EXHIBIT 10.b
FEDERAL SIGNAL CORPORATION
Corporate Management Incentive Bonus Plan
The incentive bonus plan has been established to provide an incentive to key
corporate officers and management employees of Federal Signal Corporation to
attain the highest performance possible in each year. The plan provides key
executives with an opportunity to add to their total annual compensation, if the
corporation attains prescribed levels of return on capital and increases in net
income and the participant fulfills agreed upon objectives during the year. The
details of the plan follow.
I. Incentive bonus calculations
A) Target bonus
A target bonus amount will be established for each plan participant in the
plan. This target bonus amount will be based upon a specified percentage
of the participant's salary.
B) Bonus goals
1) A specified portion of the bonus amount will be based on corporate
return on capital (ROC). For this purpose, ROC is defined as the
percent of after-tax income excluding after-tax unusual or
extraordinary items (see Section IIC3) plus interest on debt divided
by the year's monthly average of the sum of stockholders' equity plus
debt. With regard to this portion of the bonus determination, each
participant's bonus will be subject to calculation in accordance with
the scale on Attachment A for total corporate performance.
2) A specified portion of the bonus amount will be based on the
corporation's increase in net income for the year over the prior
year's net income. For this calculation, "net income" is defined by
generally accepted accounting principles subject to inclusion or
exclusion of unusual or extraordinary items as decided by the Chief
Executive Officer. With regard to this portion of the bonus
determination, each participant's bonus will be subject to calculation
in accordance with the scale on Attachment B for total corporate
performance.
3) A specified portion of the bonus amount is discretionary based on an
evaluation of the participant's performance (see Section IIB). This
part of your bonus also constitutes payment for any unused vacation
and by accepting the bonus payment you waive any claims for payment
for unused vacation. With regard to this portion of the bonus
determination, each participant's bonus will be subject to paragraph
IIB. below.
II. Administration
A) Determination of bonus award
Following the completion of the year-end audit, the actual bonus for each
participant will be calculated as follows:
1) Multiply the applicable target bonus by the respective bonus factor as
determined by Attachments A and B.
2) The discretionary award factor will be determined in accordance with
IIB. below by the employee's supervisor, which in turn requires
"one-over-one" approval. The discretionary target bonus will then be
multiplied by the discretionary award factor.
B) Determination of discretionary award
Each participant will be evaluated against the following criteria:
1) General performance of the participant's responsibilities.
2) Meeting the participant's objectives and/or priorities.
3) Evaluation of initiative, attitude, and dedication to the company.
4) Management development of self and subordinates.
5) Professional and personal conduct.
C) Other considerations
1) Bonus awards will be paid only to participants who are actively
employed as of the bonus payment date.
2) In the event of the retirement of a participant during the management
incentive bonus plan year, the amount of bonus award will be based on
the full year results with credit for the number of completed months
worked as a percent of the full plan year.
3) Net income as used in Section IB1 will be inclusive of any changes in
reserves, but will exclude any capital gains or losses and other
unusual gains or losses such as proceeds of fire or casualty insurance
or changes in accounting practices. In cases of uncertainty, the
decision of the Chief Executive Officer will be final.