<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
NATIONAL RECORD MART
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NATIONAL RECORD MART
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
[ X ] No fee required
<PAGE> 2
(LOGO)
NATIONAL RECORD MART, INC.
507 FOREST AVENUE
CARNEGIE, PENNSYLVANIA 15106
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 17, 1997
Notice is hereby given of the Annual Meeting of Stockholders of
National Record Mart, Inc. (the "Company"), which will be held at the James H.
Reed Building, 435 Sixth Avenue, 9th Floor, Pittsburgh, Pennsylvania, at 9:30
a.m. (local time) on Wednesday, September 17, 1997, for the following purposes:
(1)To elect five directors of the Company to serve until the next
annual meeting and until their successors are chosen and qualified; and
(2)To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Only stockholders of record at the close of business on July 28, 1997
are entitled to notice of and to vote at this Annual Meeting and any
adjournments thereof. A complete list of the stockholders entitled to vote
shall be available during the period of ten (10) days prior to the date of the
Annual Meeting for examination by any stockholder, for any purpose germane to
the Annual Meeting, during ordinary business hours at 507 Forest Avenue,
Carnegie, Pennsylvania.
Your vote is important. A proxy and return envelope are enclosed for
your convenience. Please complete and return your proxy card as promptly as
possible.
By Order of the Board of Directors,
/s/ LYNDA J. HUFFMAN
--------------------
LYNDA J. HUFFMAN
Secretary
August 13, 1997
IMPORTANT: YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN
AND RETURN THE ENCLOSED PROXY. A RETURN ENVELOPE REQUIRING NO POSTAGE IF MAILED
IN THE UNITED STATES IS ENCLOSED FOR YOUR CONVENIENCE. PROMPT RETURN OF THE
PROXY WILL ASSURE A QUORUM AND SAVE THE COMPANY UNNECESSARY EXPENSE. YOUR PROXY
MAY BE WITHDRAWN BY YOU AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
August 13, 1997
NATIONAL RECORD MART, INC.
507 FOREST AVENUE
CARNEGIE, PENNSYLVANIA 15106
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1997
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of National
Record Mart, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Stockholders of the Company to be held on September 17, 1997 and any
adjournments thereof (the "Annual Meeting"). A copy of the Notice of Annual
Meeting of Stockholders accompanies this Proxy Statement. It is anticipated
that the mailing of this Proxy Statement and the form of proxy will commence on
August 13, 1997. The 1997 Annual Report to Stockholders (which does not form a
part of the proxy solicitation material), including the financial statements of
the Company for the fiscal year ending March 29, 1997 ("Fiscal Year 1997"), is
enclosed herewith.
SOLICITATION OF PROXIES
The shares represented by any proxy given pursuant to this solicitation
will be voted at the Annual Meeting and, if a choice is specified on the proxy,
will be voted in accordance with such specification. In the event no choice is
specified on the proxy, the shares represented by such proxy will be voted FOR
the nominees for directors set forth herein. So far as is presently known,
there is no business to be transacted at the Annual Meeting other than that
referred to in the Notice of Annual Meeting of Stockholders and described
herein and it is not anticipated that other matters will be brought before the
Annual Meeting. If any other matters properly come before the Annual Meeting,
or if any of the persons named to serve as directors should decline or be
unable to serve, the persons named in the proxy will vote on the same in
accordance with their discretion. Shares which are present, or represented by a
proxy, at the Annual Meeting will be counted for quorum purposes regardless of
whether the holder of the shares or proxy fails to vote ("abstentions") or
whether a broker with discretionary authority fails to exercise its
discretionary authority to vote ("broker non-votes"). However, if a broker or
nominee limits on the proxy card the number of shares voted or indicates that
the shares represented by a proxy card are not voted, such "non-votes" will not
be voted and will not be counted as affirmative votes.
A proxy may be revoked by the person giving it before it is voted by
(i) delivering to the Secretary of the Company, at the address listed at the
beginning of this Proxy Statement, a written notice of revocation which must be
signed in exactly the same manner as the proxy, (ii) filing with the Secretary
of the Company a duly executed proxy which bears a later date or (iii)
delivering the signed, written revocation to the Inspector of Elections at the
Annual Meeting. Revocations and subsequent proxies will be honored only if
received at the Company's offices on or before September 12, 1997 or delivered
to the Inspector of Elections at the Annual Meeting prior to the convening
thereof. Presence at the Annual Meeting alone will not revoke the proxy.
<PAGE> 4
QUORUM AND TABULATION OF VOTES
The Bylaws of the Company provide that a majority of the shares of
Common Stock issued and outstanding and entitled to vote, present in person or
by proxy, shall constitute a quorum at the Annual Meeting of the Company. Votes
at the Annual Meeting will be tabulated by the Secretary of the Company. Shares
of Common Stock represented by a properly signed and returned proxy are
considered as present at the Annual Meeting for purposes of determining a
quorum.
VOTING SECURITIES
The Company has only one class of voting securities, its Common Stock,
par value $.01 per share (the "Common Stock"). On the record date, July 28,
1997, 4,844,624 shares of Common Stock were outstanding. Each stockholder of
record at the close of business on July 28, 1997 will be entitled to one vote
for each share of Common Stock owned on that date as to each matter presented
to the meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as to the beneficial
ownership of the Common Stock by (i) each nominee for director, current
director and executive officer named in the Summary Compensation Table, (ii)
each other person known by the Company to be the beneficial owner of more than
5% of the Common Stock and (iii) all directors, nominees and executive officers
of the Company as a group. The information in the table and the related
footnotes pertaining to directors and executive officers is based upon data
furnished to the Company by or on behalf of such persons. Unless otherwise
indicated, each of the following stockholders has sole voting and sole
investment power with respect to the shares beneficially owned by such
stockholder.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
- ------------------------------------ -------------------- --------
<S> <C> <C>
William A. Teitelbaum (1) 1,139,498 (2) 23.39%
Theresa Carlise (3) 7,000 (4) *
Irwin B. Goldstein (3) 4,900 *
Larry K. Mundorf (3) 15,400 (4) *
Samuel S. Zacharias (3) 98,960 (5) 2.03%
Michele A. Teitelbaum (1) 309,800 (6) 6.36%
All executive officers and directors as 1,267,258 (4) 25.90%
a group (6 persons)
</TABLE>
- -------------
* Less than 1%
(1) Address is 16 Carlisle Drive, Old Brookville, New York 11545.
-2-
<PAGE> 5
(2) Includes 153,950 shares held by the National Record Mart, Inc. Profit
Sharing Plan and Trust of which Mr. Teitelbaum is trustee and as to which
shares Mr. Teitelbaum has voting and investment power. Also includes 31,500
shares held by Remsen Partners, Ltd., an affiliate of Mr. Teitelbaum and
includes 12,300 shares held by Mr. Teitelbaum's children, beneficial
ownership of which shares is disclaimed. Excludes 309,800 shares owned by
Mr. Teitelbaum's wife as to which shares Mr. Teitelbaum disclaims
beneficial ownership.
(3) Address is c/o the Company, 507 Forest Avenue, Carnegie, Pennsylvania
15106.
(4) Includes, for Ms. Carlise, 3,000 shares, and for Mr. Mundorf, 2,400 shares,
in each case which may be acquired within 60 days of the date of this Proxy
Statement through the exercise of stock options.
(5) Includes 97,690 shares held by REALSEARCH AG and Three Rivers Energy
Corporation, affiliates of Mr. Zacharias.
(6) Does not include shares held by her husband, William A. Teitelbaum, as to
which shares Mrs. Teitelbaum disclaims beneficial ownership.
ELECTION OF DIRECTORS
At the Annual Meeting, five directors will be elected to hold office
(subject to the Company's By-Laws) until the next Annual Meeting of
Stockholders and until his or her respective successor has been elected and
qualified. The five candidates receiving the highest number of votes cast at
the Annual Meeting will be elected.
If any nominee listed below should become unavailable as a candidate
for any reason, which management does not anticipate, the proxy will be voted
for any substitute nominee or nominees who may be selected by the Board of
Directors prior to or at the Annual Meeting or, if no substitute is selected by
the Board of Directors, for a motion to reduce the number of directors to the
number of nominees available. The information concerning the nominees has been
furnished by them to the Company. Each nominee has consented to being named a
nominee for director and has agreed to serve if elected. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF THE FIVE PERSONS
NOMINATED TO THE BOARD OF DIRECTORS.
The following table sets forth certain information concerning the
nominees, all but one of whom are presently directors of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE SINCE POSITION
--------- ----- --------
<S> <C> <C>
William A. Teitelbaum, 47 1986 Chairman, Chief Executive Officer and Director
Larry K. Mundorf, 49 - President and Chief Operating Officer
Theresa Carlise, 38 1993 Senior Vice President, Chief Financial Officer and Director
Samuel S. Zacharias, 54 1993 Director
Irwin B. Goldstein, 68 1993 Director
</TABLE>
-3-
<PAGE> 6
Mr. Teitelbaum has served as Chairman of the Company since 1986 and
has served as President and Chief Executive Officer since 1991. In January of
1997 Mr. Teitelbaum resigned as President in order to recognize the
contribution to the Company of Mr. Mundorf. Mr. Teitelbaum retains his position
as Chairman and Chief Executive Officer. He also served as Vice President and
Treasurer from 1986 to 1991. From 1980 to 1985, he was a partner of Bear
Stearns & Co. In addition, since 1985 Mr. Teitelbaum has been the sole
shareholder and Chairman of Remsen Partners, Ltd., a New York investment firm.
Mr. Mundorf joined the Company in January of 1996 as Executive Vice
President and Chief Operating Officer. In January of 1997, the Board of
Directors appointed Mr. Mundorf President. Mr. Mundorf spent 23 years with
Camelot Music, Inc. rising through the ranks to Senior Vice President of
Operations and Director. In 1991, he joined manufacturer Alpha Enterprises,
located in Canton, Ohio, a supplier to the music and video industry, as Vice
President of Marketing until 1995.
Ms. Carlise joined the Company in July 1986 as a financial systems
consultant in connection with the establishment of an automated accounting
system and subsequently became Controller of the Company in 1987. She served as
Vice President of Finance of the Company from April 1990 to April 1993, when
she became Senior Vice President, Chief Financial Officer and a director.
Mr. Zacharias has been President and a senior partner of Gateway
Financial Group, Inc., an insurance consulting and merchant banking firm, since
1983. Mr. Zacharias also has served as President and a director of Realsearch
International, Ltd., an investment banking firm, since 1979. Mr. Zacharias has
served as a director of the Company since January 1993.
Mr. Goldstein was Senior Vice President--Credit for Warner Elektra
Atlantic Corp. from 1985 until his retirement in 1992. From 1977 to 1985, Mr.
Goldstein served in various positions at Warner Elektra Atlantic Corp.,
including Vice President and Director of Credit. Mr. Goldstein has served as a
director of the Company since September 1993.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
In Fiscal Year 1997, the Board of Directors met twice and also acted
on seven occasions by unanimous written consent. In Fiscal Year 1997, none of
the directors attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board upon which such director served.
The Board of Directors of the Company has established an Audit
Committee and a Compensation and Stock Option Committee. The Audit Committee,
comprised of Messrs. Goldstein and Zacharias, oversees actions taken by the
Company's independent auditors and reviews the Company's internal controls. The
Compensation and Stock Option Committee, comprised of Mr. Zacharias, reviews
the compensation of the Company's officers and administers the Company's 1993
Stock Option Plan and 1993 Non-Employee Director Stock Option Plan. The Audit
Committee met twice in Fiscal Year 1997. The Compensation Committee met once
and acted on two occasions by unanimous written consent in Fiscal Year 1997.
-4-
<PAGE> 7
Compensation Committee Interlocks and Insider Participation. As stated
above, the Compensation and Stock Option Committee consists of Mr. Zacharias.
During Fiscal Year 1997, no executive officer served on a compensation
committee (or other board committee performing equivalent functions) or board
of directors of an entity related to any member of the Board of Directors.
Cash Compensation. Directors who are employees of the Company do not
receive a retainer or fees for attending meetings of the Board of Directors or
meetings of committees of the Board. Non-employee directors of the Company
receive as compensation for their services to the Company, in addition to
reimbursement for out-of-pocket expenses in connection with attending Board
meetings, an annual fee of $5,000 payable in quarterly installments and a
meeting fee of $1,000 for each regularly scheduled meeting day and $500 for any
committee meeting attended.
Director Stock Option Plan. Each non-employee director receives, upon
his initial election to the Board of Directors, pursuant to the Company's 1993
Non-Employee Director Stock Option Plan (the "Directors Plan"), options to
purchase 5,000 shares of Common Stock. Options to purchase up to 15,000 shares
of Common Stock may be granted under the Directors Plan. Each option vests over
a five-year period with one-fifth of the option shares vesting on each of the
first through fifth anniversaries of the date of the grant. The exercise price
of options granted under the Directors Plan is the fair market value (as
determined pursuant to the Directors Plan) of the Common Stock on the date of
grant of the option (except that, in the case of the initial grant of options
in fiscal 1994, the exercise price is $7.50 per share).
As of March 29, 1997, the two non-employee directors of the Company
had received options to purchase a total of 10,000 shares. Such options had no
aggregate value as measured by the differences between the closing price of the
Common Stock on the NASDAQ National Market System as of March 29, 1997 ($1.50
per share) and the exercise price of the options ($7.50 per share).
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission reports of ownership and reports of changes in
ownership of the Common Stock and other equity securities of the Company. These
persons are required to furnish the Company with copies of all Section 16(a)
reports they file.
The Company believes that all such filing requirements applicable to
its directors and executive officers were complied with in Fiscal Year 1997.
COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the annual and
long-term compensation paid by the Company during Fiscal Years 1997, 1996 and
1995 to the Chairman and Chief Executive Officer, the President and Chief
Operating Officer, and the Senior Vice President and Chief Financial Officer of
the Company. There was no other executive officer of the Company whose total
annual compensation during Fiscal Year 1997 was at least $100,000.
-5-
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ---------------
FISCAL COMPENSATION OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (NO. OF SHARES) COMPENSATION ($)
- --------------------------- ---- ---------- --------------- ----------------
<S> <C> <C> <C> <C>
William A. Teitelbaum 1997 $225,000 0 $ 7,847 (2)
Chairman, Chief Executive 1996 $225,000 0 $ 4,760 (2)
Officer and Director 1995 $225,000 0 $ 4,190 (2)
Larry K. Mundorf 1997 $150,000 12,000 $20,452 (3)
President and 1996 (1) $ 37,499 0 $ 5,780 (3)
Chief Operating Officer
Theresa Carlise 1997 $100,000 5,000 $11,212 (4)
Senior Vice President, Chief 1996 $ 93,776 10,000 $10,754 (4)
Financial Officer and Director 1995 $ 88,000 0 $10,441 (4)
</TABLE>
- ------------
(1) Mr. Mundorf joined the Company in January, 1996.
(2) Includes $1,867, $420 and $0 for Fiscal Years 1997, 1996 and 1995,
respectively, representing the Company's contribution to its 401(k)
retirement savings plan on behalf of Mr. Teitelbaum, and $5,980, $4,340 and
$4,190 for such years representing premiums paid for by the Company for
insurance, medical benefits and other personal benefits.
(3) Represents premiums paid for by the Company for insurance, medical benefits
and other personal benefits.
(4) Includes $922, $209 and $0 for Fiscal Years 1997, 1996 and 1995,
respectively, representing the Company's contribution to its 401(k)
retirement savings plan on behalf of Ms. Carlise, and $10,290, $10,545 and
$10,441 for such years representing premiums paid for by the Company for
insurance, medical benefits and other personal benefits.
OPTIONS
The following table sets forth as to the persons named in the Summary
Compensation Table information with respect to (i) the number of shares
received upon the exercise of options during Fiscal Year 1997, (ii) the
aggregate dollar value realized upon exercise, (iii) the total number of shares
underlying unexercised options held at the end of Fiscal Year 1997 and (iv) the
aggregate dollar value of in-the-money unexercised options held at the end of
Fiscal Year 1997.
-6-
<PAGE> 9
OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options Value of Unexercised
Shares at Fiscal In-the-Money Options
Acquired on Value Year-End (#) at Fiscal Year-End($)
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
---- ------------ ------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C>
William A. Teitelbaum - - 0/0 (1) -
Chairman, Chief
Executive Officer
and Director
Larry K. Mundorf - - 0/12,000 $0/$0 (2)
President and Chief
Operating Officer
Theresa Carlise - - 2,000/13,000 $0/$0 (2)
Senior Vice President
Chief Financial Officer
and Director
</TABLE>
(1) On December 18, 1996, William A. Teitelbaum canceled his right to purchase
a total of 200,000 shares at an exercise price of $.10 per share.
(2) As of March 29, 1997, the options previously granted to Mr. Mundorf and Ms.
Carlise had an exercise price higher than the fair market price of the shares
on such date. Consequently, the options are not considered "in-the-money" for
purposes of this chart.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement in whole or in part, the following
report and the Stock Performance Graph on page 10 shall not be incorporated by
reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors of National
Record Mart, Inc. (the "Company") is responsible for establishing the policies
and programs which determine the compensation of
-7-
<PAGE> 10
the Company's Chief Executive Officer (subject to pre-existing contractual
relationships) and other executive officers. The Committee reviews with the
Board, in detail, all aspects of compensation for such officers. The Committee
is also responsible for administering and granting stock options pursuant to
the Company's 1993 Stock Option Plan. No member of the Committee is a former or
current officer or employee of the Company.
In performing its duties, the Committee focuses primarily on the
following principles and objectives:
(i) to provide compensation opportunities that can assist in
attracting and retaining highly qualified individuals;
(ii) to motivate executives by providing an opportunity for growth
over the course of their careers; and
(iii) to link total compensation both to the individual's performance
and to the Company's profitability.
The Company's compensation program consists principally of base salaries,
bonuses, stock options and other benefits.
Base Salaries and Bonuses. Except as discussed below, the base
salaries and bonuses of the executive officers for each fiscal year are
established by the Board of Directors upon recommendation of the Committee.
Base salary is determined at the beginning of each fiscal year, and bonuses, if
any, are awarded after the financial results for the fiscal year have become
available.
Base salary depends primarily on the office and responsibilities of
the executive officer and is reviewed annually. Increases are normally affected
by the Company's financial performance. As to determining bonuses, financial
results for the fiscal year in question are a primary consideration, but other
factors have significance as well, including the individual performance of each
officer.
The base salary of the Company's Chief Executive Officer for Fiscal
Year 1997 was specified under his employment agreement with the Company,
entered into prior to the Company's initial public offering of its Common
Stock, and approved by the Company's Board of Directors at that time. See
"Certain Relationships and Related Transactions -- Employment Agreements."
Under the terms of his employment agreement, the Company's Chief
Executive Officer is entitled to bonus compensation in an amount equal to 4% of
the increase (if any) in the Company's "pre-tax operating income" over the
prior year. No such bonus was paid in Fiscal Years 1997, 1996 or 1995.
Stock Options. Stock options are granted by the Committee pursuant to
the Company's 1993 Stock Option Plan and are the principal form of long-term
compensation presently received by the Company's executive officers. The
Committee views stock options as particularly beneficial long-term incentives
because such options strengthen the tie between the interests of the executives
with those of the stockholders. The decisions of the Committee with respect to
stock options are based upon each individual's job level and performance.
-8-
<PAGE> 11
Other Benefits. The Company provides certain perquisites and other
personal benefits to certain of its employees including its executive officers,
which perquisites and other benefits in the aggregate are not significant.
Respectfully submitted,
Compensation Committee
/s/ Samuel S. Zacharias
June 20, 1997
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Teitelbaum Loans. William A. Teitelbaum, Chairman and President of the
Company, is the sole shareholder and Chairman of Remsen Partners, Ltd., an
investment firm ("Remsen"). As of March 29, 1997, Mr. Teitelbaum and Remsen
were indebted to the Company for approximately $370,725, of which $96,000 was
repaid by Mr. Teitelbaum during the fiscal year. A portion of the indebtedness
relates to an amount pursuant to a loan made to Mr. Teitelbaum, accompanied by
a note bearing interest at prime plus 1 1/2%. Another substantial portion of
the obligations arises from the health insurance plans for the Company and
Remsen being carried on one policy; the Company pays the premiums under such
policy, and Remsen reimburses the Company, with any past due payments carrying
an interest rate of prime plus 1 1/2%. The indebtedness also includes an
obligation arising from the Internal Revenue Service's recent reclassification
of certain income of the Company. The largest amount of indebtedness of Mr.
Teitelbaum and an affiliate to the Company outstanding during Fiscal Year 1997
was approximately $396,163.
Employment Agreements. William A. Teitelbaum has an employment
agreement with the Company for an initial term of five years commencing on
April 1, 1993. Such term is automatically renewed for the third calendar year
thereafter on April 1, 1996 and each anniversary of such date unless either
party elects to terminate such automatic renewal. The agreement provides for an
annual base salary of $225,000 commencing on June 27, 1993, with annual cost of
living increases or other merit increases approved by the Board of Directors
plus a bonus equal to four percent of the increase in the Company's pre-tax
operating income from the prior fiscal year, subject to a maximum bonus equal
to the base salary. Pursuant to the agreement, the Company has purchased $5.0
million of life insurance for which Mr. Teitelbaum may designate the
beneficiary. The agreement prohibits Mr. Teitelbaum from competing with the
Company during his employment and for a period equal to the greater of (i) two
years after his termination for proper cause or (ii) the period of time during
which he is receiving payments from the Company pursuant to the agreement. The
agreement requires the Company to pay Mr. Teitelbaum an amount equal to 2.99
times his "base amount" (as defined by the Internal Revenue Code) if, following
a change in control of the Company, the agreement is terminated by the Company
or, if the Company achieves certain minimum shareholder investment returns, by
Mr. Teitelbaum. Under his employment agreement, Mr. Teitelbaum is entitled to
fringe benefits including vacation and health insurance pursuant to the
compensation policies and practices of the Company, as well as an automobile
and reimbursement for expenses reasonably incurred by Mr. Teitelbaum in
connection with the performance of his services to the Company. Mr. Teitelbaum
is also entitled to such supplementary retirement benefits, if any, as may be
provided by any plan or plans hereafter established by the Company. The
agreement provides that Mr.
-9-
<PAGE> 12
Teitelbaum will devote a substantial majority of his working time as a
full-time officer of the Company, although it permits him to engage in
non-competitive business activities.
In addition, Theresa Carlise has an employment agreement with the
Company for an initial term of three years commencing on January 1, 1996. Such
term may be automatically renewed on December 31, 1997 for three additional
years. The agreement provides for an annual base salary of $100,000, with
annual cost of living increases and such merit increases as the Chief Executive
Officer may deem appropriate. Pursuant to the agreement, Ms. Carlise is also
eligible for such bonus compensation as the Board of Directors of the Company
determines to be appropriate and is entitled to vacation, retirement benefits
and other fringe benefits. The agreement prohibits Ms. Carlise from competing
with the Company during her employment and for a one-year period following
termination of her employment, unless she is terminated without proper cause or
because of disability.
The Company believes that each of the transactions and agreements
above contains terms no less favorable to the Company than could be obtained
from unaffiliated third parties on an arms' length basis.
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the quarterly percentage change in
cumulative total stockholder return on the Company's Common Stock during the
period from August 5, 1993 (the date on which the Company's stock first traded
on the NASDAQ National Market System) to March 29, 1997 with the quarterly
cumulative total stockholder return during such period on stocks included in
(a) the NASDAQ Composite Index and (b) an index of peer issuers in the
Company's industry (the "Peer Group Index") made up of the Company, Spec's
Music, Inc., Trans World Entertainment Corp. and Musicland Stores Corp.,
weighted for marked capitalization as of the beginning of the period presented.
The information presented in the graph assumes that $100 was invested on August
5, 1993 in the Company's stock, the NASDAQ Composite Index and the Peer Group
Index and that all dividends were reinvested.
-10-
<PAGE> 13
QUARTERLY CUMULATIVE RETURN
NRM PEER GROUP NASDAQ
--- ---------- ------
Aug 93 $100.00 $100.00 $100.00
Dec 93 $97.44 $142.15 $105.00
Mar 94 $73.32 $122.30 $100.60
Jun 94 $53.32 $97.73 $95.92
Sep 94 $66.65 $94.63 $103.86
Dec 94 $46.66 $65.25 $102.66
Mar 95 $34.99 $57.63 $112.13
Jun 95 $31.66 $57.99 $130.33
Sep 95 $36.66 $51.18 $146.01
Dec 95 $12.70 $25.36 $147.74
Mar 96 $15.00 $26.40 $154.59
Jun 96 $31.66 $29.02 $167.28
Sep 96 $20.00 $19.30 $173.22
Dec 96 $16.66 $19.06 $181.71
Mar 97 $23.33 $23.04 $171.89
AUDITORS
The Board of Directors engaged Ernst & Young, independent public
accountants, to audit the books and records of the Company for Fiscal Year
1997. Representatives of Ernst & Young are expected to be present at the
Annual Meeting and, while they are not expected to make a statement, they will
have the opportunity to do so if they desire. They will also be available to
respond to appropriate questions. No principal accountant has been selected or
is being recommended to security holders for election, approval or ratification
for the current fiscal year. The Board of Directors has not yet determined
which firm will provide the best service to the Company.
EXPENSES OF SOLICITATION
The costs of this solicitation have been, or will be, borne by the
Company. In addition to the use of the mails, proxies may be solicited by the
Company's directors, officers and employees, without extra compensation, by
personal interview, telephone and telegram. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material and annual reports to the beneficial owners
of stock held of record by such persons, and the Company will reimburse them
for reasonable out-of-pocket and clerical expenses incurred by them in
connection therewith.
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST OF ANY STOCKHOLDER SOLICITED HEREBY, THE COMPANY
WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 29, 1997. REQUESTS SHOULD BE DIRECTED TO LYNDA
J. HUFFMAN, 507 FOREST AVENUE, CARNEGIE,
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<PAGE> 14
PENNSYLVANIA 15106. ANY BENEFICIAL OWNER SHOULD INCLUDE A GOOD FAITH
REPRESENTATION THAT AS OF THE RECORD DATE HE OR SHE IS A BENEFICIAL OWNER OF
SECURITIES ENTITLED TO VOTE.
STOCKHOLDER PROPOSALS FOR 1998
In order for any stockholder proposal to be considered for inclusion
in the Company's Proxy Statement and form of proxy relating to the Annual
Meeting of Stockholders to be held in 1998, the same must be received by the
Company at its principal executive offices no later than April 15, 1998.
By Order of the Board of Directors,
/s/ Lynda J. Huffman
--------------------
Lynda J. Huffman
Secretary
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<PAGE> 15
NATIONAL RECORD MART, INC.
Proxy for the Annual Meeting of Stockholders
Solicited by the Board of Directors
James H. Reed Building, 435 Sixth Avenue, 9th Floor, Pittsburgh, Pennsylvania
Wednesday, September 17, 1997 - 9:30 a.m. (local time)
The undersigned stockholder of NATIONAL RECORD MART, INC. (the "Company") does
hereby appoint William A. Teitelbaum and Theresa Carlise, or either of them
acting individually, with full power of substitution as proxies of the
undersigned to vote at the Annual Meeting of Stockholders of the Company, to be
held September 17, 1997 (the "Annual Meeting"), and at all adjournments
thereof, all the Shares of Common Stock of the Company which the undersigned
may be entitled to vote, on the matters set out on the reverse side of this
card and described in the Proxy Statement and, in their discretion, on any
other business which may properly come before the Annual Meeting.
THE UNDERSIGNED SHAREHOLDER HEREBY ALSO REVOKES ALL PREVIOUS PROXIES FOR THE
ANNUAL MEETING, ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT BOTH DATED AUGUST 13, 1997, AND OF THE ANNUAL
REPORT TO STOCKHOLDERS OF 1997.
YOU ARE URGED TO PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON SO THAT YOUR SHARES MAY
BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED AT THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS GIVEN, SUCH SHARES
WILL BE VOTED "FOR" ITEM 1.
(continued, and to be signed on the reverse side)
FOLD AND DETACH HERE
<PAGE> 16
your votes as
indicated in X
this example
ITEM 1 - Election of the following five Directors: William A. Teitelbaum, Larry
K. Mundorf, Theresa Carlise, Samuel S. Zacharias and Irwin B. Goldstein. A vote
FOR includes discretionary authority to vote for a substituted nominee if any of
the nominees listed becomes unable to serve or for good cause will not serve.
<TABLE>
<S> <C> <C>
FOR ALL WITHHOLD (To withhold authority to vote for one or more nominees, print
Nominees AUTHORITY such nominee's or nominees' name(s) on the line below).
(except as shown to Vote for All
to the right Nominees
[ ] [ ] ---------------------------------------------------------------
Please date and sign exactly as your name appears
hereon and return in the enclosed envelope. If acting
as attorney, executor, administrator, guardian or
trustee, please so indicate with your full title when
signing. If a corporation, please sign in full corporate
name, by duly authorized officer. If shares are held
jointly, each stockholder named should sign.
Date: , 1997
----------------------------------------
----------------------------------------------------
Signature
----------------------------------------------------
Signature
NOTE: Please sign as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
</TABLE>
FOLD AND DETACH HERE
