<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 27, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-22074
NATIONAL RECORD MART, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2782687
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
507 FOREST AVENUE, CARNEGIE, PENNSYLVANIA 15106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 276-6200
Securities registered pursuant to Section 12 (b) of the Act: none
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, $0.01 PAR VALUE.
(Title of Class)
The undersigned registrant hereby amends its Annual Report for the fiscal year
ended March 27, 1999 on Form 10-K as filed with the Securities and Exchange
Commission by adding Items 10, 11, 12 and 13 of Part III.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning
the directors of the Company.
<TABLE>
<CAPTION>
Director
Name Age Since Position
---- --- ----- --------
<S> <C> <C> <C>
William A. Teitelbaum 49 1986 Chairman, Chief Executive Officer, President
and Director
Theresa Carlise 40 1993 Senior Vice President, Chief
Financial Officer, Assistant Secretary and Director
Samuel S. Zacharias 56 1993 Director
Irwin B. Goldstein 70 1993 Director
</TABLE>
Mr. Teitelbaum has served as Chairman of the Company since 1986 and has served
as President and Chief Executive Officer since 1991. In January 1997 Mr.
Teitelbaum resigned as President, but retained his position as Chairman and
Chief Executive Officer. In January 1998, Mr. Teitelbaum resumed the position of
President. He also served as Vice President and Treasurer from 1986 to 1991.
From 1980 to 1985, he was a partner of Bear Stearns & Co. Since 1985 Mr.
Teitelbaum has been the sole shareholder and Chairman of Remsen Funding Corp., a
New York investment firm. In addition, since 1991, Mr. Teitelbaum has served as
a Director of Alarmax Distributors.
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. Ms. Carlise has served as
Treasurer of the Company since 1991. 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. From February 1998 to June
1999 Ms. Carlise served as Secretary of the Company. In June 1999 she was
elected Assistant Secretary.
Mr. Zacharias has been President, Senior Partner and a Director 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. He has served as a
Director of Three Rivers Energy Resources, Inc. since June 1976. 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.
Compensation Committee Interlocks and Insider Participation
The Compensation and Stock Option Committee consists of Mr.
Zacharias. During Fiscal Year 1999, 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
regularly scheduled meeting days and $500 for any committee meeting attended.
2
<PAGE> 3
Director Stock Option Plan
In May 1993, the Board of Directors adopted the National
Record Mart, Inc. 1993 Non-Employee Director Stock Option Plan (the "Directors
Plan"), which was approved by the stockholders of the Company on June 3, 1993.
The Directors Plan provides for the grant of options to purchase Common Stock to
those directors who are not employees of the Company.
Options to purchase up to 15,000 shares of Common Stock may be
granted under the Directors Plan. Shares issued upon exercise of options granted
under the Directors Plan may be authorized but unissued shares, shares
repurchased and held in treasury by the Company or a combination thereof. 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). Options granted
under the Directors Plan may be exercised by a participant by giving written
notice to the Company and by paying the exercise price in cash or by
surrendering other shares of Common Stock with a market value equal to the
exercise price.
The Directors Plan will terminate on the tenth anniversary of
its effective date, subject to earlier termination by the Board of Directors.
The Board of Directors has the authority to amend or terminate the Directors
Plan at any time without approval, except for certain amendments, which require
stockholder approval. Amendments requiring stockholder approval include
amendments which would materially increase the benefits accruing to
participants, materially increase the number of securities which may be issued
under the Directors Plan or materially modify the requirements as to eligibility
for participation in the Directors Plan. In addition, no action by the Board of
Directors or the stockholders with respect to the Directors Plan may alter or
impair any option previously granted without the participant's consent.
Vested options granted under the Directors Plan must be
exercised within ten years from the date of grant. In the event of a
participant's termination of membership on the Board of Directors, the
participant will have three months to exercise any vested options then
outstanding. In the case of termination of membership on the Board of Directors
for disability or death of the participant, the participant or his or her estate
or beneficiary (as applicable) will have twelve months to exercise any vested
options. In the event of a "change in control" (as defined in the Directors
Plan) involving the Company, all options then outstanding, including options
which have not yet vested, will be deemed to vest immediately upon occurrence of
the event constituting the change in control.
On June 30, 1997, the Company's Board of Directors approved
the 1997 Non-Employee Directors Stock Option Plan (the "1997 Directors Plan").
The 1997 Directors Plan provides for the grant of a maximum of 25,000 shares in
the aggregate to all independent members of the board who are not employees. The
options are vested as of the grant date and are exercisable over a ten year
period from the date of grant at an exercise price of not less than the fair
market value of the Common Stock on the date of grant.
As of March 29, 1999, each of the two non-employee directors
of the Company have received options to purchase 5,000 shares of Common Stock at
an exercise price of $7.50 under the Directors Plan and 5,000 shares of Common
Stock at an exercise price of $2.50 under the 1997 Directors Plan. Options at
the exercise price at $7.50 had no aggregate value as measured by the difference
between the closing price of the Common Stock on the NASDAQ National Market
System as of March 27, 1999 ($4.313 per share) and the exercise price of the
options ($7.50 per share). With respect to options granted at the exercise price
of $2.50, the potential realizable value of such unexercised options for each of
the non-employee directors was $9,065. Executive officers, directors who are
employed by the Company and other employees of the Company are not eligible to
receive any grant of options under the Directors Plan or 1997 Directors Plan.
3
<PAGE> 4
ITEM 11. EXECUTIVE 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 1999,
1998 and 1997 to the Chief Executive Officer and any other corporate officer who
received in excess of $100,000 in compensation in Fiscal Year 1999 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation All Other
Compensation Awards Compensation
------------- ------------ ------------
Securities
Fiscal Underlying
Name and Principal Position Year Salary Options(#)
- --------------------------- ------ ------ ----------
<S> <C> <C> <C> <C>
William A. Teitelbaum 1999 $225,000 - $3,616(1)
Chairman, CEO, President 1998 $225,000 200,000 $9,148(1)
and Director 1997 $225,000 - $7,919(1)
Theresa Carlise 1999 $110,000 500 $1,122(2)
Senior Vice President, 1998 $100,962 3,000 $1,101(2)
Chief Financial Officer 1997 $100,000 5,000 $1,072(2)
and Director
</TABLE>
(1) Amounts represent the Company's contributions to its 401(k) retirement
savings plan on behalf of Mr. Teitelbaum and premiums paid for by the Company
for life insurance, some of which were made pursuant to the terms of Mr.
Teitelbaum's employment agreement, discussed below in "Certain Relationships and
Related Transactions." Except as otherwise noted, no other compensation was paid
during Fiscal Year 1999 (except for perquisites and other personal benefits, the
amount of which was less than 10% of the officer's total compensation).
(2) Amounts represent the Company's contributions to its 401(k) retirement
savings plan on behalf of Ms. Carlise and premiums paid for by the Company for
life insurance. Except as otherwise noted, no other compensation was paid during
Fiscal Year 1999 (except for perquisites and other personal benefits, the amount
of which was less than 10% of the officer's total compensation).
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 was automatically renewed on April 1, 1996 for an additional
year and is automatically renewed 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
his 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.
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.
4
<PAGE> 5
The agreement provides that Mr. 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 was automatically renewed on December 31, 1997 for three additional
years. The agreement provides for an annual base salary of $100,000, with annual
cost of living increases and such merit increases, as the Chief Executive
Officer may deem appropriate. Pursuant to the agreement, Ms. Carlise is also
eligible for such bonus compensation as the Board of Directors of the Company
determines to be appropriate and is entitled to vacation, retirement benefits
and other fringe benefits. The agreement prohibits Ms. Carlise from competing
with the Company during her employment and for a one-year period following
termination of her employment, unless she is terminated without proper cause or
because of disability.
Option Grants in Fiscal Year 1999
The following table sets forth certain information regarding
options granted to the Named Executive Officers during Fiscal 1999.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Shares Total Options Market Price Price Appreciation for
Underlying Granted to on Date of Option Term
Option Grants Employees Exercise Price Grant Expiration --------------------
Name (#) in Fiscal Year ($/Share) ($/Share) Date 5% 10%
---- --- -------------- --------- --------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Theresa 500 1.5% $5.90 $5.90 11/16/08 $1,855 $4,702
Carlise
</TABLE>
5
<PAGE> 6
Option Exercises in Fiscal Year 1999 and 1999 Fiscal Year-End Values
The following table sets forth certain information regarding
options of the Named Executive Officers outstanding at the end of Fiscal Year
1999.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value of Unexercised
Acquired on Realized Unexercised Options at Fiscal In-the-Money Options at
Name Exercise Value Year-End (#) Fiscal Year-End (5)
---- -------------- --------- ------------------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. 0 0 110,000(4) 290,000(4) $223,430 $981,770
Teitelbaum
(1)(2) (3)
Theresa Carlise 0 0 8,600 9,900 $15,592 $17,949
(6)
</TABLE>
(1) On June 15, 1996, the Company's Board of Directors approved the issuance
to Mr. Teitelbaum of options to purchase 200,000 shares of the Company's
Common Stock at an option exercise price of $2.50 per share. These
options vest pro rata over 4 years, with an expiration date of June 15,
2007.
(2) On December 18, 1996, Mr. Teitelbaum canceled his option, granted in
1993, to purchase a total of 200,000 shares of the Company's Common Stock
exercisable at a price of $.10 per share.
(3) On July 1, 1997, the Company's Board of Directors approved the issuance
to Mr. Teitelbaum of options to purchase 200,000 shares of the Company's
Common Stock. The options vest pro rata over twenty years and are
exercisable at $0.10, with an expiration date of July 1, 2024. The
options vest automatically in full upon the termination or death of Mr.
Teitelbaum or the merger, acquisition or liquidation of the Company.
(4) Of the 110,000 exercisable options, 100,000 were exercisable at an
exercise price of $2.50 per share and 10,000 were exercisable at an
exercise price of $.10 per share and of the 290,000 unexercisable
options, 100,000 will be exercisable at an exercise price of $2.50 per
share and 190,000 will be exercisable at an exercise price of $.10 per
share.
(5) The per share fair market value for the Company's Common Stock was $4.313
per share at March 27, 1999.
(6) On November 3, 1995, June 10, 1996, August 1, 1997 and November 17, 1998
the Company's Board of Directors approved the issuance to Ms. Carlise of
options to purchase a total of 18,000 shares at an exercise price of
$2.50 and 500 shares at an exercise price of $5.90. These options vest
over a period of five years from date of grant with an expiration date of
10 years from date of grant.
6
<PAGE> 7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the
beneficial ownership of the Common Stock by (i) each current director, (ii) each
executive officer listed in the Summary Compensation Table, (iii) each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock and (iv) all directors 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. The address for each of the directors of the Company is
c/o National Record Mart, Inc., 507
8
<PAGE> 8
Forest Avenue, Carnegie, PA 15106. 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>
Shares Beneficially Owned
NAME AND ADDRESS NUMBER PERCENT
---------------- ------ -------
<S> <C> <C>
William A. Teitelbaum 1,296,998(1) 25.7%
Theresa Carlise 17,073(2) *
Irwin B. Goldstein 14,900(3) *
Samuel S. Zacharias 98,690(4) 2.0%
Michele A. Teitelbaum 309,800(5) 6.1%
16 Carlisle Drive
Old Brookville, NY 11545
All executive officers and directors as 1,441,631(6) 28.6%
a group (8 persons)
</TABLE>
*Less than 1%
(1) Includes 170,000 shares subject to options exercisable within 60 days
of July 1, 1999 and 129,950 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 Funding Corp., an affiliate
of Mr. Teitelbaum and 12,300 shares held by Mr. Teitelbaum's children
as to which shares Mr. Teitelbaum disclaims beneficial ownership.
Excludes 309,800 shares owned by Mr. Teitelbaum's wife as to which
shares Mr. Teitelbaum disclaims beneficial ownership.
(2) Includes 9,600 shares subject to options exercisable within 60 days of
July 1, 1999.
(3) Includes 10,000 shares subject to options exercisable within 60 days of
July 1, 1999.
(4) Includes 10,000 shares subject to options exercisable within 60 days of
July 1, 1999 and 61,690 shares held by REALSEARCH AG and 26,000 shares
held by Three Rivers Energy Corporation, both affiliates of Mr.
Zacharias.
(5) Excludes 1,296,998 shares held by Mrs. Teitelbaum's husband, William A.
Teitelbaum, as to which shares Mrs. Teitelbaum disclaims beneficial
ownership.
(6) Includes 206,100 shares subject to options exercisable within 60 days
of July 1, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Teitelbaum Loans. Mr. Teitelbaum, Chairman, Chief Executive Officer and
President of the Company, has incurred indebtedness to the Company in a variety
of transactions since 1993. The transactions represented cash advances, expense
payments and a tax withholding payment. A portion of the indebtedness is
evidenced by a note agreement in favor of the Company providing for interest at
prime plus 1-1/2%. The largest amount of indebtedness outstanding during fiscal
year 1999 was approximately $458,591. As of March 27, 1999, the amount of the
indebtedness (as subsequently adjusted to correct erroneous account entries) was
$450,993. Subsequent to March 27,
9
<PAGE> 9
1999, Mr. Teitelbaum repaid $19,975 of such indebtedness. The indebtedness is
secured by a pledge of options held by Mr. Teitelbaum to purchase 200,000 shares
of common stock of the Company at $2.50 per share. Advances have not been
included in the Summary Compensation Table because the amounts are not intended
to be compensation, but are loans which the obligor is obligated to repay on
demand.
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.
10
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf on July 23, 1999 by the undersigned, thereunto duly
authorized.
NATIONAL RECORD MART, INC.
BY: /s/ William A. Teitelbaum
------------------------------
William A. Teitelbaum
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
Chairman of the Board, President
/s/ William A. Teitelbaum Chief Executive Officer and Director July 23, 1999
- ---------------------------
William A. Teitelbaum
Senior Vice President
Chief Financial Officer,
Chief Accounting Officer,
/s/ Theresa Carlise Treasurer, Secretary and Director July 23, 1999
- ---------------------------
Theresa Carlise
/s/ Samuel S. Zacharias Director July 23, 1999
- ---------------------------
Samuel S. Zacharias
/s/ Irwin B. Goldstein Director July 23, 1999
- ---------------------------
Irwin B. Goldstein
</TABLE>
11
