annual cash bonuses to the named executive officers are paid under our management incentive plan. For 2006, 100% of the target bonuses for Mr. Welding and Ms. Kushner were based on the performance of our Company as a whole. For each of Messrs. McConnaughey, Gustafson and Weber, 20% of the target bonus was based on the performance of our Company as a whole, and the remaining 80% was based on the performance of the division under their direct supervision. The threshold, target and maximum levels of bonus payable were determined based on the Economic Value of our Company. For additional information about how Economic Value is determined, see the discussion under Annual Cash Incentives in the Compensation Discussion and Analysis beginning on page 13.

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Information as to Stock Options

Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning outstanding equity awards, as of the completed 2006 fiscal year, held by the named executive officers:

	Option Awards						Stock Awards
										Equity
										Incentive
									Equity	Plan
									Incentive	Awards:
									Plan	Market or
				Equity					Awards:	Payout
				Incentive					Number of	Value of
			Number of	Plan Awards:				Market	Unearned	Unearned
		Number of	Securities	Number of			Number of	Value of	Shares,	Shares,
		Securities	Underlying	Securities			Shares or	Shares or	Units, or	Units, or
		Underlying	Unexercised	Underlying			Units of	Units of	Other	Other
		Unexercised	Options (#)	Unexercised	Option	Option	Stock that	Stock that	Rights that	Rights that
		Options (#)	Unexercisable	Unearned	Exercise	Expiration	Have Not	Have Not	Have Not	Have Not
Name	Grant Date	Exercisable	(1)	Options (#)	Price ($)	Date	Vested (#)(2)	Vested ($)(3)	Vested ($)	Vested ($)
Robert D. Welding	11/28/2003	100,000			$ 15.10	11/28/2013
	2/12/2004	25,000	25,000		$ 18.89	2/12/2014	25,000	$ 401,000
	2/10/2005	17,133	34,267		$ 16.01	2/10/2015	48,600	$ 779,544
	4/27/2005	28,267	56,533		$ 16.01	4/27/2015
	2/8/2006		117,300		$ 16.94	2/8/2016	48,600	$ 779,544
Stephanie K. Kushner	3/1/2002	25,000			$ 25.67	3/1/2012
	2/6/2003	20,000			$ 15.65	2/6/2013	1,250	$20,050
	10/30/2003	25,000			$ 14.48	10/30/2013
	2/12/2004	5,000	5,000		$ 18.89	2/12/2014	3,750	$60,150
	2/10/2005	9,767	19,533		$ 16.01	2/10/2015	10,400	$ 166,816
	2/8/2006		25,235		$ 16.94	2/8/2016	10,400	$ 166,816
David R. McConnaughey	3/6/2006		15,000		$ 17.55	3/6/2016	18,900	$ 303,156
Marc F. Gustafson	10/20/2004	7,500	7,500		$ 17.68	10/20/2014	7,500	$ 120,300
	2/10/2005	7,567	15,133		$ 16.01	2/10/2015	8,100	$ 129,924
	2/8/2006		25,235		$ 16.94	2/8/2016	10,400	$ 166,816
Mark D. Weber	12/11/1997	2,000			$ 20.44	12/11/2007
	7/8/1999	2,000			$ 21.25	7/8/2009
	12/9/1999	1,000			$ 16.06	12/9/2009
	2/1/2001	1,000			$ 21.95	2/1/2011
	2/6/2002	1,000			$ 23.21	2/6/2012
	4/17/2003	10,000			$ 16.02	4/17/2013	1,250	$20,050
	2/12/2004	5,000	5,000		$ 18.89	2/12/2014	3,750	$60,150
	2/10/2005	7,567	15,133		$ 16.01	2/10/2015	8,100	$ 129,924
	2/8/2006		19,550		$ 16.94	2/8/2016	8,100	$ 129,924
Stephen C. Buck(4)	12/11/1997	15,000			$ 20.44	12/11/2007
	12/10/1998	8,000			$ 23.75	12/10/2008
	12/9/1999	16,000			$ 16.06	12/9/2009
	4/18/2001	10,000			$ 20.91	4/18/2011
	2/6/2002	10,000			$ 23.21	2/6/2012
	2/6/2003	15,000			$ 15.65	2/6/2013
	2/12/2004	15,000			$ 18.89	2/12/2014
	2/10/2005	22,700			$ 16.01	2/10/2015
	2/8/2006	19,550			$ 16.94	2/8/2016

(1) Stock options granted in 2004 vest at a rate of one-half in year two, and one-half in year three. Stock options granted in 2005 and 2006 are subject to graded vesting over a three-year period from the date of grant.

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| (2) | Stock awards granted in 2003 and 2004 vest ratably at 25% over a
four-year period. Stock awards granted in 2005 and 2006 vest on
the third anniversary of the grant date. |
| --- | --- |
| (3) | Based on the closing price of $16.04 per share of our
common stock on December 31, 2006. |
| (4) | Mr. Buck resigned as an executive officer in 2006. In
conjunction with his severance agreement, all outstanding
unvested options and restricted stock awards were deemed vested
as of the last day of his employment. |

Option Exercises and Stock Vested The following table sets forth information concerning amounts received or realized upon exercise of options or similar instruments, and the vesting of stock or similar instruments, by the named executive officers. None of the named executive officers exercised any stock options during the year ended December 31, 2006.

	Option Awards — Number of Shares		Stock Awards(1) — Number of Shares
	Acquired on	Value Realized on	Acquired on	Value Realized on
Name	Exercise (#)	Exercise ($)	Vesting (#)	Vesting ($)
Robert D. Welding			12,500	$ 223,875
Stephanie K. Kushner			5,625	$ 102,644
David R. McConnaughey
Marc F. Gustafson			3,750	$59,025
Mark D. Weber			3,125	$55,969
Stephen C. Buck(2)			30,575	$ 802,901

| (1) | Reflects the lapse of time-based restrictions pursuant to the
terms of grant under our long-term incentive plan for the
2002 - 2004 grant cycles. No amounts were deferred by any
of the named executive officers. |
| --- | --- |
| (2) | Mr. Buck resigned as an executive officer in 2006. In
conjunction with his severance agreement, all outstanding
unvested options and restricted stock awards were deemed vested
as of the last day of his employment. |

Post Retirement Benefits

Pension Benefits Table The following table sets forth information concerning the present value of accumulated pension benefits accrued by and any such payments made to the named executive officers:

	Plan Name	Number of Years — Credited Service	Present Value of — Accumulated	Payments During — Last Fiscal Year
Name	(1)(2)(3)	(#)	Benefit ($)	($)
Robert D. Welding	FSC Retirement Plan	2.0	$44,294
Stephanie K. Kushner(3)	FSC Retirement Plan	3.5	$55,010
	Supplemental Pension Agreement	4.8	$ 176,533
David R. McConnaughey
Marc F. Gustafson
Mark D. Weber
Stephen C. Buck	FSC Retirement Plan	20.3	$ 445,898

(1) Our retirement plan provides retirement benefits for many 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. The approximate annual pension benefit set forth in the table is based on years of service and compensation, and reflects dollar limitations under the Internal Revenue Code, as amended, which limits the annual benefits which may be paid from a tax-qualified retirement plan.

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| (2) | Ms. Kushner was eligible to receive a supplemental payment
upon retirement at or after age 57. She was entitled to a
$25,000 annual supplemental payment after five years of
employment with us, increasing by $5,000 for each year she
worked after five years of employment, up to a maximum of
$50,000 per year. In March of 2007, Ms. Kushner
entered into a Satisfaction and Release Agreement with our
Company regarding her supplemental pension agreement in exchange
for the receipt of six discretionary, supplemental and
additional contributions to the new Federal Signal Savings
Restoration Plan (SRP) as follows: March 1,
2007 $308,472, March 1, 2008
$30,322, March 1, 2009 $11,233, March 1,
2010 $11,658, March 1, 2011
$11,902, and March 1, 2012 $12,365.
Additionally, we agreed to make a discretionary, supplemental
and additional contribution on March 1, 2007 to her SRP
notional account in the amount of $15,798 in recognition of her
lost opportunity to restore company matching contributions to
her 401(k) plan in the years 2005 and 2006. |
| --- | --- |
| (3) | Mr. McConnaughey, Mr. Gustafson and Mr. Weber
were not eligible to participate in this pension plan in 2006. |

The normal retirement age under our retirement plan is age 65. The annual pension earned by an eligible named executive officer is equal to 50% of the named executive officers average monthly compensation (up to a maximum of $105,000), less one-half of Social Security payments, times the named executive officers credited service years (to a maximum of 30 years), divided by 30. For purposes of the Retirement Plan, a named executive officers compensation is his or her salary plus non-equity incentive plan compensation as set forth in the Summary Compensation Table. Under the Retirement Plan, the named executive officers are eligible to retire after age 55 if they have completed at least 10 years of service with our Company. However, in the event of such early retirement, the pension benefits payable are reduced by 1/180 for each month up to 60 months, and 1/360 for each month over 60 months, by which the actual retirement age is less than 65 years.

Non-qualified Deferred Compensation Table The following table sets forth information concerning contributions, earnings, and balances under non-qualified deferred contribution plans for the named executive officers:

	Executive	Registrant	Aggregate	Aggregate	Aggregate
	Contribution in	Contributions in	Earnings in Last	Withdrawals/	Balance at Last
Name(1)	Last FY ($)	Last FY ($)	FY ($)(2)	Distributions ($)	FYE ($)
Robert D. Welding
Stephanie K. Kushner			$9,311		$ 118,985
David R. McConnaughey
Marc F. Gustafson
Mark D. Weber			$314		$4,012
Stephen C. Buck			$ 113,620	1,781,376

| (1) | Pursuant to our Supplemental Savings and Investment Plan, each
eligible named executive officer was permitted to defer up to
100% of his or her annual bonus. Participation in this plan was
frozen in July of 2005 and no additional deferrals were made in
2006. |
| --- | --- |
| (2) | The earnings reported under this column have not been reported
as compensation in the last completed fiscal year in the Summary
Compensation Table because these earnings were not above market.
The earnings on the named executive officers deferred
compensation are calculated in the same manner and at the same
rate as earnings on externally managed investments of salaried
employees participating in the tax-qualified 401(k) savings
plan. Dividends on Company stock held by the named executive
officers are paid at the same rate as dividends paid to
shareholders of our Company. |

Other Potential Post-Employment Payments

Our Company entered into agreements with each named executive officer that provide for payments at, following, or in connection with any termination, including resignation, involuntary termination, retirement, death, disability of a named executive officer, or a Change in Control of our Company. The tables on the following pages reflect the incremental cost to our Company of providing payments and benefits, which are generally not available

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on a non-discriminatory basis, in connection with each of the aforementioned circumstances. The amounts shown in the tables assume that such termination occurs on December 31, 2006, and thus, only includes amounts earned through such time. However, the actual amounts that would be paid out under each circumstance can only be determined at the time of separation.

Material Conditions to Receipt of Payments The receipt of payments and benefits upon termination are conditioned on the named executive officers compliance with the following restrictive covenants set forth in their severance and change in control agreements:

	Execution of a general release;
	Non-disclosure of confidential information to a third party;
	Non-competition with our Company for a twelve month period;
	Cooperation with our Company in connection with any and all
lawsuits, claims, investigations, or similar proceedings;
	Non-solicitation of employees for a twelve month period; and
	Agreement not to disparage our Company or otherwise make
comments harmful to our Companys reputation.

Payments Made Upon Termination Our Company has entered into Executive General Severance Agreements with Messrs. Welding, Gustafson, McConnaughey, Weber and Ms. Kushner that provide for the payment of severance in the event of involuntary termination Without Cause or voluntary termination with Good Reason. If an executives employment is terminated under either of the preceding circumstances, he or she shall receive the following payments and benefits:

| | Payment of cash equal to one times the sum of the named
executive officers base salary and target annual bonus
established for the bonus plan year in which the
executives termination occurs; |
| --- | --- |
| | Payment of a pro-rata portion of the targeted annual bonus for
the year in which the termination occurs; |
| | Continuation of the welfare benefits of medical insurance,
dental insurance, and group term life insurance for an eighteen
month period. These benefits shall be provided to executives at
the same premium cost, and at the same coverage level, as in
effect as of the executives date of termination; |
| | Right to exercise vested options within three months from date
of termination; and |
| | Earned amounts under our 401(k) plan and Savings Restoration
Plan. |

If, however, the named executive officer is terminated by our Company for cause or if the named executive officer voluntarily terminates his or her employment without Good Reason, our Company shall not provide the named executive officer with post-termination payments or benefits other than those vested and accrued under our Companys various compensation plans and programs.

Payments Made Upon Retirement Our Company provides the following post-termination payments and benefits upon retirement:

| | Right to exercise vested options within three years from date of
termination; and |
| --- | --- |
| | Earned amounts under our 401(k) plan and Savings Restoration
Plan. |

In order to be retirement-eligible, a named executive officer must fulfill the age and service requirements stipulated in our retirement plans and other compensation arrangements. None of the named executive officers other than Mr. Buck were eligible for retirement as of December 31, 2006.

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Payments Made Upon Death or Disability In the event of death or disability, named executives officers shall receive the following payments and benefits from our Company:

| | Immediate vesting of all outstanding and unvested stock options.
Named executive officers or his or her designated beneficiary
shall have the right to exercise such options for one year from
the date of disability or death; |
| --- | --- |
| | Immediate vesting of restricted stock; and |
| | Earned amounts under our 401(k) plan and Savings Restoration
Plan. |

In addition to the benefits listed above, named executive officers will receive benefits under our non-discriminatory disability plan or payments under our group life insurance plan in the event of death or disability. Mr. Welding receives an additional executive life insurance benefit through his employment contract in the amount of one times his annual base salary.

Payments Made Upon a Change in Control We maintain Executive Change-in-Control Severance Agreements that cover our named executive officers in the event of a Change in Control of our Company. As set forth in these agreements, if a Change in Control of our Company occurs, the named executive officers would be entitled to immediate and full vesting and lapse of restrictions on all outstanding equity-based long-term incentive awards, including stock options and restricted stock awards. If, however, an executives employment is terminated within 24 calendar months following a Change in Control (other than termination by us for Cause, voluntary termination by the executive without Good Reason, or by reason of death or disability) or if the executive terminates his employment in certain circumstances defined in the agreement which constitute Good Reason, we shall provide each named executive officer with the following:

| | A lump-sum cash payment equal to three times the sum of the
executives base salary and current annual target bonus
opportunity established under the annual bonus plan in which the
executive participates; |
| --- | --- |
| | Immediate and full vesting and lapse of restrictions on all
outstanding equity-based long-term incentive awards, including
stock options and restricted stock awards; |
| | Vesting and cash-out of all outstanding cash-based long-term
incentive awards; |
| | Continuation of health and welfare benefits for up to thirty-six
months following termination. These benefits shall be provided
to the executive at the same coverage level and cost to the
executive as in effect immediately prior to the termination of
the executives employment; and |
| | If the value of the cash payments and the continuation or
acceleration of benefits upon termination under the severance
agreements would subject the executive officer to the payment of
a federal excise tax as excess parachute payments,
the executive would be entitled to receive an additional gross-up payment to cover the full cost of any excise tax and all of the
executives additional federal, state and local income,
excise and employment taxes that arise on the additional payment. |

Under the Executive Change-in-Control Severance Agreements, a Change in Control of our Company means the occurrence of any one or more of the following events:

| | acquisition by any one person or group of beneficial ownership
of forty percent (40%) or more of the combined voting power of
our Companys then outstanding securities; |
| --- | --- |
| | replacement of the majority of the directors of our Company
during any period of twenty-four consecutive months; |
| | consummation of a merger or consolidation of our Company with
another corporation, other than (1) a merger or
consolidation in which the combined voting securities of our
Company immediately prior to such merger or consolidation
continue to represent more than sixty percent (60%) of the
combined voting power of the voting securities of our Company or
the surviving entity outstanding immediately after such merger
or consolidation; or (2) a merger or consolidation effected
to implement a recapitalization of the Company or similar
transaction in which no person or group acquires more than forty
percent (40%) of the combined voting power of our Companys
then outstanding securities; |

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| | approval by our stockholders of a plan or an agreement for the
sale or disposition of all or substantially all of our
Companys assets; or |
| --- | --- |
| | any other transaction that our Board of Directors designates as
being a Change in Control. |

Under the Executive Change-in-Control Severance Agreements, Cause generally means: (1) the executive officers willful and continued failure to substantially perform his or her duties; (2) the executives conviction of a felony; or (3) the executives willful engagement in conduct that is demonstrably and materially injurious to our Company, monetarily or otherwise. Good Reason generally means: (1) the assignment of the executive officer to duties materially inconsistent with the executives authority and duties prior to the change in control or a material reduction in the executives duties and authorities; (2) a reduction in or cancellation of the executives salary, bonus, compensation or other benefit plans; (3) relocation of the executive to a new location in excess of 50 miles from the executives principal office immediately prior to the Change in Control; or (4) any material breach of the Executive Change-in-Control Severance Agreement by our Company.

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Robert Welding

The following table illustrates the potential payments and benefits received by Robert Welding under various employment termination events.

Other Potential Post-Employment Payments

	Involuntary
	Termination	Involuntary					Change in
	Without	Termination					Control and
	Cause or	for Cause or					Termination
	Voluntary	Voluntary					without
	Termination	Termination				Change in	Cause or
	with Good	Without				Control	with Good
	Reason	Good Reason	Retirement	Death	Disability	Only	Reason
Type of Payment	($)	($)	($)	($)	($)	($)	($)
Cash Compensation
Cash Severance	$1,270,395	$0	$0	$0	$0	$0	$4,394,880
Long-Term Incentives
Stock Options
Unvested & Accelerated
Awards	$0	$0	$0	$2,724	$2,724	$2,724	$2,724
Restricted Stock Units
Unvested & Accelerated
Awards	$0	$0	$0	$1,960,088	$1,960,088	$1,960,088	$1,960,088
Retirement Benefits
Pension Plan	$0	$0	$0	$0	$0	$0	$0
401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Non-Qualified 401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Benefits
Continuation of Health &
Welfare Benefits	$11,593	$0	$0	$0	$0	$0	$23,186
Life Insurance and Death Benefit
Payout	$0	$0	$0	$686,700	$0	$0	$0
Disability Payments	$0	$0	$0	$0	$0	$0	$0
Perquisites & Tax Payments
Excise Tax & Gross-Up	$0	$0	$0	$0	$0	$0	$2,053,448
Outplacement	$25,000	$0	$0	$0	$0	$0	$25,000
Total	$1,306,988	$0	$0	$2,649,512	$1,962,812	$1,962,812	$8,459,326

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Stephanie Kushner

The following table illustrates the potential payments and benefits received by Stephanie Kushner under various employment termination events.

Other Potential Post-Employment Payments

	Involuntary
	Termination	Involuntary					Change in
	Without	Termination					Control and
	Cause or	for Cause or					Termination
	Voluntary	Voluntary					without
	Termination	Termination				Change in	Cause or
	with Good	Without				Control	with Good
	Reason	Good Reason	Retirement	Death	Disability	Only	Reason
Type of Payment	($)	($)	($)	($)	($)	($)	($)
Cash Compensation
Cash Severance	$476,625	$0	$0	$0	$0	$0	$1,588,750
Long-Term Incentives
Stock Options
Unvested & Accelerated
Awards	$0	$0	$0	$586	$586	$586	$586
Restricted Stock Units
Unvested & Accelerated
Awards	$0	$0	$0	$413,832	$413,832	$413,832	$413,832
Retirement Benefits
Pension Plan	$0	$0	$0	$0	$0	$0	$0
401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Non-Qualified 401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Benefits
Continuation of Health &
Welfare Benefits	$10,678	$0	$0	$0	$0	$0	$21,355
Life Insurance and Death Benefit
Payout	$0	$0	$0	$0	$0	$0	$0
Disability Payments	$0	$0	$0	$0	$0	$0	$0
Perquisites & Tax Payments
Excise Tax & Gross-Up	$0	$0	$0	$0	$0	$0	$687,997
Outplacement	$25,000	$0	$0	$0	$0	$0	$25,000
Total	$512,303	$0	$0	$414,418	$414,418	$414,418	$2,737,520

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David McConnaughey

The following table illustrates the potential payments and benefits received by David McConnaughey under various employment termination events.

Other Potential Post-Employment Payments

	Involuntary
	Termination	Involuntary					Change in
	Without	Termination					Control and
	Cause or	for Cause or					Termination
	Voluntary	Voluntary					without
	Termination	Termination				Change in	Cause or
	with Good	Without				Control	with Good
	Reason	Good Reason	Retirement	Death	Disability	Only	Reason
Type of Payment	($)	($)	($)	($)	($)	($)	($)
Cash Compensation
Cash Severance	$480,000	$0	$0	$0	$0	$0	$1,600,000
Long-Term Incentives
Stock Options
Unvested & Accelerated
Awards	$0	$0	$0	$0	$0	$0	$0
Restricted Stock Units
Unvested & Accelerated
Awards	$0	$0	$0	$303,156	$303,156	$303,156	$303,156
Retirement Benefits
Pension Plan	$0	$0	$0	$0	$0	$0	$0
401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Non-Qualified 401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Benefits
Continuation of Health &
Welfare Benefits	$21,356	$0	$0	$0	$0	$0	$42,711
Life Insurance and Death Benefit
Payout	$0	$0	$0	$0	$0	$0	$0
Disability Payments	$0	$0	$0	$0	$0	$0	$0
Perquisites & Tax Payments
Excise Tax & Gross-Up	$0	$0	$0	$0	$0	$0	$0
Outplacement	$25,000	$0	$0	$0	$0	$0	$25,000
Total	$526,356	$0	$0	$303,156	$303,156	$303,156	$1,970,867

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Marc Gustafson

The following table illustrates the potential payments and benefits received by Marc Gustafson under various employment termination events.

Other Potential Post-Employment Payments

	Involuntary
	Termination	Involuntary					Change in
	Without	Termination					Control and
	Cause or	for Cause or					Termination
	Voluntary	Voluntary					without
	Termination	Termination				Change in	Cause or
	with Good	Without				Control	with Good
	Reason	Good Reason	Retirement	Death	Disability	Only	Reason
Type of Payment	($)	($)	($)	($)	($)	($)	($)
Cash Compensation
Cash Severance	$468,000	$0	$0	$0	$0	$0	$1,560,000
Long-Term Incentives
Stock Options
Unvested & Accelerated
Awards	$0	$0	$0	$454	$454	$454	$454
Restricted Stock Units
Unvested & Accelerated
Awards	$0	$0	$0	$417,040	$417,040	$417,040	$417,040
Retirement Benefits
Pension Plan	$0	$0	$0	$0	$0	$0	$0
401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Non-Qualified 401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Benefits
Continuation of Health &
Welfare Benefits	$21,356	$0	$0	$0	$0	$0	$42,711
Life Insurance and Death Benefit
Payout	$0	$0	$0	$0	$0	$0	$0
Disability Payments	$0	$0	$0	$0	$0	$0	$0
Perquisites & Tax Payments
Excise Tax & Gross-Up	$0	$0	$0	$0	$0	$0	$0
Outplacement	$25,000	$0	$0	$0	$0	$0	$25,000
Total	$514,356	$0	$0	$417,494	$417,494	$417,494	$2,045,205

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Mark Weber

The following table illustrates the potential payments and benefits received by Mark Weber under various employment termination events.

Other Potential Post-Employment Payments

	Involuntary
	Termination	Involuntary					Change in
	Without	Termination					Control and
	Cause or	for Cause or					Termination
	Voluntary	Voluntary					without
	Termination	Termination				Change in	Cause or
	with Good	Without				Control	with Good
	Reason	Good Reason	Retirement	Death	Disability	Only	Reason
Type of Payment	($)	($)	($)	($)	($)	($)	($)
Cash Compensation
Cash Severance	$393,375	$0	$0	$0	$0	$0	$1,311,250
Long-Term Incentives
Stock Options
Unvested & Accelerated
Awards	$0	$0	$0	$454	$454	$454	$454
Restricted Stock Units
Unvested & Accelerated
Awards	$0	$0	$0	$340,048	$340,048	$340,048	$340,048
Retirement Benefits
Pension Plan	$0	$0	$0	$0	$0	$0	$0
401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Non-Qualified 401(k) Plan	$0	$0	$0	$0	$0	$0	$0
Benefits
Continuation of Health &
Welfare Benefits	$16,427	$0	$0	$0	$0	$0	$32,855
Life Insurance and Death Benefit
Payout	$0	$0	$0	$0	$0	$0	$0
Disability Payments	$0	$0	$0	$0	$0	$0	$0
Perquisites & Tax Payments
Excise Tax & Gross-Up	$0	$0	$0	$0	$0	$0	$594,716
Outplacement	$25,000	$0	$0	$0	$0	$0	$25,000
Total	$434,802	$0	$0	$340,502	$340,502	$340,502	$2,304,323

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AUDIT COMMITTEE REPORT

The Audit Committee of our Board of Directors is currently comprised of four directors, none of whom are officers or employees. All members are independent under rules adopted by the New York Stock Exchange and the Sarbanes-Oxley Act of 2002. The Board of Directors has adopted a charter for the Audit Committee, which was included as Appendix A to our proxy statement filed with the Securities and Exchange Commission on March 22, 2005, and is available on our website.

In accordance with its written charter, the Audit Committee assists the Board in fulfilling its responsibility for monitoring the integrity of the accounting, auditing and financial reporting practices, and compliance with legal and regulatory requirements of our Company, including our codes of business ethics. In addition, for each fiscal year, the Audit Committee selects the independent registered public accounting firm to audit the financial statements of our Company and its subsidiaries, subject to approval of the Board of Directors. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements in the Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee also reviewed disclosures made by our Companys management during the certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in our internal controls.

The Committee reviewed with the independent accountants, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61). In addition, the Committee has discussed with the independent accountants the accountants independence from management and our Company, including the matters in the written disclosures required by the Independence Standards Board (including under Independence Standards Board Standard No. 1), and considered the compatibility of non-audit services with the accountants independence.

The Committee has adopted a policy for the pre-approval of all services and fees to be provided by our independent accountants for audit, audit-related, tax and all other services, which are allowable under applicable rules and regulations. The Committee annually pre-approves types of services and fees. The Committee periodically approves changes in such authorization and also delegates such periodic approval to the Committee Chairman, who reports any such authorizations to the Committee at its next meeting.

The Committee discussed with our internal auditors and independent accountants the overall scope and plans for their respective audits. The Committee meets with the internal auditors and independent accountants, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of the our financial reporting.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the Securities and Exchange Commission.

SUBMITTED BY THE AUDIT COMMITTEE

CHARLES R. CAMPBELL, CHAIRMAN ROBERT M. GERRITY

JAMES E. GOODWIN ROBERT S. HAMADA

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ACCOUNTING INFORMATION

Our Board of Directors selected Ernst & Young LLP to serve as its independent registered public accounting firm for the fiscal year ended December 31, 2006.

Ernst & Young LLP fees for 2005 and 2006 were:

($s in thousands)	2006	2005
Audit Fees(1)	$ 2,400	$ 2,540
Audit-Related Fees(2)
Tax Fees(3)	262	100
All Other Fees(4)
Total	$ 2,662	$ 2,640

callerid=999 iwidth=455 length=60

| (1) | Audit Fees These are fees for professional
services performed by Ernst & Young LLP for:
(a) the audit of our annual financial statements and review
of financial statements included in our Form 10-Q filings, and services that are normally provided in connection
with statutory and regulatory filings or engagements; and
(b) the audit of our system of internal control over
financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002. |
| --- | --- |
| (2) | Audit-Related Fees These are fees for the
assurance and related services performed by Ernst &
Young LLP that are reasonably related to the performance of the
audit or review of our financial statements. Fees incurred
principally relate to elective audit procedures performed at a
non-US subsidiary. |
| (3) | Tax Fees These are fees for professional
services performed by Ernst & Young LLP with respect to
tax compliance, tax advice and tax planning. Fees incurred
principally relate to review of tax returns, preparation of tax
returns or supporting documentation and consultation with regard
to various tax planning issues. |
| (4) | All Other Fees These are fees for
miscellaneous other services performed by Ernst & Young
LLP that do not meet the above categories. |

The Audit Committee has adopted a policy for the pre-approval of all services and fees to be provided by our independent registered public accounting firm for audit, audit-related, tax and all other services allowable under applicable rules and regulations. This policy is described above in the Audit Committee Report. All such services and fees provided by our independent registered public accounting firm during 2006 were pre-approved by the Audit Committee.

PROPOSAL 3 RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2007

Our Board of Directors, upon the recommendation of the Audit Committee, has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2007. A resolution will be presented at the meeting to ratify the appointment of Ernst & Young LLP.

Ernst & Young LLP served as our independent registered public accounting firm for the fiscal year ended December 31, 2006. A representative of that firm will be present at the Annual Meeting with the opportunity to make a statement if he or she desires to do so and to respond to any questions that you may have. The appointment of the independent accountants is approved annually by the Audit Committee.

Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2007, will require the affirmative vote of a majority of the votes cast upon this proposal at the Annual Meeting. The Board of Directors recommends that you vote for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2007.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To our knowledge, based solely upon our review of copies of reports received by us pursuant to Section 16(a) of the Securities Exchange Act of 1934, we believe that all of our directors, officers and beneficial owners of more than 10 percent of our common stock filed all such reports on a timely basis during 2006.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2006 with respect to the shares of common stock that may be issued under our existing equity compensation plans:

	Number of Securities — to be Issued upon	Weighted-Average Exercise	Number of Securities — Remaining Available
	Exercise of Outstanding	Price of Outstanding	for Future Issuance
	Options, Warrants	Options, Warrants	under Equity
Plan Category	and Rights(#)	and Rights ($)	Compensation Plans (#)
Equity Compensation Plans Approved
by Security Holders(1)
1996 Stock Benefit Plan	1,942,207	$ 18.64	552,721
2005 Executive Incentive
Compensation Plan	670,832	$ 16.71	2,963,385
Total	2,613,039	$ 18.15	3,516,106

callerid=999 iwidth=455 length=48

(1) Our Company has no equity compensation plans which have not been approved by stockholders.

FUTURE STOCKHOLDER PROPOSALS

In order to be considered for inclusion in the proxy statement for the 2008 Annual Meeting of Stockholders, we must receive any stockholder proposals on or before November 24, 2007.

In order for other business to be considered at the 2008 Annual Meeting, we must receive information relating to such other business on or before February 7, 2008. A stockholder may nominate candidates for election as directors at stockholder meetings by following the procedures set forth in the proxy statement under Committees of the Board of Directors Nominating and Governance Committee.

OTHER BUSINESS

As of the date hereof, the foregoing is the only business which our Board of Directors and management intend to present, or are aware that others will present, at the meeting. If any other proper business should be presented at 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,

Jennifer L. Sherman

Corporate Secretary

Federal Signal Corporation

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c/o National City Bank Shareholder Services Operations Locator 5352 P.O. Box 94509 Cleveland, OH 44101-4509

Vote by Telephone

Have your proxy card available when you call the Toll-Free Number 1-888-693-8683 using a touch-tone phone and follow the simple instructions to record your vote.

Vote by Internet

Have your proxy card available when you access the website www.cesvote.com and follow the simple instructions presented to record your vote.

Vote by Mail

Please mark, sign and date your proxy card and return it in the postage-paid envelope provided or return to: National City Bank, P.O. Box 535300, Pittsburgh, PA 15253.

Vote by Telephone Call Toll-Free using a Touch-Tone phone: 1-888-693-8683

Vote by Internet Access the website and cast your vote: www.cesvote.com

Vote by Mail Return your proxy in the postage-paid envelope provided.

Vote 24 hours a day, 7 days a week!

If you vote by telephone or Internet, please do not send your proxy by mail.

If voting by mail, Proxy must be signed and dated below.

ê Please fold and detach card at perforation before mailing. ê

FEDERAL SIGNAL CORPORATION

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby nominates, constitutes and appoints Jennifer L. Sherman and Lana J. Noel (the Proxies), or either of them, with full power to act alone, true and lawful attorney(s), with full power of substitution, for the undersigned and in the name, place and stead of the undersigned to vote as indicated on this proxy card all of the shares of common stock, $1.00 par value, of Federal Signal Corporation entitled to be voted by the undersigned at the 2007 Annual Meeting of Stockholders to be held at the Embassy Suites Hotel, 707 E. Butterfield Road, Lombard, Illinois on Tuesday, April 24, 2007 at 3:30 p.m., local time, and at all adjournments or postponements thereof.

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 Proposals 1 and 2 and FOR Proposal 3.

Dated:
Signature(s)
Please sign exactly as name appears hereon. Joint owners should each sign.
Where applicable, indicate official position or representative capacity.

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ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE

If you are a registered holder of shares of Federal Signal, you have the option to access future stockholder communications (e.g., annual reports, proxy statements and related proxy materials) over the Internet instead of receiving those documents in print. Participation is completely voluntary. If you give your consent by checking the box below, in the future, when Federal Signals stockholder communications are available over the Internet, the package you receive by mail containing your proxy voting card will contain the Internet location where such material is available (http://www.federalsignal.com). The stockholder communication materials will be presented in PDF format. There is no cost to you for this service other than any charges you may incur from your Internet provider, telephone and/or cable company. Once you give your consent, it will remain in effect until revoked by you. You may revoke your consent at any time and/or request paper copies of any stockholder communications by notifying Federal Signals transfer agent, National City Bank, or Federal Signal in writing at the address below.

Federal Signal Corporation 1415 W. 22 nd Street #1100 Oak Brook, IL 60523

To give your consent to receive such materials electronically, check the appropriate box located below on the attached proxy/voting instruction card when you vote by mail.

YOUR VOTE IS IMPORTANT

Regardless of whether you plan to attend the Annual Meeting of Stockholders, you can be sure your shares are represented at the meeting by promptly returning your proxy in the enclosed envelope.

â Please fold and detach card at perforation before mailing. â

Federal Signal Corporation Proxy

Unless otherwise instructed, this Proxy will be voted FOR the nominees listed in Proposals 1 and 2 and FOR Proposal 3.

ELECTION OF CLASS II DIRECTORS

o
Instructions: To withhold authority to vote for any individual nominee, draw a line through
that nominees name listed below.

(1) John F. McCartney (2) Robert M. Gerrity (3) Robert S. Hamada

ELECTION OF CLASS III DIRECTOR

o
(4) Brenda L. Reichelderfer

RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS FEDERALS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2007.

o FOR o AGAINST o ABSTAIN

The Proxies are authorized to vote upon such other matters as may properly come before the meeting or any adjournment thereof in such manner as said Proxies shall determine in their sole discretion.

o By checking the box to the left, I consent to future access to stockholder communications (e.g., annual reports, proxy statements, related proxy materials) electronically via the Internet, as described in the accompanying notice. I understand Federal Signal may no longer distribute printed materials to me for any future stockholders meeting until such consent is revoked. I understand I may revoke my consent at any time by writing Federal Signals transfer agent, National City Bank, or Federal Signal and that costs normally associated with electronic access, such as usage and telephone charges, will be my responsibility.

(Continued, and to be signed , on the reverse side)

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FEDERAL SIGNAL CORP /DE/ Proxy Solicitation & Information Statement 2007

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FEDERAL SIGNAL CORP /DE/ — Proxy Solicitation & Information Statement 2007

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FEDERAL SIGNAL CORP /DE/ Proxy Solicitation & Information Statement 2007