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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:
[ ] 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
NATIONAL RECORD MART, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(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:
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(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):
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(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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[ X ] No fee required
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NATIONAL RECORD MART, INC.
507 FOREST AVENUE
CARNEGIE, PENNSYLVANIA 15106
AUGUST 13, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders (the "Annual Meeting") of National Record Mart, Inc. (the
"Company").
Place: James H. Reed Building
435 Sixth Avenue, Ninth Floor
Pittsburgh, Pennsylvania 15219
Date: Thursday, September 17, 1998
Time: 9:30 a.m. local time
The Notice of the Annual Meeting and Proxy Statement accompany
this letter. The Proxy Statement describes the business to be transacted at the
Annual Meeting and provides other information concerning the Company. The
principal business to be transacted at the Annual Meeting will be (i) election
of four directors (ii) ratification of the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending March 27, 1999
and (iii) such other business as may properly come before the Annual Meeting and
any adjournments thereof. The Board of Directors recommends that stockholders
vote for the election of the nominated directors and the ratification of the
appointment of Ernst & Young LLP.
We know many of our stockholders will be unable to attend the
Annual Meeting. Proxies are therefore solicited so that each stockholder has an
opportunity to vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend the Annual Meeting, we hope you will
have your stock represented by marking, signing, dating and returning your proxy
card in the enclosed envelope as soon as possible. Your stock will be voted in
accordance with the instructions you have been given in your proxy card. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously returned your proxy card.
Sincerely,
William A. Teitelbaum
President, Chief Executive Officer and
Chairman of the Board
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IMPORTANT
A PROXY CARD IS ENCLOSED HEREWITH. ALL STOCKHOLDERS ARE URGED TO COMPLETE AND
MAIL THE PROXY CARD PROMPTLY. THE ENCLOSED ENVELOPE FOR RETURN OF THE PROXY CARD
REQUIRES NO POSTAGE. ANY STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY PERSONALLY
VOTE ON ALL MATTERS THAT ARE CONSIDERED, IN WHICH EVENT THE SIGNED PROXY WILL BE
REVOKED.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED
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(LOGO)
NATIONAL RECORD MART, INC.
507 FOREST AVENUE
CARNEGIE, PENNSYLVANIA 15106
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 17, 1998
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 Thursday, September 17, 1998, for the following purposes:
(1) To elect four directors of the Company to serve until the next
annual meeting and until their successors are chosen and
qualified;
(2) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 27, 1999;
and
(3) 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 27, 1998
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 will
be available during the period ten (10) days prior to the date of the Annual
Meeting for examination by any stockholder, for any purpose appropriate 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,
Theresa Carlise
Secretary
Pittsburgh, PA
August 13, 1998
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.
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August 13, 1998
NATIONAL RECORD MART, INC.
507 FOREST AVENUE
CARNEGIE, PENNSYLVANIA 15106
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1998
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 Thursday,
September 17, 1998 at the James H. Reed Building, 435 Sixth Avenue, Pittsburgh,
Pennsylvania.
A copy of the Notice of Annual Meeting of Stockholders
accompanies this Proxy Statement. The 1998 Annual Report to the Stockholders
(which does not form a part of the proxy solicitation materials), including the
financial statements of the Company for the fiscal year ended March 28, 1998
("Fiscal Year 1998"), is enclosed herewith. It is anticipated that the mailing
of this Proxy Statement and the form of proxy will commence on August 13, 1998.
RECORD DATE AND OUTSTANDING SHARES
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 27, 1998, 4,897,679 shares of Common Stock were outstanding. Each
stockholder of record at the close of business on July 27, 1998 will be
entitled to one vote for each share of Common Stock owned on that date as to
each matter presented at the meeting. Stockholders are not entitled to
cumulative voting rights in the election of directors.
QUORUM AND VOTING
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, will constitute a quorum at the Annual Meeting. Votes at the
Annual Meeting will be tabulated by the Secretary of the Company. Shares of the
Common Stock represented by a properly signed and returned proxy will be
considered as present at the Annual Meeting for purposes of determining a
quorum.
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 (i) election of the nominees for directors set forth herein and
(ii) ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 27, 1999. A nominee for
election to the Board of Directors will be elected by a plurality of the votes
cast in person or by proxy at the Annual Meeting by holders of shares of the
outstanding Common Stock. The appointment of Ernst & Young LLP will be ratified
if the proposal receives the affirmative vote of the majority of the
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outstanding shares, present in person or by proxy, at the meeting. Proxies will
be received and tabulated by Chase Mellon Shareholder Services, the Company's
transfer agent.
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 or as auditor 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 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, abstentions and broker non-votes have no effect
on the determination of whether a plurality exists with respect to a given
nominee for director. Abstentions and broker non-votes have the effect of voting
against any other proposal.
REVOCABILITY OF PROXIES
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 a 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 11, 1998 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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as to the
beneficial ownership of the Common Stock by (i) each current director or nominee
for 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, nominees for 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. 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.
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SHARES BENEFICIALLY OWNED
NAME AND ADDRESS NUMBER PERCENT
---------------- ------ -------
William A. Teitelbaum 1,260,998(1) 25.2%
Theresa Carlise 13,000(2) *
Irwin B. Goldstein 14,900(3) *
Samuel S. Zacharias 108,960(4) 2.2%
Michele A. Teitelbaum 309,800(5) 6.3%
16 Carlisle Drive
Old Brookville, NY 11545
All executive officers and directors as 1,412,858(6) 28.0%
a group (10 persons)
*Less than 1%
(1) Includes 110,000 shares subject to options exercisable within 60 days
of July 1, 1997 and 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 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 5,000 shares subject to options exercisable within 60 days of
July 1, 1998.
(3) Includes 10,000 shares subject to options exercisable within 60 days of
July 1, 1998.
(4) Includes 10,000 shares subject to options exercisable within 60 days of
July 1, 1998 and 97,960 shares held by REALSEARCH AG and Three Rivers
Energy Corporation, affiliates of Mr. Zacharias.
(5) Excludes 1,260,998 shares held by Mrs. Teitelbaum's husband, William A.
Teitelbaum, as to which shares Mrs. Teitelbaum disclaims beneficial
ownership.
(6) Includes 140,500 shares subject to options exercisable within 60 days
of July 1, 1998.
PROXY PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, four directors will be elected to hold
office (subject to the Company's Bylaws) until the next Annual Meeting of
Stockholders and until his or her respective successor has been elected and
qualified. Directors of the Company will be elected by a plurality of the votes
cast at the Annual Meeting.
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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 FOUR PERSONS NOMINATED TO THE BOARD OF DIRECTORS.
INFORMATION ABOUT DIRECTOR NOMINEES
The following table sets forth certain information concerning
the nominees, all of whom are presently directors of the Company.
Director
Name Age Since Position
---- --- ----- --------
William A. Teitelbaum 48 1986 Chairman, Chief Executive Officer, President
and Director
Theresa Carlise 39 1993 Senior Vice President, Chief
Financial Officer, Secretary and Director
Samuel S. Zacharias 55 1993 Director
Irwin B. Goldstein 69 1993 Director
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. Mr. Teitelbaum 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. In addition, since 1985 Mr. Teitelbaum has been the sole shareholder and
Chairman of Remsen Partners, Ltd., a New York investment firm.
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. In February 1998 she was
elected 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.
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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 1998, the Board of Directors met three times
and also acted on five occasions by unanimous written consent. In Fiscal Year
1998, none of the directors attended fewer than 75% of 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
Audit Committee met twice in Fiscal Year 1998. 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, 1993 Non-Employee
Director Stock Option Plan and 1997 Non-Employee Directors Stock Option Plan.
The Compensation Committee did not meet but acted on two occasions by unanimous
written consent in Fiscal Year 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As stated above, the Compensation and Stock Option Committee
consists of Mr. Zacharias. During Fiscal Year 1998, 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.
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.
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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 25,000 shares 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 $2.50.
As of March 28, 1998, 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 Director's 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
differences between the closing price of the Common Stock on the NASDAQ National
Market System as of March 28, 1998 ($5.875 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 $16,275. 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.
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EXECUTIVE OFFICERS AND COMPENSATION
The Company's executive officers, other than Mr. Teitelbaum
and Ms. Carlise, are identified below.
GEORGE BALICKY, age 50, is Senior Vice President--Merchandising. Mr. Balicky has
served the Company in various capacities since 1968, including Regional Manager,
Director of Advertising, Director of Store Operations and Vice President of
Marketing and Advertising. He is a member of the Retailers Advisory Board of the
National Association of Recording Merchandisers. He was named Senior Vice
President in February 1998.
SCOTT BARGERSTOCK, age 48, is Vice President of Business Development and has
served the Company since 1970 in various positions including Store Manager,
District Manager and Regional Manager. Mr. Bargerstock was promoted in February
1998 to his current position.
JAMES BENEDETTI, age 35, is Vice President of Information Systems and has been
with the Company for eleven years as Manager and Director of Information
Systems. In February 1998, Mr. Benedetti was promoted to his current position.
JOHN GRANDONI, age 48, is Vice President of Purchasing and has twenty-eight
years of specialty music retail experience in various positions. Prior to
joining the Company in 1996, Mr. Grandoni was Vice President of Purchasing and
Advertising for Cavages, a music specialty retailer based in Buffalo, New York.
In February 1998 Mr. Grandoni was promoted to his current position.
CHARLES MICHAEL STEPHENSON, age 43, started his career at NRM with a music
retail background of twenty years with Camelot Music in Canton, Ohio. In April
1996 he joined NRM as Director of Marketing. In February 1998, Mr.
Stephenson became Vice President of Marketing for the Company.
STEVEN ZIMMERMAN, age 43, is Vice President of Store Operations and has been in
the store operations area for over twenty years in various capacities at Camelot
Music in Canton, Ohio. Mr. Zimmerman joined NRM in November 1995 as Director of
Store Operations and has been in the position of Vice President since February
1998.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the
annual and long-term compensation paid by the Company during Fiscal Years 1998,
1997 and 1996 to the Chief Executive Officer and any other corporate officer who
received in excess of $100,000 in compensation in Fiscal Year 1998 (the "Named
Executive Officers").
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SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation All Other
Compensation Awards Compensation
------------ ------ ------------
Securities
Underlying
Name and Principal Fiscal Position Year Salary Options(#)
---------------------------------- ---- ------ ----------
$
William A. Teitelbaum 1998 $225,000 200,000 $ 9,148(1)
Chairman, CEO, President 1997 $225,000 - $ 7,919(1)
and Director 1996 $225,000 200,000 $ 4,832(1)
Theresa Carlise 1998 $100,962 $ 1,101(2)
Senior Vice President, 1997 $100,000 $ 1,072(2)
Chief Financial Officer 1996 $ 93,776 $ 356(2)
and Director
(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 1998 (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 1998, (except for perquisites and other personal benefits, the
amount of which was less than 10% of the officer's total compensation).
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information regarding
options granted to the Named Executive Officers during Fiscal 1998.
OPTION/WARRANT GRANTS IN FISCAL 1998
INDIVIDUAL GRANTS
-----------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION FOR
SHARES TOTAL OPTIONS MARKET PRICE OPTION TERM (1)
UNDERLYING GRANTED TO ON DATE OF -------------------
OPTION GRANTS EMPLOYEES EXERCISE PRICE GRANT EXPIRATION
NAME (#) IN FISCAL YEAR ($/SHARE) ($/SHARE) DATE 0% 5% 10%
---- --- -------------- --------- --------- ---- -- -- ---
William A. 200,000 88.5% $.10 $9.125 7/1/24 $1,805,000 $6,792,000 $23,906,000
Teitelbaum
- ----------
1. Based on the fair market value of the Common Stock of $9.125 per share
at July 1, 1997.
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OPTION EXERCISES IN FISCAL YEAR 1998 AND 1998 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
1998.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FY-END OPTION VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON REALIZED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
NAME EXERCISE VALUE YEAR-END (#) FISCAL YEAR-END (5)
---- -------------- --------- ---------------------- ------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
William A. 0 0 110,000(4) 290,000(4) $395,250 $1,434,750
Teitelbaum
(1) (2) (3)
(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 right 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 $5.875
per share at March 28, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires that the Company's officers, directors and persons who own
more than 10 percent of the Common Stock file with the Securities and Exchange
Commission (the "SEC") initial reports of beneficial ownership on Form 3 and
reports of changes in beneficial ownership of Common Stock and other equity
securities on Form 4. Officers, directors and greater than 10 percent
stockholders of the Company are required by SEC regulations to furnish to the
Company copies of all Section 16(a) reports that they file. To the Company's
knowledge, based solely on reviews of such reports
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furnished to the Company and written representations that no other reports are
required, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10 percent beneficial owners were complied with
during Fiscal Year 1998.
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 12 shall not be incorporated by
reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
To: 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 the Company's Chief
Executive Officer 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.
Base Salaries and Bonuses. Except as provided 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. Two executive
officers, William A. Teitelbaum and Theresa Carlise, have employment agreements
with the Company. Mr. Teitelbaum's base salary for the 1998 fiscal year was
specified under his five year employment agreement with the Company, dated April
1, 1993, described in the Company's proxy statement. Mr. Teitelbaum's employment
agreement establishes his base salary at $225,000 per year. Ms. Carlise's
employment agreement, dated as of January 1, 1996, which is also described in
the Company's proxy statement, establishes her base salary at $100,000 per year.
As to bonuses, it is a basic philosophy of the Committee that
executive officers should have a meaningful portion of their total compensation
tied to the profitability of the Company. Accordingly, financial results for the
fiscal year in question are the primary consideration in determining the bonuses
of executive officers, but other factors have significance as well, including
the individual performance of each officer. Under the terms of his employment
agreement, Mr. Teitelbaum 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 or 1996. Pursuant to
her agreement, Ms. Carlise is entitled to such bonus compensation as the
Committee deems appropriate.
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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 aid in tying 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.
Compensation Committee
Samuel S. Zacharias
June 20, 1998
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Teitelbaum Loans. Mr. Teitelbaum, Chairman, Chief Executive
Officer and President of the Company, is the sole shareholder and Chairman of
Remsen Partners, Ltd., an investment firm ("Remsen"). The largest amount of
indebtedness of Mr. Teitelbaum and Remsen to the Company outstanding during
Fiscal Year 1998 was approximately $422,298. A portion of the indebtedness
relates to a loan made by the Company to Mr. Teitelbaum which was accompanied by
a note agreement made by Mr. Teitelbaum in favor of the Company which bears
interest at prime plus 1-1/2%. Another substantial portion of the obligations
arises from the health insurance plan carried by the Company on its policy on
behalf of Remsen. The Company pays the premiums under such policy and Remsen
reimburses the Company, with any past due payments from Remsen carrying an
interest rate of prime plus 1-1/2%. The indebtedness also includes an obligation
paid by the Company on behalf of Mr. Teitelbaum which arose from the Internal
Revenue Service's recent reclassification of certain income of the Company. As
of March 28, 1998, Mr. Teitelbaum and Remsen were indebted to the Company for
approximately $399,544.
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 will be automatically renewed on April 1, 1996 for an
additional year 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 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. The agreement provides that Mr.
Teitelbaum will devote a substantial majority of his
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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.
National Record Mart, Inc.
Stock Performance Graph
Fiscal 1998
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
Jun 97 $17.50 $35.68 $203.25
Sep 97 $59.99 $74.96 $237.64
Dec 97 $48.32 $59.89 $222.90
Mar 98 $78.31 $92.68 $260.70
PROXY PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors will request that stockholders ratify
the appointment of Ernst & Young LLP as the Company's independent auditors to
examine the financial statements of the Company for the year ending March 27,
1999. The firm of Ernst & Young LLP has served as the Company's public
accountants since 1991. A representative of Ernst & Young LLP will be present at
the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF 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
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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 28, 1998. REQUESTS SHOULD BE DIRECTED TO THERESA
CARLISE, 507 FOREST AVENUE, CARNEGIE, 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.
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STOCKHOLDER PROPOSALS FOR 1999
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 1999, the same must be received by
the Company at its principal executive offices no later than April 14, 1999.
By Order of the Board of Directors,
Theresa Carlise
Secretary
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NATIONAL RECORD MART, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT
JAMES H. REED BUILDING, 435 SIXTH AVENUE, FOURTH FLOOR, PITTSBURGH, PA 15219
THURSDAY, SEPTEMBER 17, 1998 - 9:30 A.M. (LOCAL TIME)
SOLICITED BY THE BOARD OF DIRECTORS
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, 1998 (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 forth 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 stockholder 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, 1998, and of the Annual
Report to Stockholders for 1998.
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, the shares
will be voted "FOR" Items 1 and 2.
(Continued and to be signed on the reverse side)
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[ X ] Please mark you votes as this
ITEM 1 -- Election of the following four directors: William A.
Teitelbaum, 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 a good cause will not serve.
FOR All WITHHOLD
Nominees AUTHORITY
(except as shown to Vote for
to the right) All Nominees
(To withhold authority to vote for one or more
nominees, print such nominee's or nominees'
name(s) on the line below
------------------------------------------------
ITEM 2 - Ratification of the appointment of Ernst & Young as
independent auditors of the Company for the fiscal year ending
March 29, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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.
SIGNATURE(S) DATE
--------------------------------------------------------- ----------------------------------
NOTE: Please sign as name appears hereon. Just owners should each sign. When
signing as attorney, executor administrator, trustee or guardian, please give
full title as such.