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                                                                    Exhibit 10.4




                           NATIONAL RECORD MART, INC.
                               507 Forest Avenue
                          Carnegie, Pennsylvania 15106

                                                             July 1, 1997

Mr. William A. Teitelbaum
16 Carlisle Drive
Old Brookville, New York 11545

         Re: Stock Option Agreement
             ----------------------

Dear Mr. Teitelbaum:

1.       Option Grant.
         -------------

         I am pleased to advise you that in recognition of your services to
National Record Mart, Inc. (the "Company") and as an incentive for you to
continue to provide such services, as of the date hereof, the Company hereby
grants to you an option to purchase up to 200,000 shares (the "Shares") of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company at
an option exercise price of $.10 per Share (the "Option").
         
2.       Vesting Schedule.
         -----------------
         
         The Option expires at 5:00 p.m., Eastern Time, on July 1, 2024 (the
"Expiration Date"). The Option shall not be exercisable other than in accordance
with the following vesting schedule: 10,000 Shares shall vest on July 1, 1998,
thereafter, 10,000 Shares shall vest on July 1 of each of the next succeeding
nineteen (19) years, until July 1, 2017, except as otherwise provided herein.

         All Shares shall automatically vest in the event of a "Vesting Event"
(as hereinafter defined) and, upon the occurrence os such event, the Option
shall be immediately exercisable by you or (in the event of your death) your
personal representative for a period of seven (7) years thereafter. For the
purposes of this Agreement, a "Vesting Event" shall mean:

         (a) The acquisition, in one or more transactions, by any individual,
entity or group, of beneficial ownership of a number of shares of Common Stock
(or other voting securities of the Company) in excess of fifty percent (50%) of
the total outstanding shares of Common Stock (or other voting securities); or

         (b) Approval by the shareholders of the Company of a reorganization,
merger or consolidation unless all of the individuals or entities who were the
respective beneficial owners of outstanding Common Stock immediately prior to
such transaction own directly or indirectly more than fifty percent (50%) of the
outstanding Common Stock (or voting securities) following such transaction; or

         (c) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or a sale or other disposition of all
or substantially  all the assets of the Company; or

         (d) Termination of your employment with the Company for any reason
other than "proper cause" (as such term is defined in that certain Employment
Agreement by and between you and the Company dated as of the 1st day of April,
1993 (the "Employment Agreement"); or

         (e) Your death while employed by the Company.

3.       Termination of Option.
         ----------------------

         If your employment with the Company is terminated for proper cause, or
if you elect to resign from the Company at any time prior to July 1, 2017, then
(a) the Option shall terminate automatically on such date of termination as to
all unvested Shares and (b) the Option as to all vested Shares may be
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exercised by you (or your personal representative in the event of your
subsequent death) at any time within five years after such termination, at the
end of which period the Option shall automatically terminate. Notwithstanding
the foregoing, the Option may not be exercised beyond the Expiration Date.

         4.       Restrictions on Alienation.
                  ---------------------------

         (a)      Except as specifically provided below, the Option may not be
assigned or transferred, and the Option shall be exercisable during your
lifetime only by you. More particularly, but without limiting the generality of
the foregoing, the Option shall not be subject to anticipation, alienation,
sale, gift, assignment, pledge, hypothecation, encumbrance, charge, garnishment,
execution, attachment, or lien of any kind, either voluntary or involuntary,
whether arising at law or equity, other than by testamentary gift, subject
to the limits on exercise of the Option by your personal representative. Any
attempted anticipation, alienation, sale, gift, assignment, pledge,
hypothecation, encumbrance, charge, garnishment or other disposition of the
Option and any levy or any attachment or similar process upon the Option will be
null and void and without effect, and the Company may, in its discretion upon
the happening of any such event, terminate the Option immediately.

         (b)      The provisions of subsection (a) above shall not apply to the
transfer or retransfer of any Option right by you in any manner including inter
vivos gift or at death, and with or without consideration, to any spouse, 
parent, child, grandchild or lineal descendent, provided all such transferees
shall take such Option rights subject to all the restrictions, terms and
conditions of this Agreement and shall execute and deliver to the Secretary of
the Company a written statement confirming the same prior to acquiring any right
to the Option in the Company. In addition, you may transfer Option rights to not
more than 20,000 shares in the aggregate to any one or more individuals,
partnerships, corporations or other entities, provided all such transferees
shall take such Option rights subject to all the restrictions, terms and
conditions of this Agreement and shall execute and deliver to the Secretary of
the Company a written statement confirming the same prior to acquiring any right
to the Option in the Company.

5.       Adjustment of Common Stock.
         ---------------------------

         The number of Shares (vested and unvested) which shall at any time be
and remain subject to purchase pursuant to exercise of the Option, shall be
adjusted in the following events:
         
         (a) DIVIDENDS. In the event that a dividend shall be declared upon the
Common Stock of the Company payable in shares of said stock, the number of
Shares covered by the Option shall be adjusted by adding thereto the number of
shares of Common Stock which would have been distributable thereon if such
Shares had been outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend.

         (b) REORGANIZATIONS, CONSOLIDATION, MERGERS. In the event that the
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger or
consolidation, then there shall be substituted for the Shares covered by the
Option, the number and kind of shares of stock or other securities which would
have been substituted therefor if such Shares had been outstanding on the date
fixed for determining the stockholders entitled to receive such changed or
substituted stock or other securities.

         (c) OTHER CHANGES. In the event there shall be any change, other than
specified above, in the number or kind of outstanding shares of Common Stock of
the Company or of any stock or other securities into which such Common Stock
shall be changed or for which it shall have been exchanged, then if the Board of
Directors shall determine, in good faith, that such change equitably requires
an adjustment in the number or kind of Shares covered by the Option, such
adjustment shall be made by the Board of Directors and shall be effective and
binding for all purposes on this Agreement.

6.       Other Option Terms.
         -------------------

         Except as specifically set forth herein, on or before the Expiration
Date, the Option for Vested Shares may be exercised in whole or in part at any
time and from time to time. The Option may be                

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exercised by delivery of written notice to the Company setting forth the 
election to exercise and the number of Shares to be purchased. The notice must
be dated and signed by the person(s) exercising the Option and must be
accompanied by such documents as the Company may reasonably request as specified
below. If the Option is exercised by someone other than yourself, the notice
must be accompanied by proof, satisfactory to the Company, of the right of such
person(s) to exercise the Option.

         The option price upon exercise of all or part of the Option must be
paid in full in United States Dollars in cash (by check, bank draft and money
order).

         The date of exercise of the Option is the date on which the notice of
exercise, proof of right to exercise (if required) and payment in full for the
Shares to be purchased are received by the Company at its office located at 507
Forest Avenue, Carnegie, Pennsylvania 15106, to the attention of the Company's
Corporate Secretary. As of the date of exercise, you will be considered by the
Company for all purposes to be the owner of the Shares purchased, subject to the
terms set forth in this Agreement.

7. Securities Law Matters.
   -----------------------

         The Shares which may be issued upon the exercise of the Option may not
be sold, transferred, pledged or hypothecated in the absence of (i) an effective
registration statement or post-effective amendment thereto for such Option, or
Shares, respectively, under the Securities Act of 1933 (the "Act"); or (ii) the
availability of an exemption from the registration requirements of the Act.
              
         The Company is under no obligation to register the Common Stock which
may be issued or delivered upon the exercise of the Option under the Act, to
register such Common Stock or take any other action under any state or foreign
securities law in connection with the offer or sale of such Common Stock or to
prepare any disclosure document for distribution to you under the Act or any
state or foreign securities law in connection with such offer or sale.

         Prior to the issuance or delivery of any Shares pursuant to the
exercise of the Option in whole or in part, you will be required to represent
and warrant that you will not sell or otherwise transfer any such Shares unless
the Shares are registered under the Act or an exemption from registration is
available. The certificate or certificates representing the Shares to be issued
or delivered upon exercise of the Option shall bear any legends required by
applicable securities laws, and appropriate stop-transfer instructions may be
issued by the Company to its stock transfer agent with respect to such Common
Stock.

8. Miscellaneous.
   --------------

         When accepted by you, this Agreement shall constitute an agreement
which shall be binding upon the successors and assigns of the Company and upon
your heirs, legal representatives, successors and assigns. Except as otherwise
specifically set forth above, neither this Agreement, the Option, nor any Shares
acquired by you pursuant to the Option may be assigned, transferred, pledged,
hypothecated or similarly disposed of except as provided herein.

         The Company covenants that, so long as the Option is exercisable, it
will reserve from its authorized and unused Common Stock a sufficient number of
shares to provide for the delivery of stock pursuant to the exercise of the
Option.

         This Agreement does not confer upon you any rights of a stockholder of
the Company, including, without limitation, any right to vote or to consent to
or receive notice as a stockholder of the Company.

         The exercise of the Option when the fair market value of the Common
Stock exceeds the option exercise price will cause you to recognize taxable
income equal to such excess. You hereby authorize the Company to withhold from
your salary or any other payment due to you, upon exercise of all or any portion
of the Option, the amount of any taxes required by law to be withheld with
respect to the exercise of the Option or any portion thereof, as determined by
the Company in its reasonable discretion, such amount may be withheld at any
time after exercise of the Option or portion thereof, in a lump sum or
installments, in the Company's reasonable discretion.



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         This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania. If you wish to accept this
Agreement, please sign, date and return one copy to the Secretary of National
Record Mart, Inc., 507 Forest Avenue, Carnegie, Pennsylvania 15106.


                                             Very truly yours,

                                             NATIONAL RECORD MART, INC.



                                             BY /S/  Theresa Carlise
                                             --------------------------


Receipt Acknowledged and
Option Accepted:

/s/ William A. Teitelbaum
----------------------------
    William A. Teitelbaum


Date: 7-1-97







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