8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8–K

CURRENT REPORT

Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.

Date of Report (Date of earliest event reported): January 30, 2006

NORTH PITTSBURGH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania

(State or other jurisdiction of incorporation)

0-13716	25-1485389
(Commission File Number)	(IRS Employer Identification No.)

4008 Gibsonia Road
Gibsonia, PA	15044-9311
(Address of principal executive offices)	(Zip Code)

(724) 443-9600

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

North Pittsburgh Telephone Company (NPTC), a wholly owned subsidiary of North Pittsburgh Systems, Inc. (the Company), on January 30, 2006 executed a Stock Redemption Agreement (Agreement) between the Rural Telephone Bank (RTB) and NPTC, a copy of which agreement is attached hereto as Exhibit 99.1. A copy of the related Redemption Resolutions adopted by the Board of Directors of NPTC and certification as to the actual date of execution of the Agreement is attached hereto as Exhibit 99.2.

The RTB has decided to liquidate and dissolve, and the redemption of the RTB’s stock is a required part of that liquidation. Although the RTB prepared the Agreement and dated it as of November 10, 2005, the RTB did not provide it to NPTC for review, approval by NPTC’s Board of Directors and execution until January 2006.

NPTC owns both Class B stock and Class C stock of the RTB. Between 1978 and 1982, NPTC expended $1.5 million to purchase Class B stock in the RTB pursuant to the terms of NPTC’s loan agreement with the RTB. Those terms required NPTC to purchase Class B stock in the RTB in the amount equal to five percent of the RTB loans advanced. Because RTB Class B stock could be held only by eligible RTB borrowers, because of the corresponding lack of a market for the stock and because the underlying valuation of the stock was in question, for accounting purposes NPTC’s expenditures for RTB stock were treated as debt issuance costs, which were to be amortized over the life of the loans. Upon NPTC’s prepayment of its remaining loans outstanding to the RTB in December of 2002, the remaining $0.5 million of unamortized costs associated with the RTB stock was written-off. There therefore is no original basis in the RTB stock remaining on the Company’s financial statements.

Since the original $1.5 million in purchases, NPTC has received stock dividends with a par value of $18.1 million. In February of 2003, NPTC converted the majority of its RTB Class B stock into RTB Class C stock; unlike the Class B stock, RTB Class C stock was eligible for cash dividends. NPTC received cash dividends of $0.6 million, $1.2 million and $1.1 million on its RTB Class C stock in 2003, 2004 and 2005, respectively. As delineated in Schedule II of the Agreement, NPTC presently owns 49,746 shares (par value $1 per share) of RTB Class B stock and 19,572 shares (par value $1,000 per share) of RTB Class C stock.

As indicated in Section 3.3 of the Agreement, the RTB Class C stock will rank third in order of preference in redemption of RTB’s stock; that is, the RTB Class C stock will be redeemed only after redemption of all RTB Class A stock (all of which is held by the government of the United States) and all RTB Class B stock. NPTC and the other holders of RTB Class C stock therefore may not receive the full par value of their shares of RTB Class C stock, although it is the current understanding of the Company that the RTB expects to have enough funds to redeem the Class C stock at a redemption price approaching the class’s $1,000-per-share par value. Based on communications received from the RTB, the Company expects the stock redemption payments to be made in the second quarter of 2006. The Company will recognize a gain for the total amount of proceeds received for the RTB stock. The Company expects that the full value of the cash proceeds received in the redemptions will be subject to income taxes.

For security reasons, NPTC’s taxpayer identification number and bank routing and account numbers have been redacted from Schedule II in the copy of the Agreement that is attached to this Form 8-K Current Report.

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

Exhibit	Description
99.1	Stock Redemption Agreement dated as of November 10, 2005 between North Pittsburgh Telephone Company and The Rural Telephone Bank
99.2	Redemption Resolutions, with related certifications

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	North Pittsburgh Systems, Inc.
	(Registrant)
Date: February 1, 2006	/S/    H. R. BROWN
	H. R. Brown, President and Chief Executive Officer

EX-99.1

Exhibit 99.1

STOCK REDEMPTION AGREEMENT

dated as of November 10, 2005

among

NORTH PITTSBURGH TELEPHONE COMPANY

and

THE RURAL TELEPHONE BANK

STOCK REDEMPTION AGREEMENT (this “Agreement,”) dated as of November 10, 2005, is between the RURAL TELEPHONE BANK (the “Bank”) a corporation existing under the laws of the United States of America, acting through the Chairman of the Bank and NORTH PITTSBURGH TELEPHONE COMPANY (the “Holder,”) a corporation existing under the laws of the State of Pennsylvania.

WHEREAS, the Board of Directors of the Bank has authorized the liquidation and dissolution of the Bank and approved a plan of liquidation in a Resolution adopted at its board meeting held on August 4, 2005;

WHEREAS, the Bank and the United States of America (“Government,”) acting through the Rural Utilities Service (“RUS,”) have entered into a Loan Transfer Agreement, dated as of August 4, 2005, pursuant to which the Bank has conveyed to RUS the Bank’s liquidating account loan portfolio as part of the consideration for RUS’ agreement to return all of its Class A Stock to the Bank for redemption and cancellation;

WHEREAS, upon transfer to the Government, no further advances will be made on the Liquidating Account Loans, as hereinafter defined;

WHEREAS, pursuant to Section 411 of the Act (defined herein), the Bank will pay all of its liabilities and will redeem and cancel all of its outstanding Class A Stock;

WHEREAS, the Bank has converted the paper stock certificates of its outstanding shares of Class B Stock and Class C Stock to electronic “book-entry” certificates and has canceled its printed stock certificates;

WHEREAS, pursuant to the Board of Directors’ plan of liquidation, the Bank is required to redeem all of its outstanding Class B Stock and Class C Stock;

WHEREAS, pursuant to Sections 2.2 and 2.4 of the Bylaws of the Bank, as amended, the Holder is the owner of certain shares of Class B Stock and/or Class C Stock of the Bank; and

WHEREAS, the Holder has heretofore adopted, executed, and returned the Redemption Resolution (defined herein), authorizing the undersigned to execute and deliver this Agreement to the Bank on behalf of the Holder;

THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties agree and bind themselves as follows:

ARTICLE I

DEFINITIONS

“Act” means Title IV of the Rural Electrification Act of 1936, 7 U.S.C. § 941 et seq., as amended.

“Agreement” means this Stock Redemption Agreement between the Bank and the Holder.

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“Class A Stock” means all of the shares of Class A Stock of the Bank issued and outstanding pursuant to Section 406(c) of the Act.

“Class B Stock” means all of the shares of Class B Stock of the Bank issued and outstanding pursuant to Section 406(d) of the Act.

“Class C Stock” means all of the shares of Class C Stock of the Bank issued and outstanding pursuant to Section 406(e) of the Act.

“Financing Account Loan(s)” mean all loans of the Holder owed to or held by the Bank on or after October 1, 1991.

“Liquidating Account” means the Rural Telephone Bank Liquidating Account, as identified by Treasury account code 12-4231-0-3-452.

“Liquidating Account Loan(s)” mean all loans of the Holder owed to or held by the Bank before October 1, 1991, as listed on Schedule I.

“Loan Transfer Agreement” means the Loan Transfer Agreement, dated as of August 4, 2005, between the United States of America, acting through the Administrator of RUS, successor to the Rural Electrification Administration, and the Bank.

“Redemption Resolution” means that certain resolution passed by the board of directors or other governing body of the Holder which authorizes the execution and delivery of this Agreement by the undersigned on behalf of the Holder.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE HOLDER

Section 2.1 Representations and Warranties. The Holder does hereby represent and warrant as follows:

(a) The Holder is the lawful owner of Class B Stock and/or Class C Stock of the Bank in the amounts listed on Schedule II hereto.

(b) All of the information on Schedule II hereto is true and correct.

(c) The undersigned signatory for the Holder is duly authorized by the Holder to execute and deliver this Agreement on behalf of the Holder and to bind the Holder hereunder.

(d) The Redemption Resolution has been duly adopted by the board of directors or other governing body of the Holder and is currently in full force and effect and has not been repealed, modified, or amended by the Holder.

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ARTICLE III

REDEMPTION OF CLASS B STOCK AND CLASS C STOCK

Section 3.1 Delivery of Shares. The Holder hereby delivers all of its Class B Stock and/or Class C Stock of the Bank, in the amount(s) specified on Schedule II hereto, for redemption and cancellation.

Section 3.2 Redemption of Class B Stock. From funds in the Liquidating Account, the Bank shall redeem at par all of the Holder’s Class B Stock, in the amount specified in Schedule II hereto, pursuant to the terms of Section 411 of the Act and Section 2.2 of the Bylaws and shall cancel such Class B Stock.

Section 3.3 Redemption of Class C Stock. Pursuant to Section 411 of the Act and Section 2.2 of the Bylaws, after payment of all of the Bank’s liabilities, redemption of all outstanding Class A Stock, redemption of outstanding Class B Stock and monetary set aside for any unredeemed Class B Stock, all of the Holder’s Class C Stock shall be redeemed from the remaining funds in the Liquidating Account as follows:

(a) If the funds remaining in the Liquidating Account are sufficient to redeem all outstanding Class C Stock at par, the Class C Stock shall be redeemed at par, as specified in Schedule II hereto; or

(b) If the funds remaining in the Liquidating Account are insufficient to redeem all outstanding Class C Stock at par, the Class C Stock shall be redeemed, as determined by the following formula:

(Cash Remainder in Liquidating Account x Holder’s number of Class C Stock)

Total outstanding number of Class C Stock

The Bank shall thereafter cancel such Class C Stock.

Section 3.4 Payment. All amounts to be paid to the Holder of Class B Stock and Class C Stock shall be paid as follows:

(a) Via wire transfer to the banking institution and account specified by the Holder on Schedule II hereto;

(b) No payments shall be made hereunder until one hundred and twenty (120) days from the date hereof; the Bank shall use reasonable best efforts to make payments on properly documented and undisputed claims received by such date within sixty (60) days thereafter; and

(c) Notwithstanding Paragraph 3.4(b), the Holder shall have no claim, with respect to the redemption of Class B or C Stock, to any amount other than that provided in Sections 3.2 and 3.3 hereof, and shall not be entitled to any interest or claims for payment delays.

Section 3.5 Release of Claims. By executing this Agreement, the Holder hereby acknowledges and agrees that the redemption and cancellation by the Bank of the Class B Stock and Class C Stock held by the Holder as contemplated by this Agreement constitutes the full and

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complete satisfaction by the Bank of all of its obligations with respect to the redemption, payment and cancellation of the Class B Stock and Class C Stock owned by the Holder.

ARTICLE IV

NO FURTHER ADVANCES

Section 4.1 Liquidating Account. The Holder acknowledges and agrees that the Government, upon acquisition of the Bank’s loan portfolio, shall make no further advances on the Liquidating Account Loan(s) and that unadvanced Liquidating Account Loan funds are hereby rescinded.

Section 4.2 Unadvanced Financing Account Loan Funds for Stock Purchases. The Holder acknowledges and agrees that the Government, upon liquidation or dissolution of the Bank, shall make no further advances on the portion of the Financing Account Loan(s) for purchases of Class B Stock and that such funds may be rescinded at the discretion of the Government.

ARTICLE V

MISCELLANEOUS

Section 5.1 Entire Agreement. This Agreement, together with the attached documents, which are incorporated herein, embodies the entire agreement of the parties hereto in relation to the subject matter herein and supersedes all prior understandings or agreements, oral or written, between the parties.

Section 5.2 Headings. The headings and subheadings contained in this Agreement, except the terms identified for definition in Article I and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

Section 5.3 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

Section 5.4 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA.

Section 5.5 Successors. All terms and conditions of this Agreement shall be binding on the successors and assigns of the Bank and the Holder. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give any person other than the Bank or the Holder, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of the Bank and the Holder.

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Section 5.6 Modification; Assignment. No amendment or other modification, or assignment of any part of this Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties hereto.

Section 5.7 Remedies. The Bank may pursue all rights and remedies available to the Bank in connection with this Agreement, including, but not limited to, a suit for specific performance, injunctive relief or damages in connection with any fraud, misrepresentation, misstatement made by the Holder in this Agreement (including Schedule II hereto).

Section 5.8 Notice. All notices and other communications hereunder to be made to the parties shall be in writing and shall be addressed as specified below as appropriate. The address, telephone number, or facsimile number for either party may be changed at any time and from time to time upon written notice given by such changing party to the other party. A properly addressed notice or other communication shall be deemed to have been delivered at the time it is sent by facsimile (fax) transmission, provided that the original of such faxed notice or other communication shall have been received within five (5) business days.

The Bank

United States Department of Agriculture

1400 Independence Avenue, S.W.

Washington, D.C. 20250-1500

Attention: Governor

Fax: (202) 720-0810

The Holder

As listed on Schedule II

Section 5.9 Severability. If any provision of this Agreement is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

NORTH PITTSBURGH TELEPHONE COMPANY
By:	/s/    H. R. BROWN
Name:	H. R. Brown
Title:	President and General Manager
RURAL TELEPHONE BANK
By:	/s/    THOMAS DORR
	as Chairman of the Rural Telephone Bank

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SCHEDULE I

LIQUIDATING ACCOUNT LOANS

OF THE HOLDER

Loan Designation	Balance of Unadvanced Funds as of October 1, 2005
None

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SCHEDULE II

STOCKHOLDER INFORMATION

Name and Address of Holder:

North Pittsburgh Telephone Company

4008 Gibsonia Road

Gibsonia, PA 15044

Telephone Number of Holder: (724) 443-9806

Fax Number of Holder: (724) 443-9431

Class B Stock:

Number of Shares of Class B Stock Owned by the Holder: 49,746

Par Price of Class B Stock (Per Share): $1

Total Redemption Payment on Class B Stock: $49,746

Class C Stock:

Number of Shares of Class C Stock Owned by the Holder: 19,572

Par Price of Class C Stock (Per Share): $1,000

Total Redemption Payment on Class C Stock: $19,572,000

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EX-99.2

Exhibit 99.2

REDEMPTION RESOLUTIONS

I, N. William Barthlow, do hearby certify: that I am the Secretary of North Pittsburgh Telephone Company (hereinafter the “Corporation;”) that the following are true and correct copies of resolutions duly adopted by the Board of Directors of the Corporation at a Regular meeting held January 26, 2006, and entered in the minute book of the Corporation; and that none of the following resolutions has been rescinded or modified:

RESOLUTIONS

IT IS THEREFORE RESOLVED:

1. THAT the Corporation authorizes and approves the redemption of its Class (B and/or C) stock in the Rural Telephone Bank (“RTB”) in accordance with the Stock Redemption Agreement as of November 10, 2005 between the Corporation and the RTB;

2. THAT the President of the Corporation, Harry R. Brown, identified below, is authorized on behalf of the Corporation to execute and deliver under its corporate seal, which the Secretary is directed to affix and attest, as many counterparts, respectively, as shall be deemed advisable, of the Stock Redemption Agreement;

I FURTHER CERTIFY THAT the meeting was duly and regularly called and held in accordance with the bylaws of the Corporation; and that the executed Stock Redemption Agreement was authorized and approved by the Board of Directors;

I FURTHER CERTIFY THAT each member of the Board of Directors of the Corporation was furnished with notice of said meeting in compliance with the bylaws of the Corporation;

I FURTHER CERTIFY THAT the date of actual execution of the Stock Redemption Agreement is January 30, 2006; and

I FURTHER CERTIFY THAT the following is the name and signature of the President (or other executing officer of the Corporation), who validly held and occupied his/her position on said date of actual execution of the Stock Redemption Agreement.

Office	Name	Signature
President	Harry R. Brown	/s/    HARRY R. BROWN
Secretary	N. William Barthlow	/s/    N. WILLIAM BARTHLOW

IN WITNESS WHEREOF I have hereunto set my hand affixed the seal of the Corporation this 31st day of January, 2006.

/s/    N. WILLIAM BARTHLOW        

Secretary

(Seal)