<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
---------------------------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from
_______________________ to ______________________
Commission File Number 0-13716
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NORTH PITTSBURGH SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1485389
- --------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
724-443-9600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO____
-----
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding
------------------------
At October 22, 1999, the Registrant had 15,005,000 shares of common stock
outstanding, par value $.15625 per share, the only class of such stock issued.
<PAGE>
PART I
ITEM 1
FINANCIAL STATEMENTS
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Thousands - Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept. 30 Ended Sept. 30
-------------------- ------------------
1999 1998 1999 1998
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues:
Local network services $ 3,461 $ 3,009 $ 9,916 $ 8,817
Long distance and access services 11,595 10,972 35,382 33,769
Directory advertising, billing & other services 619 646 1,992 1,837
Telecommunication equipment sales 738 609 2,114 2,035
Other operating revenues 1,144 1,093 3,581 3,206
------- ------- ------- -------
Total Operating Revenues 17,557 16,329 52,985 49,664
Operating expenses:
Network and other operating expenses 8,004 6,767 23,148 19,119
Depreciation and amortization 3,502 2,972 10,032 8,792
State and local taxes 769 732 2,339 2,188
Telecommunication equipment expenses 642 576 1,901 1,920
------- ------- ------- -------
Total Operating Expenses 12,917 11,047 37,420 32,019
------- ------- ------- -------
Net Operating Revenues 4,640 5,282 15,565 17,645
Other expense (income), net:
Interest expense 607 453 1,616 1,372
Interest income (242) (253) (698) (1,022)
Sundry expense (income), net (1,276) (336) (1,770) (1,435)
------- ------- ------- -------
(911) (136) (852) (1,085)
------- ------- ------- -------
Earnings before income taxes 5,551 5,418 16,417 18,730
Income taxes 2,272 2,214 6,667 7,210
------- ------- ------- -------
Net earnings $ 3,279 $ 3,204 $ 9,750 $11,520
======= ======= ======= =======
Weighted average common shares outstanding 15,005 15,005 15,005 15,005
======= ======= ======= =======
Basic and diluted earnings per share of
common stock $ .22 $ .21 $ .65 $ .77
======= ======= ======= =======
Dividends per share of common stock $ .16 $ .15 $ .48 $ .50
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
(Unaudited)
Sept. 30 Dec. 31
ASSETS 1999 1998
------ ----------- --------
<S> <C> <C>
Current Assets:
Cash and temporary investments $ 13,096 $ 16,786
Marketable securities available for sale 15,694 14,670
Accounts receivable:
Customers 4,600 3,599
Access service settlements and other 6,198 7,310
Prepaid expenses 493 204
Inventories of construction and operating materials and
supplies 4,574 4,019
Prepaid taxes 239 -
Prepaid federal and state tax 242 -
-------- --------
Total current assets 45,136 46,588
-------- --------
Property, plant and equipment:
Land 475 475
Buildings 11,375 11,067
Equipment 144,141 136,779
-------- --------
155,991 148,321
Less accumulated depreciation and amortization 83,825 78,854
-------- --------
72,166 69,467
Construction in progress 14,857 6,863
-------- --------
Total property, plant and equipment, net 87,023 76,330
Investments 9,410 9,637
Deferred financing costs 787 857
Prepaid pension cost 669 598
Other assets 937 1,305
-------- --------
$143,962 $135,315
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,452 $ 1,850
Accounts payable 7,298 6,756
Dividend payable 2,401 2,251
Other accrued liabilities 2,104 2,616
Federal and state income taxes - 920
-------- --------
Total current liabilities 14,255 14,393
-------- --------
Long-term debt 37,621 32,196
Deferred income taxes 9,166 8,060
Accrued postretirement benefits 5,095 5,002
Other liabilities 1,743 1,858
Shareholders' equity:
Capital stock/Common stock 2,350 2,350
Capital in excess of par value 2,215 2,215
Retained earnings 71,813 69,265
Less cost of treasury stock (1999 and 1998-35,000 shares) (508) (508)
Accumulated other comprehensive income-unrealized gain
on available for sale securities, net 212 484
-------- --------
Total shareholders' equity 76,082 73,806
-------- --------
$143,962 $135,315
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended Sept. 30
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash from operating activities:
Net earnings $ 9,750 $ 11,520
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation and amortization 10,032 8,792
Gain on sale of marketable securities (352) -
Equity (income) losses of affiliated companies (515) (1,145)
Changes in assets and liabilities:
Accounts receivable 111 (85)
Inventories of construction and operating materials
and supplies (555) 57
Deferred financing costs, prepaid pension cost
and other assets 367 747
Prepaid federal and state taxes (481) (185)
Accounts payable 542 153
Other accrued liabilities (627) (479)
Accrued postretirement benefits 93 179
Federal and state income taxes 370 (2,955)
Other, net (250) 63
-------- --------
Total adjustments 8,735 5,142
-------- --------
Net cash from operating activities 18,485 16,662
-------- --------
Cash used for investing activities:
Expenditures for property and equipment (20,963) (14,116)
Net salvage on retirements 199 457
-------- --------
Net capital additions (20,764) (13,659)
-------- --------
Purchase of marketable securities available for sale (8,398) (14,320)
Proceeds from sale of marketable securities available for sale 7,271 1,202
Proceeds from sale of investment - 13,561
Investments in affiliated entities - (630)
Distributions from affiliated entities 742 43
-------- --------
Net cash used for investing activities (21,149) (13,803)
-------- --------
Cash used for financing activities:
Cash dividends (7,052) (7,353)
Retirement of debt (1,383) (597)
Proceeds from issuance of new debt 7,409 -
-------- --------
Net cash used for financing activities (1,026) (7,950)
-------- --------
Net (decrease) increase in cash and temporary investments (3,690) 5,091
Cash and temporary investments at beginning of period 16,786 15,938
-------- --------
Cash and temporary investments at end of period $ 13,096 $ 10,847
======== ========
Interest paid $ 1,554 $ 1,306
======== ========
Income taxes paid $ 6,723 $ 10,225
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
-------
The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Consolidated herein
are the financial results of the Registrant's wholly-owned subsidiaries,
North Pittsburgh Telephone Company (North Pittsburgh), Penn Telecom, Inc.
(Penn Telecom) and Pinnatech, Inc. (Pinnatech). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Nevertheless,
the Registrant believes that its disclosures herein are adequate to make
the information presented not misleading and, in the opinion of management,
all adjustments (which consisted only of normal recurring accruals)
necessary to present fairly the results of operations for the interim
periods have been reflected. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Registrant's latest annual report to the
Securities and Exchange Commission on Form 10-K.
(2) COMPREHENSIVE INCOME
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130) establishes requirements for disclosure of
comprehensive income. The objective of SFAS 130 is to report all changes
in equity that result from transactions and economic events other than
transactions with owners. Comprehensive income is the total of net income
and all other non-owner changes in equity. The reconciliation of net
income to comprehensive income (loss) is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept. 30 Ended Sept. 30
---------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $3,279 $3,204 $9,750 $11,520
Unrealized gain (loss) on
marketable securities (465) (87) (272) (89)
------ ------ ------ -------
Comprehensive income $2,814 $3,117 $9,478 $11,431
====== ====== ====== =======
</TABLE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Financial Condition
-------------------
(a) General
-------
There were no material changes in the Registrant's consolidated general
financial condition from the end of its preceding fiscal year on December
31, 1998 to September 30, 1999, the end of the nine-month period reported
herein.
4
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(b) Liquidity and Capital Resources
-------------------------------
Consolidated capital expenditure commitments for the purchase and
installation of communications and other equipment at September 30, 1999
amounted to approximately $5,479,000, with such amount being part of the
1999 construction program, which is expected to be in excess of $23 million.
Funds for financing construction expenditures in the nine-month period ended
September 30, 1999 were generated from internal sources and debt financing.
Based on its 1999 construction budget and projected cash flows, the
Registrant anticipates cash flows provided by operating activities and cash
reserves in 1999 to be sufficient to service long-term debt, to pay
dividends and to finance approximately 25% to 50% of capital additions. The
balance of capital additions will be financed from debt financing available
from the Rural Utilities Service. At September 30, 1999, construction work
in progress was $14,857,000.
The Registrant and its subsidiaries have not experienced any difficulty in
the past meeting either long-term or short-term cash commitments. Cash flow
generated through regular operations has been adequate to not only finance a
significant portion of the capital requirements of the Registrant as
discussed above but also to meet principal and interest payments on long-
term debt and all working capital requirements. It is anticipated that
future long-term interest and principal payments will be made from the same
source of internally generated funds.
(c) Regulatory/Competition
----------------------
North Pittsburgh, under Chapter 30 of the Pennsylvania Public Utility Code,
filed a petition with the Pennsylvania Public Utility Commission (PA PUC),
on July 31, 1998, seeking approval of an alternative form of regulation to
replace traditional rate base/rate of return regulation or be subject to a
show cause proceeding. The petition also included a proposed network
modernization plan. In the filing, North Pittsburgh proposed a price cap
plan whereby rates for non-competitive services are allowed to be increased
based on an index that measures general economy wide price increases. This
petition is still pending before the PA PUC and may be modified in the final
order. However, it is not possible at this time to determine the PA PUC's
disposition of this petition or the effect on North Pittsburgh's financial
position or results of operations.
The Federal Communications Commission (FCC) continues to work on Rulemakings
that will further spell out the specifics of the Telecommunications Act of
1996 (the 1996 Act). The PA PUC must then finalize its course of action to
fully implement the 1996 Act, or to the extent possible and permissible,
change the manner in which such regulations are implemented in Pennsylvania
before the impact on North Pittsburgh, a Rural Telephone Company under the
1996 Act, can be fully understood and measured. However, the clear intent of
the 1996 Act is to open up the local exchange market to competition. The
1996 Act appears to mandate, among other items, that North Pittsburgh, at
some point in time, permit the resale of its services at wholesale rates,
provide number portability, if feasible, provide dialing parity, provide
interconnection to any requesting carrier for the transmission and routing
of telephone exchange service and exchange access and provide access to
network elements. North Pittsburgh was granted a two-year suspension of the
interconnection requirements of Section 251 of the 1996 Act that expired
July 10, 1999. In January, 1999, North Pittsburgh filed for an additional
one-year extension of the suspension until July 10, 2000. In an order
entered June 25, 1999, the one-year extension of the suspension was
approved.
The 1996 Act, FCC and PA PUC regulatory proceedings and the thrust towards a
fully competitive marketplace have created some uncertainty in respect to
the levels of the Registrant's revenue growth in the future. However, the
Registrant, through its subsidiaries, has positioned itself to take
advantage of the opportunities the 1996 Act presents. The Registrant's
business plan focuses on expanding its telecommunication services outside
its traditional service area. Also, its unique location in a growing
commercial/residential suburban traffic corridor to the north of the City of
Pittsburgh, its state-of-the-art switching transmission and transport
facilities and its extensive fiber network place the Registrant in a solid
position to meet competition and minimize any loss of revenues. In addition,
the Registrant continues to make its network flexible and responsive to the
needs of its customers to meet competitive threats. Expansion of services
outside the traditional territory, new services, access line growth and
anticipated usage growth are expected to lessen or offset any reductions in
the Registrant's revenue sources.
2. Results of Operations
---------------------
Total operating revenues increased $3,321,000 (6.7%) in the nine-month
period ended September 30, 1999 over the comparable period in 1998. This
change was due to an increase
5
<PAGE>
in local network services of $1,099,000 (12.5%), and an increase in long
distance and access services of $1,613,000 (4.8%). Increased local network
service revenues were attributable to customer growth, growth in second
lines and expanded penetration of enhanced services. Higher long distance
and access services were generally the result of an increase in the number
of customers and minutes of use.
Total operating expenses for the nine-month period ended September 30, 1999
increased $5,401,000 (16.9%) over the preceding year. That change is
principally the result of an increase in network and other operating
expenses of $4,029,000 (21.1%), and an increase in depreciation and
amortization of $1,240,000 (14.1%). The increase in network and other
operating expenses consists of an increase in personnel costs due to an
expansion of existing business and an increase in personnel and other
expenses due to start-up activities of Competitive Local Exchange Carrier
and Internet-related services. Temporary increases in data processing
expenses experienced were necessary to maintain both existing and new
systems during conversion activities and ceased in the third quarter. The
increase in depreciation and amortization is the direct result of the
growth in fixed assets to serve current and future customer needs. The
increase in total operating revenues discussed above coupled with the
increase in total operating expenses resulted in net operating revenues
decreasing $2,080,000 (11.8%) between 1999 and 1998.
Interest expense increased $244,000 (17.8%) due to an increased level of
debt financing in 1999. Interest income decreased $324,000 (31.7%)
primarily due to a shift in temporary investments to available for sale
securities. The net increase in Sundry income (non-operating) of $335,000
is primarily due to receipts from a one-time insurance settlement in 1998
and a decrease in cellular partnership income from 1998 to 1999, offset by
net realized gains on available for sale securities and a one-time gain
from a cellular partnership transaction recorded in the third quarter of
1999.
The decrease in net operating revenues for the nine-month period ended
September 30, 1999, in conjunction with the decrease in Sundry income, net,
resulted in a decrease of $2,313,000 (12.4%) in earnings before income
taxes.
The Registrant's effective tax rate was 40% and 38% for the nine-month
period ended September 30, 1999 and 1998 respectively. The increase in
the effective tax rate results from receipt of a non-taxable life insurance
settlement in the quarter ended March 31, 1998.
Fluctuations in the revenues and expenses for the three-month period ended
September 30, 1999, as compared to the same quarterly period in 1998 are
generally attributable to the same reasons above in the year-to-date
comparisons.
3. New Accounting Pronouncements
-----------------------------
In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". The
Pronouncement is effective the Registrant's year beginning January 1, 2001.
The Registrant does not expect this pronouncement to impact the
consolidated financial statements because the Registrant has not entered
into derivative or hedging transactions.
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", has been adopted
by the Registrant effective January 1, 1999. SOP 98-1 provides guidance on
capitalizing costs of computer software developed or obtained for internal
use. SOP 98-1 did not have a material effect on its financial statements.
4. Year 2000
---------
(a) State of Readiness
------------------
The Registrant has taken actions to understand the nature and extent of the
work required in order to make its systems and infrastructure Year 2000
compliant. The Registrant began work last year to prepare its information
technology (IT) and non-information technology (non-IT) systems, including
updating and/or replacing existing legacy systems. The Registrant has
formed a Corporate Year 2000 Task Force, which is responsible for all Year
2000 activities and is being monitored by senior management and the Board
of Directors.
There are six phases of the Registrant's Year 2000 program: Awareness,
Inventory, Assessment, Renovation, Validation and Implementation. The
Registrant has defined the six phases as follows:
6
<PAGE>
Awareness - Gain the commitment of management and staff to solving the
problem. This phase has been completed.
Inventory - Conduct a thorough inventory of all hardware and software
systems. This phase will run until December, 1999 in order to maintain the
inventory throughout the life of the project.
Assessment and Planning - Decide which systems to retire, repair or
replace. Prepare contingency plans. This phase has been completed.
Renovation - Perform upgrades to hardware and software. The Registrant has
contracted to outsource certain operational support, billing and accounting
systems to a third party vendor. The software and hardware components of
the systems selected have been certified by the vendor as Year 2000
compliant. The Registrant has completed the remediation of all mission
critical systems at this time. The Renovation is now 98% complete. The
remaining 2% of non-mission critical systems are scheduled to be remediated
in advance of December, 1999.
Validation - Test and certify new and renovated systems. This phase is
underway; however, due to the introduction of several new product
technologies, final testing will not be completed until the end of
November, 1999. This phase is currently 90% complete.
Implementation and Follow-up - New or renovated systems go into service.
This phase is scheduled to be completed in December, 1999, and will include
the resolution of any outstanding problems. The Year 2000 Project will
extend until March, 2000 in order to address the leap day of February 29,
2000 and to address any outstanding issues.
The Registrant's Year 2000 issues related to third parties can be broken
into two categories: third party vendors who supply products to the
Registrant, and other telecommunications companies who provide joint
service to our customers. The third party vendors have been providing the
Registrant with Year 2000 solutions on an on-going basis. Year 2000
upgrades, repairs and testing are being performed as per vendor
specifications. Other telecommunications service providers are
implementing Year 2000 programs in much the same fashion as the Registrant
and industry testing is being performed on an on-going basis.
(b) Cost to Address Year 2000 Issues
--------------------------------
Expenditures related to Year 2000 remediation, the data processing
transition plan, license fees for purchase of software and training and
implementation costs are not expected to exceed $3.5 million, $3.3 million
of which has been incurred through September 30, 1999. Costs related to
implementation of new systems are being capitalized, in accordance with SOP
98-1, and will be amortized over the estimated useful life of the asset.
The remainder of these costs, including Year 2000 remediation costs,
are being expensed as incurred.
(c) Risks of Year 2000 Issues
-------------------------
The most reasonably likely worst case scenario is loss of services to other
interconnecting companies who have not attained Year 2000 compliance. This
is unlikely to occur since the interconnecting companies realize their
responsibility to comply. However, should this worst case scenario occur,
the Registrant will give customers the option of rerouting service to a
working carrier.
(d) Contingency Plan
----------------
The Registrant has developed a Corporate Year 2000 Contingency Plan to
cover its primary business activities. This plan outlines the key areas of
business, and the manner in which they will be supported in the event of a
Year 2000 failure. This plan has been developed as a result of research
into United States Telephone Association member telephone company responses
to hurricanes, tornadoes, ice storms and other disasters. The Registrant
has studied and modified these plans to cover operations during potential
Year 2000 related failures. Testing and certification of the Registrant's
Contingency Plan has been completed. The Registrant has also updated and
revised the existing Emergency Response Plan. The Registrant's Emergency
Response Plan will form the core of the Registrant's Contingency Plan if a
major service outage should occur.
7
<PAGE>
Key components of the Contingency Plan are the preparations to revert to a
manual operation, stockpiling and conservation of materials, increased
staffing levels, data storage for processing at a later date, isolation of
harmful network elements and positioning key personnel in areas where they
will be most effective. Should there be a serious service affecting
problem, the Emergency Response Plan will be activated until all services
are restored. Events, which could trigger activation of the Emergency
Response Plan, include widespread loss of gas or electric service, failures
at various interconnecting companies or failure of internal switching or
transmission systems.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
1. There have been no material changes in reported market risks faced by the
Registrant since December 31, 1998.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH PITTSBURGH SYSTEMS, INC.
------------------------------
(Registrant)
Date 11/1/1999 /s/ H. R. Brown
____________________ ________________________________
H. R. Brown, President
Date 11/1/1999 /s/ A. P. Kimble
____________________ ________________________________
A. P. Kimble, Vice President & Treasurer
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q.
--------
<TABLE>
<CAPTION>
Exhibit
Number Subject Applicability
- ------ ------- -------------
<S> <C> <C>
(2) Plan of acquisition, reorganization, Not Applicable
arrangement, liquidation or
succession
(3) (i) Articles of Incorporation Provided in Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1996 and
Incorporated Herein by
Reference.
(3) (ii) By-Laws Provided in Annual Report
on Form 10-K for the year
ended December 31, 1998
and Incorporated Herein by
Reference.
(4) Instruments defining the rights of Provided in Registration of
security holders including indentures Securities of Certain
Successor Issuers on Form
8-B filed on June 25, 1985
and Incorporated Herein by
Reference.
(10) Material Contracts Attached Hereto
(11) Statement of computation of Attached Hereto
earnings per share.
(15) Letter re unaudited interim financial Not Applicable
information
(18) Letter re change in accounting Not Applicable
principles
(19) Report furnished to security holders Not Applicable
(22) Published report regarding matters Not Applicable
submitted to a vote of security holders
(23) Consents of experts and counsel Not Applicable
(24) Power of attorney Not Applicable
(27) Financial Data Schedule Attached Hereto
(99) Additional exhibits Not Applicable
</TABLE>
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
-------------------
quarter ended September 30, 1999.
<PAGE>
EXHIBIT 10
The Executive Employment Agreement (Agreement) is effective for the President
and all Vice Presidents of the Registrant. All Agreements are dated September
1, 1999, and vary in length from four years to four years and eleven months.
Other than base salaries and length of the contracts, there are no other
differences in the terms of the Agreements, the body of which is provided in
this exhibit.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this ______day of __________, 199____, by
and between NORTH PITTSBURGH TELEPHONE COMPANY, a Pennsylvania business
corporation, having its principal office at 4008 Gibsonia Road, Gibsonia,
Pennsylvania 15044-9311 (hereinafter called "Employer") and ___________
________ with residential address at ____________________________ (hereinafter
called the "Employee").
WHEREAS, Employee is currently employed by Employer as an executive
officer, but without either a written employment agreement or a fixed term of
employment and;
WHEREAS, Employer wishes to assure Employee's future services for a
fixed term and to have an agreed upon writing which sets forth Employee's
duties, responsibilities, salary and benefits and;
WHEREAS, both Employee and Employer agree that it would be beneficial
for both to have a written employment agreement between them;
NOW, THEREFORE, for and in consideration of the mutual promises,
agreements and covenants herein contained, the parties, intending to be legally
bound, agree as follows:
1. Employment. Employer will continue to employ the Employee and the
----------
Employee accepts such continued employment by Employer upon the terms and
conditions of this Agreement.
2. Initial Term; Renewal Option. The initial term of employment under
----------------------------
this Agreement shall be _____ years in length and shall commence on
_____________, 1999 and terminate at 5 p.m. on __________________, 2003 (the
"Initial Term"). Employer may renew Employee's employment under this Agreement
for successive terms of between one to four years by providing Employee with
written notice of said renewal at least three (3) months before the last day of
the prior term. If the renewal notice fails to state how long the next term of
employment shall be, then said term shall be deemed to be one year in length.
3. Fidelity Payment. Employer agrees to pay Employee a Fidelity Payment
----------------
of TWENTY THOUSAND DOLLARS ($20,000) in two equal installments. The first
installment of TEN THOUSAND DOLLARS ($10,000) shall be paid within thirty (30)
days after Employee's first day of work under the Initial Term of this Executive
Employment Agreement. The second installment of TEN THOUSAND DOLLARS ($10,000)
shall be paid on January 28, 2000. Employee agrees that the fidelity payment is
not otherwise due Employee, but arises solely from this Agreement and is subject
to all remaining terms and conditions of this Agreement.
4. Compensation and Benefits.
-------------------------
(a) For all services rendered by the Employee hereunder, the
Employer shall (i) pay Employee a base salary of ___________ per 12 month
period, payable in equal monthly installments, one at the end of each monthly
period; (ii) include the Employee as a participant in the Employer's Executive
Bonus Plan (see Attachment I) which will remain in effect throughout the term of
this Agreement and which may from time to time be modified or amended; (iii)
include the Employee as a participant in the Employer's salaried employees'
benefit programs; and (iv) provide Employee with the use of an automobile. Use
of the automobile shall be subject to such rules and limitations as
<PAGE>
Employer may establish. Salary payments shall be subject to withholding and
other applicable taxes. All compensation payable under the Executive Bonus Plan
shall be included in the calculation of the Employee's retirement benefit. In
addition to any other benefits that may apply to Employee, or that may be
implemented during the term of this Agreement, Employer shall provide two times
the Employee's base salary in Life Insurance Benefits on behalf of the Employee.
(b) Employer will review Employee's base salary on at least an annual
basis for purpose of determining any increase which may be justified or merited.
5. Duties and Office. The Employee shall serve at the direction of
-----------------
Employer's President and/or Board of Directors as an executive officer of
Employer with the title of __________________________. Employee's duties in
that capacity shall be as set forth in Schedule A hereto with the understanding
that Employee's duties may from time to time be modified or expanded by the
President and/or the Board as the business interests of Employer may require.
Subject to the provisions of Paragraph 12(c) of this Agreement regarding a
change of control, it is expressly understood that the Employer's Board of
Directors may elect Employee to a different executive office having different
responsibilities and duties than those set forth in Schedule A and different
compensation and benefits than those set forth in Paragraph 4 hereof. It is
expressly understood that the newly assigned responsibilities and compensation
shall be equal to or greater than those set forth in this Agreement.
6. Exclusivity of Employment. Employee agrees to work exclusively and
-------------------------
full-time for Employer and devote his/her talents, skills, attention, best
efforts and time during normal business hours and such other times as may be
necessary to the business and affairs of Employer and, to discharge the
responsibilities assigned to him/her and to use his/her best efforts to perform
faithfully and efficiently the responsibilities assigned to him/her. The
Employee shall not during the term of this Agreement be engaged in any other
employment without the consent of the Employer. The Employee may (i) serve on
civic or charitable boards or committees or (ii) perform volunteer work for a
charitable, educational, civic or other nonprofit organization so long as such
activities do not interfere in any material respect with the performance of the
Employee's job responsibilities under this Agreement.
7. Restrictive Covenant.
--------------------
(a) In consideration of, and as an inducement for, Employer entering
into this Agreement with Employee, Employee promises that during his/her
employment hereunder and for a period of fifteen (15) months after his/her
employment hereunder terminates for any reason, Employee shall not in any way,
directly or indirectly, manage, operate, control, accept employment with,
consult for, or otherwise advise or assist or be associated with or own or have
any other interest in or right with respect to (other than through ownership of
not more than five percent of the outstanding voting shares of a corporation's
stock) any business or organization within the Basic Trading Area of the City of
Pittsburgh as defined by Rand McNally & Co in the Rand McNally 1993 Commercial
Atlas & Marketing Guide, p. 4 (124th ed 1993) which performs substantially
similar activities to that performed by Employer and/or any of its subsidiaries,
joint ventures or related entities during the time Employee worked for Employer.
Employee further agrees that for a period of fifteen (15) months following
Employee's termination of employment under this Agreement, Employee shall not
provide consultative or advisory services to any governmental agency with
regulatory authority over the business of Employer, its subsidiaries, or
affiliates, the Pennsylvania Office of Consumer Advocate or the Pennsylvania
Office of Small Business Advocate.
(b) It is hereby acknowledged and agreed by the parties that
Employee's violation of this covenant shall severely damage Employer's business,
and the parties recognize that such damage shall be difficult to precisely
quantify or determine. Moreover, the parties agree that the sum of one and-a-
half times the Employee's final annual salary with the Employer represents a
fair estimate of the damage Employer would suffer as a result of Employee's
violation of this covenant. Therefore, it is expressly agreed that Employer
shall be entitled to liquidated damages in the amount of one and-a-half times
the Employee's final annual base salary in the event that Employee breaches this
covenant, which amount shall be immediately payable upon any such breach.
Moreover, Employer shall also be entitled to injunctive relief against Employee
in the event of any such breach.
<PAGE>
(c) If any restriction in Paragraph 7(a) is greater than the maximum
restriction permitted by law, then the restriction herein shall be deemed to be
such maximum permissible restriction.
(d) In order to monitor compliance with the terms of this restrictive
covenant, Employee agrees to give written notice, including a pertinent
description, to the Employer of each position of employment, ownership of more
than five percent of the value or voting shares of any business, operation or
participation with another entity or organization (excepting religious
institutions or charitable organizations not related to Employer's activities)
which Employee obtains from the date of this Agreement and continuing until
fifteen (15) months after the termination of Employee's employment with Employer
for any reason.
(e) Employee agrees that during his/her employment with Employer and
continuing for fifteen (15) months thereafter, Employee shall not, directly or
indirectly, for his/her own account or as an agent, servant or employee of any
business or organization, engage, hire or offer to hire or entice away, or in
any other manner persuade or attempt to persuade any current or future officer,
employee, or agent of the Employer or any of its subsidiaries, joint ventures or
related entities, to discontinue his or her relationship therewith for any
reason.
(f) This covenant shall be construed as an agreement independent of
any other provision of this Agreement; and the existence of any claim or cause
of action of Employee against Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to Employer's enforcement of this
covenant.
(g) If Employer chooses not to renew this Agreement, terminates
Employee without cause, or terminates Employee without cause following a change
of control, the conditions contained in Section 7 (a), (b), (c), (d), and (f)
shall not apply. Section 7 (e) will apply.
8. Confidential Information & Employer Materials.
---------------------------------------------
(a) Employee acknowledges that Employer has, through Employee and
other key personnel, developed valuable confidential information such as, but
not limited to, plans, diagrams, equipment specifications, business strategies,
pricing methods, policies, resolutions, negotiations, customer/client lists,
technical data, computer programs, algorithms and trade secrets relating to
Employer's business. Confidential information includes information which is not
generally known in the business conducted by Employer, its subsidiaries or
affiliates, but does not include general skills, knowledge and experience
acquired by Employee during his/her employment with Employer. Employee
covenants and agrees not to disclose this confidential information outside
Employer and expressly covenants and agrees not to provide such confidential
information to any new employer of Employee and to use his/her best efforts both
during and after his/her employment with Employer to prevent its dissemination
outside the Employer. Employee further covenants and agrees to use such
confidential information exclusively for the benefit of Employer and to make any
new employer of Employee aware of Employee's obligation under Paragraph 8 of
this Agreement.
(b) Any such confidential information developed by Employee during
the term of this Agreement shall be the property of Employer. Should Employer
elect to apply for any patent, copyright or other property right relating to the
confidential information or to any development made by Employee on behalf of
Employer during the term of this Agreement, Employee shall, upon written request
of Employer, assign and transfer to Employer his/her entire right, title and
interest therein. Employee further agrees to assist Employer with the
prosecution of any such application, whether such assistance is requested during
or after the term of this Agreement.
(c) All documents and materials of any nature pertaining to
activities of Employer, its subsidiaries or affiliates, which are in Employee's
possession or control, including but not limited to memoranda, notebooks, notes,
data sheets, papers, tapes, computer disks and any other electronic or other
recording media, are and shall be the sole property of Employer and each such
item and any copies or reproductions of them shall be given to Employer upon
Employee's separation from employment with Employer and at any earlier time when
requested by Employer.
<PAGE>
9. Expenses. The Employer shall reimburse Employee for all reasonable and
--------
necessary expenses incurred in carrying out Employee's duties under this
Agreement. Employee shall present to the Employer, on a monthly basis, an
itemized account of such expenses in any form required by the Employer.
10. Termination By Employee and Repayment of Fidelity Payment.
---------------------------------------------------------
(a) Employee may, without cause, terminate his employment with
Employer by giving thirty (30) days prior written notice to Employer. The
Employee shall continue to render his/her services until the effective date of
termination unless Employer states otherwise and shall be paid his regular
compensation to the date of termination.
(b) Employee must repay to Employer that percentage of the Fidelity
Payment specified in Paragraph 3 hereof equal to the percentage of the Initial
Term which remains if Employee terminates his employment within the Initial
Term. Employer will deduct all of this amount, if due, from the gross wages to
be paid to Employee by Employer. Any amount repaid shall be deducted from
Employee's W-2 earnings in the year in which repayment is made. Any balance due
on this amount shall be paid to Employer by Employee within 60 days of
Employee's last day of employment. After 60 days, interest shall accrue on the
unpaid amount at a rate of 1% per month or portion thereof. This subparagraph
shall not apply if termination occurs under the circumstance of a "Change of
Control" as described in Paragraph 12(c) hereto.
11. Termination of Employee by Employer
-----------------------------------
(a) Without Cause. Employer shall have the right, without cause or
-------------
stated reason, to terminate Employee's employment at any time.
(b) For Just or Good Cause. Employer may terminate Employee's
----------------------
employment at any time for "just or good cause". Just or good cause may
include, but need not be limited to:
(i) Violation by Employee of the provisions of this Agreement,
including those set forth in Paragraphs 6, 7 and 8 hereof;
(ii) Employee's disloyalty, insubordination, or dishonesty
toward Employer or commission or conviction (whether that conviction
be a consequence of plea, finding or verdict) of a felony or of any
crime involving moral turpitude;
(iii) Employee's persistent incompetence or persistent neglect
of his/her assigned duties;
(iv) Employee's public actions which may damage the business
interests or image of the Employer; or
(v) Employee's actions in the workplace which violate
Employer's standards of employee conduct.
In the case of terminations for just or good cause occurring during the
Initial Term of this Agreement, the Employee must repay to the Employer that
percentage of the Fidelity Payment specified in Paragraph 3 equal to the
percentage of the Initial Term which remains. Employer will deduct all of this
amount, if due, from the gross wages to be paid to Employee by Employer. Any
amount repaid shall be deducted from Employee's W-2 earnings in the year in
which repayment is made. Any balance due on this amount shall be paid to
Employer by Employee within 60 days of Employee's last day of employment. After
60 days, interest shall accrue on the unpaid amount at a rate of 1% per month or
portion thereof.
12. Severance Compensation.
-----------------------
(a) Termination by Employer Other Than for Cause. If prior to the
--------------------------------------------
expiration of Employee's term of employment (except in the termination
circumstance described in Paragraph 12(c)), the Employer terminates Employee's
employment under this Agreement other than for just or good cause, then the
Employer shall be obligated to pay to the Employee, within thirty (30) days
after the date of termination, a severance amount equal to the aggregate of
Employee's annual base salary (at its level as of the
<PAGE>
date of termination) which would be payable to the Employee for the balance of
the present term of employment. In no event shall the severance amount to be
paid Employee under this provision exceed two hundred and fifty percent (250%)
of Employee's annual base salary or be less than one hundred twenty-five percent
(125%) of Employee's annual base salary.
(b) Termination by Employer for Just or Good Cause. In the event of
----------------------------------------------
the termination of the Employee's employment for just or good cause, the
Employer shall have no obligation to pay the Employee any severance amount,
including any amount described in this Paragraph 12.
(c) Termination Following Change of Control. If, following a change
---------------------------------------
of control, any action should be taken to terminate this Executive Employment
Agreement, terminate Employee's employment, substantially change his/her duties
or privileges, substantially breach Employer's obligations under this Executive
Employment Agreement, substantially limit Employee's managerial duties and
control or relocate Employee to a different geographic location unacceptable to
Employee, then Employee may elect to terminate his/her employment with Employer
(or its successor or purchaser). If the Employee so elects to terminate his/her
employment or if Employer (or its successor or purchaser) terminates Employee
without cause after a change of control, the Employer shall pay to the Employee
within thirty (30) days after the date of termination an amount equal to two (2)
times the Employee's then current annual base salary. The Employer shall be
obligated to make such payment in lieu of, and not in addition to, the
Employer's payment obligations under Paragraph 12(a) of this Agreement. For
purposes of this Agreement, a change of control shall be deemed to have occurred
in the event of: (i) the acquisition, directly or indirectly, by any person or
entity, or persons or entities acting in concert, whether by purchase, merger,
consolidation or otherwise, of voting power over that number of voting shares of
the capital stock of the Employer which, when combined with the existing voting
power of such persons or entities, would enable them to cast fifty percent (50%)
or more of the votes which all shareholders of the Employer would be entitled to
cast in the election of directors of the Employer, or (ii) the sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Employer to a
transferee other than Employer, an entity of which a controlling interest is
owned by Employer, or an entity which, prior to the change in control, owns,
directly or indirectly, a controlling interest in Employer. All fringe
benefits applicable to Employee which have a vesting schedule shall be deemed
fully vested as of the date of a change of control.
13. Bona Fide Executive/High Policy Making Employee Retirement Program.
------------------------------------------------------------------
Employee acknowledges that he/she is presently a bona fide executive and/or high
policy making employee of Employer and that he/she recognizes and has been
informed that Employer may, at its discretion, require that Employee retire at
the age of sixty-five (65) years or older if for the two (2) year period
immediately before retirement Employee has remained employed in a bona fide
executive or high policy making position and if at that time Employee is
entitled to an immediate nonforfeitable annual retirement benefit from a
pension, profit sharing savings, or deferred compensation plan, or any
combination of such plans of Employer, which benefit equals in the aggregate at
least $44,000 annually or such greater amount as may be set forth in the
provisions of the federal Age Discrimination in Employment Act, as amended,
which Act concerns mandatory retirement of bona fide executives or high policy
makers.
14. Death During Employment. If the Employee dies during the term of
-----------------------
his/her employment, the Employer shall pay to the Employee's estate the
compensation that would otherwise be payable to the Employee up to the end of
the month in which his death occurs.
15. Interpretation. This Agreement shall be construed in accordance
--------------
with, and be governed by, the laws of the Commonwealth of Pennsylvania.
16. Notices. Any notice required or desired to be given under this
-------
Agreement shall be deemed given if in writing and sent by certified mail, return
receipt requested, to the Employee's residence or to the Employer's principal
office, as the case may be. The Employer shall also have the option of delivery
of the written notice to the person of the Employee.
17. Waiver of Breach. The Employer's waiver of, or failure to act upon,
----------------
a breach of any provision in this Agreement by the Employee shall not operate or
be construed as a
<PAGE>
waiver of any subsequent breach by the Employee. No waiver shall be valid unless
in writing and signed by an authorized officer of the Employer.
18. Assignment. The Employee acknowledges that his services are unique
----------
and are personal to the Employer. The Employee may not assign his rights or
delegate his duties or obligations under this Agreement. The Employer's rights
and obligations under this Agreement shall inure to the benefit of, and shall be
binding upon, the Employer's successors and assigns. Employer shall provide any
person/entity that Employer is aware is likely to acquire a controlling interest
in Employer (as described in Paragraph 12(c) of this agreement) with a copy of
this Agreement, make that person/entity aware of its provisions (including but
not limited to those in Paragraph 12 above), and require that person/entity, as
a condition of the acquisition, to adopt the provisions of this Agreement or
make the payment to Employee specified in paragraph 12(a).
19. Arbitration of Claims and Disputes. Except as hereinafter set
----------------------------------
forth, no civil action concerning any disputes, controversies or claims between
Employee and Employer arising out of this Agreement or out of Employee's
employment or termination shall be instituted before any court and all such
disputes, controversies, or claims shall be submitted to final and binding
arbitration under the auspices of the American Arbitration Association,
Pittsburgh, Pennsylvania or another professional arbitration association, panel
or entity. Such arbitration shall be conducted in accordance with the protocols
and procedures of The American Arbitration Association. This provision shall
apply to any and all such disputes, controversies or claims whether asserted
against the Employer and/or against any employee, officer, alleged agent,
director or affiliate of the Employer with regard to any matter arising out of
this agreement or out of Employee's employment or the termination of Employee's
employment including, but not limited to, any claim relating to the purported
validity, interpretation, enforceability or breach of Employer's standards of
Employee conduct or this Agreement, and/or any other claim or controversy
arising out of the employment relationship (or the nature of the relationship)
or the commencement or termination of that relationship, including, but not
limited to, claims for violation of law and/or for breach of covenant, breach of
implied covenant of good faith and fair dealing, wrongful termination, breach of
contract, or intentional infliction of emotional distress, defamation, breach of
right of privacy, interference with the advantageous or contractual relations,
conspiracy or other tort claims of any kind. All costs and expenses of the
arbitration, including reasonable attorney's fees, shall be allocated among the
parties according to the arbitrators' discretion. The arbitrators' award
resulting from such arbitration shall be final, binding and nonappealable and
may be confirmed and entered as a final judgment in any court of competent
jurisdiction and enforced accordingly. Furthermore, the parties hereto expressly
agree that proceeding to arbitration and obtaining an award thereunder shall be
a condition precedent to the bringing or maintaining of any action in any court
with respect to any dispute arising under this Agreement.
This Paragraph 19 shall not apply to any disputes or claims arising under
Paragraphs 6, 7 and 8 of this Agreement and shall not give Employee the right to
seek stay or injunction of any Employer action pending resolution of a claim or
dispute through arbitration.
20. Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties. It may not be changed orally but only by an agreement in writing
signed by both parties.
21. Headings. Headings in this Agreement are for convenience only and
--------
shall not be used to interpret or construe its provisions.
22. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
23. Counsel. Employee acknowledges that he/she has been provided with
-------
notice that he/she may review this Agreement with legal counsel of his/her
choosing prior to signing. Employee further acknowledges that Employee has had
adequate time to exercise the opportunity to consult with legal counsel of
his/her choosing with regard to this Agreement, and that he/she enters into it
after having had full opportunity to review it provisions.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
NORTH PITTSBURGH TELEPHONE COMPANY
By
Attest
(Seal)
(Employee)
<PAGE>
ATTACHMENT I
NORTH PITTSBURGH SYSTEMS, INC.
1999 EXECUTIVE BONUS PLAN
-------------------------
1. Purpose of Plan
---------------
The purpose of this Bonus Plan (the "Plan") is to further the long-term
growth and earnings of North Pittsburgh Systems, Inc. ("NPSI") and its
subsidiaries by offering bonus incentives to supplement the base salaries of
those officers of NPSI who will be largely responsible for such growth.
2. Term of Plan
------------
This Bonus Plan shall be in effect for Calendar Year 1999, from January 1,
1999 through December 31, 1999. The establishment of any bonus plans for
subsequent years shall be by action of NPSI's Board of Directors upon the
recommendation of its Compensation Committee.
3. Eligibility and Participation
-----------------------------
Each employee of NPSI who is a Vice President, Executive Vice President or
President of NPSI and who holds a covered office at December 31 of a bonus
determination year as hereinafter defined will participate in the Plan for so
long as such employee holds any one of such offices.
4. Payment of Bonuses
------------------
NPSI will pay bonuses under the Plan determined in accordance with the
following steps:
(a) The "maximum total bonus amount" (the maximum total amount potentially
payable to all eligible participants for the bonus determination year) will
---
be determined by multiplying the bonus determination year total salary of
all officers eligible to participate in the bonus plan by 20%. This
calculation will be made at the end of each bonus determination year.
(b) The "earnings percentage" for the bonus determination year will be
determined under the following table, based on the amount by which NPSI's
earnings per share for the bonus determination year exceed NPSI's earnings
per share for the calendar year immediately preceding the bonus
determination year:
Increase in Earnings Per Share Earnings Percentage
------------------------------ -------------------
Less than 1% 0%
1% 10%
2% 20%
3% 30%
4% 40%
5% 50%
6% 60%
7% 70%
8% 100%
(c) One-half (1/2) of the maximum total bonus amount for the bonus
determination year, multiplied by the earnings percentage for the bonus
determination year, will be paid as bonuses in equal shares to all eligible
Plan participants.
(d) The "revenue percentage" for the bonus determination year will be
determined under the following table, based on the amount by which NPSI's
gross operating revenues for the bonus determination year exceed NPSI's
gross operating revenues for the calendar year immediately preceding the
bonus determination year:
<PAGE>
Increase in Gross Operating Revenues Revenue Percentage
------------------------------------ ------------------
Less than 3% 0%
3% 10%
4% 20%
5% 30%
6% 40%
7% 50%
8% 60%
9% 70%
10% 100%
(e) One-half (1/2) of the maximum total bonus amount for the bonus
determination year, multiplied by the revenue percentage for the bonus
determination year, will be paid as bonuses in equal shares to all eligible
Plan participants.
(f) Notwithstanding any provision in this Plan to the contrary, in the event
that an employee is an eligible participant for less than a full bonus
determination year, the participant's share of the total bonuses payable
will be a fraction of a full share, the numerator of which is the number of
days the participant was employed by NPSI during the bonus determination
year, and the denominator of which is 365.
For purposes of the Plan, all financial information will be based on the
audited financial statements of NPSI for each bonus determination year.
However, for purposes of the Plan, certain adjustments may be made in NPSI's
earnings per share in order to exclude amounts paid under this Plan,
extraordinary items of gain or loss (e.g., sales of substantial assets or
subsidiaries, receipt of life insurance proceeds, etc.), or such other items as
may be determined from time to time. Any such adjustments will be determined by
the Compensation Committee of the NPSI Board of Directors (the "Committee") in
its sole discretion.
All bonuses for a bonus determination year (subject to withholding of all
applicable income and employment taxes) will be paid as soon as practicable in
the year following the bonus determination year, after completion of the audited
financial statements for the bonus determination year. All compensation payable
under the Executive Bonus Plan will be included in the calculation of the
Employee's retirement benefit.
5. Death of a Participant
----------------------
If a participant dies while employed by NPSI during a bonus determination
year, the payment of the bonus will be made to the participant's beneficiary (as
designated in signed and dated writing delivered to NPSI), or to the
participant's estate if no such beneficiary has been designated.
6. Retirement/Termination of a Participant
---------------------------------------
If a participant retires from employment by NPSI during a bonus
determination year, and does not seek and/or enter employment with any competing
business, the retiring employee shall be considered an eligible participant for
the portion of the bonus determination year prior to retirement and his/her
bonus shall be determined in accordance with Paragraph 3(f) of this Executive
Bonus Plan. However, under no circumstances shall a terminated employee or a
retiring employee, who seeks and/or enters employment with a business competing
with NPSI or any of its subsidiaries, be considered an eligible participant for
any portion of the bonus determination year prior to or after termination or
retirement.
7. Administration of the Plan
--------------------------
The Plan shall be administered by the Committee. All decisions and
determinations by the Committee shall be final and binding upon all parties. The
Committee shall have the authority to interpret the Plan, to establish and
revise rules and regulations relating to the Plan, and to make any other
determinations that it believes necessary or advisable for administration of the
Plan.
<PAGE>
8. Non-Exclusivity
---------------
Nothing contained in the Plan shall be deemed to preclude NPSI from
establishing other compensation or bonus plans, or limit other plans which may
be in effect from time to time, or limit the authority of NPSI to exercise its
corporate rights and powers with respect to compensation and incentives to the
full extent permitted by law.
NPSI, intending to signify its consent hereto and to be legally bound,
has caused these presents to be duly executed as of the _________ day of
____________ 19_____.
ATTEST: NORTH PITTSBURGH SYSTEMS, INC.
________________________ By ______________________________
<PAGE>
EXHIBIT 11
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
Statement of Computation of Earnings per Share
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept. 30 Ended Sept. 30
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Earnings $ 3,279,000 $ 3,204,000 $ 9,750,000 $11,520,000
=========== =========== =========== ===========
Weighted average common shares
outstanding 15,005,000 15,005,000 15,005,000 15,005,000
=========== =========== =========== ===========
Basic and diluted earnings per share
of common stock $ .22 $ .21 $ .65 $ .77
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1999 QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,096
<SECURITIES> 15,694
<RECEIVABLES> 10,798
<ALLOWANCES> 0
<INVENTORY> 4,574
<CURRENT-ASSETS> 45,136
<PP&E> 170,848
<DEPRECIATION> 83,825
<TOTAL-ASSETS> 143,962
<CURRENT-LIABILITIES> 14,255
<BONDS> 37,621
0
0
<COMMON> 2,350
<OTHER-SE> 73,732
<TOTAL-LIABILITY-AND-EQUITY> 143,962
<SALES> 2,114
<TOTAL-REVENUES> 52,985
<CGS> 1,901
<TOTAL-COSTS> 37,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,616
<INCOME-PRETAX> 16,417
<INCOME-TAX> 6,667
<INCOME-CONTINUING> 9,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,750
<EPS-BASIC> .65
<EPS-DILUTED> .65
</TABLE>
