<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ............................]
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Tasty Baking Company
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Elizabeth H. Gemmill
-----------------------------------------------------------------------------
(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), or 14a-6(j)(2).
/ / $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:*
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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>
TASTY BAKING COMPANY
2801 HUNTING PARK AVENUE
PHILADELPHIA, PENNSYLVANIA 19129
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1996
------
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Tasty Baking Company (hereinafter
called the "Company") will be held at the Germantown Cricket Club, Manheim &
Morris Streets, Philadelphia, Pennsylvania, on Friday, April 26, 1996, at
11:00 A.M., for the following purposes:
(1) to elect three directors in Class 1 to hold office until the Annual
Meeting of Shareholders in 1999, and until their successors are elected
and qualified;
(2) to approve the selection of Coopers & Lybrand L.L.P. as independent
certified public accountants for the fiscal year ending December 28, 1996;
and
(3) to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on February 15, 1996,
will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ELIZABETH H. GEMMILL, Esq.
Vice President and Secretary
Philadelphia, Pennsylvania, March 20, 1996
- ---------------------------------------------------------------------------
SHAREHOLDERS ARE REQUESTED TO SIGN, MARK, DATE, AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ADDRESSED REPLY ENVELOPE WHICH IS FURNISHED FOR YOUR
CONVENIENCE. THIS ENVELOPE NEEDS NO POSTAGE IF MAILED WITHIN THE UNITED
STATES.
- ---------------------------------------------------------------------------
<PAGE>
TASTY BAKING COMPANY
2801 Hunting Park Avenue
Philadelphia, Pennsylvania 19129
215-221-8500
------------
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1996
------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Tasty Baking Company (hereinafter called
the "Company" or "Tasty") to be used in voting at the Annual Meeting of
Shareholders to be held on Friday, April 26, 1996 at 11:00 A.M., at the
Germantown Cricket Club, Manheim & Morris Streets, Philadelphia,
Pennsylvania, or at any adjournment or adjournments thereof. This Proxy
Statement, the Notice, the Proxy and the Company's 1995 Annual Report,
including Consolidated Balance Sheets as of December 30, 1995 and December
31, 1994 and Consolidated Statements of Operations and Retained Earnings,
Changes in Capital Accounts and Cash Flows for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994, have been mailed on
or before March 20, 1996 to each shareholder of record at the close of
business on February 15, 1996.
You are requested to sign, mark and complete the enclosed Proxy and return it
in the addressed reply envelope which is furnished for your convenience.
Proxies in the form enclosed, if duly signed, marked, and received in time
for voting, will be voted in accordance with the directions of the shareholders.
The persons designated as the proxies shall have the discretionary authority to
vote cumulatively for the election of Directors and to distribute such votes
among the nominees standing for election (except as otherwise instructed by a
shareholder in the accompanying Proxy) to assure the election of the nominees of
the Board of Directors. The giving of a Proxy does not preclude the right to
vote in person should the shareholder so desire. As provided by the laws of
Pennsylvania, a shareholder may revoke the Proxy by giving notice to the
Secretary of the Company in writing at the address of the principal executive
offices or in open meeting, but such revocation shall not affect any vote
previously taken.
The expense of soliciting Proxies for the Annual Meeting, including the cost
of preparing, assembling and mailing the Notice, Proxy and Proxy Statement, will
be paid by the Company. The solicitation will be made by the use of the mails
and through brokers and banking institutions and may also be made by officers
and regular employees of the Company. Proxies may be solicited by personal
interview, mail, telephone and possibly by facsimile transmission. At the Annual
Meeting, in accordance with past practice, shareholders will be requested to
approve the minutes of the 1995 Annual Meeting of Shareholders. The approval
requested will be for the minutes, and not the underlying actions taken by the
shareholders at that meeting.
As hereinafter used, and unless otherwise provided, the term "Executive
Officers" refers to the President and Chief Executive Officer, the Vice
President and Chief Financial Officer, the Vice President, Human Resources, the
Vice President, Sales and Marketing, and the Vice President, Manufacturing.
1
<PAGE>
VOTING SECURITIES
GENERAL
Each holder of record of the Company's Common Stock at the close of
business on February 15, 1996 is entitled to one vote per share on matters
that come before the meeting, except that cumulative voting rights may be
exercised with respect to the election of Directors as described in the
following paragraph.
CUMULATIVE VOTING
A shareholder wishing to exercise cumulative voting rights in the election
of Directors may multiply the number of shares which he or she is entitled to
vote by the total number of Directors to be elected (three) and may
distribute the total number of such votes among one or more nominees in such
proportion as he or she desires. The proxies shall have the discretionary
authority to vote cumulatively and to distribute such votes among the
nominees so as to assure the election of the nominees of the Board of
Directors, except such nominees as to whom a shareholder withholds authority
to vote and except where a shareholder has directed that votes be cast
cumulatively by specific instructions to the proxies.
At the close of business on February 15, 1996, there were outstanding
6,184,850 shares of the Company's Common Stock entitled to vote at the Annual
Meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of February 15, 1996, the shares of the
Company's Common Stock held by shareholders of the Company who were known by
the Company to own beneficially more than 5% of its outstanding Common Stock,
by the Directors and nominees, and by all Directors and Officers of the
Company as a group:
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership
Name and Address of ---------------------------------- Percent of
Beneficial Owner Direct Indirect Shares(1)
-------------------------------- ------------ ------------------- ------------
<S> <C> <C> <C>
Philip J. Baur, Jr. 89,048 208,513(2)(3)(5)(6) 5
2801 Hunting Park Avenue
Philadelphia, PA 19129
Marie B. Dillin -- 726,399(3)(4)(6)(7) 11
1408 S. Highland Park Drive
Lake Wales, FL 33853
Name of Director and/or
Nominee and Executive Officer
--------------------------------
Fred C. Aldridge, Jr. 38,337(9) -- *
Philip J. Baur, Jr. 89,048 208,513(2)(3)(5)(6) 5
G. Fred DiBona, Jr. -- -- *
James L. Everett, III 19,992(9) -- *
Nelson G. Harris 70,249(9) -- 1
John M. Pettine 50,667(8) -- *
Harold F. Still, Jr. 1,000 -- *
Judith M. von Seldeneck 1,000 -- *
Carl S. Watts 63,767(8) -- 1
William E. Mahoney 18,000(8) -- *
W. Dan Nagle 30,236(8) -- *
Paul M. Woite 5,052(8) -- *
All Directors and Executive
Officers as a Group (12
persons) 387,348(8) 208,513(2)(3)(5)(6) 9
</TABLE>
* Representing less than 1% of the outstanding stock.
2
<PAGE>
- ------
(1) Based on information furnished to the Company by the respective
shareholders, or contained in filings made with the Securities and
Exchange Commission. For purposes of this table, if a person has or
shares voting or investment power with respect to such shares, they are
considered beneficially owned by that person under rules of the
Securities and Exchange Commission. As a result, in some cases, the same
shares are listed opposite more than one name in the table. The table
also includes shares which are the subject of presently exercisable stock
options granted to certain officers and directors of the Company under
stock option plans of the Company. Such shares are deemed outstanding for
the purpose of computing the percentage ownership of such officers and
directors individually and in the aggregate. The total number of shares
held by shareholders of the Company who were known by the Company to own
beneficially more than 5% of the outstanding Common Stock, after
elimination of duplication, is 911,565 or 14% of the outstanding shares
of Common Stock.
(2) Includes (i) 12,217 shares in a trust of which Philip J. Baur, Jr. has
sole voting and investment power, (ii) 10,794 shares owned by the
Philippian Foundation, a charitable foundation of which Mr. Baur is
trustee and has sole voting and investment power and (iii) 10,787 shares
owned by Mr. Baur's spouse. Also includes 31,226 shares held in three
trusts of which Mr. Baur and CoreStates Bank N.A. are co-trustees and
share investment power. Mr. Baur has sole power to vote all shares held
in these three trusts.
(3) Includes 105,395 shares held in two trusts created by Emma M. Baur,
deceased, Philip J. Baur, Jr. and Marie B. Dillin are co-trustees and
share voting and investment power.
(4) A total of 444,004 shares are held in three trusts created under the will
of Philip J. Baur, deceased, of which First Fidelity Bank and Marie B.
Dillin are co-trustees and share investment power. Marie B. Dillin has
sole power to vote all the shares held in the three trusts.
(5) Includes 31,094 shares held in a trust created through distribution of
the Estate of Marguerite E. Baur, deceased. Philip J. Baur, Jr. and Edwin
R. Boynton are co-trustees for the trust. Mr. Baur has sole power to vote
all shares held in the trust.
(6) Includes 7,000 shares held in a trust created through distribution of the
Estate of Marguerite E. Baur, deceased. Marie B. Dillin and Steven P.
Crouse are co-trustees. Philip J. Baur, Jr. has sole power to vote all
shares held in the trusts and shares investment power with respect to
these shares with the co-trustees.
(7) Includes 170,000 shares held in a trust created by Marie B. Dillin, of
which Marie B. Dillin and Northern Trust Bank are co-trustees and share
voting and investment power.
(8) Includes presently exercisable options for 23,000, 50,000, 18,000, 23,750
and 3,000 shares for Messrs. Pettine, Watts, Mahoney, Nagle and Woite,
respectively, granted to them under the Company's 1985 Stock Option Plan,
1991 Long Term Incentive Plan and 1994 Long Term Incentive Plan.
(9) Includes presently exercisable replacement options for 16,037, 16,037,
and 26,366 shares granted to Mr. Aldridge, Mr. Everett and Mr. Harris
respectively under the Company's 1993 Replacement Option Plan (P&J
Spin-Off).
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
At the Annual Meeting, three persons will be elected to the Board of
Directors as Class 1 Directors to serve for three years and until the Annual
Meeting in 1999. The Company's Charter and By-Laws, as amended by the
Shareholders at the Special Meeting held on December 20, 1985 and as further
amended by the Shareholders at the Annual Meetings held on April 21, 1989,
April 29, 1992 and June 2, 1995, provide for three classes of directors with
staggered terms of three years each. At present, Class 2 Directors will hold
office until the Annual Meeting of Shareholders in 1997 and Class 3 directors
will hold office until the Annual Meeting of Shareholders in 1998 with the
members of each class to hold office until their successors are elected and
qualified.
Pursuant to the Retirement Policy of the Board of Directors, Harold F.
Still, Jr., who is a Class 1 Director will retire effective as of this Annual
Meeting of Shareholders. The Nominating Committee recommended that G. Fred
DiBona, Jr., be nominated for election as a Class 1 Director to fill the
resulting vacancy at the Annual Meeting to be held on April 26, 1996. The
Board of Directors unanimously approved the recommendation.
Listed below are the nominees for the Board of Directors, as well as the
remaining Directors and Executive Officers of the Company. Messrs. Aldridge
and Pettine are incumbent Directors. Any Proxy not specifically marked will
be voted by the named proxies for the election of the nominees named below,
except as otherwise instructed by the shareholders, provided that, as set
forth above, the proxies have discretionary authority to cumulate their
votes. It is not contemplated that any of the nominees will be unable or
unwilling to serve as a Director, but, if that should occur, the Board of
Directors reserves the right to nominate another person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES:
NOMINEES FOR DIRECTORS -- CLASS 1 (TERM EXPIRES AT ANNUAL MEETING IN 1999):
Fred C. Aldridge, Jr. (age 62) -- Mr. Aldridge was elected a Director in
April, 1981. He is a senior partner at the Philadelphia law firm of Stradley,
Ronon, Stevens & Young, counsel to the Company, President of The Grace S. and
W. Linton Nelson Foundation, a charitable foundation, and President of
Preston Drainage Company, a Pennsylvania public utility company. He is a
Director of PrimeSource Corporation.
G. Fred DiBona, Jr. (age 45) -- Mr. DiBona has been President and Chief
Executive Officer of Independence Blue Cross since 1990. He is also a director
of Philadelphia Suburban Corporation, Pennsylvania Savings Bank and Magellan
Health Services, Inc. and Chairman of the Blue Cross and Blue Shield
Association.
John M. Pettine (age 53) -- Mr. Pettine was elected a Director in April,
1992. Mr. Pettine was elected Vice President and Chief Financial Officer of the
Company in April 1991. He had served as Vice-President, Finance since December,
1983. He is a Director of PrimeSource Corporation.
DIRECTORS -- CLASS 2 (TERM EXPIRES AT ANNUAL MEETING IN 1997):
James L. Everett, III (age 69) -- On August 1, 1988, Mr. Everett retired
as Chairman of the Board and Chief Executive Officer of PECO Energy Company,
a position he had held since June, 1982. Mr. Everett is also a Director of
Lockheed Martin Corporation. He has served as a Director of the Company since
1970.
Nelson G. Harris (age 69) -- Mr. Harris was elected a Director of Tasty
Baking Company in April, 1979, President of the Company in September, 1979,
Chief Executive Officer in April, 1981 and Chairman and Chief Executive Officer
in February, 1991 in which capacity he served until his retirement on May 1,
1992. Mr. Harris presently serves as Chairman of the Executive Committee of the
Board of Directors. He is a Director of the CoreStates Financial Corp., American
Water Works Company, Inc. and PECO Energy Company.
Carl S. Watts (age 52) -- Mr. Watts was elected a Director in April, 1992.
Mr. Watts was elected President and Chief Executive Officer, effective May 1,
1992 and was elected President of the Company in February 1991. He joined the
Company in 1967 and has held a variety of positions in the Sales and Marketing
Department. He became Vice President of Sales and Marketing in September, 1985
and President of the Tastykake Division in November, 1989.
5
<PAGE>
DIRECTORS -- CLASS 3 (TERM EXPIRES AT ANNUAL MEETING IN 1998):
Philip J. Baur, Jr. (age 65) -- On December 31, 1987, Mr. Baur retired as
President of Tastykake, Inc. a position he had held for more than fourteen
years. Mr. Baur has been a Director of the Company since 1954 and Chairman of
the Board since 1981. He is a Director of PrimeSource Corporation,
Pennsylvania Manufacturers' Association and Pennsylvania Manufacturers'
Association Insurance Company. Mr. Baur may be deemed a "control person" of
the Company.
Judith M. Von Seldeneck (age 55) -- Mrs. von Seldeneck was elected a Director
in July, 1991. She is the Chief Executive Officer of Diversified Search
Companies, a general executive search firm. Mrs. von Seldeneck is also a
Director of Meridian Bancorp, Inc., Keystone Insurance Company and Triple A
MidAtlantic.
During the fiscal year ended December 30, 1995, seven scheduled meetings
of the Board of Directors were held. In addition, an aggregate of six
meetings of the committees of the Board of Directors were held in that
period. Attendance at the Board of Directors meetings and committee meetings
averaged 98% among all directors during 1995. Each director attended 90% or
more of the aggregate number of meetings of the Board of Directors and
committees on which he or she served.
During the Company's last fiscal year, the Company paid Mr. Aldridge
$75,000 in consideration for legal services rendered to the Company.
Stradley, Ronon, Stevens & Young was separately compensated for its legal
services to the Company.
During fiscal year 1995 non-officer directors of the Company's were each
paid an annual retainer fee of $12,000 and a fee of $800 for each meeting of
the Board of Directors or committee of the Board of Directors attended.
Committee Chairmen received $1,000 for attendance at committee meetings.
Non-officer directors who have ceased to be directors and who have reached
age 65 with five or more years of service on the Board of Directors are
entitled to receive an annual retirement benefit equal to the greater of
$16,000 or the amount of the annual retainer fee in effect on the date the
director ceases to be a director. This benefit will be paid monthly to the
retired director until the earlier of the death of the retired director or
for the number of years of credited service of such director as a member of
the Board of Directors of the Company.
The Company has entered into a Trust Agreement with Meridian Trust Company
for the benefit of directors. Under this Trust Agreement the Company is
obligated to deposit sufficient funds with the Trustee to enable it to
purchase annuity contracts to fund the retirement benefits in the event of a
change in control of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has a standing Audit Committee. The
Committee is charged with the responsibility of reviewing reports from the
Company's independent certified public accountants, keeping the Board
informed with respect to the Company's accounting policies and the adequacy
of internal controls, making recommendations regarding the selection of the
Company's independent certified public accountants and reviewing the scope of
their audit. James L. Everett, III is the Chairman of the Audit Committee and
Messrs. Fred C. Aldridge, Jr. and Harold F. Still, Jr. are members of the
Committee. During the fiscal year ended December 30, 1995, there were two
meetings of the Audit Committee.
The Board of Directors has a standing Compensation Committee, the function
of which is to review and make recommendations with respect to compensation
of the President and Chief Executive Officer and the other key executive
officers of the Company, including salary, bonus and benefits under the
various compensation plans maintained by the Company. Judith M. von Seldeneck
is Chairman of the Compensation Committee and Nelson G. Harris, and Harold F.
Still, Jr. are members of the Committee. During the fiscal year ended
December 30, 1995, there was one meeting of the Compensation Committee.
The Board of Directors has a standing Executive Committee. The Executive
Committee may exercise all of the powers and authority of the Board of Directors
in the management and conduct of the business of the Company, subject to
subsequent ratification and approval of the Board of Directors, and periodically
5
<PAGE>
reviews the Company's employee benefit retirement plans and reports and makes
recommendations to the Board of Directors on the administration and performance
of these plans. Nelson G. Harris is the Chairman of the Executive Committee and
Carl S. Watts, Fred C. Aldridge, Jr. and James L. Everett, III are members of
the Committee. During the fiscal year ended December 30, 1995, there were two
meetings of the Executive Committee.
The Board of Directors has a standing Nominating Committee charged with
the responsibility of making their recommendations annually to the Board with
respect to those persons for whose election as Directors by the shareholders
proxies shall be solicited by the Board of Directors and the filling of any
vacancy among the shareholder-elected Directors. The Nominating Committee
will consider shareholder recommendations of nominees for election to the
Board if the recommendations are accompanied by comprehensive written
information relating to the recommended individual's business experience and
background and by a consent executed by the recommended individual stating
that he or she desires to be considered as a nominee, and, if nominated or
elected, that he or she will serve as a Director. Recommendations should be
sent to the Secretary of the Company by December 1, 1996. Philip J. Baur, Jr.
is the Chairman of the Nominating Committee and Carl S. Watts and Nelson G.
Harris are members of the Committee. The Committee met on December 13, 1995
and February 2, 1996, to consider and recommend the candidates to be
nominated for election at this meeting.
EXECUTIVE OFFICERS (Not Also Directors):
William E. Mahoney (age 56) -- Mr. Mahoney was elected Vice President,
Human Resources, in December, 1984. He joined the Company in 1972 and served
as Director of Industrial Relations and Personnel from 1982 to 1984.
W. Dan Nagle (age 49) -- Mr. Nagle was elected Vice President, Sales and
Marketing in November 1989. He joined the Company in 1984 as Director of
Marketing and became Director of National Sales in 1986.
Paul M. Woite (age 56) -- Mr. Woite was elected Vice President,
Manufacturing, on April 21, 1995. Mr. Woite was Manager, Maintenance Operations
from May 1989 to October 1993 and Director, Engineering & Maintenance from
October 1993 to April 1995. He joined the Company in 1963.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly paid executive officers
for the three fiscal years ended December 30, 1995.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long-term
Name Annual Compensation Compenssation(2)
and --------------------------------- ----------------
Principal Stock All Other
Position Year Salary Bonus Options Compensation(3)
--------------- ------ ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 1995 $290,000 $121,500 35,000 $5,424
President & 1994 260,000 135,000 35,000 3,273
CEO 1993 225,000 125,000 38,000 1,077
J. M. Pettine 1995 154,000 59,400 7,500 541
Vice Pres. & 1994 148,000 66,000 7,500 520
CFO 1993 141,500 59,000 23,000 522
W. D. Nagle 1995 142,000 54,000 7,500 2,914
Vice Pres., 1994 133,000 60,000 7,500 819
Sales & Mktg. 1993 126,500 48,000 22,250 823
W. E. Mahoney 1995 134,500 58,500 7,500 2,782
Vice Pres., 1994 128,500 55,000 7,500 3,586
Human Res. 1993 122,500 46,000 16,500 1,872
P. M. Woite 1995 115,000 34,200 15,000 541
Vice Pres., 1994 91,000 23,500 0 450
Manufacturing 1993 87,308 19,000 0 450
</TABLE>
- ------
(1) This table does not include columns for Other Annual Compensation,
Restricted Stock Awards, and Long-Term Incentive Plan Payouts. The
Company had no amounts to report in the columns for Restricted Stock
Awards and Long-Term Incentive Plan Payouts. The amount of Other Annual
Compensation paid to the named executive officers was in each case for
perquisites which are not reportable since they did not exceed the lesser
of $50,000 or 10% of salary and bonus as reported for any named executive
officer.
(2) See description on page 7. In addition, at year-end, P.M. Woite held
1,407 shares of restricted stock which had a market value of $17,060.
Restrictions will lapse by October 19, 2000. Mr. Woite receives dividends
on these shares.
(3) Includes contributions made for all executive officers under the
Company's Thrift Plan and term life insurance premiums paid on behalf of
each executive. In 1995 Messrs. Watts, Pettine, Nagle, Mahoney and Woite
each received contributions of $450 under the Thrift Plan and imputed
values of $4,974, $91, $2,464, $2,332 and $91, respectively, for term
life insurance premiums.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on fiscal year 1995 grants of
options to the named executives to purchase shares of the Company's common
stock.
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------------------------
% of Total
Options
Granted to Exercise
Options Employees in Or Base Expiration Grant Date
Name Granted (1) Fiscal year (2) Price/Share Date Present Value(3)
- --------------- ----------- --------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 35,000 36.84% $13.375 12/05/2005 $ 57,860
J. M. Pettine 7,500 7.89 13.375 12/05/2005 12,399
W. D. Nagle 7,500 7.89 13.375 12/05/2005 12,399
W. E. Mahoney 7,500 7.89 13.375 12/05/2005 12,399
P. M. Woite 15,000 15.79 13.375 12/05/2005 24,797
</TABLE>
- ------
(1) One-fifth of the options become exercisable on grant and one-fifth on
each anniversary of grant until fully exercisable after four years from
grant.
(2) The Company granted options representing 95,000 shares to key executives
in fiscal 1995.
(3) To determine grant date present value, the Company used the Black-Scholes
model of option valuation, discounted by 50% to reflect lack of
marketability, non-transferability, the fact that the options may be
subject to forfeiture, and the fact that only a portion of the options
are immediately exercisable. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. The present value calculations are based on a ten year option
term for the grants. Other assumptions used for the valuations are:
risk-free interest rate of 5.71%; annual dividend yield of 4.00% and
volatility of 28.35%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal
year 1995 by the named executive officers and the value of such officers'
unexercised options at December 31, 1995.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in-the-Money
Shares Options at Fiscal Year-End Options at Fiscal Year-End (1)
Acquired Value -------------------------------------------- -------------------------------------
On Exercise Realized Total Exercisable Unexercisable Total Exercisable Unexercisable
------------- ---------- --------- ------------- --------------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. W. Watts None $0 108,000 50,000 58,000 $0 $0 $0
J. M. Pettine None 0 38,000 23,000 15,000 0 0 0
W. D. Nagle None 0 37,250 23,750 13,500 0 0 0
W. E. Mahoney None 0 31,500 18,000 13,500 0 0 0
P. M. Woite None 0 15,000 3,000 12,000 0 0 0
</TABLE>
- ------
(1) These columns represent the difference on December 31, 1995 between the
market price of the Company stock and the option exercise price.
8
<PAGE>
PENSION PLAN
The following table shows the approximate annual retirement benefits which
will be payable in total under the Company's Pension Plan and Supplemental
Executive Retirement Plan at the normal retirement age of 65 (assuming
continuation of the plans) for specified years of service and levels of
average remuneration.
Final
Average Years of Service
Remuneration 15 or more years
-------------- ----------------
$125,000 $ 56,250
150,000 67,500
175,000 78,750
200,000 90,000
225,000 101,250
250,000 112,500
300,000 135,000
350,000 157,500
The Company has a defined benefit, non-contributory pension plan which
covers substantially all employees, including the executive officers named
above. Annual amounts which are contributed to the plan and charged to
expense during the year are computed on an aggregate actuarial basis and
cannot be individually allocated. The remuneration covered by the plan
includes salaries and bonuses paid to plan participants as reflected in the
Summary Compensation Table (see page 7). Benefits under the plan are
calculated as a percentage of average remuneration over the last five years
of employment, which percentage depends on the employee's total number of
years of service. Benefits under the pension plan are subject to reduction
for Social Security and are presently restricted under Federal tax law to a
maximum of $120,000 per year. Messrs. Watts, Pettine, Nagle, Mahoney and
Woite have 28-3/4, 23-1/4, 11-3/4, 23-1/2 and 32-1/2 years, respectively, of
credited service under the plan.
The Supplemental Executive Retirement Plan ("SERP") was adopted by the
Board of Directors effective February 18, 1983 in order to encourage key
executives to continue in the service of the Company. The SERP is designed to
provide to key executives upon their retirement a supplemental retirement
benefit monthly equal to the difference between (i) 45% of the average 60
highest calendar months compensation paid by the Company or subsidiary, as
the case may be, during the 120 calendar months immediately preceding the
executive's separation from service, and (ii) the sum of the executive's
primary monthly Social Security Benefits, monthly payments which the
executive would be eligible to receive under the Tasty Baking Company Pension
Plan on a single life annuity basis, and any other monthly retirement
benefits for which the executive is eligible. The SERP was amended by the
Board of Directors on May 15, 1987 to provide for benefits to the surviving
spouse of a deceased executive in the same percentage or proportion, if any,
as the surviving spouse would be entitled to receive under the Tasty Baking
Company Pension Plan.
The Company has also entered into a Trust Agreement with Meridian Trust
Company for the benefit of the participants in the SERP. Under this Trust
Agreement the Company is obligated to deposit sufficient funds with the
trustee to enable it to purchase annuity contracts to fund the SERP in the
event of a change in control of the Company.
TERMINATION ARRANGEMENTS
In 1988, certain key executives entered into Employment Agreements with
the Company which contained termination arrangements. Pursuant to those
arrangements, Messrs. Watts, Pettine, Nagle, and Mahoney will receive
annually for three years a minimum of $298,500, $158,000, $146,000, and
$139,000, respectively, upon termination of their employment under the
following circumstances: (a) termination by the Company except for cause or
upon death, retirement or three years prior notice, (b) termination by the
executive because his authority or duties are changed so as to be
inconsistent with his training and experience or (c) termination by the
executive because of a breach of his Employment Agreement by the Company.
This payment would be in addition to any other damages which the executive
may suffer as a result of such termination.
9
<PAGE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The purpose of the Company's executive compensation program is to attract,
retain and motivate qualified executives to manage the business of the
Company so as to maximize profits and shareholder value. Executive
compensation in the aggregate is made up principally of the executive's
annual base salary, a bonus which may be awarded under the Company's
Management Incentive Plan and awards of Company stock or stock options under
the Company's 1985 Stock Option Plan, 1991 Long Term Incentive Plan, and 1994
Long Term Incentive Plan. The Company's Compensation Committee (the
"Committee") (see p. 5) annually considers and makes recommendations to the
Board of Directors as to executive compensation including changes in base
salary and bonuses.
Consistent with the above-noted purpose of the executive compensation
program, it is the policy of the Committee, in recommending the aggregate
annual compensation of executive officers of the Company, to consider the
overall performance of the Company, the performance of the division of the
Company for which the executive has responsibility and the individual
contribution and performance of the executive. The performance of the Company
and of the function for which the executive has responsibility are
significant factors in determining aggregate compensation although they are
not necessarily determinative. While shareholders' total return (see p. 11)
is important and is considered by the Committee, it is subject to the
vagaries of the public market place and the Company's compensation program
focuses on the Company's strategic plans, corporate performance measures, and
specific corporate goals which should lead to a favorable stock price. The
corporate performance measures which the Committee considers include sales,
earnings, return on equity and comparisons of sales and earnings with prior
years, with budgets, with the Company's competitors and peer group.
The Compensation Committee does not rely on any fixed formulae or specific
numerical criteria in determining an executive's aggregate compensation. It
considers both corporate and personal performance criteria, competitive
compensation levels, the economic environment and changes in the cost of
living as well as the recommendations of management. The Committee then
exercises business judgment based on all of these criteria and the purposes
of the executive compensation program.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Watts, President and Chief Executive Officer of the Company, joined
the Company in 1967 and held a variety of positions in the Sales and
Marketing Department until he became President in February 1991 and Chief
Executive Officer on May 1, 1992. For fiscal year 1995, Mr. Watts had a base
salary of $290,000. He was awarded 35,000 stock options valued at $57,860
(see page 7) under the 1994 Long Term Incentive Plan by the Plan Committee.
The Compensation Committee determined that Mr. Watts should be awarded a
bonus of $121,500 for 1995 under the Management Incentive Plan and that his
base salary for 1996 should be increased from $290,000 to $298,500.
In reviewing Mr. Watts' compensation for 1995 and determining its
recommendation of Mr. Watts' bonus compensation for 1995 and base salary
adjustment for 1996, the Committee considered shareholder total return in
1995, the execution of the Company's strategic plan, specific corporate
performance measures and Mr. Watts' performance in connection with those
measures and against specific goals and criteria the Committee had
established to measure his performance in 1995 as the Company's Chief
Executive Officer.
The Committee noted that shareholder returns and Company sales and net
income had not met expectations for 1995 although, from an historical
perspective, sales and earnings were comparatively good. The Committee
considered that these results were caused by factors which Mr. Watts could
not have anticipated and over which he had no control and were symptomatic
for the industry as a whole. He reacted to the situation in a professional
manner and took appropriate steps which, notwithstanding the difficulties
encountered, resulted in the Company performing well in difficult
circumstances and in a difficult economic environment.
The Committee reviewed each of the specific goals and criteria which had
been established for Mr. Watts and concluded that he had performed well in
each area and had met established goals.
10
<PAGE>
The Committee's conclusion was that Mr. Watts had done an outstanding job
as Chief Executive Officer of Tasty Baking Company in 1995 despite
significant challenges on many fronts and that, taking into consideration all
of the circumstances referred to in this Report and the award of stock
options by the Stock Option Plan Committee, it was appropriate to award Mr.
Watts the bonus compensation referred to above and that his base salary for
1996 also be adjusted as noted.
The Committee's recommendations were made to the Board of Directors and,
after due consideration, were approved as presented.
The Compensation Committee
Judith M. von Seldeneck, Chairman
Nelson G. Harris
Harold F. Still, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Harris who served as a member of the Compensation Committee of the
Board of Directors in 1995 was formerly an Executive Officer of the Company
until his retirement on May 1, 1992.
11
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the five year cumulative total
shareholder return on the Company's Common Stock with (i) the Wilshire 5000
and (ii) a peer group consisting of four snack food companies which include
Flowers Industries, Interstate Bakeries, Lance, Inc. and J&J Snack Foods
Corp. The returns of each peer group company have been weighted according to
their respective stock market capitalization for purposes of arriving at a
peer group average.
TASTY BAKING COMPANY
UNIT VALUES USED FOR PROXY
1995
240 |------------------------------------------------------------------|
| |
| |
| # |
220 |------------------------------------------------------------------|
| |
| |
| * * |
200 |------------------------------------------------------------------|
| * |
| |
| |
180 |------------------------------------------------------------------|
| |
| |
| # # |
160 |------------------------------------------------------------------|
| * |
| |
| * # & |
140 |-------------------------------------------------------------&----|
| |
| # & & |
| |
120 |------------------------------------------------------------------|
| & |
| |
| |
100 |---*&#------------------------------------------------------------|
| |
| |
| |
80 |------------------------------------------------------------------|
| |
| |
| |
0|----|----------|---------|-----------|-----------|-----------|----|
12/90 12/91 12/92 12/93 12/94 12/95
* = Tasty Baking Company & = Peer
# = Wilshire 5000
<TABLE>
<CAPTION>
Five Year Total Return
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Tasty Baking Company * 100 146 159 193 211 203
Peer Group & 100 117 131 147 129 140
Wilshire 5000 # 100 134 146 163 163 222
</TABLE>
Assumes $100 invested on December 31, 1990 in Tasty Baking Company Common
Stock, the Wilshire 5000 Index and Peer Group Common Stock. Total shareholder
returns assume reinvestment of dividends, including in 1993 the treatment of
the P&J Spin-Off as a cash dividend of $8.66 per share (based on the market
value of the P&J stock at the time of the dividend adjusted for the dividend
ratio). The stock price performance shown above is not necessarily indicative
of future price performance.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Shareholders will be asked to approve the selection by the Company of
Coopers & Lybrand L.L.P. as independent certified public accountants for the
fiscal year ending December 28, 1996. Coopers & Lybrand L.L.P. is the
Company's present independent certified public accountant. Representatives of
the firm will be present at the meeting, will be given an opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions by shareholders concerning the accounts of the Company.
Although the submission to shareholders of the appointment of Coopers &
Lybrand L.L.P. is not required by law or the Company's By-Laws, the Board is
submitting this question to shareholders. If the shareholders do not ratify
the appointment, the Board will not be bound to seek other independent
auditors for 1996, but the selection of other independent auditors will be
considered in future years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF COOPERS & LYBRAND
L.L.P.
OTHER BUSINESS
The Board of Directors does not know of any other business to come before
the meeting. However, if any additional matters are presented at the meeting,
it is the intention of the persons named in the accompanying Proxy to vote
such Proxy in accordance with their judgment on such matters.
12
<PAGE>
PROPOSALS FOR THE 1997 ANNUAL MEETING
Any proposal which a shareholder of the Company intends to present at the
1997 Annual Meeting must be received by the Secretary of the Company at 2801
Hunting Park Avenue, Philadelphia, Pennsylvania 19129, not later than
December 1, 1996 for inclusion in the Company's proxy statement and proxy
relating to the 1997 Annual Meeting.
ANNUAL REPORT ON FORM 10-K FILED WITH
SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-K for its fiscal year
ended December 30, 1995 may be obtained, without charge, by any shareholder,
upon written request directed to Elizabeth H. Gemmill, Vice President and
Secretary, Tasty Baking Company, 2801 Hunting Park Avenue, Philadelphia,
Pennsylvania 19129.
By Order of the Board of Directors
Elizabeth H. Gemmill
Vice President and Secretary
13
<PAGE>
TASTY BAKING COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for the Annual Meeting of Shareholders, April 26, 1996 at 11:00 A.M.
The undersigned hereby constitutes and appoints Philip J. Baur, Jr. and
Carl S. Watts, or any one of them, (with full power to act alone), with full
power of substitution, to vote all of the common stock of Tasty Baking
Company which the undersigned has the full power to vote at the Annual
Meeting of Shareholders of Tasty Baking Company to be held at the
Germantown Cricket Club, Manheim & Morris Streets, Philadelphia, Pennsylvania,
and at any adjournments thereof, in the transaction of any business which may
come before said meeting, with all the powers the undersigned would possess if
personally present and particularly to vote each matter set forth, all as in
accordance with the Notice of Annual Meeting and Proxy Statement furnished with
this Proxy.
(Continued on other side)
<PAGE>
/X/ Please mark your
votes as in this
example.
FOR WITHHELD
1. ELECTION / / / / Nominees: Class 1
OF Fred C. Aldridge, Jr.
DIRECTORS. G. Fred DiBona, Jr.
For, except vote withheld John M. Pettine
from the following
nominee(s)
- --------------------------------
FOR AGAINST ABSTAIN
2. Approval of the selection of / / / / / /
Coopers & Lybrand LLP, as
independent public accountants for
the fiscal year ending December 28,
1996
In their discretion the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting or any adjournment thereof.
This proxy when properly executed will
be voted in the manner directed herein by
the shareholder. If no direction is made,
this proxy will be voted for proposals
1 and 2 and in accordance with the
instructions of the Board of Directors,
on all other matters which may properly
come before the meeting.
PLEASE DATE, SIGN AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE.
SIGNATURES: DATE
------------------------------------- --------------------------
(Note: Shareholders signatures should be exactly as name appears hereon. All
joint owners must sign. When signing as attorney, executor,
administrator, tustee or guardian, please give full title and, if more
than one, all should sign)
