<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:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
RYKA INC.
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(Name of Registrant as Specified In Its Charter)
RYKA INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
RYKA, INC.
555 S. HENDERSON ROAD SUITE B
KING OF PRUSSIA, PENNSYLVANIA 19406
May 22, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders of RYKA Inc. which will be held on Wednesday, June 19, 1996, at
10:00 A.M., at the executive offices of the Company, 555 South Henderson Road,
Suite B, King of Prussia, Pennsylvania 19406. The official notice of the meeting
together with a proxy statement and form of proxy are enclosed. Please give this
information your careful attention.
Shareholders of the Company are being asked to elect three members of the
Company's Board of Directors, to amend the Company's Certificate of
Incorporation, and to ratify and approve the Company's 1996 Equity Incentive
Plan. Whether or not you expect to attend the meeting in person, it is
important that your shares be voted at the meeting. I urge you to specify your
choices by marking the enclosed proxy and returning it promptly.
Your copy of the Company's 1995 Annual Report also is enclosed. We
appreciate your interest in the Company.
Sincerely,
MICHAEL G. RUBIN
Chairman and
Chief Executive Officer
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE AND SIGN YOUR PROXY
CARD AND PROMPTLY RETURN IT IN THE REPLY ENVELOPE PROVIDED (WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES). IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOUR OWN SHARES THAT ARE REGISTERED DIFFERENTLY, THEN PLEASE DATE,
SIGN AND RETURN ALL OF THEM. THANK YOU.
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<PAGE>
RYKA INC.
555 SOUTH HENDERSON ROAD SUITE B
KING OF PRUSSIA, PA 19406
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 19, 1996
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To Our Shareholders:
The 1996 Annual Meeting of Shareholders of RYKA Inc. (the "Company") will
be held at the executive offices of the Company, 555 South Henderson Road, Suite
B, King of Prussia, Pennsylvania 19406, on Wednesday, June 19, 1996, at 10:00
A.M.,for the following purposes as more fully described in the annexed Proxy
Statement:
1. To elect three members of the Board of Directors;
2. To amend Article 4 of the Company's Certificate of Incorporation
to provide that the number of shares of Common Stock which the Company has
authority to issue be increased from 70,000,000 to 90,000,000 shares;
3. To ratify and approve the adoption of the Ryka Inc. 1996 Equity
Incentive Plan; and
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed May 17, 1996 as the record date for the
determination of shareholders entitled to vote at the meeting. Only shareholders
of record at the close of business on that date will be entitled to notice of,
and to vote at, the meeting.
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting in person, you are urged to sign and date the
enclosed proxy and return it promptly in the envelope provided for that purpose.
By the Order of the Board of Directors
STEVEN A. WOLF
Secretary
May 22, 1996
<PAGE>
RYKA INC.
555 SOUTH HENDERSON ROAD
KING OF PRUSSIA, PA 19406
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PROXY STATEMENT
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This proxy statement, which together with the accompanying proxy card is
first being mailed to shareholders on or about May 22, 1996, is furnished to the
shareholders of the Company in connection with the solicitation of proxies by
the Board of Directors on behalf of the Company for use in voting at the 1996
Annual Meeting of Shareholders, including any adjournment or postponement
thereof.
Proxies in the form enclosed, if properly executed and received in time
for voting, and not revoked, will be voted as directed in accordance with the
instructions thereon. Any proxy not so directing to the contrary will be voted
"for" the Company's nominees as directors, "for" approval of the amendment to
the Company's Certificate of Incorporation, and "for" approval of the
ratification and approval of the 1996 Equity Incentive Plan. Sending in a signed
proxy will not affect a shareholder's right to attend the meeting and vote in
person since the proxy is revocable. Any shareholder giving a proxy may revoke
it at any time before it is voted at the meeting by delivering a later dated
proxy or by giving written notice to the Secretary of the Company.
At the close of business on May 17, 1996, the record date for the
determination of shareholders entitled to receive notice of and to vote at the
meeting, the Company's outstanding voting securities consisted of 46,615,326
shares of Common Stock. In order for a quorum to be present at the 1996 Annual
Meeting, a majority of the outstanding shares of the Company's Common Stock as
of the close of business on the record date must be present in person or
represented by proxy at the meeting. All such shares that are present in person
or represented by proxy at the meeting will be counted in determining whether a
quorum is present, no matter how the shares are voted or whether they abstain
from voting or are broker non-votes.
Holders of Common Stock are entitled to one vote per share. The election
of directors will be determined by a plurality vote, with the three nominees
receiving the most "for" votes being elected. Approval of the amendment to the
Company's Certificate of Incorporation requires that a majority of the Company's
outstanding shares of Common Stock vote "for" the proposal. Approval of the 1996
Equity Incentive Plan requires that a majority of the quorum vote "for" the
proposal. An abstention or broker non-vote on any proposal other than the
election of directors, therefore, will have the same legal effect as an
"against" vote, although some persons analyzing the voting results may interpret
these actions differently.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or facsimile by directors, officers or employees of the Company and
its subsidiaries without additional compensation. The Company will, on request,
reimburse shareholders of record who are brokers, dealers, banks or voting
trustees, or their nominees, for their reasonable expenses in sending proxy
materials and annual reports to the beneficial owners of the shares they hold of
record.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock as of April 24, 1996 by (i) by each person known
to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) each of the Company's directors, (iii) each of the named
executive officers, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE OF
BENEFICIAL OWNER /(1)/ BENEFICIALLY OWNED /(2)/ COMMON STOCK
--------------------------------------- ------------------------- ---------------
<S> <C> <C>
Michael G. Rubin...................... 20,311,444 /(3)/ 39.0%
Kenneth J. Adelberg................... 225,000 /(4)/ *
Sheri Poe............................. 2,351,411 /(5)/ 5.0%
Dennis F. DiDominicis................. 2,000 *
Steven A. Wolf........................ 100,000 /(6)/ *
All directors and executive officers
as a group (5 persons)............. 22,989,855 /(3)(7)/ 43.6%
</TABLE>
*less than 1.0%
(1) Except as otherwise shown, the address of each person listed above is in
care of the Company, 555 S. Henderson Road, Suite B, King of Prussia, PA
19406.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or member of a group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage
ownership of such individual or group, but are not deemed to be outstanding
for the purpose of computing the percentage ownership of any other person
shown in the table.
(3) Includes 14,750,000 shares of Common Stock and a warrant to purchase
5,100,000 shares of Common Stock held by MR Acquisitions, L.L.C., and
461,444 shares of Common Stock which are the vested shares issuable upon
exercise of a Contingent Common Stock Purchase Warrant held by MR
Acquisitions, L.L.C. to purchase 4,000,000 shares of Common Stock. Mr.
Rubin is the Manager of MR Acquisitions, L.L.C.
(4) Includes 25,000 shares of Common Stock issuable upon exercise of
outstanding options.
(5) Includes 395,000 shares of Common Stock issuable upon exercise of
outstanding options.
(6) Represents 100,000 shares of Common Stock issuable upon the exercise of
outstanding options.
(7) Includes 520,000 shares of Common Stock issuable upon exercise of
outstanding options.
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<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Three directors are to be elected at the 1996 Annual Meeting to serve for
one-year terms until the 1997 Annual Meeting and until their respective
successors are elected and qualified. All of the nominees currently are serving
as directors of the Company. The Company knows of no reason why any nominee
would be unable to serve as a director. Each nominee has consented to being
named in this proxy statement and to serve if elected. If any nominee should for
any reason become unable to serve, then all valid proxies will be voted for the
election of such substitute nominee as the Board of Directors may designate, or
the Board may reduce the number of directors to eliminate the vacancy.
The nominees for election as directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ----- ---------------------------------------------------
<S> <C> <C>
Michael G. Rubin /(1)(2)/..... 23 Chief Executive Officer and Chairman of the Board
Sheri Poe /(1)/............... 42 Founder, Spokesperson and Director
Kenneth J. Adelberg /(2)(3)/.. 43 Director
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
Michael G. Rubin has served as Chairman of the Board and Chief Executive
Officer of the Company since July 31, 1995. Since establishing KPR Sports
International, Inc., a privately-held footwear distribution company in 1991, Mr.
Rubin has served as its President and Director. In 1994, Mr. Rubin received the
1994 Entrepreneur of the Year Award for the Delaware Valley Region which is
sponsored by Inc. magazine and Ernst & Young. Mr. Rubin is the President of
several privately-held companies based in King of Prussia, Pennsylvania and
serves as the Manager of MR Acquisitions, L.L.C., a Delaware limited liability
company. Mr. Rubin attended Villanova University, Villanova, Pennsylvania.
Sheri Poe is a co-founder of the Company and serves as spokesperson for
the Company. Ms. Poe served as Chairman of the Board from April 1988 until July
31, 1995 and as an executive officer of the Company since its inception until
July 31, 1995, serving as President and Treasurer from the Company's inception
in February 1987 until February 1991 and as President and Chief Executive
Officer since February 1991. Ms. Poe also served as Treasurer of the Company
from April 1995 until July 31, 1995. Ms. Poe attended Southern Illinois
University.
Kenneth J. Adelberg has served as a Director of the Company since July
31, 1995. Since 1987, he has been President and Chief Executive Officer of HiFi
House Group of Companies, a privately-
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<PAGE>
held company based in Broomall, Pennsylvania. Mr. Adelberg is a director and
founding stockholder of US Wats, Inc., a publicly-traded company specializing in
business telecommunications services, located in Bala Cynwyd, Pennsylvania,
which was established in 1989. Mr. Adelberg is a founding stockholder and
director of Republic Bank, Philadelphia, Pennsylvania, a publicly-traded bank
which has been in operation since 1989. Mr. Adelberg holds Bachelor of Science
degrees in Biophysics and Physiological Psychology from Pennsylvania State
University and attended the MBA program at Drexel University, Philadelphia,
Pennsylvania.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
From January 1, 1995 until July 31, 1995, the Board of Directors
consisted of Susan E. Engel, Robert J. Fuhrman, Richard S. Humphrey, Jr. and
Sheri Poe. On July 31, 1995, Ms. Engel and Messrs. Fuhrman and Humphrey resigned
from the Board and the Committees of the Board on which they served, and Michael
G. Rubin and Kenneth J. Adelberg were elected to the Board. During 1995, the
Board of Directors held 13 meetings, the Audit Committee held no meetings, the
Compensation Committee held two meetings, and the Executive Committee held no
meetings. The Board of Directors does not have a standing Nomination Committee.
During 1995, each director attended at least 90% of the total number of meetings
of the Board of Directors and Committees on which he served.
The Audit Committee reviews the Company's accounting and financial
practices and policies and the scope and results of the Company's external and
internal audits. The Audit Committee also recommends to the Board of Directors
the selection of the Company's independent public accountants and administers
the Company's business conduct, conflict of interest and related policies. Mr.
Adelberg currently serves on the Audit Committee.
The Compensation Committee establishes the compensation policies for
executive officers of the Company and administers the Company's stock option
plans. Only directors who are "disinterested" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended, may serve on the
Compensation Committee. Messrs. Rubin and Adelberg currently serve on the
Compensation Committee.
The Executive Committee reviews certain aspects of transactions and
policies that have been generally approved by the Board of Directors. The
Executive Committee also is authorized to exercise the powers of the Board of
Directors during the intervals between Board meetings, except those powers that
are prohibited by law from being delegated. The Executive Committee currently
consists of Mr. Rubin and Ms. Poe.
DIRECTOR COMPENSATION
Each Director who is not an employee of the Company received an option to
purchase 25,000 shares of the Company's Common Stock upon joining the Board of
Directors and annual stock option grants to purchase 25,000 shares. The
Directors do not receive any cash compensation for their services on behalf of
the Company but are reimbursed for reasonable travel and lodging expenses
incurred in attending meetings of the Board of Directors and any Committee.
Those Directors who are employees of the Company do not receive any compensation
for their services as Directors.
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<PAGE>
PROPOSAL TWO
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY 20,000,000
Under the Company's Certificate of Incorporation, the Company currently
is authorized to issue up to 70,000,000 shares of Common Stock. As of May 17,
1996, after taking into account the transactions and proposed transactions
described below, the Company had issued, reserved for issuance or proposed to
reserve for issuance 71,287,206 shares of the Company's Common Stock. In March
1996, the Board of Directors approved an amendment to the Company's Certificate
of Incorporation that increases the maximum number of authorized shares by
20,000,000 to a total of 90,000,000 shares, subject to approval by the
shareholders of the Company. The purpose of the Amendment is to provide
sufficient shares for the transactions and proposed transactions described below
and for future financings, equity-based compensation plans, recapitalizations,
acquisitions and other corporate transactions. Once authorized, the additional
shares of Common Stock may be issued with approval of the Board of Directors but
without further approval of the shareholders unless shareholder approval is
required by applicable law, rule or regulation. Accordingly, this solicitation
may be the only opportunity for shareholders to approve such transactions.
At the November 15, 1995 meeting of shareholders, the Company's
shareholders approved an increase in the number of the Company's authorized
shares of common stock from 45,000,000 to 70,000,000. This increase was
necessary in order to (i) consummate the financing arrangements between the
Company and MR Acquisitions, L.L.C., a company that is indirectly, wholly-owned
by Michael Rubin, and related financings, (ii) effect settlements with certain
of the Company's creditiors, and (iii) provide sufficient shares for the
Company's 1995 Stock Option Plan and 1995 Non-Employee Directors Stock Option
Plan. Since November 15, 1995, the Company (i) adopted its "Partners Share
Success" Equity Incentive Plan providing for the issuance of up to 4,200,000
shares of common stock pursuant to stock awards granted to the retail sales and
management personnel of certain of the Company's customers, (ii) negotiated a
credit facility with a new Lender to replace its existing facility, which new
facility requires the Company to raise an additional $2,000,000 in equity as a
condition to obtaining such facility, and (iii) adopted the 1996 Equity
Incentive Plan (as further described below) providing for the issuance of up to
2,000,000 shares.
Shareholder approval of this proposal is required under Delaware law.
Approval of the amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of common stock by 20,000,000
requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock. If the shareholders do not approve the amendment, then
the number of authorized shares of the Company's Common Stock will remain at
70,000,000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL TWO.
PROPOSAL THREE
APPROVAL OF THE COMPANY'S 1996 EQUITY INCENTIVE PLAN
In March, 1996, the Board of Directors adopted the Company's 1996 Equity
Incentive Plan ("Incentive Plan"), subject to approval by the shareholders of
the Company. The primary reason for adopting the Incentive Plan is to ensure
that the Company will be able to continue providing equity based compensation to
its key employees.
PURPOSES. The purposes of the Incentive Plan are to promote the long-
term retention of the Company's key employees and certain other persons who are
in a position to make significant contributions to the success of the Company,
to further reward these employees and other persons for their contributions, to
provide additional incentive to these employees and other persons to continue
making similar contributions, and to further align the interests of these
employees and other persons with those of the Company's shareholders. To achieve
these purposes, the Incentive Plan permits grants of incentive stock options
("ISOs"), options not intended to qualify as ISOs ("nonqualified options"),
stock appreciation rights ("SARs"), restricted, unrestricted and deferred
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<PAGE>
stock awards, performance awards, loans and supplemental cash awards, and
combinations of the foregoing (all referred to as "Awards").
NUMBER OF SHARES. The Incentive Plan permits Awards to be granted for a
total of 2,000,000 shares of the Company's Common Stock, which may be treasury
shares, reacquired shares or newly-issued shares. Shares issuable under Awards
that terminate unexercised, shares issuable under Awards that are payable in
stock or cash but are paid in cash, and shares issued but later forfeited will
be available for future Awards under the Incentive Plan.
ELIGIBLE RECIPIENTS. All current and future employees of the Company,
and other persons who, in the opinion of the Compensation Committee are in a
position to make significant contributions to the success of the Company, such
as consultants and non-employee directors other than members of the Compensation
Committee itself, are eligible to receive Awards under the Incentive Plan.
ADMINISTRATION. The Incentive Plan is administered by the Compensation
Committee which determines, among other things and subject to certain
conditions, the persons eligible to receive Awards, the persons who actually
receive Awards, the type of each Award, the number of shares of Common Stock
subject to each Award, the date of grant, exercise schedule, vesting schedule
and other terms and conditions of each Award, whether to accelerate the exercise
or vesting schedule or waive any other term or conditions of each Award, whether
to amend or cancel an Award, and the form of any instrument used under the
Incentive Plan. The Compensation Committee has the right to adopt rules for the
administration of the Incentive Plan, settle all controversies regarding the
Incentive Plan and any Award, and construe and correct defects and omissions in
the Incentive Plan and any Award. The Incentive Plan may be amended, suspended
or terminated by the Board of Directors, subject to certain conditions, provided
that shareholder approval will be required whenever necessary for the Incentive
Plan to continue to satisfy the requirements of certain securities and tax laws,
rules and regulations.
STOCK OPTIONS. Recipients of stock options under the Incentive Plan
will have the right to purchase shares of the Company's Common Stock at an
exercise price, during a period of time and on such other terms and conditions
determined by the Compensation Committee. For ISOs, the recipient must be an
employee, the exercise price must be at least 100% (110% if issued to a 10%
shareholder) of fair market value on the date of grant, and the term cannot
exceed ten years (five years if issued to a 10% stockholder) from date of grant.
If permitted by the Compensation Committee and subject to certain conditions, an
option exercise price may be paid by delivery of shares of the Company's Common
Stock that have been outstanding for at least six months, or a promissory note,
or a broker's undertaking to promptly deliver the necessary funds, or by a
combination of those methods. If permitted by the Compensation Committee,
options (other than those granted in tandem with SARs) may be settled by the
Company paying to the recipient, in cash or shares of Common Stock (valued at
fair market value), an amount equal to the fair market value minus the exercise
price of the option shares.
SARS. SARs may be granted under the Incentive Plan either alone or in
tandem with stock options. Generally, recipients of SARs are entitled to
receive, upon exercise, cash or shares of Common Stock (valued at fair market
value) equal to the fair market value on the date of exercise minus the fair
market value on the date of grant of the shares subject to the SAR, although
certain
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<PAGE>
other measurements also may be used. A SAR granted in tandem with a stock
option is exercisable only if and to the extent that the option is exercised.
STOCK AWARDS. The Incentive Plan provides for restricted, unrestricted
and deferred stock awards. Stock awards allow the recipient to acquire shares of
the Company's Common Stock for their par value or any higher price determined by
the Compensation Committee. In the case of restricted stock awards, the shares
acquired are subject to a vesting schedule and other possible conditions
determined by the Compensation Committee. In the case of a deferred stock award,
the recipient is entitled to acquire shares in the future at such times and on
such conditions determined by the Compensation Committee.
PERFORMANCE AWARDS. The Incentive Plan provides for performance awards
entitling the recipient to receive stock options, stock awards or other types of
Awards conditional upon achieving performance goals determined by the
Compensation Committee. Performance goals may involve overall corporate
performance, operating group or business unit performance, personal performance
or any other category of performance determined by the Compensation Committee.
Financial performance may be measured by revenue, operating income, net income,
earnings per share, Common Stock price, price-earnings multiple, or other
financial factor determined by the Compensation Committee.
OTHER AWARDS. Under the Incentive Plan, loans or supplemental cash
awards may be granted to recipients of Awards to help defray taxes due as a
result of the Awards. The terms and conditions of loans and supplemental cash
awards, including the interest rate which may be zero, and whether any loan will
be forgiven, are determined by the Board of Directors.
TERMINATION OF EMPLOYMENT. Generally, upon termination of a recipient's
employment or relationship with the Company, stock options and SARs remain
exercisable for a period of three months (one year if termination is due to
death or disability) to the extent that they were exercisable at the time of
termination, and unvested shares under outstanding restricted stock awards vest
immediately except in the case of a voluntary resignation or termination for
cause (as defined in the Incentive Plan). Stock options, SARs and other Awards
that are not exercisable at the time of termination automatically terminate, and
payments or benefits under deferred stock awards, performance awards and
supplemental cash awards that are not irrevocably due at the time of termination
are forfeited.
CHANGE IN CONTROL. Upon a change in control of the Company (as defined
in the Incentive Plan), all outstanding options and SARs become fully
exercisable, all unvested shares under outstanding restricted stock awards vest,
and all conditions on deferred stock awards, performance awards and supplemental
cash awards that relate only to the passage of time and continued employment
lapse, in all cases effective six months after the change in control or upon an
earlier involuntary termination of employment without cause. The pre-change in
control Board of Directors of the Company may elect, however, to suspend
operation of some or all of the change in control acceleration provisions.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES. This discussion, which is
based upon federal income tax as currently in effect, summarizes certain federal
income tax consequences associated with the Incentive Plan. The tax
consequences to executive officers, directors, and to
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<PAGE>
others subject to Section 16 of the Securities Exchange Act of 1934, as amended,
may be different from those summarized below.
No taxable income is realized upon the grant of a stock option or SAR,
nor upon the exercise of an ISO except to the extent that the exercise may
result in alternative minimum tax liability. Upon the exercise of a
nonqualified option, the recipient realizes ordinary income equal to the fair
market value on the date of exercise minus the exercise price of the option
shares. Upon the exercise of a SAR, the recipient realizes ordinary income
equal to the amount of cash and fair market value of any shares of Common Stock
received. If restricted or deferred shares of Common Stock are used to settle a
stock option or SAR, however, then the realization of income may be deferred.
Upon a disposition of shares acquired by exercise of a stock option or SAR, the
gain or loss generally constitutes a capital gain or loss. In the case of a
disposition of ISO shares within one year after the date of exercise or within
two years after the date of grant, the difference between the fair market value
on the date of exercise and the exercise price constitutes ordinary income, and
any additional gain above the fair market value on the date of exercise
constitutes a capital gain.
Upon the grant of an unrestricted stock award, the recipient realizes
ordinary income equal to the fair market value on the date of grant minus the
price paid for the shares awarded. A recipient of a restricted stock award
realizes ordinary income only as and when the shares vest, and a recipient of a
deferred stock award realizes ordinary income only when the shares are actually
transferred. The ordinary income realized on each vesting or transfer date
equals the fair market value on that date less the price paid for the shares. A
recipient of a restricted stock award may, however, choose or be required by the
terms of the award to elect under Section 83(b) of the Internal Revenue Code to
have the ordinary income associated with all of the restricted shares realized
and measured on the date of grant. The recipient who makes such an election and
later forfeits restricted shares may not claim a loss for tax purposes.
The tax consequences of a performance award depend upon the nature of
the underlying Award earned if and when the performance goals are achieved.
Generally, loans made under the Incentive Plan do not result in taxable income
to the recipient. If the interest rate is lower than certain rates specified
under the Internal Revenue Code, however, then ordinary income may be imputed to
the recipient. Forgiveness of all or part of a loan also results in ordinary
income to the recipient. The recipient of a supplemental cash award realizes
ordinary income equal to the amount received.
Generally, whenever a recipient realizes ordinary income, a corresponding
deduction is available to the Company. Under the Revenue Reconciliation Act of
1993, however, the Company will be denied a deduction for certain compensation
exceeding $1,000,000 paid to its chief executive officer and four other highest
paid executive officers, excluding (among other things) certain performance
based compensation.
SHAREHOLDER APPROVAL. There are two reasons for seeking shareholder
approval of the Incentive Plan. The first reason is to satisfy federal income
tax law requirements relating to ISOs and requirements relating to performance
based compensation, both of which include shareholder approval. The second
reason is to satisfy the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, which include shareholder approval. If the
Rule 16b-3 requirements are satisfied, then neither the grant of stock options,
SARs or stock awards under the Incentive Plan, nor the transfer of shares to pay
an option exercise price under the Incentive Plan
-8-
<PAGE>
(subject to certain conditions) will trigger the provisions of Section 16(b) of
the Exchange Act regarding "short-swing" profits. If the stockholders do not
approve the Incentive Plan, then the Incentive Plan will not become effective.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL THREE.
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<PAGE>
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
REPORT OF THE BOARD OF DIRECTORS
In November 1995, the Board of Directors of the Company re-established
a Compensation Committee. The Committee currently consists of Messrs. Rubin and
Adelberg. For 1995, the Board of Directors reviewed the compensation of
executive officers, made decisions regarding executive compensation and
administered the Company's employee stock option plans.
The Company's compensation policies for executive officers are to (i)
provide compensation packages, so as to attract, motivate and retain executives,
(ii) link a significant portion of compensation to financial results, so as to
reward successful performance, and (iii) provide long-term equity based
compensation, so as to further align the interests of executives with those of
the shareholders and further reward success and performance. The principal
components of the Company's executive compensation are base salary, incentive
compensation and stock options.
In determining compensation levels, the Company considers compensation
packages offered by similar sized companies within the athletic footwear
industry. Compensation levels for individual executive officers may be more or
less than those offered by such other companies, depending on a subjective
assessment of individual factors, such as the executive's position, skills,
achievements, tenure with the Company and historical compensation levels.
The Company has employment agreements with Dennis F. DiDominicis as
President, Steven A. Wolf as Chief Financial Officer and Sheri Poe as Founder
and Spokesperson. Mr. DiDominicis' agreement, which was effective as of
September 25, 1995, has an initial term of five years, subject to automatic
annual extensions. Mr. Wolf's and Ms. Poe's agreements, which were effective as
of August 1, 1995, have initial terms of three years, subject to automatic
annual extensions. Pursuant to the agreements, total compensation is divided
into three primary components: base salary, bonus and stock options. The award
of bonuses and stock options serve as incentives for superior performance and
are based upon both the performance of the executives and the Company.
Compensation of the named executive officers for fiscal 1995 was determined in
accordance with the employment agreements as described herein.
The Company does not have an employment agreement with Michael G. Rubin
who joined the Company on July 31, 1995 and who serves as the Company's Chief
Executive Officer and Chairman of the Board without compensation.
Under the stock option plans established by the Company, stock options
are periodically granted to employees at the discretion of the Board of
Directors or Compensation Committee. It is contemplated that executives of the
Company will be eligible to receive stock option grants, subject to individual
performance and the performance of the Company as a whole.
During 1995, the Company's President, Chief Financial Officer and
Spokesperson were granted a total of 1,200,000 options to purchase Common Stock
at exercise prices ranging from $.46875 to $.50 per share.
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<PAGE>
Section 162(m) of the Internal Revenue Code generally denies deduction
to any publicly held company such as the Company for certain compensation
exceeding $1,000,000 paid to the chief executive officer and the four other
highest paid executive officers, excluding among other things certain
performance-based compensation. The Company has been advised that stock options
granted before the adoption of Section 162(m) are not subject to the limit on
deductions and that its general stock option grants will qualify for the
performance based exclusion. The Company has not yet recommended any change to
the Company's executive compensation policies and plans as a result of Section
162(m), but the Compensation Committee will continue to evaluate the impact of
recently finalized tax regulations to ensure that the Company's executive
compensation plans most effectively serve the interests of the Company and its
shareholders.
Michael G. Rubin
Kenneth J. Adelberg
Sheri Poe
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid to the Chief Executive Officer of the Company, and to each of the three
other most highly compensated executive officers of the Company, for services
rendered in all capacities to the Company during 1995 (collectively, the "named
executive officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- --------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) OPTIONS #
------------------------------------------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C>
Michael G. Rubin /(1)/.................... 1995 -- -- --
Chief Executive Officer and Chairman of
the Board
Dennis F. DiDominicis /(2)/............... 1995 $45,688 $1,500 500,000
President
Steven A. Wolf /(3)/...................... 1995 $44,687 $1,500 200,000
Chief Financial Officer
Sheri Poe................................. 1995 $120,833 $1,000 500,000
Founder, Spokesperson
1994 $150,000 -- 370,000
1993 $150,000 -- 150,000
</TABLE>
_____________________
(1) Mr. Rubin joined the Company on July 31, 1995 and is serving as the
Company's Chief Executive Officer and Chairman of the Board without
compensation.
(2) Mr. DiDominicis joined the Company on September 25, 1995. His annual base
salary is $165,000.
(3) Mr. Wolf joined the Company on August 1, 1995. His annual base salary is
$97,500.
-11-
<PAGE>
EMPLOYMENT AGREEMENTS
Dennis F. DiDominicis. On September 25, 1995, the Company entered into
an employment agreement with Dennis F. DiDominicis, President of the Company,
for an initial term of five years, subject to automatic annual extensions.
Pursuant to the terms of Mr. DiDominicis' employment agreement, Mr. DiDominicis
is entitled to receive (i) an annual base salary of $165,000 which will be
increased $5,000 each year commencing in calendar year 1997, (ii) an annual
bonus based on Mr. DiDominicis' achievement of specified performance goals as
determined by the Company's Board of Directors, and (iii) other benefits similar
to those provided to the Company's other officers. Pursuant to the employment
agreement, Mr. DiDominicis is also entitled to receive a car allowance of $6,000
per year and has been granted a five-year option to purchase 500,000 shares of
the Company's Common Stock at an exercise price per share equal to the fair
market value of the underlying Common Stock on the date of the grant, of which
(i) 50,000 shares shall automatically vest on each of the first, second, third,
fourth and fifth yearly anniversaries of September 25, 1995, and (ii) 50,000
shares shall vest on each of the first, second, third, fourth and fifth yearly
anniversaries of December 31, 1995 based on the achievement by Mr. DiDominicis
of performance goals to be established by the Company's Board of Directors.
Mr. DiDominicis' employment agreement may be terminated by the Company
with or without cause which is defined to include, among other things, the
willful failure or refusal by Mr. DiDominicis to comply with explicit directions
of the Board of Directors or to render the services required by the employment
agreement, willful breach or habitual neglect in the performance of his duties,
conviction of a felony or fraud or embezzlement involving assets of the Company.
In the event of termination without cause by the Company, Mr. DiDominicis will
be entitled to receive a lump sum amount in cash equal to one-half of his then
current annual base salary less any amounts owed to the Company. In the event of
termination by the Company for any other reason, Mr. DiDominicis will be
entitled to receive any unpaid salary and benefits through the date of
termination. Under the employment agreement, Mr. DiDominicis is prohibited from
disclosing confidential information during and after the term of the agreement.
In addition, Mr. DiDominicis is prohibited from soliciting employees of the
Company or engaging or participating in any business which competes with the
Company while he is employed by the Company and for one year thereafter.
Steven A. Wolf. On August 1, 1995, the Company entered into an
employment agreement with Steven A. Wolf, Vice President of Finance and Chief
Financial Officer of the Company, for an initial term of three years, subject to
automatic annual extensions. Pursuant to the terms of Mr. Wolf's employment
agreement, Mr. Wolf is entitled to receive (i) an annual base salary of $97,500,
subject to annual adjustments determined by the Company's Board of Directors,
(ii) incentive compensation up to 35% of his base salary based on sales and/or
profit projections for the Company and based on his performance as determined by
the Board of Directors, and (iii) other benefits similar to those provided to
the Company's other officers. Pursuant to the employment agreement, Mr. Wolf has
been granted a five-year option to purchase 200,000 shares of the Company's
Common Stock at an exercise price per share equal to the fair market value of
the underlying Common Stock on the date of the grant, of which 50,000 shares
shall vest on the date of grant and 50,000 shares on each of the first, second,
and third yearly anniversaries of August 1, 1995.
Mr. Wolf's employment agreement may be terminated by the Company with or
without cause which is defined identically to Mr. DiDominicis' employment
agreement described above. In the
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<PAGE>
event of termination without cause by the Company, Mr. Wolf will be entitled to
receive a lump sum amount in cash equal to five-twelfths of his then current
annual base salary less any amounts owed to the Company and to have any unvested
stock options accelerate and become fully exercisable. In the event of
termination by the Company for any other reason, Mr. Wolf will be entitled to
receive any unpaid salary and benefits through the date of termination. Under
the employment agreement, Mr. Wolf is prohibited from disclosing confidential
information during and after the term of the agreement. In addition, Mr. Wolf
is prohibited from soliciting employees of the Company or engaging or
participating in the technical women's athletic footwear business while he is
employed by the Company and for one year thereafter.
Sheri Poe. On August 1, 1995, the Company entered into a new employment
agreement with Sheri Poe, the Founder and Spokesperson of the Company, for an
initial term of three years, subject to automatic annual extensions. Pursuant
to the terms of Ms. Poe's employment agreement, Ms. Poe is entitled to receive
an annual base salary of $100,000, subject to adjustment as set forth below:
<TABLE>
<CAPTION>
BASE SALARY AGREEMENT TIME PERIOD
-------------------- ---------------------------
<S> <C>
$100,000 1 through 6 months
$120,000 7 through 18 months
$127,500 19 through 30 months
$135,000/(1)/ 31 through 36 months
</TABLE>
___________________
(1) Subject to increase by $10,000 if the Company's pre-tax net income is
determined to be $500,000 or more, after all bonuses and accruals for the
year ending December 31, 1997.
For each fiscal year commencing with the year ending on December 31,
1995, Ms. Poe is entitled to receive a cash bonus equal to one and one-half (1
1/2%) percent of the Company's pre-tax income after all bonuses required to be
paid by the Company pursuant to written agreements and related accruals. In
addition, for the year ending December 31, 1997, if the Company's pre-tax income
after all bonuses required to be paid by the Company pursuant to written
agreements and related accruals is determined to for $500,000 or more, Ms. Poe
is entitled to receive an additional cash bonus of $10,000. Ms. Poe is also
entitled to receive benefits similar to those provided to the Company's other
officers. The Company maintains for its benefit a $4 million term insurance
policy on the life of Ms. Poe.
Ms. Poe's employment agreement may be terminated by the Company with or
without cause which is defined identically to Mr. DiDominicis' employment
agreement described above. In the event Ms. Poe's employment is terminated
without cause, the Company will be obligated to pay Ms. Poe as severance pay (i)
a lump sum equal to one-half of her current base salary and the Company will
release certain restrictions imposed on Ms. Poe relating to the sale of Common
Stock of the Company owned by her, or (ii) a lump sum amount equal to 75% of her
current base salary, plus 50% of her base salary for the balance of the
agreement term, in which case Ms. Poe will continue
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<PAGE>
to be bound by certain restrictions relating to the sale of Common Stock of the
Company owned by her. The employment agreement may also be terminated by Ms.
Poe for good reason, which includes, among other things, a significant change of
her duties, the termination of her membership on the Executive Committee of the
Board of Directors, a reduction in her annual base salary or upon a change of
control of the Company.
As part of her new employment agreement, the option to purchase 250,000
shares which was granted to Ms. Poe on June 1, 1994 was modified and a new stock
option to purchase 500,000 was granted to her. The new option vests over a
four-year period, and 200,000 of the shares subject to the new option are
subject to the achievement of certain milestones. Under the employment
agreement, Ms. Poe is prohibited from disclosing confidential information during
and after the term of the agreement. In addition, Ms. Poe is prohibited from
soliciting employees of the Company or engaging or participating in any business
which competes with the Company while she is employed by the Company and for one
year thereafter.
OPTION GRANTS
The following table sets forth certain information concerning options
granted during 1995 to the executive officers named in the Summary Compensation
Table. The following table also sets forth the potential realizable value over
the term of the options (the period from the grant date to the expiration date),
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These amounts do not represent the Company's estimate of future stock price.
Actual realizable values, if any, of stock options will depend on the future
performance of the Common Stock.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
----------------------------------------------------------------- ---------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED # FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------- ------------- ------------------ ------------ -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Rubin....... -- -- -- -- -- --
Dennis F. DiDominicis.. 500,000 38.91% $0.50 09/18/00 $69,070 $152,628
Steven A. Wolf......... 200,000 15.56% $0.46875 07/31/00 $25,901 $57,235
Sheri Poe.............. 500,000 38.91% $0.46875 07/31/00 $64,753 $143,088
</TABLE>
_______________________
(1) Represents the difference between the market value of the Common Stock
for which the option may be exercised, assuming that the market value of
the Common Stock appreciates in value from the date of grant to the end
of the option term at annualized rates of 5% and 10%, respectively, and
the exercise price of the option.
-14-
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
No options were exercised in 1995 by any of the executive officers named
in the Summary Compensation Table above. The following table sets forth, for
each of such executive officers, the number and value of options held at
December 31, 1995.
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995 (1)
------------------------------ ------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ---------------- ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Rubin....... -- -- -- -- -- --
Dennis F. DiDominicis.. -- -- -- 500,000 -- --
Steven A. Wolf......... -- -- 50,000 150,000 -- --
Sheri Poe.............. -- -- 395,000 625,000 -- --
</TABLE>
_________________________________
(1) Calculated by determining the difference between the deemed fair value of
the securities underlying the options on December 31, 1995 and the exercise
price. Since there was no difference between the deemed fair value and the
exercise price on December 31, 1995, the value of unexercised options were
not in-the-money.
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company relocated to King of Prussia, Pennsylvania in August 1995
where it maintains its executive offices in a 5,000 square foot portion of a
75,000 square foot facility subleased from KPR Sports International, Inc.
("KPR"), an affiliate of MR Acquisitions, L.L.C. ("MR Acquisitions"), a company
wholly-owned indirectly by Michael G. Rubin, the Company's Chairman and Chief
Executive Officer. Under this sublease, the Company has the right to use
warehouse space at this facility. Pursuant to the sublease, charges are
approximately $4,000 per month for use of these facilities and certain
warehousing services, and the remaining term of the sublease is one and one-half
years. Any other costs related to the use of the joint facility or for other
services provided by MR Acquisitions or its affiliates will be charged to the
Company on an arm's-length basis and will be subject to approval by a special
committee of the Board of Directors comprised of disinterested directors.
On July 31, 1995, the Company borrowed the sum of $851,440 from KPR in
the form of a secured subordinated loan with interest at the prime rate plus one
percent and repayment terms coincident with the revolving credit facility with
the Company's principal lender. For 1995, the Company paid $34,555 in interest
to KPR. Under the Company's existing revolving credit facility, MR Acquisitions
is responsible for
-15-
<PAGE>
making future subordinated loans or capital infusions or causing them to occur,
in amounts substantially equal to any losses incurred by the Company subsequent
to July 31, 1995, so that the Company's capital funds (as described in the loan
documents) are maintained at a minimum of $2,000,000.
MR Acquisitions, through KPR, has made available to the Company, a letter
of credit facility in the amount of $2,000,000. This facility is used by the
Company to finance the purchase of manufactured inventory through KPR on the
Company's behalf, at KPR's cost, from overseas vendors. Through this facility,
during 1995, the Company purchased inventory from KPR for $256,892.
During 1995, KPR advanced a total of $172,591 to the Company on a
temporary basis, all of which, except for $2,043, had been repaid as of
December 31, 1995. In September 1995, the Company sold footwear to KPR for
$85,254. These goods were prior season's merchandise which were sold at
negotiated terms on an arms-length basis. In July 1995, the Company sold certain
warehouse equipment to KPR for approximately $15,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE TRANSACTIONS
From January 1, 1995 until July 31, 1995, the Compensation Committee
consisted of Susan E. Engel and Richard S. Humphrey, Jr., both of whom resigned
from the Committee on July 31, 1995. Neither Ms. Engel nor Mr. Humphrey was an
officer or employee or a former officer or employee of the Company. Although the
Compensation Committee was re-established in November 1995, and currently
consists of Michael G. Rubin and Kenneth J. Adelberg, from July 31, 1995 through
December 31, 1995, the Board of Directors determined executive officer
compensation. Both Michael G. Rubin and Sheri Poe are officers and/or employees
of the Company, but Mr. Rubin receives no compensation.
During 1995, the Company had no compensation committee "interlocks" --
meaning that it was not the case that an executive officer of the Company served
as a director or member of the compensation committee of another entity and an
executive officer of the other entity served as a director or member of the
Compensation Committee or the Board of Directors of the Company.
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends, if any) to Ryka's shareholders during the
five-year period ended December 31, 1995, as well as an overall stock market
index (CRSP Index for NASDAQ Stock Market - U.S. Companies) and a
self-determined peer group consisting of companies that Management believes to
be in a similar business (Timberland Co., Wolverine World Wide Inc., Penobscot
Shoe Co., K-Swiss, Inc., Sam & Libby, Inc. and Hyde Athletic Industries, Inc.).
The data points used for the performance graph are listed in the table below.
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, PEER GROUP AND BROAD MARKET
PERFORMANCE GRAPH DATA POINTS
<TABLE>
<CAPTION>
- ----------------------------- FISCAL YEAR ENDING -------------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
RYKA INC 100 188.87 555.46 188.87 199.96 177.75
PEER GROUP 100 120.74 126.65 242.50 164.79 199.28
BROAD MARKET 100 128.38 129.64 155.50 163.26 211.77
</TABLE>
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
[PERFORMANCE GRAPH APPEARS HERE.]
-16-
<PAGE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The accounting firm of Margolis & Company P.C. has acted as the Company's
independent accountants for the fiscal year ended December 31, 1995 and has been
selected by the Board of Directors to serve as the Company's independent
accountants for 1996. The selection of the Company's independent accountants is
not being submitted to shareholders because there is no legal requirement to do
so. Margolis & Company P.C.'s services to the Company for 1995 included the
audit of the Company's annual consolidated financial statements, reviews of the
Company's federal income tax returns and consultation on other business matters.
Effective August 23, 1995, the Company notified the accounting firm of
Coopers & Lybrand L.L.P. that the Audit Committee of the Board of Directors had
voted to dismiss the firm as the Company's independent accountants for the
fiscal year ending December 31, 1995. Coopers & Lybrand L.L.P. had served as the
Company's independent public accountants for each of the fiscal years ended
December 31, 1993 and 1994. In connection with the audits of the Company's
financial statements for the years ended December 31, 1993 and December 31,
1994, the report for each of those years included a modification concerning the
Company's ability to continue as a going concern. In connection with the audits
of the Company's financial statements for the years ended December 31, 1993 and
December 31, 1994, there were no disagreements with Coopers & Lybrand L.L.P. on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures. Coopers & Lybrand L.L.P. did not
advise the Company that it questioned the fairness, accuracy, or reliability of
the Company's financial statements, management's representations, internal
controls or prior audits.
The Company filed a Current Report on Form 8-K dated August 23, 1995 on
August 28, 1995 as amended on October 13, 1995 reporting the change in the
Company's independent auditors from Coopers & Lybrand L.L.P. to Margolis &
Company P.C.
A representative of Margolis & Company P.C. is expected to be present at
the 1996 Annual Meeting, to have the opportunity to make a statement if he
desires to do so, and to be available to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by the Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its executive
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<PAGE>
officers, directors and greater than 10% beneficial owners were complied with,
except that Messrs. Adelberg, DiDominicis and Wolf and Ms. Poe each failed to
file a Form 5.
OTHER MATTERS
As of the date hereof, the Company knows of no other business that will
be presented for consideration at the Annual Meeting. However, the enclosed
proxy confers discretionary authority to vote with respect to any and all of the
following matters that may come before the meeting: (i) matters that the
Company's Board of Directors does not know, a reasonable time before proxy
solicitation, are to be presented for approval at the meeting; (ii) approval of
the minutes of a prior meeting of shareholders, if such approval does not
constitute ratification of the action at the meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this Proxy Statement
and the form of proxy pursuant to Rule 14a-8 under the Exchange Act, as amended;
and (v) matters incidental to the conduct of the meeting. If any such matters
come before the meeting, the proxy agents named in the accompanying proxy card
will vote in accordance with their judgment.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals intended to be presented at the 1997 Annual Meeting
must be submitted by January 22, 1997 to receive consideration for inclusion in
the Company's 1997 proxy materials.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO THE
REPORT, BY SENDING A WRITTEN REQUEST TO THE CORPORATE SECRETARY, AT 555 SOUTH
HENDERSON ROAD, SUITE B, KING OF PRUSSIA, PENNSYLVANIA 19406.
By Order of the Board of Directors
STEVEN A. WOLF
Secretary
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<PAGE>
RYKA, INC.
1996 Annual Meeting of Shareholders -- June 19, 1996
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED
BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Michael G. Rubin and
Kenneth J. Adelberg and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned, to appear at the Annual Meeting of Shareholders of
Ryka, Inc. to be held on the 19th day of June, 1996 and at any postponement or
adjournment thereof, and to vote all of the shares of Ryka, Inc. that the
undersigned is entitled to vote, with all the powers and authority the
undersigned would possess if personally present. The undersigned hereby directs
that this proxy be voted as follows:
1. ELECTION OF DIRECTORS
[_] FOR the election of Michael G. Rubin, Sheri Poe and Kenneth
J. Adelberg as directors for a term of one year.
To withhold authority to vote for all directors, please
check this box [_].
To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.
____________________________________________________________
2. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S 1996 EQUITY INCENTIVE PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
(Please date and sign on reverse side)
<PAGE>
This proxy, when properly executed, will be voted as directed. If no
directions to the contrary are indicated, the proxy agents intend to vote FOR
Items 1, 2 and 3.
A majority of the proxy agents present and acting in person or by their
substitutes (or if only one is present and acting, then that one) may exercise
all the powers conferred hereby. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS
TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
Receipt of the Company's 1995 Annual Report to Shareholders and the Notice of
the 1996 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
Date:______________________________, 1996
(Please date this Proxy)
__________________________________________
__________________________________________
(Signature(s))
It would be helpful if you signed your name exactly as it appears hereon,
indicating any official position or representative capacity. If shares are
registered in more than one name, all owners must sign.
Please date and sign this proxy and return it promptly in the enclosed
postage paid envelope.
