<PAGE>
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 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:
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(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 19, 2000
------------
The Annual Meeting of Shareholders of North Pittsburgh Systems, Inc. will be
held on Friday, May 19, 2000 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 11, 2000 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
N. William Barthlow
Secretary
Dated: Gibsonia, PA
April 21, 2000
<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 19, 2000
------------
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 19, 2000 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
11, 2000 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
21, 2000. 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. Proxies and notices of revocation should be mailed
or delivered to the Company's transfer agent, Norwest Shareowner Services,
P.O. Box 64873, St. Paul, MN 55164-0873, for receipt by Norwest Bank
Minnesota, N.A. no later than two (2) business days prior to the 2000 Annual
Meeting of Shareholders, or should be deposited with the Chairman or the
Secretary of the Company immediately prior to the commencement of the 2000
Annual Meeting.
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 11, 2000 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. Proxies will
be received and tabulated by Norwest Bank Minnesota, N.A., Shareowner
Services, with the results thereof reported to the three (3) Judges of
Election appointed by the Company's Board of Directors under the authority of
the Bylaws of the Company and the Pennsylvania Business Corporation Law.
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, 2000, 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, 2000
of those filing the Schedule 13D, or subject to the reporting requirements
thereof, was 1,316,756 shares or 8.78% 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, 2000 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 3,100 Direct 0.02%
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 of
Armstrong and a Director and Secretary of Armstrong Holdings, Inc. If he
were deemed the beneficial owner of the 935,740 and 297,996
2
<PAGE>
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, 2000 of individual Directors, Nominees and of all
Directors, Nominees 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 19,878 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 Allen P. Kimble 1,129 Direct (6) .008%
Common
Stock Stephen G. Kraskin 2,000 Direct 0.01%
Common
Stock David E. Nelsen 2,500 Direct (7) 0.02%
Common
Stock Jay L. Sedwick 6,000 Direct 0.04%
1,286,536 Indirect (8) 8.57%
Common
Stock Charles E. Thomas, Jr. 23,710 Direct (9) 0.16%
21,000 Indirect (10) 0.14%
Common
Stock All Directors, Nominees and Officers 116,775 Direct 0.78%
as a Group (13 Persons) 1,352,974 Indirect (11) 9.02%
</TABLE>
- --------
(1) Included in the shares set forth in the table above are (a) shares
beneficially owned by the Director/Nominee, 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/Nominee has voting power or
power of disposition with respect to the shares. Share amounts are
reported as of March 13, 2000 and percentages of share ownership are
calculated based upon 15,005,000 shares of Common Stock outstanding as of
that date.
(2) Of the 19,878 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, 21,272 shares are
held jointly with his wife.
3
<PAGE>
(5) The 21,972 shares indirectly owned by Charles E. Cole are held
individually by his wife.
(6) The 1,129 shares directly owned by Allen P. Kimble are held jointly with
his wife.
(7) The 2,500 shares directly owned by David E. Nelsen are held jointly with
his wife.
(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) Of the 23,710 shares directly owned by Charles E. Thomas, Jr., 11,800
shares are held jointly with his wife.
(10) 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.
(11) The 1,352,974 shares indirectly owned by all Directors, Nominees 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, Nominee, 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 Bylaws 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 2001 Annual Meeting of
Shareholders and until their successors are elected and qualify. All nominees
are present Directors of North Pittsburgh and were elected at the 1999 Annual
Meeting of Shareholders. The number of Common shares represented at the 1999
Annual Meeting of Shareholders held May 21, 1999 was 12,492,659 represented by
proxy and 3,380 in person or 83.3% of the 15,005,000 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.
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.
4
<PAGE>
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, 63, has been President of North Pittsburgh Systems, Inc. and
President and General Manager of North Pittsburgh Telephone Company since
1998. He was Vice President of North Pittsburgh Systems, Inc. from 1992 to
1998. Mr. Brown also held the following North Pittsburgh positions: Vice
President--Operations from 1987 to 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, 69, is a retired physician who previously practiced with the Cole-
Lechmanick division of Genesis Medical Associates in the Town of McCandless,
PA.
ALLEN P. KIMBLE Director of North Pittsburgh since 1998
Vice President and Treasurer of North Pittsburgh Systems, Inc. and North
Pittsburgh Telephone Company
Mr. Kimble, 53, 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 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.
STEPHEN G. KRASKIN Director of North Pittsburgh since May 21, 1999
Partner of Kraskin, Lessee & Cosson, LLP
Mr. Kraskin, 49, is an attorney and managing partner in the legal and
consulting firm of Kraskin, Lessee & Cosson, LLP, which he founded in 1992.
Mr. Kraskin's professional practice is concentrated in the provision of legal,
regulatory and business planning services to a wide variety of
telecommunications companies. Prior to
- --------
/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. With
the exception of North Pittsburgh Telephone Company, 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, nominee, North Pittsburgh Systems, Inc. or
its subsidiaries or any other person pursuant to which a director or nominee
was or is to be elected.
5
<PAGE>
entering private practice, he was General Counsel to a telecommunications
consulting firm, and served as Deputy General Counsel of the National
Association of Regulatory Utility Commissioners.
DAVID E. NELSEN Director of North Pittsburgh since May 21, 1999
Chief Executive Officer of CoManage Corporation
Since 1998, Mr. Nelsen, 39, has been Chief Executive Officer of CoManage
Corporation, a telecom network management software company. Previously, from
1996-1998, he was Senior Director at FORE Systems, a Pittsburgh area high
technology manufacturing company, with responsibility for product management
and marketing of FORE's service provider products, business planning and
strategy. Prior thereto, he served as FORE's Director of Marketing from 1994
to 1996 with responsibility for video and telco product management and
marketing. Before joining FORE, Mr. Nelsen held a variety of positions during
almost 12 years at AT&T, including ATM Service Product Manager at AT&T
Business Communication Services (1991-1994) and Private Packet Network
Services Technical Manager at AT&T Bell Laboratories (1982-1991).
JAY L. SEDWICK Director of North Pittsburgh since 1980
Chairman of the Board and Director of Armstrong Utilities, Inc.
Mr. Sedwick, 65, 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
Chairman of Board of Directors of North Pittsburgh
Mr. Thomas, Jr., 57, has been Chairman of the Board of Directors of North
Pittsburgh since 1998. Mr. Thomas, has also 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 $100,825 in fees
during 1999.
Meetings of the Board and Committees
The Board of Directors held twelve meetings during 1999. Jay L. Sedwick,
Chairman of the Committee, Charles E. Cole, Stephen G. Kraskin, David E.
Nelsen and Charles E. Thomas, Jr. served, without additional compensation, as
a Compensation Committee and, in respect to compensation for 1999, held three
meetings during 1999. Compensation for 1999 was also a subject of meetings of
the Compensation Committee in 1998 with Messrs. Kraskin's and Nelsen's
predecessors, Richard R. Kauffman and Barton B. Williams, serving on the
Committee at that time (see Compensation Committee Report on Executive
Compensation). Charles E. Thomas, Jr., Chairman of the Committee, Harry R.
Brown, Allen P. Kimble, Stephen G. Kraskin and Jay L. Sedwick served, without
additional compensation, as a standing Audit Committee. However, as Audit
Committee matters were considered during regularly scheduled meetings of the
Board, the Audit Committee did not meet separately in 1999.
6
<PAGE>
A Nominating Committee was formed in 1999 with Jay L. Sedwick, Chairman of the
Committee, Harry R. Brown, Charles E. Cole and Charles E. Thomas, Jr., serving
without additional compensation. The Nominating Committee met five times
during 1999 for the purpose of considering and interviewing prospective
nominees to the Board.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation Table. The Executive Compensation Table below shows
the total compensation of North Pittsburgh's five most highly compensated
Executive Officers whose compensation exceeded $100,000 during 1999.
Executive Compensation Table(A)
<TABLE>
<CAPTION>
(c)
Annual (i)
(a) (b) Compensation (d) All Other
Name and Principal Position Year Salary Bonus Compensation(B)
- --------------------------- ---- ------------ ------ ---------------
<S> <C> <C> <C> <C>
Harry R. Brown (1) 1999 $199,500 $6,433 $ 5,995
1998 150,000 -- 5,373
1997 129,000 -- 16,521
Allen P. Kimble (2) 1999 $133,000 $6,433 $ 4,902
1998 127,000 -- 4,614
1997 114,300 -- 4,061
N. William Barthlow (3) 1999 $122,500 $6,433 $ 4,868
1998 112,000 -- 4,360
1997 101,000 -- 3,735
Frank A. Macefe (4) 1999 $122,500 $6,433 $ 4,505
1998 96,000 -- 3,757
1997 91,250 -- 3,194
Albert W. Weigand (5) 1999 $116,750 $6,433 $ 4,450
1998 91,000 -- 3,458
1997 80,000 -- 2,804
</TABLE>
- --------
(1) President since 1998 and Vice President from 1992 to 1998 of North
Pittsburgh Systems, Inc.; President and General Manager since 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.
(2) Vice President since 1989, Treasurer since 1985 and a Director since 1998
of both companies.
(3) President since May 21, 1999 of Pinnatech, Inc. d/b/a Nauticom; Vice
President since 1994, Secretary since 1998 and Assistant Secretary from
1993 to 1998 of North Pittsburgh Systems, Inc.; Vice President--Marketing
and Revenues since 1994, Secretary since 1998 and Assistant Secretary
from 1993 to 1998 of North Pittsburgh Telephone Company.
(4) President since 1998 of Penn Telecom, Inc.; Vice President since January
1, 1999 and Assistant Vice President from 1989 to 1999 of North
Pittsburgh Systems, Inc.; Vice President--Sales since January 1, 1999,
Assistant Vice President--Marketing from 1989 to 1999 and Marketing
Manager from 1979 to 1989 of North Pittsburgh Telephone Company.
(5) Vice President since January 1, 1999 and Assistant Vice President from
1997 to 1999 of North Pittsburgh Systems, Inc.; Vice President--
Operations since January 1, 1999, Assistant Vice President--Operations
from 1997 to 1999, Sr. Planning Engineer from 1995 to 1997 and Planning
Engineer from 1986 to 1995 of North Pittsburgh Telephone Company.
7
<PAGE>
Notes to Executive Compensation Table:
(A) The Executive Compensation Table reflects salary and Company
contributions to a defined contribution plan. Since 1998, inside
Directors receive no additional compensation for serving on the Board of
Directors. No other forms of compensation such as Restricted Stock
Awards, Stock Appreciation Rights, Options or Long Term Incentive
Payments were in effect during 1999. In addition, during 1999, no one
participated in the Deferred Compensation Plan.
(B) In 1999, annual contributions were made to the North Pittsburgh Telephone
Company Employees' Savings and Retirement Plan (401-K) for the benefit of
Messrs. Brown, Kimble, Barthlow, Macefe and Weigand.
Employment Agreements
The Company has employment agreements (the Agreements) with the officers
named in the Executive Compensation Table and with one additional executive
officer of the Company and with an officer of one of the Company's
subsidiaries. The Agreements provide for certain payments should certain
prescribed conditions occur after a change of control (as defined in the
Agreements). If prior to the expiration of executive officer's term of
employment, the Company terminates the officer's employment other than for
just or good cause, then the Company shall be obligated to pay to the officer,
a severance amount equal to the base salary which would be payable to the
officer for the balance of the present term of the Agreement. In no event
shall the severance amount to be paid to the officer exceed two hundred and
fifty percent (250%) of the officer's annual base salary or be less than one
hundred twenty-five percent (125%) of the officer's annual base salary.
Compensation Committee Report on Executive Compensation. As indicated in the
Compensation Committee Report appearing in the Proxy Statement for the 1999
Annual Meeting of Shareholders, Peter R. Johnson & Company (Johnson) was
employed in 1998 to conduct an executive compensation study and to make
recommendations to the Committee. The Johnson Report which included
information as to salary ranges for executive officers and other data based
upon a study of comparable and other companies within the industry was then
considered at meetings of the Committee held on August 10 and 27, 1998. Also
considered at the August 27, 1998 meeting were a comparison of the various
fringes, executive perks and working hours of the Company's executive team
with those of executives at other companies and sample computations of the
value to the Company's executive officers of various benefits including
pensions, sick leave, vacations, automobile allowances, meals, etc.
A meeting of the Compensation Committee was then held on November 10, 1998
for the purpose, among other things, of considering executive compensation for
Calendar Year 1999, including the possible implementation of an executive
bonus plan. Prior to the meeting, President and General Manager Harry R. Brown
had circulated his recommendations for executive salaries and an executive
bonus plan for the coming year. Mr. Brown was invited to attend the meeting
and asked to provide an overview of his salary proposals and proposed
executive bonus plan following which the proposals were discussed in depth and
compared to the information in the Johnson Report previously distributed. It
was the general consensus of the Committee that the Company's executive
officers compared quite favorably with those of other comparable companies
and, therefore, salary levels above the Johnson Report middle range were
appropriate. After excusing Mr. Brown from the meeting, the matter of the
appropriate level of salary increases for each executive officer and the
promotion of F. A. Macefe, K. J. Albaugh and A. W. Weigand to full Vice
Presidents were discussed at length. The responsibilities and performances of
each officer were considered, as was the relationship of each officer's
present salary with those of other officers and other members of the
management group. The general consensus of the Committee was that executive
salary levels should be approximately 105% of the mid point of the ranges
shown in the Johnson Report and that increases necessary to reach those levels
should be recommended to the Board. A number of modifications to the proposed
executive bonus plan were also discussed and agreed upon. A salary
recommendation for each officer and an executive bonus plan with both revenue
and earnings triggers were then formally approved for recommendation to the
Board for adoption effective January 1, 1999. In addition, the matter of
employment contracts for executive officers was discussed and it was agreed
that the matter would be considered at a future meeting.
8
<PAGE>
The Compensation Committee again met on December 15, 1998 and took action,
among other things, to recommend that the previously approved executive bonus
plan be for 1999 only and take effect along with the previously approved
promotions on January 1, 1999 and that the matter of executive employment
contracts be deferred until the second half of 1999.
An organizational meeting of the Compensation Committee was held on May 21,
1999 during the organizational meeting of the Board of Directors following the
1999 Annual Meeting of Shareholders with new directors, David E. Nelsen and
Stephen G. Kraskin, joining the Committee in place of outgoing directors,
Richard R. Kauffman and Barton B. Williams. The only action taken at this
meeting, which followed the re-election by the Board of all officers to their
existing offices, was to recommend, pending further consideration, the
continuation of the 1999 salaries previously approved for each officer.
The Compensation Committee next met on July 9, 1999 and reviewed the actions
taken by the Committee in 1998, the Johnson Report and an informational packet
which had been circulated prior to the meeting containing a draft form of
executive employment contract, as well as a memo and supporting schedules
submitted by Mr. Brown proposing increases for each executive officer which
would generally take their salaries to a level approximately 110% of the
Johnson Report middle range, but conditioned upon the execution of an
employment contract. The performance and contribution of each of the executive
officers were considered with the consensus being that the Company's executive
officers were continuing to compare quite favorably with their peer groups in
the industry. The Johnson Report data was also revisited and extensively
discussed. It was the consensus that increases to bring salaries to
approximately 110% of the Johnson Report middle range would be appropriate
with some modifications based upon existing salary relationships and the
magnitude of the increase which would result provided the executive officers
would sign employment contracts. Proposed salaries for each individual officer
were discussed and agreed upon with the clear understanding that any salary
increase would be conditioned upon the officer agreeing to sign an employment
contract. It was also the consensus that any further salary increases should
be tied to future performance. A motion was adopted to recommend the
individual salaries for approval by the entire Board conditioned upon the
individual officers signing an employment contract. The provisions of the
draft employment contract were then reviewed. The matter of the non-compete
provisions was of particular concern as were certain other provisions and a
number of revisions to the form of agreement were discussed and agreed upon.
The possibility of a stock option plan and other performance incentives were
also discussed. It was agreed that the executive employment agreement would be
rerun to reflect the revisions agreed upon, submitted for review by the
Company's labor lawyers and circulated for final consideration at the next
meeting of the Committee.
The final meeting of the Compensation Committee for 1999 was held on August
3, 1999 at which the proposed form of executive employment agreement
reflecting the revisions agreed upon at the last meeting was reviewed and
action taken to recommend its approval by the entire Board at a special
meeting to be held later the same day.
Compensation Committee:
Jay L. Sedwick--Chairman
Charles E. Cole
Stephen G. Kraskin
David E. Nelsen
Charles E. Thomas, Jr.
9
<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.
PERFORMANCE GRAPH
[LINE GRAPH]
FISCAL YEAR
ENDED
DECEMBER 31 NPSI S&P TELEPHONE NASDAQ
1994 100.00 100.00 100.00
1995 163.96 147.39 130.91
1996 136.70 159.53 133.86
1997 103.98 227.33 195.75
1998 81.26 385.89 322.30
1999 98.61 419.31 561.27
The above Performance Graph provides an indication 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, 1994 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 $100 at the end of the five-year
period.
10
<PAGE>
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.
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
120,000 17,400 34,800 52,200 69,600
140,000 20,300 40,600 60,900 81,200
160,000 23,200 46,400 69,600 92,800
180,000 26,100 52,200 78,300 104,400
200,000 29,000 58,000 87,000 116,000
220,000 31,900 63,800 95,700 127,600
</TABLE>
- --------
Notes to Retirement Benefits Table:
(1) The compensation amounts paid to Messrs. Brown, Kimble, Barthlow, Macefe
and Weigand for 1999, viz. $199,500, $133,000, $122,500, $122,500 and
$116,750, respectively, as shown in the Annual Compensation Salary column
of the Executive Compensation Table, are covered under the Company's
Retirement Plan. Messrs. Brown, Kimble, Barthlow, Macefe and Weigand as of
December 31, 1999 had accumulated 39.28, 23.65, 22.44, 24.27 and 21.00
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, 1999 was equal to 2.4% of the total covered remuneration of
all Participants in the Retirement Plan.
Directors' Compensation. During 1999, Directors of the Company, excluding
those holding offices with the Company and Mr. Thomas, received $1,200 per
month as compensation for all services as a Director. Charles E. Thomas, Jr.,
received $2,400 per month for his services as both a Director and Chairman of
the Board. No further compensation was paid to Directors for special or
committee assignments and as Officers-Directors, no additional compensation
was paid to Messrs. Brown and Kimble for their services as Directors.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Under the Company's Bylaws, 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 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, 2000. As a
consequence, no recommendations will be made at the 2000 Annual Meeting in
respect to accountants and this matter will not be submitted for a vote at the
meeting.
A representative of KPMG 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.
11
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended for presentation at the 2001 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 22,
2000 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.
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 1999, which includes the following audited
financial statements: Consolidated Balance Sheets as of December 31, 1999 and
1998, and for each of the years in the three-year period ended December 31,
1999, Consolidated Statements of Earnings, Consolidated Statements of
Shareholders' Equity and Comprehensive Income 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
N. William Barthlow
Secretary
Dated: April 21, 2000
12
<PAGE>
Logo of
[North Pittsburgh Systems Inc.]
- --------------------------------------------------------------------------------
Logo of
[North Pittsburgh] 4008 Gibsonia Road, Gibsonia, PA 15044-9311 proxy
- --------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on May 19, 2000.
The shares of stock you hold in your account will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Item 1.
By signing the proxy, you revoke all prior proxies and appoint Harry R. Brown,
Allen P. Kimble, and Charles E. Cole, and each of them, with full power of
substitution, to vote your shares on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE>
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to North Pittsburgh Systems, Inc., c/o Shareowner
Services/SM/, P.O. Box 64873, St. Paul, MN 55164-0873.
\/ Please detach here \/
The Board of Directors Recommends a Vote FOR Item 1.
1. Election of directors: 01 Harry R. Brown 05 David E. Nelsen
02 Charles E. Cole 06 Jay L. Sedwick
03 Allen P. Kimble 07 Charles E. Thomas, Jr.
04 Stephen G. Kraskin
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
(except as marked)
- -------------------------------------------
- -------------------------------------------
(Instructions: To withhold authority to vote
for any indicated nominee, write the
number(s) of the nominee(s) in the
box provided to the right.) [ ]
-----------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1.
---
Address Change? Mark Box [ ]
Indicate changes below:
Date
----------------------------------
[ ]
------------------------------------------
[ ]
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Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc. should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
