<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Preliminary Additional Materials
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.149-11(c) or Section 240.14a-12
RAG SHOPS, INC.
(Name of Registrant as Specified in its Charter)
RAG SHOPS, INC.
Name of Person(s) Filing Proxy Statement)
<PAGE>
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JANUARY 23, 1997
-------------------
To the Stockholders of
RAG SHOPS, INC.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of Rag
Shops, Inc., a Delaware corporation (the "Company"), will be held at 9:30 a.m.
(Eastern Daylight Time) on Thursday, January 23, 1997, at the Regency House
Hotel, 140 Highway 23 North, Pompton Plains, New Jersey, to consider and vote
upon:
1. Election of three directors for a three-year term.
2. Ratification of the selection by the Board of Directors of Deloitte
& Touche, LLP as independent public accountants for the Company's 1997
fiscal year.
3. Any other business that may properly come before the meeting.
The Board of Directors has fixed the close of business on December 16, 1996,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at said meeting. Stock transfer books will not be closed.
To assure representation of your shares, YOU ARE REQUESTED, WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE MEETING, TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
If your shares are held of record by a broker, bank, or other nominee and
you wish to vote your shares at the meeting, you must obtain and bring to the
meeting a letter from the broker, bank, or other nominee confirming your
beneficial ownership of the shares.
By Order of the Board of Directors
DORIS BERENZWEIG
SECRETARY
Hawthorne, New Jersey
December 20, 1996
<PAGE>
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of Rag Shops, Inc. (the "Company"). All proxies in the accompanying
form, which are properly executed and duly returned, will be voted at the Annual
Meeting of Stockholders to be held on Thursday, January 23, 1997, at 9:30 a.m,
at the Regency House Hotel, 140 Highway 23 North, Pompton Plains, New Jersey,
for the purposes set forth in the accompanying Notice of Annual Meeting.
This proxy statement and the enclosed form of proxy are being mailed to
stockholders on or about December 20, 1996.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), at the close of business on December 16, 1996, will
be entitled to notice of and to vote at the meeting. On that date there were
issued and outstanding 4,514,400 shares of Common Stock. Each outstanding share
of Common Stock is entitled to one vote on all matters that come before the
meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, officers, directors and regular employees of the Company
may solicit proxies personally or by telephone, telegraph or facsimile
transmission. The Company also intends to request that brokerage houses, banks,
custodians, nominees, and fiduciaries forward soliciting material to the
beneficial owners of Common Stock held of record by such persons, and will
reimburse such persons for their reasonable expenses in forwarding such
material.
The holders of a majority of the total shares of Common Stock issued and
outstanding, whether present in person or represented by proxy, will constitute
a quorum for the transaction of business at the meeting. The affirmative vote of
a majority of the total shares of Common Stock represented in person or by proxy
at the meeting is required for the election of directors and the ratification of
the appointment of independent public accountants. Since only affirmative votes
are counted as votes in favor of these matters, abstentions and broker non-votes
have the same effect as votes against these matters. Proxies and ballots will be
tabulated by the inspectors of election.
It is important that proxies be returned promptly. Therefore, whether or not
you plan to attend in person, you are urged to execute and return your proxy in
the enclosed envelope, to which no postage need be affixed if mailed in the
United States. The proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Company an instrument revoking such proxy or a
duly executed proxy bearing a later date, or by attending the meeting and voting
in person.
BENEFICIAL OWNERSHIP
The following table sets forth information, as of December 1, 1996, as to
the beneficial ownership of Common Stock (including shares which may be acquired
within sixty days pursuant to stock options) of each director of the Company and
each executive officer of the Company listed in the Summary Compensation Table
below, all directors and executive officers as a group and persons known by the
Company to beneficially own 5% of the Common Stock. Except as set forth below,
no person beneficially
<PAGE>
owns 5% or more of the Common Stock. Unless otherwise indicated, the address of
each person below is care of the Company, 111 Wagaraw Road, Hawthorne, New
Jersey 07506-2711.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENTAGE
NAME OF OWNER OWNED OF CLASS
- ---------------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Stanley Berenzweig................................................................ 932,864(1) 20.7%
Doris Berenzweig.................................................................. 1,016,136(1) 22.5%
Dimensional Fund Advisors, Inc.................................................... 308,400(2) 6.8%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90101
Evan Berenzweig................................................................... 238,500(3) 5.3%
Judith Lombardo................................................................... 187,500(3) 4.1%
Steven Barnett.................................................................... 187,500(3) 4.1%
Fred J. Damiano................................................................... 1,000 *
Alan C. Mintz..................................................................... 17,000(3) *
Terry Smith....................................................................... 8,000(4) *
Michael Aaronson.................................................................. 20,000(5) *
All directors and executive officers as a group (10 persons)...................... 2,510,500 54.6%
</TABLE>
- ------------------------
(1) Excludes shares held by spouse and includes 98,000 shares beneficially owned
by the Stanley and Doris Berenzweig Charitable Foundation, Inc. of which Mr.
and Mrs. Berenzweig are trustees. Mr. and Mrs. Berenzweig each disclaim
beneficial ownership of the shares held by the other and by the Foundation.
(2) Based solely upon information set forth in a Schedule 13G filed with the
Securities and Exchange Commission, dated February 7, 1996.
(3) Includes 15,000 shares subject to presently exercisable stock options at
$6.25 per share.
(4) Represents shares subject to presently exercisable stock options at $6.00
and $8.125 per share.
(5) Represents shares subject to presently exercisable stock options at $2.375
per share.
* Less than 1 percent.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the division of the
Company's Board of Directors into three classes whose respective three-year
terms of office expire in different years. Each year the directors in one class
are elected to serve for a term of three years. The Company's Class III
Directors have terms expiring at the 1997 Annual Meeting, and until their
respective successors are fully elected and qualified. The officers of the
Company are appointed by the Board of Directors to hold office until their
successors are duly elected and qualified. Vacancies on the Board of Directors
are filled by the remaining directors.
Certain information regarding the three nominees for election as directors
at this year's Annual Meeting is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------ --- ---------------------------------------------------
<S> <C> <C>
Steven B. Barnett..................................... 49 Senior Vice President, Treasurer, Chief Financial
Officer and Class III Director
Evan Berenzweig....................................... 40 Senior Vice President and Class III Director
Alan C. Mintz......................................... 64 Class III Director
</TABLE>
2
<PAGE>
STEVEN B. BARNETT, who joined the Company in 1984, has been a Senior Vice
President, Treasurer and a Director of the Company since April 1991, and the
Chief Financial Officer of the Company since August 1986. From August 1986 to
April 1991, Mr. Barnett was a Vice President of the Company and from December
1984 to August 1986 he was the Controller.
EVAN BERENZWEIG, who joined the Company in 1980, has been a Senior Vice
President since November 1994 and a Director of the Company since April 1991.
Mr. Berenzweig served as the Treasurer of the Company from August 1986 to April
1991 and Vice President from April 1991 to November 1994, and, prior to 1986, he
served the Company in various capacities in merchandising, store operations and
distribution.
ALAN C. MINTZ, a Certified Public Accountant, has been a Director of the
Company since April 1991 and has been a partner in the firm of Mintz Rosenfeld &
Company, Certified Public Accountants, and its predecessors, since 1957. Mr.
Mintz, through Mintz Rosenfeld & Company, continues to render tax and consulting
services to the Company.
DIRECTORS CONTINUING IN OFFICE
AND OTHER EXECUTIVE OFFICERS
Certain information regarding Directors who are not standing for election at
this year's Annual Meeting and executive officers who are not directors is set
forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------ --- ---------------------------------------------------
<S> <C> <C>
Stanley Berenzweig.................................... 76 Chairman of the Board, Chief Executive Officer and
Class I Director
Michael Aaronson...................................... 48 President, Chief Operating Officer and Class I
Director
Judith Lombardo....................................... 48 Senior Vice President and Class II Director
Fred J. Damiano....................................... 52 Class II Director
Terry Smith........................................... 40 Vice President
Doris Berenzweig...................................... 70 Secretary
Leonard M. Settanni................................... 54 Vice President
</TABLE>
STANLEY BERENZWEIG, who co-founded the Company in 1963, has been Chairman of
the Board of the Company since August 1986, Chief Executive Officer and Director
since April 1991 and Chief Operating Officer of the Company from September 1994
to April 1995.
MICHAEL AARONSON, who joined the Company in November 1994, has been the
President, Chief Operating Officer and a Director since April 1995. From
November 1994 to April 1995, Mr. Aaronson was the Executive Vice President of
the Company. Mr. Aaronson was formerly President and Chief Operating Officer of
Fabrics, Crafts & Floral Bonanza, a fabrics and craft specialty store retail
chain, from November 1993 to October 1994. Prior thereto, Mr. Aaronson was
Senior Vice President and Chief Financial Officer of Home, Ltd., a home
furnishings retail venture, from January 1990 to October 1993 and Vice President
and Chief Financial Officer of Mothercare Stores, Inc., a retail specialty store
chain, from October 1984 to January 1990.
JUDITH LOMBARDO, who joined the Company in 1966, has been a Senior Vice
President of the Company since August 1986 and a Director since April 1991. Ms.
Lombardo was a Vice President from 1982 to 1986, and prior to 1982, she served
the Company in various capacities in merchandising, advertising and store
operations.
FRED J. DAMIANO has been a Director of the Company since April 1991 and an
Executive Vice President of Haband Company, Inc., a direct marketer of clothing,
since 1981. Mr. Damiano has been President of Fashion Outlets, Inc., a retail
clothing operation, since October 1990.
3
<PAGE>
TERRY SMITH, who joined the Company in March 1993, has been the Vice
President of Distribution since January 1995. From March 1993 to January 1995,
Mr. Smith was the Vice President of Management Information Systems, Internal
Audit and Loss Prevention. Mr. Smith was formerly with Roses Stores, a discount
department store chain, as Corporate Audit Manager specializing in data
processing operations and system development for 6 years.
DORIS BERENZWEIG, who is a co-founder of the Company, has been the Secretary
of the Company since its inception and was a Director from that time until April
1991.
LEONARD M. SETTANNI, who joined the Company in January 1995 as Vice
President of Management Information Systems, was formerly Vice President of
Management Information Systems of Mothercare Stores, a maternity and children's
specialty store retail chain, from July 1988 to April 1994.
Stanley Berenzweig and Doris Berenzweig are husband and wife. Evan
Berenzweig is their son.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on material provided to the Company, all forms and reports with
respect to directors and executive officers of the Company were timely filed
with the Securities and Exchange Commission.
DIRECTORS' MEETINGS
The Board of Directors met four times during fiscal year 1996. Each Director
attended more than 75% of the combined number of meetings of both the Board of
Directors and of any committees of the Board on which the Director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established compensation, audit and option
committees. The Compensation Committee consists of Fred J. Damiano, Alan C.
Mintz and Stanley Berenzweig, the Audit Committee consists of Fred J. Damiano
and Alan C. Mintz and the Option Committee consists of Stanley Berenzweig and
Fred J. Damiano. The foregoing committees met zero, one and one times,
respectively, in fiscal 1996.
The Audit Committee reviews and examines detailed reports of the Company's
independent public accountants; consults with the independent public accountants
regarding internal accounting controls, audit results and financial reporting
procedures; recommends the engagement and continuation of engagement of the
Company's independent public accountants; and meets with, and reviews and
considers recommendations of, the independent public accountants.
The Compensation Committee reviews the performance of senior management and
key employees whose compensation is the subject of review and approval by the
Committee; periodically reviews and recommends to the Board of Directors
compensation arrangements for senior management and key employees; and
periodically reviews the main elements of and administers the Company's
compensation and benefit programs, other than the 1991 Stock Option Plan.
The Option Committee administers the 1991 Stock Option Plan and, to the
extent provided by such Plan, determines the persons to whom options are
granted, the exercise price, term and number of shares covered by each option
and the type of option to be granted. In addition, the Option Committee
exercises all discretionary power regarding the Plan's operation.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or accrued
by the Company for services in all capacities for the Chief Executive Officer
and all executive officers of the Company who were serving as such at the end of
fiscal 1996 (the year ended August 31, 1996) whose aggregate compensation
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION OPTION
NAME AND ---------------------------- AWARDS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#)
- -------------------------------------------------------------------- --------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Stanley Berenzweig.................................................. 1996 164,567 0 0
Chief Executive Officer 1995 175,000 0 0
1994 178,365 0 0
Michael Aaronson (1)................................................ 1996 150,461 0 0
President 1995 122,077 0 50,000
Steven Barnett,..................................................... 1996 136,356 0 0
Senior Vice President and 1995 145,000 0 0
Chief Financial Officer 1994 147,788 0 0
Judith Lombardo,.................................................... 1996 136,356 0 0
Senior Vice President 1995 145,000 0 0
1994 147,788 0 0
Leonard Settanni (1)................................................ 1996 100,000 0 0
Vice President 1995 65,385 0 10,000
</TABLE>
- ------------------------
(1) Mr. Aaronson and Mr. Settanni joined the Company during fiscal 1995.
The table set forth below shows the value of unexercised options held by the
individuals listed in the Summary Compensation Table during fiscal 1996. No
options were granted or exercised during fiscal 1996.
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS 8/31/96 OPTIONS 8/31/96($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stanley Berenzweig........................................ 0 0 N/A N/A
Michael Aaronson.......................................... 0 50,000 0 0
Steven Barnett............................................ 15,000 0 0 0
Judith Lombardo........................................... 15,000 0 0 0
Leonard Settanni.......................................... 0 10,000 0 0
</TABLE>
- ------------------------
(1) The closing price of the Common Stock on August 29, 1996 was $2.25.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Messrs. Berenzweig, Damiano and Mintz were members of the Compensation
Committee in fiscal 1996. Mr. Berenzweig is the Chief Executive Officer of the
Company. Since 1964, the Company has leased
5
<PAGE>
its principal offices and its Hawthorne, New Jersey store from Momar Realty
L.L.C. ("Momar"), the two members of which are Stanley Berenzweig and Doris
Berenzweig. The offices and store are located in a strip shopping center owned
by Momar. The initial term of the current ten-year lease commenced on March 1,
1991 and provides for payment of an aggregate of $233,575 of basic rent for each
of the second five years of the lease together with a proportionate share of the
costs of maintaining common areas, insurance, real estate taxes, and other
operating costs associated with the strip shopping center. The Company has four
options to renew this lease, each for additional terms of five years. The basic
rent for each term will be increased by the greater of 15% of the basic rent
paid for the previous five-year term or one-half of the percentage increase in
the Consumer Price Index. During fiscal 1996, the Company paid Momar an
aggregate of $288,897 of rent for these facilities. The Company believes that
the terms of this lease are no less favorable to the Company than would be the
terms obtained from an unaffiliated third party.
In addition the Company, from time to time, receives tax, accounting and
other financial consulting services from Mintz Rosenfeld & Company, Certified
Public Accountants ("Mintz Rosenfeld"). Mr. Mintz is a partner of Mintz
Rosenfeld. During fiscal 1996, Mintz Rosenfeld received $56,373 for services
rendered to the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally are
made by the Compensation Committee of the Board. The Compensation Committee is
not responsible for the administration or determination of grants to be made
under the Company's 1991 Stock Option Plan. Decisions on awards under this Plan
are made solely by the Option Committee. Pursuant to rules of the Securities and
Exchange Commission designed to enhance disclosure of companies' polices toward
executive compensation, there is set forth below a report submitted by Messrs.
Berenzweig, Mintz and Damiano, in their capacities as the members of the Board's
Compensation Committee, and Messrs. Berenzweig and Damiano, in their capacities
as the members of the Board's Option Committee, addressing the Company's
compensation policies for fiscal 1996 as they affected the Company's executive
officers generally (including the executive officers set forth in the Summary
Compensation Table above), and as they affected Mr. Berenzweig in his capacity
as Chief Executive Officer of the Company.
BACKGROUND
In June 1991, the Company consummated its initial public offering ("IPO").
In contemplation of the IPO, the Company's executive compensation levels, plans
and policies that have been followed subsequent to the IPO were established. As
part of this process, initial salaries were established and the 1991 Stock
Option Plan was adopted. The annual salaries of the individuals listed in the
Summary Compensation Table have not been increased since the IPO or their date
of employment, if later. In addition, Stanley Berenzweig, Michael Aaronson,
Steven Barnett and Judith Lombardo elected to (1) temporarily reduce their
salaries by 10% effective January 28, 1996, as did two other officers of the
Company, and (2) forego bonuses in fiscal 1994, fiscal 1995 and fiscal 1996 in
light of the Company's financial performance.
COMPONENTS OF EXECUTIVE COMPENSATION
The primary components of the compensation of the Company's executive
officers for fiscal 1996 consisted of salary and stock option grants. Bonuses
were also potentially available.
The salaries of Messrs. Berenzweig, Aaronson, Settanni and Barnett and Ms.
Lombardo were set by the Compensation Committee and approved by the Board of
Directors.
The stock options granted under the Plan were granted by the Option
Committee. The size of the grants to executive officers were determined
generally by the Option Committee in accordance with the policy described below.
6
<PAGE>
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Company's compensation policy toward executive officers is to base
compensation on the perceived value of each executive officer considering such
factors, which tend to be subjective, as the officer's ability to contribute to
the Company's growth, efficiency and performance and the level of responsibility
given to the officer.
RELATIONSHIP OF CORPORATE PERFORMANCE TO EXECUTIVE COMPENSATION
Mr. Aaronson's salary and stock option grants were set by the Compensation
Committee and the Option Committee and approved by the Board of Directors. Since
Mr. Aaronson joined the Company in fiscal 1995, his compensation was based on
his perceived ability to improve the Company's performance.
Any portion of compensation represented by stock options is directly related
to future corporate performance. Stock option grants tie that portion of
executive compensation attributable to the stock options to stock performance,
since the options will only have value if and to the extent the market price of
the Company's stock increases over the exercise price of the options. The
Company's policy with respect to stock options is to use stock option grants to
retain executives and motivate them to improve the Company's overall performance
with the expectation that the value of the Company's Common Stock will
thereafter increase. In determining the size of grants, the Option Committee
considers various factors, including the relative position of the grantee and
the grantee's perceived ability to influence the Company's performance, which
tend to be subjective determinations.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Berenzweig's initial salary and bonus were specified in his employment
agreement which was entered into in connection with the IPO and has since
expired. This initial compensation package was designed to be competitive with
compensation packages offered to other chief executive officers of leading
specialty retailers and recognized the compensation arrangement that had been in
place prior to the IPO. Mr. Berenzweig's salary has remained the same since the
expiration of his employment agreement until January 28, 1996, and since then
was voluntarily and temporarily reduced by Mr. Berenzweig by ten percent.
Further, as noted above, no bonus has been received by Mr. Berenzweig since
fiscal 1993.
STANLEY BERENZWEIG FRED DAMIANO ALAN MINTZ
Members of the Compensation Committee
STANLEY BERENZWEIG FRED DAMIANO
Members of the Option Committee
7
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total annual stockholder
return on the Company's Common Stock during the past five fiscal years, based on
the market price of the Common Stock and assuming reinvestment of dividends,
with the cumulative total monthly return of the S&P 500 Index and the S&P Retail
Specialty Index. The graph is based on the assumption that $100 was invested on
August 31, 1991 in the Company's Common Stock, the S&P 500 Index and the S&P
Retail Specialty Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
S&P Retail -
Rag Shops, Inc. S&P 500 Specialty
Aug-91 100.00 100.00 100.00
Aug-92 111.43 107.92 106.01
Aug-93 74.29 124.34 99.69
Aug-94 32.86 131.14 97.77
Aug-95 34.29 159.27 71.97
Aug-96 25.71 189.10 88.18
</TABLE>
INDEXED RETURNS
YEARS ENDING
<TABLE>
<CAPTION>
BASE
COMPANY/INDEX AUG 91 AUG 92 AUG 93 AUG 94 AUG 95 AUG 96
- -------------------------------------------------------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
RAG SHOPS, INC.......................................... 100 111.43 74.29 32.86 34.29 25.71
S&P 500 COMPOSITE....................................... 100 107.92 124.34 131.14 159.27 189.10
S&P RETAIL-SPECIALTY.................................... 100 106.01 99.69 97.77 71.97 88.18
</TABLE>
8
<PAGE>
DIRECTOR FEES
Directors who are employees of the Company receive no additional
compensation for services as a director. Directors not so employed receive an
annual retainer of $5,000 and fees of $1,250 for each Board meeting attended,
with no additional compensation for committee meetings attended.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has served as the Company's independent public
accountants since 1990. The Board of Directors has selected Deloitte & Touche
LLP to serve as the independent public accountants of the Company for the fiscal
year ending August 30, 1997. This selection will be submitted for ratification
at the Annual Meeting. Representatives of Deloitte & Touche LLP are expected to
attend the Annual Meeting. They will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
ANNUAL REPORT
The Annual Report to Stockholders (including financial statements) for the
fiscal year ended August 31, 1996 is mailed herewith to all stockholders. COPIES
OF THE COMPANY'S FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY BE OBTAINED, WITHOUT CHARGE, BY WRITTEN REQUEST TO STEVEN B. BARNETT, CHIEF
FINANCIAL OFFICER.
OTHER MATTERS
Management is not aware of any matters to come before the meeting which will
require the vote of stockholders other than those matters indicated in the
Notice of Meeting and this Proxy Statement. However, if any other matter calling
for stockholder action should properly come before the meeting or any
adjournments thereof, those persons named as proxies in the enclosed proxy form
will vote thereon according to their best judgment.
ADVANCE NOTICE FOR DIRECTOR NOMINATIONS
The Company's Certificate of Incorporation provides that in order for a
stockholder to nominate a candidate for election as a director at an annual
meeting of stockholders or to propose business for consideration at such
meeting, notice must be delivered to the Secretary of the Company not less than
60 days nor more than 90 days prior to the annual meeting. Based on the
scheduled meeting date for this year's annual meeting, in order for a
stockholder to propose director nominations at the 1998 Annual Meeting, the
stockholder must deliver notice to the Secretary between October 25 and November
24, 1997. Any stockholder desiring a copy of the Company's Certificate of
Incorporation will be furnished one without charge upon written request to the
Secretary.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals (other than those regarding director nominations as
described above) for the 1998 Annual Meeting must be received in writing by the
Company on or before September 25, 1997 in order to be considered for inclusion
in the Company's proxy material for such meeting.
By Order of the Board of Directors
Doris Berenzweig, Secretary
Hawthorne, New Jersey
December 20, 1996
9
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2.
Please sign exactly as name
appears below. When shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate name
by president or other authorized
officer. If a partnership or
limited liability company, please
sign in partnership or limited
liability company name by
authorized person.
Dated: _____________________, 199_
__________________________________
Signature
__________________________________
Signature if held jointly
<PAGE>
RAG SHOPS, INC.
111 WAGARAW ROAD
HAWTHORNE, NEW JERSEY 07506
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STANLEY BERENZWEIG and STEVEN BARNETT as
Proxies, each with power to appoint his substitute, and hereby authorizes either
of them to represent and to vote, as designated below, all the shares of the
Common Stock of Rag Shops, Inc. held of record by the undersigned on December
16, 1996 at the Annual Meeting of Rag Shops, Inc. Stockholders to be held on
January 23, 1997 or any adjournment thereof.
(1) Election of three Class III Directors.
NOMINEES: STEVEN B. BARNETT, EVAN BERENZWEIG, and ALAN C. MINTZ (Mark only
one of the following lines.)
/ / VOTE FOR all nominees listed above, except vote withheld as to the
following nominees (if any):
________________________________________________________________________
/ / VOTE WITHHELD from all nominees
(2) Selection of auditors.
To ratify the appointment of Deloitte & Touche LLP as the independent
auditors for the Company for the fiscal year ending August 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued and to be signed and dated on reverse side)
