exv10wee







	 	 	 	 	 



EXHIBIT
EE




Federal Signal Corporation

Management Incentive Plan—Detailed Specifications



The following Management Incentive Plan specifications provide a detailed description of a new
annual incentive bonus arrangement for Federal Signal Corporation executives. The plan will provide
key corporate and business unit executives an opportunity to earn an annual cash award based on the
level of achievement of specific “Economic Value” (“EV”) based goals over a 12-month period and
beyond.




	 	 	 
	Effective Date

	 	The effective date of the plan will be January 1, 2005, and will replace the annual bonus
opportunity offered under the existing Management Incentive Plan.
	 
	 	 
	Performance Period

	 	The measurement period, for earning an award under this Plan, will be 12 months in
length, which will correspond to the calendar year.
	 
	 	 
	General Plan Concept

	 	Specific EV goals will be established for each 12-month performance period (i.e., 3-year
goals stated in annual increments). The level of achievement of the preestablished EV
goals by the end of each year will determine the size of the corresponding bonus earned
by each participant for that year. A “carry-forward” feature will exist, such that bonus
dollars at or above target not earned in any year can be re-earned over the next two
years (50% in the first year, and the remaining 50% in the second year).
	 
	 	 
	Eligibility

	 	Top executives and key contributors at both the corporate and business unit levels (i.e.,
approximately 244 incumbents) will be eligible to participate in this Plan for 2005. This
includes corporate officers and direct reports, and Group and Business Unit Heads, Vice
Presidents, and specified managers.




The Plan may be expanded in 2006 to include all salary-exempt employees. Further
expansion is possible in 2007 to include all hourly employees.
	 
	 	 
	Award Opportunities

	 	Minimum, target, and maximum award opportunities will be established for each participant
level, as a percentage of salary grade midpoint for each grade.




The minimum opportunity will be 50 percent of target and maximum will be 200 percent of
target (with target being 100%).






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	 	The proposed award opportunities for the 2005 plan year are as follows:






	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Bonus Award Opportunity
	 	 	 	(As a Percent of Salary Grade Midpoint)
	 	 	 	Minimum	 	 	 	 	 	 	Maximum
	Position	 	 	(50% of Target)	 	 	Target	 	 	(200% of Target)
	Corporate
	 	 	 	 	 	 	 	 	 	 	 	 
	President and CEO
	 	 	37.5	%	 	 	75	%	 	 	150	%
	 
	VP-CFO
	 	 	25.0	%	 	 	50	%	 	 	100	%
	 
	VP-Legal
	 	 	20.0	%	 	 	40	%	 	 	80	%
	VP-HR
	 	 	20.0	%	 	 	40	%	 	 	80	%
	VP-CIO
	 	 	20.0	%	 	 	40	%	 	 	80	%
	 
	VP-Corporate Development
	 	 	15.0	%	 	 	30	%	 	 	60	%
	VP-Controller
	 	 	15.0	%	 	 	30	%	 	 	60	%
	VP-Treasurer
	 	 	15.0	%	 	 	30	%	 	 	60	%
	VP-Internal Audit
	 	 	15.0	%	 	 	30	%	 	 	60	%
	VP-Taxes
	 	 	15.0	%	 	 	30	%	 	 	60	%
	VP-Procurement
	 	 	15.0	%	 	 	30	%	 	 	60	%
	 
	Assistant Treasurer
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Assistant Controller
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Assistant VP Leasing
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Director Supply Chain
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Director Audit
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Director HR
	 	 	10.0	%	 	 	20	%	 	 	40	%
	Corporate Attorney
	 	 	10.0	%	 	 	20	%	 	 	40	%
	 
	Procurement Manager
	 	 	7.5	%	 	 	10	%	 	 	20	%
	Commodity Manager
	 	 	7.5	%	 	 	10	%	 	 	20	%
	Supply Chain Manager
	 	 	7.5	%	 	 	10	%	 	 	20	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Business Groups and Units
	 	 	 	 	 	 	 	 	 	 	 	 
	Group Presidents
	 	 	25.0	%	 	 	50	%	 	 	100	%
	 
	Group Vice Presidents
	 	 	15.0	%	 	 	30	%	 	 	60	%
	General Managers
	 	 	12.5	%	 	 	25	%	 	 	50	%
	 
	Direct Reports to VPs
	 	 	10.0	%	 	 	20	%	 	 	40	%






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	Carry-Forward Opportunity

	 	If, in any 12-month bonus plan year,
the maximum bonus opportunity is not
earned, the difference between the
maximum opportunity and the actual
bonus earned, or the “unearned
spread” (“US”) can be re-earned over
the next two years by achieving the
corresponding goal (i.e., target
through maximum) in those years.
However, performance in years 2 and
3 must be at or above target for any
amount to be earned. Fifty percent
of the US can be earned in the
immediately proceeding year, with
the remaining 50 percent being
re-earnable in the year thereafter.
If not re-earned in the specified
year, the opportunity expires.



Overlapping unearned spread
opportunities can exist if the
maximum bonus is not earned in
consecutive years as follows:






	 	 	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2006	 	2007	 	2008	 	2009
	 	 	 
	2005 Bonus
Opportunity

	 	50% Min. to
200% Max.
	 	50% of
Unearned Spread
	 	50% of
Unearned
Spread
	 	—
	 	—
	2006 Bonus
Opportunity

	 	—
	 	50% Min. to
200% Max.
	 	50% of
Unearned
Spread
	 	50% of
Unearned 

Spread
	 	—
	2007 Bonus
Opportunity

	 	—
	 	—
	 	50% Min. to
200% Max.
	 	50% of
Unearned
Spread
	 	50% of
Unearned 


Spread






	 	 	 
	Performance 


Metrics/Goals

	 	EV will be the exclusive performance measure and, thereby,
the level of achievement of the EV goal will determine
100 percent of each participant’s bonus.
	 
	 	 
	 

	 	Every three years EV goals will be established for a
three-year period. These
three-year goals should be considered fixed, absent the
occurrence of any significant unforeseeable events. The
three-year goal will be communicated to participants in
terms of three annual goals. The level of achievement of
the annual goal will determine the value of the earned
award each year.






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	Weighting

	 	The level of achievement of the EV goal will be weighted
for corporate, versus group, versus business unit
performance, dependent upon where each participant is
employed within the organization.
	 
	 	 
	 

	 	An example of the possible weighting for 2005 is as follows:






	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	EV Goal Weighting Guidelines
	 	 	 	Corporate	 	 	Group	 	 	Unit
	Position	 	 	Level	 	 	Level	 	 	Level
	 
	Corporate

	 	 	 	 	 	 	 	 	 	 	 	 
	
President and CEO
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	VP-CFO
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	VP-Legal
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-HR
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-CIO
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	VP-Corporate Development
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-Controller
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-Treasurer
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-Internal Audit
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-Taxes
	 	 	100	%	 	 	 	 	 	 	 	 
	VP-Procurement
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	Assistant Treasurer
	 	 	100	%	 	 	 	 	 	 	 	 
	Assistant Controller
	 	 	100	%	 	 	 	 	 	 	 	 
	Assistant VP Leasing
	 	 	100	%	 	 	 	 	 	 	 	 
	Director Supply Chain
	 	 	100	%	 	 	 	 	 	 	 	 
	Director Audit
	 	 	100	%	 	 	 	 	 	 	 	 
	Director HR
	 	 	100	%	 	 	 	 	 	 	 	 
	Corporate Attorney
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	Procurement Manager
	 	 	100	%	 	 	 	 	 	 	 	 
	Commodity Manager
	 	 	100	%	 	 	 	 	 	 	 	 
	Supply Chain Manager
	 	 	100	%	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Business Groups and Units
	 	 	 	 	 	 	 	 	 	 	 	 
	Group Presidents
	 	 	20	%	 	 	80	%	 	 	 	 
	 
	Group Vice Presidents
	 	 	10	%	 	 	90	%	 	 	 	 
	Direct Reports to VPs at group
	 	 	 	 	 	 	100	%	 	 	 	 
	 
	General Managers
	 	 	 	 	 	 	20	%	 	 	80	%
	Direct Reports to VPs at unit
	 	 	 	 	 	 	20	%	 	 	80	%
	 






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	Termination of Employment

	 	If a participant’s employment is
terminated due to normal retirement
(as defined under the Company’s
qualified retirement plan), death,
or permanent disability, at any time
prior to the end of the plan year in
which any annual bonus is otherwise
earned, the participant will receive
a pro rata payout of the actual
bonus earned, based on the number of
days actively employed during the
bonus plan year. This pro rata bonus
will be paid after the end of the
corresponding plan year, at the same
time active participants receive
their bonus payouts. If a
participant’s employment is
terminated for any other reason,
prior to the end of the plan year in
which any annual bonus is otherwise
earned, the participant shall not be
eligible to receive a payout for
that year.
	 
	 	 
	 

	 	Notwithstanding the above, upon a
Change in Control and for two years
thereafter, if a participant’s
employment is terminated
involuntarily by the Company without
Cause, or voluntarily by the
participant for Good Reason, then
the participant shall receive a pro
rata portion of their target bonus
for the year of termination, within
ten calendar days of termination.
	 
	 	 
	 

	 	“Cause” and “Good Reason” shall have
definitions identical to those
contained in the Executive
Change-in-Control Agreements.
	 

	“Umbrella” Pool Plan Design

	 	The plan will be structured so that
payouts will be exempt from the
Internal Revenue Code Section 162(m)
“$1 million” nondeductibility rules.
To accomplish this exemption,
separate and distinct from the EV
plan design, a bonus pool will be
established annually (for the proxy
reported executives) based on a
single, fixed financial metric
(e.g., 1.5% of net income). The
Committee will then use “negative
discretion” to award bonuses based
on the EV performance criteria using
the actual minimum, target, and
maximum award opportunities by
position. As long as the actual
bonuses paid (using the EV criteria)
are less than the amount as
determined by the umbrella pool
approach, all payouts should be
exempt as being “performance based”
under Section 162(m).
	 
	 	 
	 

	 	Note: This approach will require
shareholder approval of the umbrella
pool formula and maximum
opportunities for each proxy
reported participant, among other
details. These provisions will be
made a part of the long-term
incentive plan document (which also
will require shareholder approval
via the next proxy statement).
	 
	 	 
	Deferral of Bonus Dollars

	 	Executives who otherwise participate
in the Company’s voluntarily
deferral plan will be allowed to
voluntary defer all or any portion
of amounts earned under this bonus
plan, subject to properly executed
deferral elections.






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Bonus Calculation Example




Bonus Calculation for 2005




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Minimum	 	 	Target	 	 	Maximum	 
	 	 	 	 	 	 	% of	 	 	 	Required	 	 	% of	 	 	 	Required	 	 	% of	 	 	 	Required	 
	Position	 	Midpoint	 	 	Midpoint	 	 	 	EV	 	 	Midpoint	 	 	 	EV	 	 	Midpooint	 	 	 	EV	 
	 
	Corporate
VP— CFO
	 	$	265,000	 	 	 	25	%	 	 	<$23.8M>	 	 	 	50	%	 	 	<$17.1M>	 	 	 	100	%	 	 	<$7.0M>	 
	 
	 	 	 	 	 	 	($66,200	)	 	 	 	 	 	 	($132,500	)	 	 	 	 	 	 	($265,000	)	 	 	 	 
	 





Assumptions





	•	 	One hundred percent of the goals are based on corporate-wide performance (i.e., there is no
weighting given to business group or business unit performance).






	•	 	At the end of the year, presume the target level of EV performance is achieved.





Bonus Amounts





	•	 	Regular Annual Bonus. With the achievement of target level of EV performance, the result is
a payout of the target bonus amount of $132,500 (or 50% of base pay).






	•	 	Carry-Forward Opportunity. In addition to the regular annual bonus, 50 percent of the
difference between the maximum opportunity and the actual earned
bonus (($265,000 – $132,500)
× 50% = $66,250) can be earned in the next year, proportionally, if anywhere between target
and maximum performance is achieved by the end of that year (i.e., not the base year maximum
goal of <$7.0M>). Further, the remaining 50 percent can be earned in the second year
thereafter, proportionally, if anywhere between target and maximum performance is achieved by
that year end (less the amounts previously earned).






	•	 	Interpolation. For performance between the points (i.e., minimum, target, and maximum), the
actual payout will be determined by using straight-line interpolation between the points.






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