<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
TASTY BAKING COMPANY
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
----------------------------------------------------------------------
/ / 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>
TASTY BAKING COMPANY
2801 HUNTING PARK AVENUE
PHILADELPHIA, PENNSYLVANIA 19129
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1997
------
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 25, 1997, at
11:00 A.M., for the following purposes:
(1) to elect three directors in Class 2 to hold office until the Annual
Meeting of Shareholders in 2000, and until their successors are elected and
qualified;
(2) to consider and vote upon a proposal to amend the Tasty Baking
Company Management Stock Purchase Plan to extend the period during which
management employees of the Company may be granted the right to purchase
shares of the Company's Common Stock to December 31, 2001 and to permit the
Company's Board of Directors to modify, suspend or terminate the Plan.
(3) to approve the selection of Coopers & Lybrand L.L.P. as independent
certified public accountants for the fiscal year ending December 27, 1997;
and
(4) 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 14, 1997,
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, 1997
- --------------------------------------------------------------------------------
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 25, 1997
------
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 25, 1997 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 1996 Annual Report, including Consolidated Balance
Sheets as of December 28, 1996 and December 30, 1995 and Consolidated Statements
of Operations and Retained Earnings, Changes in Capital Accounts and Cash Flows
for the fiscal years ended December 28, 1996, December 30, 1995 and December 31,
1994, have been mailed on or before March 20, 1997 to each shareholder of record
at the close of business on February 14, 1997.
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 1996 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 14, 1997 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 14, 1997, there were outstanding
6,193,634 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 14, 1997, 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 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>
Marie B. Dillin -- 670,799(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. 41,837(10) -- *
Philip J. Baur, Jr. 79,503(10) 177,013(2)(3)(5)(6) 4
G. Fred DiBona, Jr. 1,500(10) -- *
James L. Everett, III 21,492(10) -- *
Nelson G. Harris 50,244(10) 25,005(8) 1
John M. Pettine 56,711(9) -- *
Judith M. von Seldeneck 2,500(10) -- *
Carl S. Watts 87,826(9) -- 1
William E. Mahoney 23,651(9) -- *
W. Dan Nagle 36,101(9) -- *
Paul M. Woite 9,619(9) -- *
All Directors and Executive
Officers as a Group (11
persons) 410,984(9)(10) 202,018(2)(3)(5)(6)(8) 10
</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 or
grants by 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.
(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 23,726 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 93,395 shares held in two trusts created by Emma M. Baur,
deceased. Philip J. Baur, Jr., Marie B. Dillin and CoreStates Bank, N.A.
are co-trustees. Mr. Baur and Mrs. Dillin share voting and investment
power.
(4) A total of 426,004 shares are held in three trusts created under the will
of Philip J. Baur, deceased, of which First Union 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 21,094 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
investment and voting power over all shares held in the trust.
(6) Includes 5,000 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 investment and
voting power over all shares held in the trust.
(7) Includes 146,400 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) Represents 25,005 shares owned by Mr. Harris' spouse.
(9) Includes presently exercisable options for 29,000, 74,000, 23,500, 29,250
and 7,500 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.
(10) Includes (i) presently exercisable replacement options for 16,037, 16,037,
and 26,366 shares granted to Messrs. Aldridge, Everett and Harris
respectively, under the Company's 1993 Replacement Option Plan (P & J
Spin-Off) (ii) presently exercisable options granted by the Board of
Directors of 1,500 shares each for Messrs. Aldridge, Baur, DiBona, Everett,
and Harris and Ms. von Seldeneck.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
At the Annual Meeting, three persons will be elected to the Board of
Directors as Class 2 Directors to serve for three years and until the Annual
Meeting in 2000. 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 3 Directors will hold office until
the Annual Meeting of Shareholders in 1998 and Class 1 directors will hold
office until the Annual Meeting of Shareholders in 1999 with the members of each
class to continue to hold office thereafter until their successors are elected
and qualified.
Listed below are the nominees for the Board of Directors, as well as the
remaining Directors and Executive Officers of the Company. Messrs. Everett,
Harris and Watts 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 2 (TERM EXPIRES AT ANNUAL MEETING IN 2000):
James L. Everett, III (age 70) -- 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. He has served as a Director of the
Company since 1970.
Nelson G. Harris (age 70) -- 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 American Water Works
Company, Inc. and PECO Energy Company.
Carl S. Watts (age 53) -- 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.
DIRECTORS -- CLASS 3 (TERM EXPIRES AT ANNUAL MEETING IN 1998):
Philip J. Baur, Jr. (age 66) -- 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. Mr. Baur
may be deemed a "control person" of the Company.
Judith M. Von Seldeneck (age 56) -- 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 CoreStates Financial Corp. Keystone Insurance Company and
Triple A MidAtlantic.
DIRECTORS -- CLASS 1 (TERM EXPIRES AT ANNUAL MEETING IN 1999):
Fred C. Aldridge, Jr. (age 63) -- Mr. Aldridge was elected a Director in
April, 1981. He is a senior partner at the Philadelphia law firm of Stradley,
Ronon, Stevens & Young, LLP, 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 46) -- 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.
4
<PAGE>
John M. Pettine (age 54) -- 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.
During the fiscal year ended December 28, 1996, six scheduled meetings of the
Board of Directors were held. In addition, an aggregate of eight 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 100% among all
directors during 1996. Each director attended 100% 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, LLP was separately compensated for its legal services to the
Company.
During fiscal year 1996 non-officer directors of the Company 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 CoreStates Bank, N.A.,
formerly 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.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On April 22, 1988 the Company adopted the Tasty Baking Company 1988 Director
Option Plan, which was most recently revised on March 16, 1989. There are no
options granted under this Plan which are outstanding. After consultation with
an independent compensation consultant, management recommended to the Board of
Directors that the 1988 Director Option Plan be terminated and that each
non-employee member of the Board be granted options to purchase the common stock
of the Company to encourage equity ownership in the Company by outside
non-employee Directors. At its meeting on December 20, 1996 the Board considered
the recommendations of management, terminated the Tasty Baking Company 1988
Director Option Plan, and determined that it is in the best interest of the
Company and its shareholders to provide the non-employee members of the Board
with stock-based incentive compensation to enable the Company to continue to
attract and retain qualified directors and to align further the interests of
directors with those of shareholders. At that meeting the Board granted to each
non-employee director of the Company options to purchase 7,500 shares of the
Company's Common Stock, par value $0.50 per share, at an option exercise price
determined at the closing price of the Common Stock on the New York Stock
Exchange as of the date of the grant, December 20, 1996. The closing price of
the Common Stock on December 20, 1996 was $14.50. The options are exercisable in
five equal installments beginning on the date of grant until fully exercisable
after four years.
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 G. Fred DiBona, Jr. are members of the
Committee. During the fiscal year ended December 28, 1996, there were two
meetings of the Audit Committee.
5
<PAGE>
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 G. Fred DiBona, Jr., and Nelson G. Harris are members
of the Committee. During the fiscal year ended December 28, 1996, there was two
meetings of the Compensation Committee.
The Board of Directors has a standing Long Term Incentive Plan Committee. The
Long Term Incentive Plan Committee administers the Company's 1985 Stock Option
Plan, 1991 Long Term Incentive Plan and 1994 Long Term Incentive Plan ("Plans")
and may grant options to certain executives under these Plans. Judith M. Von
Seldeneck is the Chairman of the Long Term Incentive Plan Committee and G. Fred
DiBona, Jr. is a member of the Committee. During the fiscal year ended December
28, 1996, there was one meeting of the Long Term Incentive Plan 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
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 28, 1996, 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, 1997 for nominations to be considered at the 1997
Annual Meeting to be held in April 1998. 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 January 24, 1997, to consider and recommend
the candidates to be nominated for election at this meeting.
EXECUTIVE OFFICERS (Not Also Directors):
William E. Mahoney (age 57) -- 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 50) -- 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 57) -- 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.
Section 16(a) Beneficial Ownership Reporting Compliance
The initial report of beneficial ownership on Form 3 for G. Fred DiBona,
Jr. was filed late.
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 28, 1996.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long-term
Compensation
Name Annual Compensation (2)
and --------------------------------- -------------- All Other
Principal Stock Compensation
Position Year Salary Bonus Options (3)
--------------- ------ ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 1996 $298,500 $150,000 35,000 $5,574
President & 1995 290,000 121,500 35,000 5,424
CEO 1994 260,000 135,000 35,000 3,273
J. M. Pettine 1996 158,000 77,000 7,500 541
Vice Pres. & 1995 154,000 59,400 7,500 541
CFO 1994 148,000 66,000 7,500 520
W. D. Nagle 1996 146,000 70,000 7,500 2,987
Vice Pres., 1995 142,000 54,000 7,500 2,914
Sales & Mktg. 1994 133,000 60,000 7,500 819
W. E. Mahoney 1996 139,000 76,000 7,500 2,869
Vice Pres., 1995 134,500 58,500 7,500 2,782
Human Res. 1994 128,500 55,000 7,500 3,586
P. M. Woite 1996 130,000 52,000 7,500 541
Vice Pres., 1995 115,000 34,200 15,000 541
Manufacturing 1994 91,000 23,500 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 each named executive officer.
(2) See description on page 8. In addition, at year-end, P. M. Woite held
1,126 shares of restricted stock which had a market value of $16,046.
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 1996 Messrs. Watts, Pettine, Nagle, Mahoney and Woite each
received contributions of $450 under the Thrift Plan and imputed values of
$5,124, $91, $2,537, $2,419 and $91, respectively, for term life insurance
premiums.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on fiscal year 1996 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 Grant Date
Options Employees in Or Base Expiration Present Value
Name Granted (1) Fiscal year (2) Price/Share Date (3)
--------------- ----------- --------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 35,000 40.00% $14.50 12/18/2006 $88,550
J. M. Pettine 7,500 8.57 14.50 12/18/2006 18,975
W. D. Nagle 7,500 8.57 14.50 12/18/2006 18,975
W. E. Mahoney 7,500 8.57 14.50 12/18/2006 18,975
P. M. Woite 7,500 8.57 14.50 12/18/2006 18,975
</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 87,500 shares to key executives in
fiscal 1996.
(3) The Company used the Black-Scholes model of option valuation. 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 five year option term for the grants. Other assumptions used
for the valuations are: risk-free interest rate of 6.17%; annual dividend
yield of 4.17% and volatility of 19.51%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal year
1996 by the named executive officers and the value of such officers' unexercised
options at December 28, 1996.
<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 $0 143,000 74,000 69,000 $93,375 $54,500 $38,875
J. M. Pettine None 0 45,500 29,000 16,500 27,438 18,250 9,188
W. D. Nagle None 0 44,750 29,250 15,500 27,063 18,375 8,688
W. E. Mahoney None 0 39,000 23,500 15,500 24,188 15,500 8,688
P. M. Woite None 0 22,500 7,500 15,000 13,125 5,250 7,875
</TABLE>
- ------
(1) These columns represent the difference on December 28, 1996 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 $150,000 per year. Messrs. Watts, Pettine,
Nagle, Mahoney and Woite have 29-3/4, 24-1/4, 12-3/4, 24-1/2 and 33-1/2 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 CoreStates Bank,
N.A., formally 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 $310,000, $163,500, $151,000, and $144,000,
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. 6) 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. 12) 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 1996, Mr. Watts had a base salary of
$298,500. He was awarded 35,000 stock options valued at $88,550 (see page 8)
under the 1994 Long Term Incentive Plan by the Plan Committee. The Compensation
Committee determined that Mr. Watts should be awarded a bonus of $150,000 for
1996 under the Management Incentive Plan and that his base salary for 1997
should be increased from $298,500 to $310,000.
In reviewing Mr. Watts' compensation for 1996 and determining its
recommendation of Mr. Watts' bonus compensation for 1996 and base salary
adjustment for 1997, the Committee considered shareholder total return in 1996,
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 1996 as the Company's Chief Executive Officer.
The Committee noted that shareholder returns for 1996 were 22%, Company sales
increased during 1996 and net income for 1996 was exceptionally strong. Net
sales for 1996 were $146,718,000 which represents a 3.4% increase over the net
sales for 1995. The Company's net income of $6,305,000 or $1.02 per share
represents improvements of 26% and 24%, respectively, over 1995 operating
results.
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 1996 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
Long Term Incentive Plan Committee, it was appropriate to award Mr. Watts the
bonus compensation referred to above and that his base salary for 1997 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
G. Fred DiBona, Jr.
Nelson G. Harris
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Harris who served as a member of the Compensation Committee of the
Board of Directors in 1996 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.
240----------------------------------------------------------------------------
-
220-
- $
200- @
-
180-
-
160- @ #
-
140- #
- #
#
120- @$
- @$# @ $
$
100-$@#
-
80----------------------------------------------------------------------------
Dec.-91 Dec-92 Dec.-93 Dec.-94 Dec.-95 Dec.-96
- --------------------------------------------------------------------------------
# = TBC $ = Peers @ = Wilshire 5000
- --------------------------------------------------------------------------------
Dec.-91 Dec.-92 Dec.-93 Dec.-94 Dec.-95 Dec.-96
-------- ------- ------- ------- ------- -------
TBC 100 109 132 145 139 165
Peers 100 121 125 110 119 214
Wilshire 5000 100 109 121 121 165 201
Assumes $100 invested on December 31, 1991 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
Phillips & Jacobs Spin-Off as a cash dividend of $8.66 per share (based on the
market value of the Phillips & Jacobs 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.
MANAGEMENT STOCK PURCHASE PLAN
The Company has a Management Stock Purchase Plan pursuant to which management
employees of the Company and its subsidiaries may be granted the right to
purchase shares of Common Stock of the Company at 50% of the fair market value
of the stock at the date of the grant of the right to purchase. The number of
shares of the Company's Common Stock which may be sold under the Plan may not
exceed 745,254 (of which 187,540 remain available for sale) shares subject to
the adjustments as described in the Plan. The purpose of the Plan is to
strengthen the Company's ability to attract, employ and retain executives and
management employees of outstanding abilities and to provide an incentive for
continued employment. Shares may be sold under the Plan to management and
supervisory employees of the Company or of any of the Company's subsidiaries.
However, executives who are eligible for grants of options under the Company's
stock option plans are not eligible for awards under the Management Stock
Purchase Plan. The plan presently provides that during the first three years
after the date of purchase, the shares purchased by the participating employee
may not be sold or otherwise disposed of except to the Company, which has the
right to repurchase them at the original price paid by the employee. Thereafter,
these restrictions lapse over a period of years as set forth under the Plan.
Approximately 73 persons are currently participating and eligible to participate
in the Plan.
The difference between the fair market value of the stock at the date of
grant and the purchase price represents compensation. The compensation is
deferred and amortized over a ten year period or the period the management
employees perform services, whichever is less. Amortization charged to income
amounted to $60,986, $51,444, and $38,755 in 1994, 1995 and 1996, respectively.
12
<PAGE>
The Board of Directors of the Company may terminate, modify or suspend the
Plan, provided no modification shall, without shareholder approval, increase the
maximum number of shares which may be sold under the Plan, permit sale of shares
unless full payment is made at the time of purchase, decrease the minimum price
at which shares are to be sold, extend the period during which shares may be
sold or modify the provisions of the Plan with respect to restrictions against
disposition or pledge or the obligation to resell shares to the Company.
The Board of Directors has approved amendments to the provisions of the Plan,
which are being submitted for consideration by the shareholders at this Annual
Meeting. These amendments would extend the time in which management employees of
the Company may be granted the right to purchase shares of the Company's Common
Stock under the Plan from December 31, 1996 to December 31, 2001 and would allow
the Board of Directors to modify, suspend or terminate the Plan without seeking
shareholder approval. This amendment will allow the Board of Directors without
direct shareholder approval, to increase the maximum number of shares which may
be sold under the Plan, permit sale of shares unless full payment is made at the
time of purchase, decrease the minimum price at which shares are to be sold,
extend the period during which shares may be sold or modify the provisions of
the Plan with respect to restrictions against disposition or pledge or the
obligation to resell shares to the Company. It is the intention of the Board of
Directors to continue the Plan for its original purposes as stated above.
Accordingly, the Board of Directors recommends that the following resolutions
be adopted by the shareholders:
RESOLVED, that the last sentence of Paragraph 1 of the Tasty Baking Company
Management Stock Purchase Plan be amended in its entirety to provide as
follows:
Accordingly, the Company may, from time to time, on or before December 31,
2001, sell to such Employees as may be selected in the manner hereinafter
provided, shares of the Common Stock of the Company on terms and conditions
hereinafter established; and
FURTHER RESOLVED, that the date in the fourth paragraph of Paragraph 3 of the
Tasty Baking Company Management Stock Purchase Plan be amended to read
"December 31, 2001"; and
FURTHER RESOLVED that the Paragraph 9 of the Tasty Baking Company Management
Stock Purchase Plan be amended in its entirety to provide as follows:
The Board of Directors of the Company may at any time terminate or from time
to time modify or suspend this Plan in any fashion, provided however, that no
such amendment or modification may permit participation in the Plan by
Employees who are also officers or directors of the Company without the
approval of the Shareholders of the Company.
The foregoing amendment to the Plan requires the approval of a majority of
the votes cast by all shareholders, present in person or by proxy, and
voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE MANAGEMENT STOCK PURCHASE PLAN.
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 27, 1997. 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
1997, but the selection of other independent auditors will be considered in
future years.
13
<PAGE>
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.
PROPOSALS FOR THE 1997 ANNUAL MEETING
Any proposal which a shareholder of the Company intends to present at the
1998 Annual Meeting must be received by the Secretary of the Company at 2801
Hunting Park Avenue, Philadelphia, Pennsylvania 19129, not later than December
1, 1997 for inclusion in the Company's proxy statement and proxy
relating to the 1998 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 28, 1996 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
14
<PAGE>
TASTY BAKING COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for the Annual Meeting of Shareholders, April 25, 1997 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>
A /X/ Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Class 2
James L. Everett, III
1. ELECTION OF DIRECTORS / / / / Nelson G. Harris
Carl S. Watts
For, except vote withheld from the following
nominee(s)
- ---------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the Amendments to the Tasty Baking / / / / / /
Company Management Stock Purchase Plan.
3. Approval of the selection of Coopers & Lybrand / / / / / /
L.L.P. as independent public accountants for
the fiscal year ending December 27, 1997.
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, 2, and 3 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.
SIGNATURE(S) DATE
----------------------------------------- ---------------------
(Note: Shareholder's signatures should be exactly as name appears hereon. All
joint owners must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title, and, if more
than one, all should sign.)
