Confidential, for Use of the
Commission only (as permitted by Rule
14a-6(e)(2))
Definitive Proxy
Statement
Definitive Additional
Materials
Soliciting Material Under Rule
14a-12
FEDERAL SIGNAL
CORPORATION
(Name of Registrant as Specified in its
Charter)
WARREN B. KANDERS
STEVEN R. GERBSMAN
NICHOLAS SOKOLOW
(Name of Person(s) Filing Proxy
Statement if Other Than the Registrant)
Payment of Filing Fee (Check the
appropriate box)
x
No fee
required.
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:
Fee paid previously with
preliminary materials.
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:
TABLE
OF CONTENTS
Page
INTRODUCTION
4
BACKGROUND
TO THE SOLICITATION
5
REASONS
TO VOTE FOR THE KANDERS GROUP’S NOMINEES
9
ABOUT
THE KANDERS GROUP AND THE NOMINEES
13
PROPOSAL
1
14
ELECTION
OF THE KANDERS GROUP’S NOMINEES
14
PROPOSAL
2
16
COMPANY
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
16
OTHER
MATTERS TO BE CONSIDERED AT THE 2009 ANNUAL MEETING
17
CERTAIN
INFORMATION REGARDING THE PARTICIPANTS AND NOMINEES
17
OTHER
MATTERS
17
SOLICITATION;
EXPENSES
18
VOTING
AND REVOCATION OF PROXIES
18
APPENDIX
A
21
BENEFICIAL
OWNERSHIP INFORMATION AND TWO YEAR TRANSACTION HISTORY
21
BENEFICIAL
OWNERSHIP OF WARREN B. KANDERS
21
BENEFICIAL
OWNERSHIP OF NICHOLAS SOKOLOW
21
TRADING
ACTIVITY OF WARREN B. KANDERS
22
TRADING
ACTIVITY OF NICHOLAS SOKOLOW
24
i
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED MARCH 19, 2009
ANNUAL MEETING OF STOCKHOLDERS
OF
FEDERAL SIGNAL
CORPORATION
_____________________________________________
PROXY STATEMENT OF
WARREN B. KANDERS
STEVEN R. GERBSMAN
NICHOLAS SOKOLOW
To Stockholders of Federal Signal
Corporation:
This proxy statement (the “Proxy Statement”) and the enclosed GOLD proxy card are being furnished to
stockholders of Federal
Signal Corporation (the
“Company” or “Federal
Signal”) in connection with
the solicitation of proxies by Warren B. Kanders, Steven R. Gerbsman
and Nicholas Sokolow (collectively,
the “Kanders Group,” “us” or “we”) to be used at the 2009 annual meeting of stockholders of the
Company, including any adjournments or postponements thereof and any meeting
held in lieu thereof (the “2009 Annual Meeting”). The 2009 Annual Meeting is scheduled to be held on ______,
__________at ______ p.m., local time, at ___________. The date of this Proxy Statement is
_________, 2009. This Proxy Statement and the GOLD proxy card are first being furnished to
stockholders on or about _____, 2009.
NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIAL: Our proxy materials are available on
the following web site:_______________________.
THIS SOLICITATION IS BEING MADE BY
THE KANDERS GROUP
AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”).
The Kanders Group is soliciting your proxy for the
2009 Annual Meeting in support of the
following proposals:
(1) To elect Warren B. Kanders, Steven R. Gerbsman
and Nicholas Sokolow (collectively, the “Nominees”) to serve
as Class I Directors of the Company until the 2012 annual meeting of stockholders or until
their respective successors have been duly elected and qualified;
(2) To ratify the appointment of
Ernst & Young
LLP as the Company’s independent registered public accounting
firm for 2009; and
(3) To consider and act upon such other
matters as may properly come before the 2009 Annual Meeting or any adjournments,
postponements or continuations thereof.
Stockholders who own shares of the
Company’s common stock, $1.00 par value per share (the “Common
Stock”) at the close of business on March 3, 2009, the record date for the
2009 Annual Meeting (the “Record Date”), as
determined by the Company’s Board, and as set forth in the Company’s proxy
statement for the 2009 Annual Meeting, will be entitled to
vote at the 2009 Annual Meeting. Each stockholder is
entitled to one vote for each share of Common Stock the stockholder owned as of
the Record Date.
According to the Company’s proxy
statement for the 2009
Annual Meeting, as of the
Record Date, there were 47,592,751 shares of Common Stock outstanding and
entitled to vote at the 2009 Annual Meeting.
As of the Record Date, Warren B. Kanders beneficially owns, in the aggregate,
1,253,313 shares of Common Stock, representing
approximately 2.63% of the Company’s outstanding Common
Stock and Nicholas Sokolow beneficially
owns, in the aggregate,
119,043 shares of Common Stock. Messrs. Kanders and Sokolow intend to vote such shares of Common
Stock FOR the election of the Nominees.
OUR NOMINEES ARE COMMITTED TO ACTING IN THE
BEST INTERESTS OF ALL STOCKHOLDERS. YOU SHOULD HAVE A VOICE IN THE FUTURE OF THE
COMPANY; WE BELIEVE THAT
CAN BEST BE EXPRESSED
THROUGH THE ELECTION OF OUR NOMINEES. ACCORDINGLY, THE KANDERS GROUP URGES YOU TO VOTE YOUR GOLD PROXY CARD FOR THE KANDERS GROUP’S NOMINEES.
As explained in the detailed
instructions on your GOLD proxy card, there are three ways
you may vote.
1. By
Mail. If your shares are registered in your own
name, you may sign, date and return the enclosed
GOLD proxy card directly to the Kanders Group, c/o MacKenzie Partners, Inc., in the
enclosed postage-paid envelope. The Kanders Group recommends that you vote on the GOLD proxy card even if you plan to attend
the 2009 Annual Meeting.
If your shares are held in the name of a
brokerage firm, bank, or nominee on the Record Date, only such brokerage firm,
bank, or nominee can vote such shares and only upon receipt of your specific
instructions. Accordingly, please promptly contact the person responsible for
your account at such institution and instruct that person to execute and return
the GOLD proxy card on your behalf. Please do
this for each account you maintain to ensure that all of your shares are voted.
We urge you to confirm your instructions
in writing to the person responsible for your account and to provide a copy of
such instructions to the
Kanders Group at the
address set forth on the back cover, so that we are aware of all instructions and can
attempt to ensure that such instructions are followed.
2. In
Person. If you are a record
holder, you may vote in
person by attending the 2009 Annual Meeting. Written ballots will be
distributed to stockholders of record who wish to vote in person at the
2009 Annual Meeting. However, if you hold your shares through a bank,
broker or other custodian, you must obtain a legal proxy from such custodian in
order to vote in person at the meeting.
2
3. By Telephone
or Internet. You
may deliver your voting
instructions by telephone or over the Internet. Instructions for voting by
telephone or over the Internet may be found on the GOLD proxy card.
THE KANDERS GROUP URGES YOU NOT TO VOTE THE WHITE PROXY CARD SENT TO YOU BY THE COMPANY.
IF YOU HAVE ALREADY VOTED THE WHITE PROXY CARD, YOU MAY VOTE FOR THE KANDERS NOMINEES AND
REVOKE YOUR PREVIOUSLY
SIGNED PROXY BY SIGNING AND RETURNING A LATER-DATED GOLD PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE, BY DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE KANDERS GROUP OR TO MACKENZIE PARTNERS, INC. AT THE ADDRESS
SET FORTH BELOW OR BY VOTING IN PERSON BY ATTENDING THE 2009 ANNUAL
MEETING. ONLY YOUR LATEST DATED PROXY WILL COUNT
AT THE 2009 ANNUAL MEETING.
HOLDERS OF SHARES AS OF THE RECORD DATE
ARE URGED TO SUBMIT A GOLD PROXY CARD EVEN IF YOUR SHARES WERE
SOLD AFTER THE RECORD DATE. IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE
FIRM, BANK, BANK NOMINEE OR OTHER INSTITUTION ON THE RECORD DATE, ONLY THAT
INSTITUTION CAN VOTE THOSE SHARES AND ONLY UPON RECEIPT OF YOUR SPECIFIC
INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT THAT PERSON TO SIGN AND RETURN ON YOUR BEHALF THE
GOLD PROXY CARD AS SOON AS
POSSIBLE.
The Kanders Group has retained MacKenzie Partners, Inc.
to assist us in communicating with stockholders in
connection with the proxy solicitation and to assist in efforts to obtain
proxies, and will pay them
a fee of $________, plus expenses, for their services. If you have any questions about
executing your GOLD proxy, or if you require assistance,
please contact:
According to publicly available
information, the Company
has a classified board, currently consisting of three (3) Class I directors,
three (3) Class II directors and four (4) Class III directors. At each annual
meeting of stockholders, directors are duly elected for a full term of three
years to succeed those whose terms are expiring. The Company has announced that
three persons will be elected as Class I
directors of the Company at the 2009 Annual Meeting. Each person elected as
a Class I director is elected to hold office
until the 2012 annual meeting and until his or her
respective successor shall have been duly elected and qualified. The Class
II and Class III directors currently serve until the
annual meetings of stockholders to be held in 2010 and 2011, respectively.
Warren B. Kanders has provided written notice to the Company
of his intent to nominate three individuals, Warren B. Kanders, Steven R. Gerbsman
and Nicholas Sokolow, for
election to the Board as Class I directors at the 2009 Annual Meeting, and is soliciting your proxy in support of
their election. We believe
the Nominees are highly
qualified individuals based on their extensive business and professional
experience and
credentials.
A quorum of stockholders is necessary to
transact business at the 2009 Annual Meeting. A majority of the outstanding shares,
present in person or by proxy, will constitute a quorum at 2009 Annual Meeting.
According to the Company’s proxy statement for the
2009 Annual Meeting, for purposes of determining if a
quorum is present, the Company will count all proxies designated as “withholding
authority” to vote for a nominee or nominees or “abstaining” from any proposal,
as well as “broker non-votes,” as shares represented at the meeting and counted
toward establishing the presence of a quorum. A “broker non-vote” occurs when a
nominee (such as 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. If a quorum is present at the
2009 Annual Meeting, since this is a contested election, each
of the Kanders Group’s
Nominees will be elected if they receive a plurality of the votes cast.
The three nominees receiving the highest number of votes cast will be elected to
the Board. According to the Company’s 2009 proxy statement, stockholder
instructions to withhold authority to vote for one or more of the nominees, and
abstentions, will result in those nominees receiving fewer “FOR” votes but will
not count against a nominee’s election.
In the event the Company purports to
increase the number of directorships pursuant to its Bylaws, or otherwise increases the number
of directors to be elected at the 2009 Annual Meeting, the Kanders Group reserves the right to nominate additional
persons as directors to fill any vacancies created by the increase or to fill
any additional positions on the Board which the Company’s stockholders shall
vote on at the 2009 Annual Meeting.
4
BACKGROUND
TO THE SOLICITATION
Although
facing a difficult economic environment, Federal Signal contains a unique group
of businesses with attractive long-term growth
opportunities. Nevertheless, the Kanders Group believes that the lack
of leadership and accountability on the Board is simply
unacceptable.
For
fiscal 1999, the year in which outgoing Chairman of the Board, James C. Janning,
was first elected, the Company reported revenues of approximately $1.1 billion
and pre-tax income of $84.4 million. The average stock price during
1999 was $21.38.
The
average tenure of the current Board of Directors, excepting the directors
elected pursuant to a settlement from a proxy contest in 2008, is approximately
6.5 years. Six years ago, in 2003, the Company reported revenues of
approximately $1.2 billion and pre-tax income of $46.0 million. The average
stock price during that year was $16.90.
In 2008,
the Company reported revenues of approximately $958.8 million and pre-tax income
of $26.3 million, not including an enormous loss from the disposal of
underperforming businesses of $126.9 million, and the average stock price during
that year was $11.79.
From
fiscal 1999 through fiscal 2008, Federal Signal spent approximately $210.0
million investing in property plant and equipment (excluding its former leasing
business), approximately $307.6 million acquiring other businesses, and an
additional $12.8 million either investing in or guaranteeing the debt of joint
ventures, for a combined total $530.5 million of capital invested. The
average market capitalization during fiscal 1999 was approximately $968.5
million. The market capitalization as of March 17, 2009 was approximately
$238.8 million.
On March17, 2009, the closing price of the Company’s stock was $4.81.
Through
2008, Mr. Kanders exchanged a number of public and private communications with
the Company, represented at the time by its Chairman, James C.
Janning. Included in these exchanges were a number of questions and
criticisms, as well as a demand that Mr. Janning resign his
position. Apparently, rather than responding to Mr. Kanders’
questions and criticism, Mr. Janning chose to accede to Mr. Kanders’ request and
resign from the Board. While Mr. Kanders is gratified that Mr.
Janning will no longer be associated with the Company, the concerns over
leadership and accountability remain unresolved.
A
significant number of governance and conflict of interest issues, which Mr.
Kanders repeatedly challenged, also remain unanswered, including:
·
Details
around the Board’s decision to sell its subsidiary, E-ONE, for
$20,000,000, a price significantly below what Mr. Kanders and independent
analysts believed it was worth, to a group which included members of
E-ONE’s management team, including its President, Peter Guile in addition
to a private equity firm founded by colleagues of Federal Signal Board
member Paul W. Jones;
5
·
The
Board’s failure to fully and adequately explain the circumstances
surrounding the apparently sudden retirement of Robert D. Welding, the
Company’s former President and CEO, in December 2007, which led to a nine
month long CEO search, while paying him a substantial severance package of
$1.27 million; and
·
The
Board’s failure to publicly disclose the report of the independent
investigation of alleged insider trading activities in September 2003 by
family members of Mr. Joseph J. Ross, former Chairman of the Board,
President and Chief Executive Officer of the Company, and which arguably
may have led to Mr. Ross’s retirement as President and CEO in
November 2003 and as Chairman and director in January 2004, as well as the
resignation of Mr. Kim Wehrenberg, the Company’s then General Counsel and
Corporate Secretary, in February
2004.
What has
now been confirmed by the Company itself is that the business has been run
inefficiently, the Board has sanctioned undisciplined acquisitions with no
integration planning, and the Board has consistently failed to hold management
accountable for its leadership failures.
Analyst
reports have been consistent:
·
“Federal
Signal has been an underperformer for about a decade” (Goldman Sachs
report, dated June 13, 2007);
·
“If
new FSS CEO Jim Goodwin were to increase focus on improving results in the
short term, it would appear that intensifying cost control would be an
area of potential opportunity” (Goldman Sachs report, dated February 28,2008);
·
“the
$20 million target for SEG&A expense reduction shows a focus on core
profitability that is welcome” (Next Generation Equity Research LLC
report, dated February 27, 2008);
·
cited
expectation that “savings from plan to remove $20 million from expenses
will be realized largely in the second half of 2008” (Next Generation
Equity Research LLC report, dated May 5,2008);
·
“FSS
shares . . . offer inferior ROCE, growth and cash generation.” (Goldman
Sachs report dated October 1, 2008, downgrading the Company’s stock from
Neutral to Sell);
·
cited
need to “[deal] with overhead issues that have plagued the company for
years.” (Next Generation Equity Research LLC report dated February 4,2009);
In its
2008 Annual Report on Form 10-K, the Company reported 2008 SEG&A expenses of
$193.7 million, an 11.8% increase of $20.5 million over 2007 SEG&A
expenses. Not only did Mr. Goodwin not reduce expenses by the $20
million that he targeted in his February 28, 2008 earning call, he increased
them by the same amount. Newly appointed CEO William E. Osborne, who
has been on the job less than six months, was quoted in an interview with Melita
Marie Garza reported on Bloomberg on March 12, 2009 as stating that Federal
Signal “needs a big internal merger” to reduce expenses created by “our history
of acquisitions without integration.” This admission confirms what many outside
observers have already noted – under the direction of this Board of Directors,
the Company has a track record of undisciplined acquisitions and capital
allocation and has consistently failed to integrate and achieve synergies with
companies it has acquired.
6
As to
2009, Mr. Osborne in the same interview was also quoted as stating that “[w]e
have seen orders drop off in the 15 to 20 percent range so far in the first
quarter. Unless there is a miraculous rebound in the economy in the second half,
we don’t project a growth in revenue for this year.”
Mr.
Kanders has been concerned for some time with the failure of management, under
the direction of the Company’s Board, to articulate and execute a strategy to
reverse the Company’s long standing decline in stockholder value and failure to
generate long-term growth. We believe that the Board’s current slate of nominees
lacks the credibility and experience to implement the change needed for the
Company to realize its potential.
Mr.
Osborne is untested. He lacks experience in the Company’s core industry
segments, law enforcement and security, and he has no expertise in the
“information business” which he has cited as the future of Federal
Signal. In addition, contrary to Mr. Osborne’s assertion that law
enforcement and security “are no longer about boots and suits”, Mr. Kanders,
through his experience and leadership at Armor Holdings, Inc. has demonstrated
that a properly executed strategy in “boots and suits” can create significant
stockholder value. Not a single member of the current Board of
Directors, including its current nominees, has direct operating experience in
the industry segments that management has cited as key drivers of growth for the
future of Federal Signal, according to their published
backgrounds. In short, the Kanders Nominees can best provide the
strategic oversight that Mr. Osborne and the management team require to manage
the “number of headwinds” facing the Company.
On April24, 2008, in connection with the Company’s previously announced search for a new
Chief Executive Officer, Mr. Kanders wrote a letter to the Board formally
submitting his candidacy to serve as the Company’s CEO. On June 26,2008, Mr. Kanders received a letter from Mr. Janning stating that he was no
longer a candidate for the CEO position.
On
September 15, 2008, the Board announced the appointment of Mr. William H.
Osborne as its new CEO. The closing price of the Company’s stock on
the business date prior to the appointment of Mr. Osborne was $15.71 per
share. The closing price of the Company’s stock on the business day
of the previously mentioned Bloomberg interview was $4.42 per share, a 71.9%
decline.
Over the
past nine months, Mr. Kanders, in a series of letters to the Board, dated July9, 2008, July 16, 2008, July 23, 2008, August 4, 2008, August 15, 2008,
September 2, 2008 and October 28, 2008, and in press releases, has continued to
raise, on behalf of all of the Company’s outside stockholders, a number of
significant issues and concerns relating to the Company and actions of its
Board, in particular Mr. Janning and Mr. Goodwin, the Company’s acting CEO prior
to the appointment of Mr. Osborne. Mr. Kanders expressed particular
concern over:
7
·
The
Board’s decision to sell its subsidiary, E-ONE, for $20,000,000, a price
significantly below what Mr. Kanders and independent analysts believed it
was worth, to a group which included members of E-ONE’s management team,
including its President, Peter Guile. Mr. Kanders questioned
the process by which the E-ONE sale was conducted, particularly in light
of the fact that E-ONE was sold to a group which included
E-ONE’s management and business colleagues of a Board member, the apparent
failure of the
Company to receive an independent fairness opinion, and the Company’s
refusal to publicly disclose the terms and provisions of the purchase
agreement.
·
The Board’s failure to
fully and adequately explain the circumstances surrounding the apparently
sudden retirement of Robert D. Welding, the Company’s former President and
CEO, in December 2007, which led to a nine month long CEO search,
while paying him a substantial severance package. According to the Release
and Severance Agreement filed as an Exhibit to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2007, the Company agreed to
treat such retirement as a termination by the Company without “Cause” for
purposes of cash severance benefits under the Company’s General Severance
Plan and incurred $1.27 million of termination costs and payments to the
former President and CEO.
·
The Board’s failure to
publicly disclose the report of the independent investigation of alleged
insider trading activities in September 2003 by family members of
Mr. Joseph J. Ross, former Chairman of the Board, President and Chief
Executive Officer of the Company, and which arguably may have led to Mr.
Ross’s retirement as President and CEO in November 2003 and as
Chairman and director in January 2004; as well as the resignation of Mr.
Kim Wehrenberg, the Company’s then General Counsel and Corporate
Secretary, in February 2004. Only after Mr. Kanders publicly raised his
concerns did the Company publicly disclose, nearly five years
after the fact, that Mr. Wehrenberg had presented information to
the Board regarding certain trading activity by family members of Mr. Ross
and that the Board had conducted an investigation of the matter. While the
Company has stated in its Form 8-K filing dated August 25, 2008 that the
Board concluded that the “investigation did not develop evidence” that
there were any violations of any securities laws, the Company continues
to refuse to publicly release the report of the independent counsel that
investigated the matter.
·
The
Board’s actions in July 2008 amending the Company’s
By-laws to restrict the rights of stockholders
by:
8
·
Moving
the date of the annual meeting of stockholders, in the absence of a
contrary Board determination, to the Friday of the Memorial Day
weekend;
·
Replacing
the inspectors of election responsible for determining contested elections
from two persons “who are not affiliated with the Corporation” to persons
who may be employees of the
Company;
·
Lengthening
the advance notice requirement for stockholders nominating directors to
the Board from 30 days prior to the Annual Meeting to a narrow window
between 90 and 120 days prior to the anniversary of the last Annual
Meeting;
·
Requiring
any person nominated by a stockholder for election as a director to
furnish, in addition to the information required by the Federal proxy
rules, any information the Company may require, including “submission of a
questionnaire, representation and agreement in the form requested by the
Corporation”;
while Mr.
Janning claimed in a letter to employees, dated August 1, 2008, that the Board
has a “record of strong corporate governance” and a commitment to “maintaining
the highest standards of corporate governance.”
REASONS
TO VOTE
FOR
THE KANDERS GROUP’S NOMINEES
For the
reasons set forth above and in detail below, the Kanders Group believes that the
current Board has not acted, and will not act, in the best interests of all of
the stockholders. We have lost confidence in the ability and willingness
of the Board to provide the Company with effective leadership, grow the
Company’s business, reduce costs, be disciplined with respect to acquisitions
and capital allocations, provide transparent corporate governance and generate
greater value for the benefit of all of its stockholders. For a decade,
this Board of Directors has allowed the Company to spend over $530 million of
capital to invest in growing the business through purchase of capital equipment
and through acquisitions and the result has been a continued and steady erosion
of stockholder value.
Significantly,
the current Board has failed to answer any of the many letters Mr. Kanders has
sent to the Board seeking public disclosures about the circumstances surrounding
the E-ONE sale to a group including Company insiders and colleagues of a Board
member without the benefit of an independent fairness opinion, the unexplained
resignations of Messrs. Welding and Ross, including the insider trading
allegations with respect to Mr. Ross’ family members, and the prolonged search
process for a new CEO.
We
believe that our Nominees, Warren B. Kanders, Steven R. Gerbsman and Nicholas
Sokolow, each of whom has a long history of successfully creating stockholder
wealth and a commitment to good corporate governance, will act to maximize
stockholder value in the best interests of all stockholders, rather than
allowing the Company to drift along with disappointing financial results and a
deteriorating share price, to eliminate the “clubby” network of the current
Board, implement best practices of corporate governance, and to make the Company
more transparent for the benefit of all stockholders. The background
of our Nominees is included in the section of this proxy statement entitled
“Proposal 1: Election of the Kanders Group’s Nominees.” We urge you to compare the
backgrounds and records of achievement of our nominees with the Board’s
nominees.
9
As set
forth above, the current Board has repeatedly been non-responsive to, and has
repeatedly ignored the interests of, the Company’s real owners, its
stockholders. As a significant long term investor, Mr. Kanders is
proposing, together with the rest of the Kanders Group, to elect three truly
independent directors to the Company’s Board to represent and protect the
interests of all of the Company’s outside stockholders and to improve corporate
governance and the Company’s transparency with its stockholders.
The
Company has failed to join the ever increasing number of companies who have
de-staggered their boards, consistent with modern trends in corporate
governance. We believe that the Company’s Board should be fully accountable to
the stockholders of the Company, which accountability is best served by annual
elections of the entire Board. We believe that a staggered board adversely
affects stockholder democracy. Our Nominees will support annual elections
of the entire Board and push for repeal of the staggered board in the Company’s
By-laws.
The
current Board, as a group, excluding James Janning, beneficially owns only
182,851 shares of common stock, excluding options exercisable within sixty
days. The Kanders Group collectively holds 1,372,356 shares, or 7.5
times as much as the entire Board of Directors combined. The Kanders
Group, in addition to having the experience and credibility to contribute to the
leadership needed on the Board, has committed significant personal capital to an
investment in the Company.
One of
the current Class I directors, and Board nominee for re-election, James E.
Goodwin, has been a member of the Board since 2005 and, as mentioned above,
served as the Company’s interim President and Chief Executive Officer from
January 1, 2008 until the appointment of his successor, William H. Osborne, in
September 2008 and we believe was completely ineffective at delivering on his
promise of reducing costs. In his prior experience, Mr. Goodwin, as
CEO of United Airlines, was forced to resign in October 2001 after publicly
speculating that the company where he was in control of costs would be forced to
file for bankruptcy if it was unable to reduce its costs, as reported by press
reports including a March 27, 2002 article written by Kay Riley for
Chicagobusiness.com as well as a December 9, 2002 article written by Mark Tatge
and Brandon Copple for Forbes.com. As a result of his recent position
as interim President and CEO of Federal Signal, for which he received almost
$850,000 in compensation, we do not believe Mr. Goodwin is truly an independent
director.
A second
Class I director, Joseph R. Wright, was appointed one year ago as part of a
settlement with a hedge fund that has since sold its entire
position. Mr. Wright owns only 4,460 shares and he has not purchased
a single share with his own capital. In addition, as a result of
numerous conversations with Mr. Wright, Mr. Kanders believes that due to Mr.
Wright’s extensive travel commitments, he has apparently been unable or
unwilling to devote the time necessary to properly fulfill his duties as a
member of the Board of Directors.
10
Lastly,
the Company’s newly appointed CEO, William Osborne is untested. In
addition to the reasons previously stated, Mr. Osborne has never been the CEO of
a public company, nor has he had public company board experience, and he has no
relevant industry experience in the businesses which the Company currently
operates or in the businesses he has articulated are key to Federal Signal’s
future. Mr. Osborne recently purchased 10,000 shares, which is hardly
a significant vote of confidence in the future of Federal Signal, especially
considering the Company’s $4.00-$4.15 stock price at the time of the
purchase. Given these factors, we believe it is premature to consider
Mr. Osborne for a board position.
On the
other hand, the Kanders Nominees have extensive experience and a demonstrated
track record of building stockholder value in the Company’s core safety and
security business, as well as experience in the disciplined execution and
integration of acquisitions, implementing effective cost containment strategies,
and in guiding and running public companies.
Mr.
Kanders has a public record of building long-term stockholder value. In January
1996, Mr. Kanders invested in Armor Holdings, Inc. (“Armor Holdings”) then known
as American Body Armor and Equipment, Inc., a publicly traded company listed on
the NASDAQ pink sheets, at an average cost of $0.71 per share. Armor
Holdings had just emerged from bankruptcy, and had approximately $12,000,000 in
revenues and $1,000,000 in EBITDA in 1995. Over the next eleven plus
years, Armor Holdings grew, both organically and through more than 30
acquisitions, to a diversified global manufacturer of protective systems for the
military, government, law enforcement agencies and commercial
customers. Armor Holdings manufactured products sold to law
enforcement, municipal and military customers, and Armor Holdings competed
directly with Federal Signal in the manufacture of signal
devices.
In that
time, Armor Holdings completed and integrated over 30 acquisitions, completed
numerous bank financings and public offerings and private placements of both
debt and equity securities, including $1.2 billion of financings between 2003
and 2006, and became listed first on the American and then on the New York Stock
Exchanges. Mr. Kanders served as the Chairman of the Board of Armor
Holdings from January 1996 and as its Chief Executive Officer from
April 2003. At the time of Armor Holdings’ sale to BAE Systems,
Inc. in July 2007, for an aggregate price of $4.5 billion, or $88 per share, it
had revenues of approximately $2.2 billion and EBITDA of approximately $280
million for fiscal 2006, with fiscal 2007 guidance of approximately $3.5 billion
in revenues. From the time Mr. Kanders made his investment in Armor Holdings at
$0.71 per share in January 1996 to the time the sale of Armor Holdings was
announced in July 2007, the compounded annual return
to public stockholders during the period was approximately 51.95% per
annum.
Our
second nominee, Nicholas Sokolow, is a practicing attorney, who has served
on the Armor Holdings Board, as well as its Compensation, Nominating/Corporate
Governance and Audit Committees, and possesses significant other public board
experience. Mr. Sokolow is an expert in corporate governance and has counseled
and advised public companies on a broad range of matters for over twenty five
years.
11
Our third
nominee, Steven R. Gerbsman, is a principal in a company which has provided
consulting, management, advisory and investment banking services to its clients
in a broad range of industries. He has significant experience with companies in
the type of “information businesses” that management has identified are
important to Federal Signal’s future, in assisting companies in crisis
management and turnaround situations and expense reduction programs and has
worked with a wide spectrum of stakeholders in maximizing enterprise,
stakeholder and stockholder value.
When Mr.
Osborne was initially appointed as Chief Executive Officer, he committed in his
initial conference call to reach out to all significant
stockholders. However, Mr. Osborne never reached out to Mr. Kanders,
even after Mr. Kanders issued a press release on October 29, 2008 noting
publicly that Mr. Osborne had failed to approach him even though, after his sale
of approximately 800,000 shares following Mr. Osborne’s appointment, Mr. Kanders
remained Federal Signal’s largest individual stockholder.
At that
time, Mr. Kanders also noted a sharp decline in the price of the Company’s
common stock following Mr. Osborne’s appointment. Since that time,
the erosion of stockholder value has only accelerated. Only then, in early 2009,
did Mr. Kanders make the difficult decision to nominate his slate of directors
for election to the Board in order to protect the interests of all stockholders
and reverse the continued erosion of the Company’s stock price and address the
failure of the Board to be responsive to the legitimate ethical, business,
governance and conflict of interest issues he has raised.
As a last
resort and in order to protect the interests of all the stockholders, Mr.
Kanders has been forced to take the step of proposing three nominees for
election at the Company’s 2009 Annual Meeting. In light of the
Company’s continuing disappointing financial performance
and deteriorating stock price, we believe that at the
present time it is in the interests of all of the stockholders that our Nominees
be elected to the Board in order to allow for fresh perspectives and
voices.
For the last decade, under
the watch of the Board, the Company has endured management turnover, erratic
profitability, underperformance of its shares relative to its peers, poor
corporate governance and a significant erosion of stockholder value, many of the
reasons cited by Goldman Sachs in its October 1, 2008 analyst report downgrading
the Company to “Sell”.
Significantly,
the Company’s shares have lost a substantial portion of their value, with
negative annual stockholder returns averaging approximately 14.0% per annum over
the last ten years, or an absolute decline of 77.9% between March 17, 1999 and
March 17, 2009. The Company’s stock price hit its 52-week closing
price high on September 3, 2008, the day on which Mr. Kanders issued a press
release demanding that the Board release the results of a report related to
potential insider trading by family members of Mr. Joseph Ross, a former
Chairman and Chief Executive Officer of Federal Signal and calling upon Mr.
Janning to resign as Chairman of the Board. On September 15, 2008
when William Osborne was appointed Chief Executive Officer, the stock closed at
$14.83 per share. On March 17, 2009, the stock
closed at $4.81, a decline of 67.6% from the announcement of the appointment of
Mr. Osborne as CEO and a decline of 70.5% from the 52-week closing price high of
September 3, 2008. While a portion of the short-term decline
in share price may reflect market trends, we believe that the long term decline
in share price is attributable to the failure of management, under the
leadership of the Board, to develop and effectively execute a clear strategy and
manage the business of the Company, which is reflected both in the stock price
of the Company as well as in the decline in profitability.
12
The
Company faces many complex financial and operational challenges, in both the
domestic and international arenas, that require strategic vision and guidance at
the Board of Directors level. A significant portion of the
Company’s business is international, requiring thoughtful leadership and
vigilant oversight to compete effectively and grow the business while also
protecting the Company from losses such as the loss suffered in fiscal 2008 on
the Company’s joint venture in China. The Company’s profitability also
depends heavily on varying conditions in the United States government and
municipal markets and the overall United States economy, and its businesses are
subject to some degree of cyclicality. Strategic vision informed by
experience in Federal Signal’s markets is required to grow into new products and
geographic markets while offsetting risks and wisely allocating Federal Signal’s
capital. Based on their experience and their track record, we believe
the Kanders Group Nominees are best qualified to provide this leadership and
guidance.
All
strategic initiatives to increase revenues and margins need to be
explored. The Company’s overhead costs must be evaluated
and drastically reduced and its manufacturing efficiencies significantly
improved. Under Mr. Goodwin’s watch, this was supposed to be his
greatest achievement. Yet, under his watch, SEG&A expenses rose
by $20 million. Indeed, in a recent public statement on March 12, 2008, Mr.
Osborne has apparently adopted Mr. Kanders’ urgent call to drastically cut
overhead as Mr. Osborne has proposed to cut salary costs by 13%, or $20 million,
as the Company’s operations have shrunk. Considering the Board of
Directors’ prior ineptitude in overseeing cost controls, acquisition
integrations, and other expense reduction efforts, it is especially important
that management is overseen by directors with significant personal capital
invested in the Company who have the experience to ask the right questions and
monitor the results.
Under the
stewardship of the Board, the Company has over the years engaged in what we
believe to be a series of under-performing strategic acquisitions which we
believe have been a factor in the Company’s financial underperformance, and
questionable dispositions of assets, such as the recent E-ONE disposition at
less than what we and independent analysts believe to be optimal prices. Income
before income taxes has been erratic over the past ten years, declining from
$84.4 million in 1999 to $26.3 million in 2009, not including a loss from
discontinued operations of an additional $126.9 million. We believe that the current
directors must be held accountable for the Company’s unacceptable
performance.
The Kanders Group believes
that the current Board has grown stale and needs an infusion of new blood and
fresh thinking. All of our Nominees have outstanding credentials and
are well-respected members of the business or legal community, well-qualified to
serve on the Board and committed to building long-term stockholder
value. They can provide the leadership
necessary to reverse the negative rate of return the Company has delivered to
stockholders over the past decade.
13
We
encourage all the Company’s stockholders to carefully review the biographies and
expertise of the Nominees included in the section of this proxy statement
entitled “Proposal 1: Election of the Kanders Group’s Nominees.”
We
believe that the election of our three Nominees to the Board will add to the
Board persons with the expertise, business acumen and commitment to stockholders
necessary to provide new ideas for improving the Company’s performance and
building stockholder value.
Our Nominees, if elected,
will constitute a minority of the Board. Accordingly, the Nominees, even
if voting together, will not be able to adopt any measures without the support
of other members of the current Board. Nevertheless, the Nominees will have an
opportunity to articulate and raise their concerns about the Company’s business
practices and strategic plans with the rest of the Board members and work
constructively with the Board members to build consensus to accomplish these
important goals.
WE
BELIEVE THE ELECTION OF THE KANDERS GROUP’S NOMINEES WILL PROVIDE THE COMPANY
WITH ABLE DIRECTORS THAT WILL STRIVE TO ENSURE THAT ALL OF THE COMPANY’S
STOCKHOLDERS ARE BEING BEST SERVED. ELECTION OF THE KANDERS GROUP’S NOMINEES
WILL SEND A CLEAR MESSAGE TO THE COMPANY’S BOARD THAT THEY MUST TAKE IMMEDIATE
STEPS TO INCREASE STOCKHOLDER VALUE.
In moving
forward with its nominations of the Nominees to the Board, the Kanders Group is seeking
to bring a level of accountability and focus to the Board that has been
lacking, and increase value for all of the stockholders of the
Company.
The Nominees are committed
to work constructively with the Board to promptly address the critical
issues facing the Company and, if elected, will take the steps necessary to
enhance value for all stockholders. Given the Board’s
disappointing track record, we believe that it is in the best interest of all
Company stockholders that the Kanders Group’s Nominees be elected at the 2009
Annual Meeting so that they may promptly begin working constructively
with management and the Company’s other directors to deliver improved financial
results, implement best practices in corporate governance and adopt a strategy
to enhance value for all stockholders.
The
Kanders Group believes that your voice in the future of the Company can best be
expressed through the election of our Nominees. Accordingly, we urge you to vote
your GOLD proxy card FOR the election to the Board of Warren B. Kanders, Steven
R. Gerbsman and Nicholas Sokolow.
YOUR
VOTE IS IMPORTANT.
IN ORDER TO HAVE A BOARD THAT PLACES THE INTERESTS
OF THE STOCKHOLDERS BEFORE ITS OWN SELF-INTERESTS, WE URGE YOU TO ELECT THE KANDERS GROUP’S NOMINEES TO THE BOARD. VOTE TO ELECT THE NOMINEES BY AS LARGE A
VOTE AS POSSIBLE SO YOUR VOICE WILL BE HEARD.
THE KANDERS GROUP STRONGLY RECOMMENDS THAT YOU VOTE TO
PROTECT YOUR INTEREST AS A STOCKHOLDER OF THE COMPANY BY SIGNING, DATING, AND
RETURNING THE GOLD PROXY CARD TODAY.
About the Kanders Group and the
Nominees
The solicitation of proxies is made by
the Kanders
Group. Information concerning the Kanders Group and Nominees
is set forth below under
the heading “Certain Information Regarding the Participants and
Nominees.”
14
PROPOSAL 1
ELECTION OF THE KANDERS GROUP’S NOMINEES
The Company has a classified board,
currently consisting of three (3) Class I directors, three (3) Class II directors and four (4) Class III directors. At each annual
meeting of stockholders, directors are duly elected for a full-term of three
years to succeed those whose terms are expiring. At the 2009 Annual Meeting, three persons will be elected as Class I
directors of the Company. Each person elected as a Class I director is elected to hold office until
the 2012 annual meeting and until his or her
respective successor shall have been duly elected and qualified. The Class
II and Class III directors currently serve until the
annual meetings of stockholders to be held in 2010 and 2011, respectively.
At the 2009 Annual Meeting, the Kanders Group will seek to elect three (3) Class I directors, Warren B. Kanders, Steven R. Gerbsman,
and Nicholas Sokolow, each of whom has consented to being
named in this proxy statement and to serving as a director, if elected, to fill
the three (3) open director seats, in opposition to
the Company’s three
nominees. Pursuant to the Company’s Bylaws, each
of Warren B. Kanders, Steven R. Gerbsman and Nicholas Sokolow will be elected if a quorum is present and they receive
affirmative votes of a plurality of the votes cast. The Company’s proxy statement for the
2009 Annual Meeting provides that
abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Proxies
withholding authority to vote for the Nominees and broker non-votes will not
count as affirmative votes for the Nominees. If elected, the Nominees would be
entitled to serve until the annual meeting of the Company’s stockholders to be
held in 2012.
You must sign and return the Kanders Group’s GOLD proxy card to vote for Messrs.
Kanders, Gerbsman and
Sokolow.
Name, Age and Business
Address
Present
Principal Occupation or Employment and Business Experience During Last
Five Years; Current Directorships
Mr. Kanders
has served as the President of Kanders & Company since 1990. Prior to
the acquisition by BAE Systems, Inc. on July 31, 2007 of Armor
Holdings, Inc., formerly a New York Stock Exchange-listed company, a
manufacturer and supplier of military vehicles, armed vehicles and safety
and survivability products and systems to the aerospace and defense,
public safety, homeland security and commercial markets, he served as the
Chairman of the Board of Armor Holdings, Inc. from January 1996 and
as its Chief Executive Officer from April 2003. From April 2004
until October 2006, Mr. Kanders served as the Executive
Chairman, and since October 2006, has served as the Non-Executive
Chairman of the Board of Stamford Industrial Group, Inc. [SIDG.PK],
formerly named Net Perceptions, Inc., a publicly-held company that,
through its subsidiary, Concord Steel, is a leading independent
manufacturer of steel counterweights. Since November 2004,
Mr. Kanders has served as the Chairman of the Board of Directors of
Langer, Inc. [GAIT], a Nasdaq-listed manufacturer of skin-care products.
Mr. Kanders has served since June 2002 as a member of the Board of
Directors of Clarus Corporation [CLRS.PK], a publicly-held company, and as
the Executive Chairman of Clarus Corporation’s Board of Directors since
December 2002. Since May 2007, Mr. Kanders has served as a
director of Highlands Acquisition Corp., a publicly-held special purpose
acquisition company formed in 2007. From October 1992 to
May 1996, Mr. Kanders served as Founder and Vice Chairman of the
Board of Benson Eyecare Corporation, a manufacturer and provider of eye
care products and services. Mr. Kanders received a B.A. degree in
Economics from Brown University in
1979.
15
Name,
Age and Business Address
Present
Principal Occupation or Employment and Business Experience During Last
Five Years; Current Directorships
Since
1980, Mr. Gerbsman has been a principal of Gerbsman Partners, a company
providing consulting, management, advisory and investment banking services
to its clients in a broad variety of industries. Mr. Gerbsman has
significant experience in assisting companies in crisis management and
turnaround situations and advising companies seeking to improve
performance in specific balance sheet, financial or operating areas. Mr.
Gerbsman has worked with a wide spectrum of senior and junior lenders,
bondholder groups, venture capital and equity sources, private investors
and institutional groups in maximizing enterprise, stakeholder and
shareholder value. To date, Mr. Gerbsman has been involved in over
$2.2 billion of restructuring, financing and M&A transactions.
Prior to forming Gerbsman Partners in 1980, Mr. Gerbsman was
President of four operating divisions of ITEL Corporation with
responsibility in the technology, leasing and business sectors. Mr.
Gerbsman began his business career at IBM Corporation in 1967. Mr.
Gerbsman received a BS in Accounting from Hunter College, New York and
attended the Baruch Graduate School of Business in New York. Mr. Gerbsman is also a guest
lecturer at the University of San Francisco’s MBA program and at the Haas
Graduate School of Business in Berkeley,
California.
Since
2007, Mr. Sokolow has been in private law practice as a partner in
the firm of Lebow & Sokolow LLP. From 1994 to 2007, Mr. Sokolow was a
partner in the law firm of Sokolow, Carreras & Partners. From June
1973 until October 1994, Mr. Sokolow was an associate and partner in the
law firm of Coudert Brothers. Mr. Sokolow has served as a member of the
Board of Directors of Stamford Industrial Group, Inc. since April 2004 and
has served as a member of the Board of Directors of Clarus Corporation
since June 2002. Prior to the acquisition by BAE Systems, Inc. of Armor
Holdings, Inc. on July 31, 2007, Mr. Sokolow served as a member
of the Board of Directors of Armor Holdings, Inc. since January
1996. Mr. Sokolow is a graduate of the Institut D’Etudes
Politiques (Economics and Finance) and the Faculte de Droit (Law) and
received a Masters of Comparative Law degree from the University of
Michigan.
16
Each of the Nominees has consented to
serve as a director until the expiration of his respective term and until such
Nominee’s successor has been elected and qualified or until the earlier
resignation or removal of such Nominee. The Kanders Group believes that the
Nominees are highly qualified to serve as directors on the Board and has
no reason to believe that
any of the Nominees will be disqualified or
unable or unwilling to serve if elected. However, if any of the Nominees is unable to serve or for good
cause will not serve, proxies may be voted for another person nominated by
the Kanders Group
to fill the
vacancy.
In the event the Company purports to
increase the number of nominees to be elected at the annual meeting pursuant to
its Bylaws, the Kanders Group reserves the right to nominate such number of
additional persons as directors as necessary to fill any vacancies created by
the increase and to vote the GOLD proxies in favor of the election of
such nominees.
There is no assurance that any of the
Company’s nominees will serve as directors if Messrs. Kanders, Gerbsman or Sokolow are elected to the Board. In the event
that one or more
of the Kanders Group Nominees is elected and that one or
more of the Company’s nominees declines to serve with such Nominee or Nominees,
the Bylaws of the Company provide that director vacancies may be filled by
majority vote of the directors then in office.
If any of Messrs. Kanders, Gerbsman or Sokolow is unable to serve as a director, _________________ and ________, the named proxies on the
attached GOLD card, or their designees, will vote for
the election of an alternative nominee as may be proposed by Kanders.
PROPOSAL 2
COMPANY PROPOSAL TO RATIFY APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As discussed in further detail in the Company’s proxy statement,
the Company’s Audit Committee appointed Ernst & Young LLP as the Company’s
independent registered public accounting firm for the year ending December 31,2009. The Company is asking stockholders to ratify the appointment of Ernst
& Young LLP as independent auditors for the Company’s year ending December31, 2009. According to the Company’s proxy statement, the proposal to ratify the
appointment of Ernst & Young LLP as the Company’s independent registered
accounting firm will require the affirmative vote of a majority of the votes
cast affirmatively or negatively at the 2009 Annual Meeting for approval. An
abstention will not count as a vote cast against this
matter.
The Kanders Group makes no
recommendation on Proposal 2.
While this proposal also appears on the
Company’s WHITE proxy card, you cannot vote for the Kanders Group’s Nominees on
that proxy card and thus we request that you use the GOLD proxy card to vote on
this matter. If you return the GOLD proxy card and no direction is
made with respect to this proposal, you will be deemed to have given a direction
to vote all the shares represented by the GOLD proxy card FOR this
proposal.
17
OTHER MATTERS TO BE
CONSIDERED
AT THE 2009 ANNUAL MEETING
The Kanders Group is not aware of any other proposals to be
brought before the 2009 Annual Meeting. Should other proposals
be brought before the 2009 Annual Meeting, the persons named as
proxies in the enclosed GOLD proxy card will vote on such matters in
their discretion.
CERTAIN INFORMATION REGARDING THE
PARTICIPANTS AND NOMINEES
During
the last ten years, none of the Nominees has been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, none of the Nominees has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, which as a result of such proceeding, was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Neither Mr. Kanders nor any other Nominee, nor any associate of
Mr. Kanders or any other Nominee is believed to have any interest in the matters to be voted
upon at the 2009 Annual Meeting, other than an interest,
if any, as a stockholder of the Company or, with respect to the Nominees, as a
nominee for director.
Except as otherwise described herein,
neither Mr. Kanders nor any
other Nominee nor any
associate of Mr.
Kanders or any other Nominee is now, or within the past year
has been, a party to any contract, arrangement or understanding with any person
with respect to any securities of the Company (including, but not limited to,
joint ventures, loan or option arrangements, puts or calls, guarantees against
loss or guarantees of profit, division of losses or profits, or the giving or
withholding of proxies).
Except as otherwise described herein,
neither Mr. Kanders nor any
other Nominee, nor any
associate of Mr. Kanders or
any other Nominee: (1) has engaged in or has a
direct or indirect interest in any transaction or series of transactions since
the beginning of the Company’s last fiscal year, or in any currently proposed
transaction, to which the Company or any of its subsidiaries is a party where
the amount involved was in excess of $120,000; (2) has borrowed any funds for
the purpose of acquiring or holding any securities of the Company; (3) has any
arrangement or understanding with any person regarding any future employment by
the Company or its affiliates, or any future transaction to which the Company or
any of its affiliates will or may be a party; or (4) is the beneficial or record
owner of any securities of the Company or any parent or subsidiary
thereof.
Additional information concerning
Mr. Kanders and the other
Nominees, including, but
not limited to, beneficial ownership of and transactions in the Company’s Common Stock, is set forth in
Appendix A hereto.
OTHER MATTERS
In accordance with federal securities
laws, the Kanders Group has omitted from this proxy statement certain
disclosures that are included in the Company’s proxy statement. These
disclosures include, among other things, information regarding: (1) securities
ownership of certain beneficial owners and management; (2) meetings and
committees of the Board; (3) the background of the Company’s nominees for the
Board; (4) the compensation and remuneration paid and payable to the Company’s
directors and management; (5) voting procedures, including the share vote
required for approval or election, at the 2009 Annual Meeting; (6) the submission of
stockholder proposals at the Company’s next annual meeting of stockholders; and
(7) information regarding fees and services of the Company’s independent
auditors. The
Kanders Group has no knowledge of the accuracy or
completeness of the Company’s disclosures in its proxy
materials.
18
SOLICITATION;
EXPENSES
Proxies may be solicited by the Kanders Group by mail, advertisement, telephone,
facsimile, and personal solicitation. Banks, brokerage houses, and other
custodians, nominees, and fiduciaries will be requested to forward the
Kanders Group’s
solicitation material to
their customers for whom they hold shares and the Kanders Group will reimburse them for their reasonable
out-of-pocket expenses. Our
proxy materials are available on the following web site:
___________.
The Kanders Group has retained MacKenzie Partners, Inc. to
assist in the solicitation of proxies and for related services. The Kanders Group will pay MacKenzie Partners, Inc. a
retainer of $______ for its services and has agreed to
reimburse it for its reasonable out-of-pocket expenses. Mr. Kanders has agreed to indemnify MacKenzie
Partners, Inc. against certain liabilities and
expenses, including certain liabilities under the federal securities laws. The
Securities and Exchange Commission deems such indemnification to be against
public policy. Approximately _______ employees of MacKenzie Partners, Inc.
will be involved in the solicitation of proxies.
The entire expense of preparing,
assembling, printing, and mailing this Proxy Statement and related materials and
the cost of soliciting proxies will be borne by the Kanders Group.
Although no precise estimate can be made
at the present time, the
Kanders Group currently
estimates that the total expenditures relating to the proxy solicitation
incurred by them
will be approximately
$_____of which approximately $______ has been incurred to date. The Kanders Group intends to seek reimbursement from the
Company for those expenses incurred by them in connection with this proxy
solicitation, if any or all
of the Kanders Group’s Nominees are elected, but does not intend to submit the question of
such reimbursement to a vote of the stockholders.
VOTING AND REVOCATION OF
PROXIES
For the proxy solicited hereby to be
voted, the enclosed GOLD proxy card must be signed, dated, and
returned to the Kanders
Group, c/o MacKenzie
Partners, Inc., in the enclosed envelope in time to be voted at the 2009 Annual Meeting. If you wish to vote for
the Nominees, you must submit the enclosed GOLD proxy card and must NOT submit the
Company’s WHITE proxy card. If you have already
returned the Company’s WHITE proxy card, you have the right to
revoke it as to all matters covered thereby by signing, dating, and mailing the
enclosed GOLD proxy card. If you later vote on the
Company’s WHITE proxy card (even if it is to withhold
authority to vote for the Company’s nominees), you will revoke your previous
vote for the Kanders
Group’s Nominees. ONLY YOUR
LATEST DATED PROXY WILL COUNT AT THE 2009 ANNUAL MEETING. WE URGE YOU NOT TO
RETURN ANY WHITE PROXY CARD SENT TO YOU BY THE
COMPANY.
19
If your shares are held in the name of a
brokerage firm, bank, or nominee, only such brokerage firm, bank, or nominee can
vote such shares and only upon receipt of your specific instructions.
Accordingly, please promptly contact the person responsible for your account at
such institution and instruct that person to execute and return the GOLD proxy card on your behalf. You should
also promptly sign, date, and mail the voting instruction form (or GOLD proxy card) that your broker or banker
sends you. Please do this for each account you maintain to ensure that all of
your shares are voted. If any of your shares were held in the name of a
brokerage firm, bank, or nominee on the Record Date, you will need to give
appropriate instructions to such institution if you want to revoke your proxy.
IF YOU DO NOT GIVE INSTRUCTIONS TO YOUR BROKER, BANK OR OTHER NOMINEE, YOUR
SHARES WILL NOT BE VOTED.
If your shares are held in the name of a
brokerage firm, bank, or other nominee, that bank, brokerage firm or nominee may
allow you to deliver your voting instructions by telephone or over the Internet.
Stockholders whose shares are held by a brokerage firm, bank or nominee should
refer to the voting instruction card forwarded to them by that brokerage firm,
bank or other nominee holding their shares.
Execution of a GOLD proxy card will not affect your right
to attend the 2009 Annual Meeting and to vote in person.
Any proxy may be revoked as to all matters covered thereby at any time prior to
the time a vote is taken by: (i) filing with the Secretary of the Company a
later dated written revocation; (ii) submitting a duly executed proxy bearing a
later date to the Kanders
Group or to the Company; or
(iii) attending and voting at the 2009 Annual Meeting in person. Attendance at
the 2009 Annual Meeting will not in and of itself
constitute a revocation.
Although a revocation will be effective
only if delivered to the Company, the Kanders Group requests that either the original or a
copy of all revocations be mailed to the Kanders Group, c/o MacKenzie Partners, Inc., 105 Madison Avenue, New York, NewYork10016, so that
the Kanders Group will be aware of all revocations and can
more accurately determine if and when the requisite proxies for the election of
the Nominees as directors have been received. The Kanders Group may contact stockholders who have
revoked their proxies.
Shares of Common Stock represented by a
valid, unrevoked GOLD proxy card will be voted as specified.
Shares represented by a GOLD proxy card where no specification has
been made will be voted FOR the Nominees.
Except as set forth in this Proxy
Statement, the
Kanders Group is not aware of any other matter to be
considered at the 2009 Annual Meeting. The persons named as
proxies on the enclosed GOLD proxy card will, however, have
discretionary voting authority as such proxies regarding any other business that
may properly come before the 2009 Annual Meeting. The proxies may
exercise discretionary authority only as to matters unknown to the Kanders Group a reasonable time before this proxy
solicitation.
Only holders of record of the Company’s Common Stock on the Record Date will be
entitled to vote at the 2009 Annual Meeting. If you are a
stockholder of record on the Record Date, you will retain the voting rights in
connection with the 2009 Annual Meeting even if you sell such
shares after the Record Date. Accordingly, it is important that you vote the
shares of Common Stock held by you on the Record
Date, or grant a proxy to vote such shares on the GOLD proxy card, even if you sell such
shares after such date.
20
The Kanders Group believes that it is in your best
interest to elect the Nominees as directors at the 2009 Annual Meeting. WE STRONGLY RECOMMEND A VOTE FOR THE
NOMINEES.
If you have any questions, require
assistance in voting your GOLD proxy card, or need additional copies
of the Kanders
Group’s proxy materials,
please call MacKenzie Partners, Inc. at the phone numbers listed
below:
Beneficial Ownership Information and Two Year Transaction
History
The following sets forth the number of
shares of the Company’s Common Stock beneficially owned by the Nominees and the two year transaction
history for the
shares. Except
as otherwise provided herein, none of the purchase price or market value of
these shares is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities. Mr. Kanders used his own
assets to purchase the shares of the Company’s Common Stock owned by him. Such
shares were originally purchased for cash, free and clear of any liens, through
brokerage custodian accounts. Mr. Kanders subsequently hypothecated such shares
to a commercial bank, as customary collateral to secure a line of
credit.
BENEFICIAL
OWNERSHIP OF WARREN B. KANDERS
Name
Number of Shares
Approximate
Percentage of
Outstanding
Shares(1)
Warren
B. Kanders
1,253,313
2.6333%
(1) Based
upon 47,592,751 shares of Common Stock outstanding as of March 3, 2009, as set
forth in the Company’s Proxy Statement for the 2009 Annual Meeting dated
_______, 2009, as filed with the Securities and Exchange Commission on ________,
2009.
.
BENEFICIAL
OWNERSHIP OF NICHOLAS SOKOLOW
Name
Number of Shares
Approximate
Percentage of
Outstanding
Shares(1)
S.T.
Investors Fund LLC(2)
59,043
Less
than one percent (1%)
Anapa
and Company, LLC (3)
60,000
Less
than one percent (1%)
Total
119,043
Less
than one percent
(1%)
(1)
Based
upon 47,592,751 shares of Common Stock outstanding as of March 3, 2009, as
set forth in the Company’s Proxy Statement for the 2009 Annual Meeting
dated _______, 2009, as filed with the Securities and Exchange Commission
on ________, 2009.
(2)
Represents
shares of Common Stock held by S. T. Investors Fund, LLC, of which Mr.
Sokolow is general manager, with sole power to direct the voting and
disposition of the shares.
(3)
Represents
shares of Common Stock held by Anapa and Company, LLC, of which Mr.
Sokolow is general manager, with sole power to direct the voting and
disposition of the shares.
22
TRADING
ACTIVITY OF WARREN B. KANDERS
The following table contains sets forth
certain information with respect to all purchases and sales of the Common Stock
effected within the past two years by Mr. Kanders.
No. of Shares
Action
Date
25,000
Purchase
11/30/2007
30,000
Purchase
12/3/2007
45,000
Purchase
12/4/2007
50,000
Purchase
12/5/2007
145,100
Purchase
12/6/2007
3,100
Purchase
12/10/2007
26,800
Purchase
12/11/2007
50,000
Purchase
12/14/2007
5,000
Purchase
12/17/2007
20,000
Purchase
12/28/2007
50,000
Purchase
12/31/2007
125,000
Purchase
1/18/2008
200,000
Purchase
1/22/2008
25,000
Purchase
1/23/2008
100,000
Purchase
1/25/2008
50,000
Purchase
1/28/2008
17,000
Purchase
1/29/2008
33,000
Purchase
1/30/2008
25,000
Purchase
2/1/2008
25,000
Purchase
2/8/2008
50,000
Purchase
2/11/2008
50,000
Purchase
2/12/2008
100,000
Purchase
2/14/2008
12,300
Purchase
2/15/2008
23
No. of Shares
Action
Date
12,700
Purchase
2/19/2008
200,000
Purchase
2/27/2008
50,000
Purchase
2/28/2008
25,000
Purchase
2/29/2008
50,000
Purchase
3/4/2008
25,000
Purchase
3/5/2008
25,000
Purchase
3/7/2008
1,700
Purchase
3/11/2008
50,000
Purchase
3/19/2008
50,000
Purchase
3/20/2008
50,000
Purchase
3/24/2008
75,000
Purchase
3/26/2008
112,254
Purchase
3/27/2008
50,000
Purchase
3/28/2008
50,000
Purchase
4/1/2008
25,000
Purchase
4/7/2008
800
Purchase
4/8/2008
24,200
Purchase
4/10/2008
20,000
Purchase
4/18/2008
25,000
Purchase
4/22/2008
25,000
Purchase
4/23/2008
52,000
Purchase
4/24/2008
25,000
Purchase
4/25/2008
2,900
Purchase
4/28/2008
33,500
Purchase
4/29/2008
13,600
Purchase
4/30/2008
15,000
Purchase
5/1/2008
15,000
Purchase
5/23/2008
87,265
Purchase
6/24/2008
24
No. of Shares
Action
Date
32,300
Purchase
6/26/2008
7,835
Purchase
6/25/2008
137,600
Purchase
6/26/2008
125,000
Purchase
6/27/2008
100,000
Purchase
7/9/2008
14,600
Purchase
7/25/2008
(100,000)
Sale
7/31/2008
(165,700)
Sale
8/1/2008
(34,300)
Sale
8/4/2008
(250,000)
Sale
9/19/2008
(200,000)
Sale
9/22/2008
(365,300)
Sale
9/23/2008
(92,541)
Sale
9/24/2008
(70,000)
Sale
9/29/2008
(339,400)
Sale
10/1/2008
TRADING
ACTIVITY OF NICHOLAS SOKOLOW
The following table contains sets forth
certain information with respect to all purchases and sales of the Common
Stock effected within the past two years by Nicholas Sokolow and his
affiliates.
Holder
No. of Shares
Action
Date
ST
Investors Fund, LLC
3,000
Purchase
2/22/2008
ST
Investors Fund, LLC
2,000
Purchase
3/7/2008
ST
Investors Fund, LLC
10,000
Purchase
3/13/2008
ST
Investors Fund, LLC
5,000
Purchase
4/23/2008
ST
Investors Fund, LLC
3,000
Purchase
5/2/2008
ST
Investors Fund, LLC
2,000
Purchase
5/19/2008
ST
Investors Fund, LLC
300
Purchase
5/22/2008
ST
Investors Fund, LLC
3,000
Purchase
5/23/2008
ST
Investors Fund, LLC
2,700
Purchase
5/27/2008
ST
Investors Fund, LLC
4,000
Purchase
6/2/2008
25
Holder
No. of Shares
Action
Date
ST
Investors Fund, LLC
4,619
Purchase
6/18/2008
ST
Investors Fund, LLC
10,400
Purchase
6/20/2008
ST
Investors Fund, LLC
10,000
Purchase
6/23/2008
ST
Investors Fund, LLC
1,724
Purchase
6/24/2008
ST
Investors Fund, LLC
5,000
Purchase
6/26/2008
ST
Investors Fund, LLC
2,300
Purchase
6/30/2008
ST
Investors Fund, LLC
1,000
Purchase
7/1/2008
ST
Investors Fund, LLC
3,000
Purchase
7/10/2008
ST
Investors Fund, LLC
2,000
Purchase
7/11/2008
ST
Investors Fund, LLC
10,000
Sale
9/16/2008
ST
Investors Fund, LLC
6,000
Sale
10/16/2008
Anapa
and Company, LLC
1,000
Purchase
1/31/2008
Anapa
and Company, LLC
2,000
Purchase
2/1/2008
Anapa
and Company, LLC
15,000
Purchase
2/5/2008
Anapa
and Company, LLC
4,000
Purchase
2/6/2008
Anapa
and Company, LLC
2,000
Purchase
2/7/2008
Anapa
and Company, LLC
2,000
Purchase
2/15/2008
Anapa
and Company, LLC
1,000
Purchase
3/24/2008
Anapa
and Company, LLC
1,000
Purchase
3/25/2008
Anapa
and Company, LLC
5,500
Purchase
3/26/2008
Anapa
and Company, LLC
2,500
Purchase
3/27/2008
Anapa
and Company, LLC
9,000
Purchase
3/28/2008
Anapa
and Company, LLC
18,000
Purchase
4/7/2008
Anapa
and Company, LLC
2,000
Purchase
4/9/2008
Anapa
and Company, LLC
10,500
Sale
9/16/2008
Anapa
and Company, LLC
1,500
Purchase
10/10/2008
Anapa
and Company, LLC
5,000
Sale
10/17/2008
Anapa
and Company, LLC
6,000
Purchase
10/28/2008
Anapa
and Company, LLC
3,000
Purchase
11/25/2008
26
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED MARCH 19, 2009
WARREN B. KANDERS
STEVEN R. GERBSMAN
NICHOLAS SOKOLOW
PROXY
VOTING INSTRUCTION CARD
CONTROL NUMBER: [ ●
]
Your vote is important. Casting your
vote in one of the three ways described on this instruction card votes all
shares of Common Stock of Federal Signal Corporation that you are entitled to
vote.
Please consider the issues discussed in
the Proxy Statement and cast your
vote:
By Mail
Completing, dating, signing and mailing
the GOLD proxy card in the postage-paid envelope
included with the Proxy Statement.
Via Internet
Accessing the World Wide Web site
http://www.cesvote.com. Enter the Control Number shown above and
follow the instructions to vote via the internet.
By Phone
Using a touch-tone telephone to vote by
phone from the U.S. or Canada toll free. Have your proxy card ready. Simply dial
1-888-693-8683, enter the Control Number shown above and follow the
instructions. When you are finished voting, your vote will be confirmed, and the
call will end.
You can vote by phone or via the
internet any time prior to 11:59 p.m. Eastern Daylight Time on ________,
2009. You will need the Control Number
printed at the top of this instruction card to vote by phone or via the
internet. If you do so, you do not need to mail in your proxy
card.
NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIAL: Our proxy materials are available on
the following web site: ______________________.
GOLD PROXY CARD
2009 ANNUAL MEETING OF STOCKHOLDERS OF
FEDERAL SIGNAL
CORPORATION
THIS PROXY IS BEING SOLICITED BY
WARREN B. KANDERS, STEVEN
R. GERBSMAN AND NICHOLAS SOKOLOW (“KANDERS GROUP”)
The undersigned, revoking any proxy
previously given, hereby appoints _________, ___________ and ____________, and each of them, as attorneys and
proxies (each with the power to act alone and with the power of substitution and
revocation) to vote in the name of and as proxies for the undersigned at the
2009 Annual Meeting of Stockholders of
Federal Signal
Corporation (the “Company”)
to be held on _______,
2009 at ______, local
time, at the ___________ and at any adjournments, postponements
or continuations thereof, according to the number of votes that the undersigned
would be entitled to cast if personally present on the following
matter:
27
This proxy, when properly executed, will
be voted in the manner directed herein by the undersigned stockholder. Unless
otherwise specified, this proxy will be voted “FOR” the election of the nominees
listed in Proposal 1 and “FOR” Proposal 2. This proxy revokes all
prior proxies given by the undersigned.
PLEASE VOTE THIS PROXY CARD
TODAY
(continued and to be signed on reverse
side)
THE KANDERS GROUP STRONGLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR KANDERS
GROUP’S NOMINEES LISTED IN
PROPOSAL 1.
PROPOSAL 1.
ELECTION OF DIRECTORS – To elect as
Class I directors of the Company for three-year terms of office: (1)
Warren B.
Kanders, (2) Steven R. Gerbsman, and (3) Nicholas Sokolow.
FOR___
WITHHOLD___
FOR ALL EXCEPT____________________________
The Kanders Group intends to use this proxy to vote FOR
Messrs. Kanders, Gerbsman
and Sokolow. To withhold
authority to vote for the election of Messrs. Kanders, Gerbsman and
Sokolow, place an X next to
“Withhold.” To withhold authority to vote for the election of one or more nominees, including Messrs.
Kanders, Gerbsman and Sokolow, place an X next to “For All Except” and
write the name of the nominee or nominees for which you are
withholding your vote on
the line above.
There is no assurance that any of the
Company’s nominees will serve as directors if Messrs. Kanders, Gerbsman or Sokolow
are elected to the Board.
In the event that one or two of the Kanders Group’s Nominees is elected and that one or more
of the Company’s nominees declines to serve with such Nominee or Nominees, the
Bylaws of the Company provide that director vacancies may be filled by majority
vote of the directors then in office.
IF NO DIRECTION IS INDICATED WITH
RESPECT TO PROPOSAL 1, THIS PROXY WILL BE VOTED FOR THE ELECTION OF NOMINEES
DESCRIBED IN PROPOSAL 1.
PROPOSAL 2.
RATIFY THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR 2009.
FOR___
AGAINST ___
ABSTAIN
___
THE KANDERS GROUP MAKES NO RECOMMENDATION ON
PROPOSAL 2.
28
IF NO DIRECTION IS INDICATED WITH
RESPECT TO PROPOSAL 2, THIS PROXY WILL BE VOTED FOR PROPOSAL
2.
In their discretion, the proxies are
authorized to vote upon such other business as may be properly presented to the
meeting or any adjournment, postponement or continuation thereof, and is unknown
to the proxies and their representatives a reasonable time before the proxy
solicitation.
IMPORTANT: PLEASE SIGN AND DATE
BELOW.
Dated:
, 2009
Signature
Signature if jointly
held
Title:
Please sign exactly as your name appears
hereon or on your proxy card previously sent to you. When shares are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporation name by the President or other duly
authorized officer. If a partnership, please sign in partnership name by
authorized person.
29
Dates Referenced Herein and Documents Incorporated by Reference
