<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
North Pittsburgh Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
IT WILL ASSIST MATERIALLY IN THE PREPARATION FOR THE ANNUAL MEETING IF
SHAREHOLDERS RETURN THEIR PROXIES PROMPTLY.
NORTH PITTSBURGH SYSTEMS, INC.
4008 GIBSONIA ROAD
GIBSONIA, PENNSYLVANIA 15044-9311
TELEPHONE NO. 724-443-9600
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1998
------------
The Annual Meeting of Shareholders of North Pittsburgh Systems, Inc. will be
held on Friday, May 15, 1998 at 2:00 p.m., Eastern Daylight Saving Time, at
THE SHERATON INN PITTSBURGH NORTH (WARRENDALE), 910 SHERATON DRIVE, MARS,
PENNSYLVANIA, for the purpose of considering and acting upon the following
matters, as described in the accompanying Proxy Statement:
1.To elect Directors.
2.To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 7, 1998 as
the record date for the determination of Shareholders entitled to notice of
and to vote at the meeting.
You are cordially invited to attend the meeting. If you are unable to do so,
please sign and date the enclosed proxy and return it promptly by mail in the
enclosed envelope. No postage is required if mailed in the United States.
By Order of the Board of Directors
/s/ N. William Barthlow
Secretary
Dated: Gibsonia, PA
April 17, 1998
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC.
4008 Gibsonia Road
Gibsonia, Pennsylvania 15044-9311
Telephone No. 724-443-9600
------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 15, 1998
------------
GENERAL
This Statement is furnished in connection with the solicitation by and on
behalf of the Board of Directors of North Pittsburgh Systems, Inc. (North
Pittsburgh or Company) of Proxies to be used at the Annual Meeting of
Shareholders of the Company and any adjournments thereof, to be held at THE
SHERATON INN PITTSBURGH NORTH (WARRENDALE), 910 SHERATON DRIVE, MARS,
PENNSYLVANIA, on May 15, 1998 at 2:00 p.m., Eastern Daylight Saving Time for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The Board of Directors has fixed the close of business on April
7, 1998 as the record date for the determination of Shareholders entitled to
notice of and to vote at the Annual Meeting.
It is anticipated that this Proxy Statement and accompanying proxy card
(Proxy) will be mailed to Shareholders for the first time on or about April
17, 1998. Shares represented by a valid Proxy received in time for voting will
be voted in accordance with the Shareholder's instructions. If no such
instructions are specified, the Proxy will be voted FOR each of the nominees
for election as a Director. Shareholders may revoke their proxies at any time
before such proxies are exercised by giving notice in writing to N. William
Barthlow, Secretary, North Pittsburgh Systems, Inc., at its principal office,
4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311, by execution and
submission of a Proxy bearing a later date, or by appearing at the Annual
Meeting and giving notice of the revocation in person.
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mails, the Company, if necessary, may use its officers and its
regular employees, who will receive no compensation in addition to regular
salary or pay, to solicit proxies from Shareholders, either personally, by
telephone, facsimile, telegraph or letters. Arrangements will be made by the
Company with brokers and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of the shares held of record,
and the Company will reimburse these persons for reasonable out-of-pocket
expenses incurred.
VOTING RIGHTS
Only Shareholders of record at the close of business on April 7, 1998 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. At that date, the Company had outstanding and entitled to vote
15,005,000 shares of Common Stock. Holders of Common Stock are entitled to one
vote for each share held in respect to the election of Directors. Three Judges
of Election were appointed by the Company's Board of Directors under the
authority of the By-Laws of the Company and the Pennsylvania Business
Corporation Law to conduct the tabulation of votes in respect to the election
of Directors and to report the results thereof. Election as a Director
requires a favorable vote of the majority of the total shares represented at
the meeting. The total shares represented includes abstentions, withheld votes
and broker non-votes.
STOCK OWNERSHIP
As of March 13, 1998, Armstrong Utilities, Inc. (Armstrong), a Pennsylvania
corporation, the principal business of which is cable television and all of
the stock of which is owned by Armstrong Holdings, Inc., a
1
<PAGE>
Delaware corporation, held of record 935,740 shares or 6.24% of the Company's
15,005,000 shares of outstanding Common Stock. As of that date, no other
entity or individual held of record more than 5% of such stock. A Schedule 13D
and amendments thereto have been filed with the Securities and Exchange
Commission on the joint behalf of (i) Armstrong, (ii) Armstrong Holdings, Inc.
(holder of 297,996 shares), (iii) the Sedwick Foundation (holder of 34,638
shares), (iv) the Jud L. Sedwick Family Trust No. 2 (holder of 400 shares) and
(v) Director Jay L. Sedwick and his spouse, Jay L. Sedwick's son, his brother-
in-law and his spouse, an unrelated officer of Armstrong and Armstrong
Holdings, Inc., and his spouse and certain other persons, both individually
and in respect of certain of their capacities as officers of Armstrong and
Armstrong Holdings, Inc. The aggregate beneficial ownership at March 13, 1998
of those filing the Schedule 13D, or subject to the reporting requirements
thereof, was 1,318,956 shares or 8.79% of the Company's outstanding Common
Stock. Each of such persons disclaimed any membership in any "group" as such
term is defined in Rule 13d-5 under the Securities Exchange Act of 1934 and
the reporting persons have indicated that the stock has been acquired for
investment.
The following table sets forth information with respect to all persons known
to the Company who could be beneficial owners of more than 5% of the Company's
voting securities as of March 13, 1998 including those persons who by virtue
of their relationship to Armstrong and Armstrong Holdings, Inc. might be
deemed to be beneficial owners of the North Pittsburgh stock held by those
corporations:
TABLE I
BENEFICIAL OWNERS OF MORE THAN 5%
OF OUTSTANDING VOTING SECURITIES
<TABLE>
<CAPTION>
(2) (3) (4)
(1) OWNER'S NAME AND AMOUNT AND NATURE PERCENT
TITLE OF CLASS BUSINESS ADDRESS OF OWNERSHIP OF CLASS
- -------------- ------------------------- ----------------- --------
<S> <C> <C> <C> <C>
Common Stock Armstrong Utilities, Inc. 935,740 Direct 6.24%
One Armstrong Place
Butler, PA 16001
Common Stock Jay L. Sedwick 6,000 Direct 0.04%
One Armstrong Place 1,286,536 Indirect (1) 8.57%
Butler, PA 16001
Common Stock William C. Stewart 5,300 Direct 0.04%
One Armstrong Place 1,273,374 Indirect (2) 8.49%
Butler, PA 16001
Common Stock Kirby J. Campbell 10,600 Direct 0.07%
One Armstrong Place 1,268,774 Indirect (3) 8.46%
Butler, PA 16001
Common Stock Dru A. Sedwick 1,250 Direct .008%
One Armstrong Place 1,233,736 Indirect (4) 8.22%
Butler, PA 16001
</TABLE>
- --------
(1) Jay L. Sedwick, a Director of the Company, is Chairman of the Board and
Director of Armstrong and of Armstrong Holdings, Inc. If he were deemed
the beneficial owner of the 935,740 and 297,996 shares respectively held
by such corporations, the 34,638 shares held by the Sedwick Foundation, of
which Jay L. Sedwick is a Co-Trustee, the 400 shares held by the Jud L.
Sedwick Family Trust No. 2, of which Jay L. Sedwick is a Co-Trustee, and
the 17,762 shares held by Citrus Enterprises, L.P., a Delaware limited
partnership which handles diversified investments, of which Jay L. Sedwick
is a partner, his indirect beneficial ownership would total 1,286,536
shares.
(2) William C. Stewart, brother-in-law of Jay L. Sedwick, is a Director and
Chief Executive Officer of Armstrong and a Director and Secretary of
Armstrong Holdings, Inc. If he were deemed the beneficial
2
<PAGE>
owner of the 935,740 and 297,996 shares respectively held by such
corporations, the 5,000 shares held individually by his wife and the 34,638
shares held by the Sedwick Foundation, of which William C. Stewart is a Co-
Trustee, his indirect beneficial ownership would total 1,273,374 shares.
(3) Kirby J. Campbell is a Director, Executive Vice President and Treasurer of
Armstrong and a Director, Chief Executive Officer and Treasurer of
Armstrong Holdings, Inc. If he were deemed the beneficial owner of the
935,740 and 297,996 shares respectively held by such corporations, the
34,638 shares held by the Sedwick Foundation, of which Kirby J. Campbell
is a Co-Trustee, and the 400 shares held by the Jud L. Sedwick Family
Trust No. 2, of which Kirby J. Campbell is a Co-Trustee, his indirect
beneficial ownership would total 1,268,774 shares.
(4) Dru A. Sedwick, son of Jay L. Sedwick, is a Director, Executive Vice
President and Secretary of Armstrong and a Director and President of
Armstrong Holdings, Inc. If he were deemed the beneficial owner of the
935,740 and 297,996 shares respectively held by such corporations, his
indirect beneficial ownership would total 1,233,736 shares.
The following table sets forth information with respect to the beneficial
ownership as of March 13, 1998 of individual Directors and of all Directors
and Officers as a Group:
TABLE II
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
(2) (3) (4)
(1) NAME OF AMOUNT AND NATURE PERCENT
TITLE OF CLASS BENEFICIAL OWNER OF OWNERSHIP (1) OF CLASS
- -------------- ---------------- ----------------- --------
<S> <C> <C> <C> <C>
Common Stock Harry R. Brown 19,978 Direct (2) 0.13%
19,416 Indirect (3) 0.13%
Common Stock Charles E. Cole 52,028 Direct (4) 0.35%
21,972 Indirect (5) 0.15%
Common Stock Richard R. Kauffman 47,675 Direct 0.32%
Common Stock Allen P. Kimble 1,000 Direct (6) 0.01%
Common Stock Frank D. Reese 9,100 Direct 0.06%
9,100 Indirect (7) 0.06%
Common Stock Jay L. Sedwick 6,000 Direct 0.04%
1,286,536 Indirect (8) 8.57%
Common Stock Charles E. Thomas, Sr. 79,630 Direct 0.53%
25,686 Indirect (9) 0.17%
Common Stock Charles E. Thomas, Jr. 23,710 Direct (10) 0.16%
21,000 Indirect (11) 0.14%
Common Stock Barton B. Williams 29,220 Direct (12) 0.19%
Common Stock All Directors and Officers 286,451 Direct 1.91%
as a Group (16 Persons) 1,387,760 Indirect (13) 9.25%
</TABLE>
- --------
(1) Included in the shares set forth in the table above are (a) shares
beneficially owned by the Director, his wife, minor children, and
relatives living in his house, and, includable in such table under rules
of the Securities and Exchange Commission and (b) shares which are deemed
to be beneficially owned because the Director has voting power or power
of disposition with respect to the shares. Share amounts are reported
3
<PAGE>
as of March 13, 1998 and percentages of share ownership are calculated
based upon 15,005,000 shares of Common Stock outstanding as of that date.
(2) Of the 19,978 shares directly owned by Harry R. Brown, 1,354 shares are
held jointly with his wife.
(3) The 19,416 shares indirectly owned by Harry R. Brown are held
individually by his wife.
(4) Of the 52,028 shares directly owned by Charles E. Cole, 32,272 shares are
held jointly with his wife.
(5) The 21,972 shares indirectly owned by Charles E. Cole are held
individually by his wife.
(6) The 1,000 shares directly owned by Allen P. Kimble are held jointly with
his wife.
(7) The 9,100 shares indirectly owned by Frank D. Reese are held individually
by his wife. Mr. Reese will not be a nominee for reelection as a Director
at the 1998 Annual Meeting of Shareholders.
(8) For information with respect to the 1,286,536 shares indirectly owned by
Jay L. Sedwick, please refer to Note 1 to Table I above.
(9) The 25,686 shares indirectly owned by Charles E. Thomas, Sr. are held
individually by his wife. Mr. Thomas will not be a nominee for reelection
as a Director at the 1998 Annual Meeting of Shareholders.
(10) Of the 23,710 shares directly owned by Charles E. Thomas, Jr., 11,800
shares are held jointly with his wife.
(11) The 21,000 shares indirectly owned by Charles E. Thomas, Jr., are held by
him under the PA Uniform Transfers to Minors Act as custodian for five
children.
(12) The 29,220 shares directly owned by Barton B. Williams are held jointly
with his wife.
(13) The 1,387,760 shares indirectly owned by all Directors and Officers as a
Group include the 1,286,536 shares indirectly owned by Jay L. Sedwick and
described in Note 1 to Table I above.
No Director, officer or "group" as defined in Rule 13d-5 under the
Securities Exchange Act of 1934 is a beneficial owner of more than 5% of the
Company's Common Stock by virtue of any voting trust or similar arrangement.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
The By-Laws provide that North Pittsburgh shall be managed by a Board of
Directors of not less than seven (7) nor more than nine (9) members and that
the number of Directors to be elected shall be determined by the Board of
Directors prior to the Annual Meeting at which such Directors are to be
elected. The Board of Directors has established the number of Directors at
seven (7) for the coming year.
The persons named in the following table will be nominated for election as
Directors of North Pittsburgh to serve until the 1999 Annual Meeting of
Shareholders and until their successors are elected. All nominees are present
Directors of North Pittsburgh and were elected at the 1997 Annual Meeting of
Shareholders except Allen P. Kimble who was appointed to the Board of
Directors on January 30, 1998 to fill the vacancy created by the death of
Gerald A. Gorman. The number of shares of Common Stock represented by proxy at
the 1997 Annual Meeting of Shareholders held May 16, 1997 was 13,626,776 or
90.6% of the 15,040,000 outstanding shares of such stock on that date.
It is the intention of the proxies to vote for the election of seven (7)
Directors and unless authority to vote for any or all individual nominees is
withheld, it is the intention of the proxies to vote for the election of the
nominees listed in the following table. If any of the following nominees
should become unavailable as a candidate for any reason, which is not
anticipated, the Board of Directors in its discretion may designate a
substitute nominee, in which event votes will be cast for such substitute
nominee pursuant to the accompanying Proxy.
4
<PAGE>
The information in the table which follows includes as to each such nominee,
the nominee's age, the year in which service commenced as a Director of North
Pittsburgh, the nominee's current positions and offices held with North
Pittsburgh, the nominee's business experience during the past five years and
certain other information. Individual shareholdings of each nominee may be
found above in Table II, Security Ownership of Management.
NOMINEES FOR ELECTION AS DIRECTORS
AND INFORMATION CONCERNING THEM
BIOGRAPHICAL SUMMARIES OF NOMINEES/1/
Unless otherwise specified, "North Pittsburgh" as used below means North
Pittsburgh Systems, Inc. since May 31, 1985 and North Pittsburgh Telephone
Company, its predecessor, before that date. Positions and experience related
only to North Pittsburgh Telephone Company, the Company's principal
subsidiary, are also presented.
HARRY R. BROWN Director of North Pittsburgh since 1989
President of North Pittsburgh Systems, Inc. and President and General Manager
of North Pittsburgh Telephone Company
Mr. Brown, 61, has been President of North Pittsburgh Systems, Inc. and
President and General Manager of North Pittsburgh Telephone Company since
January 30, 1998. He was Vice President of North Pittsburgh Systems, Inc. from
1992 to January 30, 1998. Mr. Brown also held the following North Pittsburgh
positions: Vice President--Operations from 1987 to January 30, 1998, Assistant
Vice President--Operations from 1986 to 1987, Network Engineering Manager from
1984 to 1986 and Equipment Supervisor from 1975 to 1984.
DR. CHARLES E. COLE Director of North Pittsburgh since 1968
Retired Physician
Dr. Cole, 67, is a retired physician who previously practiced with the Cole-
Lechmanick division of Genesis Medical Associates in the Town of McCandless,
PA.
RICHARD R. KAUFFMAN Director of North Pittsburgh since 1980
Private Investor
Mr. Kauffman, 56, has been a private investor since 1996. He previously
served as Executive Vice President and Chief Executive Officer of The National
Bank of Coxsackie, Coxsackie, NY from 1991 to 1996, Executive Vice President
and Chief Operating Officer of The Sussex Trust Company, Georgetown, DE in
1990 and 1991. Also, Mr. Kauffman served as President and Executive Vice
President of Valley National Bank in Freeport, PA during the period 1978 to
1988.
- --------
/1/Unless otherwise indicated, a nominee has had the same principal occupation
for the past five years. Only directorships in companies with a class of
equity securities registered pursuant to the Securities Exchange Act of 1934,
or otherwise subject to its periodic reporting requirements, are listed. No
corporation or organization listed herein is a parent, subsidiary or other
affiliate of North Pittsburgh Systems, Inc. or its subsidiaries. There are no
arrangements or understandings among any director, North Pittsburgh Systems,
Inc. or its subsidiaries or any other person pursuant to which a director was
or is to be selected.
5
<PAGE>
ALLEN P. KIMBLE Director of North Pittsburgh since January 30, 1998
Vice President and Treasurer of North Pittsburgh Systems, Inc. and North
Pittsburgh Telephone Company
Mr. Kimble, 51, has been Vice President since 1989 and Treasurer since 1985
of North Pittsburgh Systems, Inc. and Vice President since 1989 and Treasurer
since 1979 of North Pittsburgh Telephone Company. Mr. Kimble also held the
following North Pittsburgh positions: Secretary from 1993 to January 30, 1998,
Assistant Vice President from 1987 to 1993, Assistant Secretary from 1979 to
1993, Assistant Secretary-Treasurer from 1977 to 1979 and Assistant to Vice
President--Finance from 1976 to 1977.
JAY L. SEDWICK Director of North Pittsburgh since 1980
Chairman of the Board and Director of Armstrong Utilities, Inc.
Mr. Sedwick, 63, is Chairman of the Board and Director in a number of
companies comprising the Armstrong Group of Companies (engaged in the business
of telephony, cable television, home security and real estate in several
states). He has been the Chairman of Armstrong Utilities, Inc. in Butler, PA
since 1993 and was President and Chief Executive Officer of the same company
from 1988 to 1997. Mr. Sedwick also served in various officer capacities for
Armstrong Utilities, Inc. from 1963 to 1988.
CHARLES E. THOMAS, JR. Director of North Pittsburgh since 1993
Partner of Thomas, Thomas, Armstrong & Niesen
Mr. Thomas, Jr., 55, son of Charles E. Thomas, Sr., retiring Chairman of the
Board, has been a partner in the law firm of Thomas, Thomas, Armstrong &
Niesen, Harrisburg, PA, since the formation of this firm in 1991,
concentrating in public utility, securities regulation and corporate law.
Previous thereto, he was a partner in the law firm of Thomas & Thomas from
1977 to 1990. Thomas, Thomas, Armstrong & Niesen is retained as general
counsel for North Pittsburgh and was paid a total of $133,888 in fees during
1997.
BARTON B. WILLIAMS Director of North Pittsburgh since 1986
President of Parks Moving and Storage, Inc.
Mr. Williams, 56, has been President of Parks Moving and Storage, Inc.,
Warrendale, PA since 1973.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors held twenty-one meetings during 1997. Charles E.
Thomas, Sr., Chairman of the Committee, Charles E. Cole, Frank D. Reese and
Gerald A. Gorman until December 1, 1997 and Harry R. Brown upon Mr. Gorman's
resignation served, without additional compensation, as an Executive Committee
of North Pittsburgh Systems, Inc. and subsidiaries with full power of the
Board of Directors when the Board was not in session and action was considered
necessary and in the best interests of each company. Five Executive Committee
meetings were held in 1997. Charles E. Thomas, Sr., Chairman of the Committee,
Charles E. Cole, Richard R. Kauffman, Frank D. Reese, Jay L. Sedwick, Charles
E. Thomas, Jr. and Barton B. Williams served, without additional compensation,
as a Compensation Committee and, in respect to compensation for 1997, held one
meeting over two days (see Compensation Committee Report on Executive
Compensation). Charles E. Thomas, Jr., Chairman of the Committee, Richard R.
Kauffman, Jay L. Sedwick, Barton B. Williams and Allen P. Kimble served,
without additional compensation, as a standing Audit Committee. No Audit
Committee meetings were held in 1997. The Company does not have a standing
nominating committee, but rather acts as a committee of the whole with respect
to this function.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION TABLE. The Executive Compensation Table below shows
the total compensation of Gerald A. Gorman, Harry R. Brown, Allen P. Kimble
and N. William Barthlow, the only Executive Officers whose compensation
exceeded $100,000 during 1997.
EXECUTIVE COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
(C)
ANNUAL (I)
(A) (B) COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
- --------------------------- ---- ------------ ------------
<S> <C> <C> <C>
Gerald A. Gorman* 1997 $186,160 $16,848(2)
1996 142,500 16,738
1995 135,450 15,891
Harry R. Brown** 1997 $130,125 $16,521(2)
1996 119,500 15,932
1995 113,600 15,126
Allen P. Kimble*** 1997 $115,150 $ 4,061
1996 105,200 3,682
1995 99,960 3,499
N. William Barthlow**** 1997 $105,100 $ 3,735
1996 96,400 3,374
1995 98,000 3,189
</TABLE>
- --------
* Mr. Gorman retired as President on December 1, 1997 due to continuing
health problems and subsequently passed away on January 5, 1998.
** President since January 30, 1998 and Vice President from 1992 to 1998 of
North Pittsburgh Systems, Inc.; President and General Manager since January
30, 1998 and Vice President--Operations from 1987 to 1998 of North
Pittsburgh Telephone Company. Mr. Brown was also a Director of both
companies in all three years.
*** Vice President and Treasurer and a Director since January 30, 1998 of both
companies.
****Vice President since 1994, Secretary since January 30, 1998 and Assistant
Secretary from 1993 to 1998 of North Pittsburgh Systems, Inc.; Vice
President--Marketing and Revenues since 1994, Secretary since January 30,
1998 and Assistant Secretary from 1993 to 1998 of North Pittsburgh
Telephone Company.
NOTES TO EXECUTIVE COMPENSATION TABLE:
(1) The Executive Compensation Table reflects salary, Director fees and
Company contributions to a defined contribution plan only. No other forms
of compensation such as Bonus, Restricted Stock Awards, Stock Appreciation
Rights, Options or Long Term Incentive Payments exist. During 1997, no one
participated in the Deferred Compensation Plan.
(2) Messrs. Gorman and Brown received, in 1997, $12,000 each as compensation
as Directors. No amounts were paid for special or committee assignments.
In 1997, annual contributions were made to the North Pittsburgh Telephone
Company Employees' Savings and Retirement Plan (401-K) for the benefit of
Messrs. Gorman, Brown, Kimble and Barthlow in the amounts of $4,848,
$4,521, $4,061 and $3,735, respectively.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Directors Charles
E. Thomas, Sr., Charles E. Cole, Richard R. Kauffman, Frank D. Reese, Jay L.
Sedwick, Charles E. Thomas, Jr. and Barton B. Williams, acting as a
Compensation Committee met on December 5 and 6, 1996 for the purpose of
determining Officers' Compensation for 1997. They had available for use, as a
general basis for consideration, information obtained from executive
compensation seminars and salary levels for comparable positions, both
nationally and regionally, in other utilities (including telephone companies)
and in other general industry segments. Also considered were Officer salary
levels existing in 1996, the continuing changes in the telephone industry as a
whole over the course of the past year, the effect of these changes on the
Company and the responsibilities of Officers relating to these changes and
their performance in meeting their responsibilities. As was done for previous
years, the Compensation Committee's evaluation of appropriate salary
compensation levels for Officers included consideration of the
responsibilities of each office in 1997, the salary structures of the
Pittsburgh area, inflation and merit. This latter factor was not based solely
on traditional performance measures which may exist in other industries such
as sales, earnings, return on equity, etc. (see Performance Graph), but rather
reflected one of the basic philosophies of the Company, namely, that Officers
are charged with the principal responsibility of providing quality telephone
communication services at reasonable prices and, at the same time, enhancing
Shareholder values. In the opinion of the Committee, these objectives were
being successfully achieved by management as a whole. In addition, the
responsibilities and performance of each individual Officer were considered in
the context of the considerations previously set forth. The amounts set forth
in the Summary Compensation Table reflect the 1997 salary levels recommended
by the Compensation Committee in December, 1996 and approved by the Board of
Directors.
COMPENSATION COMMITTEE:
Charles E. Thomas, Sr.--Chairman
Charles E. Cole
Richard R. Kauffman
Frank D. Reese
Jay L. Sedwick
Charles E. Thomas, Jr.
Barton B. Williams
8
<PAGE>
The following Performance Graph provides Shareholders with a comparison of
the total return experienced by the Company in relation to the broad equity
market indexes shown thereon.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG NPSI, S&P TELEPHONE INDEX AND NASDAQ INDEX
Measurement period S&P
(Fiscal year Covered) NPSI Telephone NASDAQ
- --------------------- ----- --------- ------
Measurement PT - 12/31/92 $100.00 $100.00 $100.00
FYE 12/31/93 $112.45 $115.41 $114.75
FYE 12/31/94 $138.24 $114.06 $111.10
FYE 12/31/95 $226.66 $172.09 $159.18
FYE 12/31/96 $188.97 $186.27 $304.62
FYE 12/31/97 $143.73 $265.43 $433.54
The above Performance Graph provides an indicator of cumulative total
shareholder returns over a five-year period for the Company (North Pittsburgh
Systems, Inc. (NPSI)) as compared with the National Association of Security
Dealers Automated Quotation System (NASDAQ) Composite Index and the Standard
and Poor's (S&P) Telephone Index. "Total shareholder returns" assumes the
reinvestment of dividends. The Graph also assumes that $100 was invested on
December 31, 1992 in NPSI, the S&P Telephone Index and the NASDAQ Index. For
example, NPSI's base of $100 at the beginning of the period, on a total return
basis, is calculated to be approximately $144 at the end of the five-year
period, a gain of approximately 44% over such period.
RETIREMENT BENEFITS TABLE. The following table illustrates estimated annual
benefits (average annual earnings multiplied by a benefit factor of 1.45%
multiplied by years of service) payable to Participants at their respective
retirement dates under the Company's Retirement Plan.
9
<PAGE>
RETIREMENT BENEFITS TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS USED YEARS OF SERVICE
AS BASIS FOR COMPUTING -----------------------------------------------------------
RETIREMENT BENEFITS 10 20 30 40
------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$100,000 $14,500 $29,000 $43,500 $58,000
110,000 15,950 31,900 47,850 63,800
120,000 17,400 34,800 52,200 69,600
130,000 18,850 37,700 56,550 75,400
140,000 20,300 40,600 60,900 81,200
150,000 21,750 43,500 65,250 87,000
160,000 23,200 46,400 69,600 92,800
</TABLE>
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NOTES TO RETIREMENT BENEFITS TABLE:
(1) The compensation amounts paid to Mr. Gorman, Mr. Brown, Mr. Kimble and Mr.
Barthlow for 1997 of $186,160, $130,125, $115,150 and $105,100,
respectively, as shown in the Annual Compensation-Salary column of the
Executive Compensation Table, are covered under the Company's Retirement
Plan. Mr. Brown, Mr. Kimble and Mr. Barthlow as of December 31, 1997 had
accumulated 37.28, 21.65 and 20.44 years of credited service,
respectively, under the Retirement Plan.
(2) Benefits listed in the Table are not subject to any deductions for Social
Security or other offset amounts.
(3) The Company's Retirement Plan (Retirement Plan) provides retirement
benefits to all full-time employees, age 21 and over, generally based on
average basic monthly compensation, excluding overtime earnings or other
amounts earned, during the highest sixty (60) months of employment. The
amount of contribution or accrual applicable to an individual in respect
to this defined benefit plan cannot be calculated readily. However, the
aggregate cash contribution required for the Retirement Plan year ended
October 31, 1997 was equal to 6.6% of the total covered remuneration of
all Participants in the Retirement Plan.
DIRECTORS' COMPENSATION. During 1997, Directors of the Company, including
those holding offices with the Company, received $1,000 per month as
compensation for all services as a Director. The Chairman of the Board
received an additional $44,500 for his services in that position. No further
compensation was paid to Directors for special or committee assignments.
Commencing in 1998, Directors, other than the Chairman of the Board, who are
also officers of the Company, no longer receive additional compensation for
serving as Directors.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Under the Company's By-Laws, the Board of Directors has the authority to
appoint a firm of accountants to conduct an annual examination of the
financial status, property and affairs of the Company. In accordance with such
authority, KPMG Peat Marwick LLP, which has audited the financial statements
of the Company annually since 1952, has been appointed by the Board of
Directors to provide audit and tax services for the year ending December 31,
1998. As a consequence, no recommendations will be made at the 1998 Annual
Meeting in respect to accountants and this matter will not be submitted for a
vote at the meeting.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, will be given an opportunity to make a statement, if he/she so
desires, and will be available to respond to appropriate questions by
Shareholders.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for presentation at the 1999 Annual Meeting
must be received at the office of the Secretary, North Pittsburgh Systems,
Inc., 4008 Gibsonia Road, Gibsonia, PA 15044-9311 not later than December 18,
1998 in order to be eligible to be included in the Company's Proxy Statement
for that meeting. It is recommended that Shareholder proposals be sent to the
Company by Certified Mail, Return-Receipt Requested.
10
<PAGE>
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than that stated in the Notice of
Meeting. However, if any other business shall properly come before the
meeting, votes may be cast pursuant to the proxies solicited hereby in respect
to such other business in accordance with the best judgment of the person or
persons acting under the proxies.
Accompanying this Proxy solicitation material is a copy of the Company's
Annual Report for the year 1997, which includes the following audited
financial statements: Consolidated Balance Sheets as of December 31, 1997 and
1996, and for each of the years in the three-year period ended December 31,
1997, Consolidated Statements of Earnings, Consolidated Statements of
Shareholders' Equity and Consolidated Statements of Cash Flows. The Annual
Report is submitted for the general information of the Company's Shareholders
and is not intended to induce, or for use in connection with, any sale or
purchase of securities of the Company, nor should it be regarded as Proxy
soliciting material or as a communication by means of which any solicitation
is made.
By Order of the Board of Directors
/s/ N. William Barthlow
Secretary
Dated: April 17, 1998
11
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC.
4008 GIBSONIA ROAD
GIBSONIA, PA 15044-9311
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Harry R. Brown,
Allen P. Kimble and Charles E. Cole, and/or any one or more of them, each with
the power to appoint his substitute, as proxies of the undersigned and
authorizes them to represent and to vote, as designated below, all shares of
Common Stock of North Pittsburgh Systems, Inc., which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on May 15,
1998 and at any adjournments thereof.
1. ELECTION OF DIRECTORS [_] FOR all [_] WITHHOLD AUTHORITY to vote for
nominees listed below: all nominees listed below:
Harry R. Brown, Charles E. Cole, Richard R. Kauffman, Allen P. Kimble, Jay L.
Sedwick,
Charles E. Thomas, Jr., Barton B. Williams
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below)
-------------------------------------------------------------------------
(Continued and to be signed on other side)
<PAGE>
The Proxies may vote in their discretion on any other business as may
properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL LISTED NOMINEES IN THE ELECTION OF DIRECTORS.
Please sign exactly as name appears below. If stock is held in joint names,
both must sign. When signing as attorney, executor, administrator, custodian,
trustee or guardian, please give title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ......................, 1998
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
................................
(Signature)
................................
(Signature if held jointly)
