<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 /X/
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):
/X/ 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 23, 1999
----------------
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 23, 1999, 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 2002, and until their successors are elected and
qualified;
(2) to approve the selection of PricewaterhouseCoopers LLP as
independent certified public accountants for the fiscal year ending January
1, 2000; 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 12, 1999,
will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
RONALD O. WHITFORD, JR., Esq.
Secretary
March 23, 1999
Philadelphia, Pennsylvania
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 23, 1999
----------------
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 23, 1999 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 1998 Annual Report, including Consolidated
Balance Sheets as of December 26, 1998 and December 27, 1997 and Consolidated
Statements of Operations and Retained Earnings, Changes in Capital Accounts and
Cash Flows for the fiscal years ended December 26, 1998, December 27, 1997, and
December 28, 1996, have been mailed on or before March 23, 1999 to each
shareholder of record at the close of business on February 12, 1999.
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. If
any matters that are not specifically set forth on the proxy card and in this
Proxy Statement properly come before the Annual Meeting, the proxies intend to
vote on such matters in accordance with their reasonable business judgment.
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 a 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 1998 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 Executive
Vice President and Chief Financial Officer, the Vice President, Human
Resources, the Vice President, Route and Food Service Operations, the Vice
President, Marketing and National Sales, and the Vice President, Manufacturing.
1
<PAGE>
VOTING SECURITIES
General
Each holder of record of the Company's Common Stock, par value $0.50 per
share, at the close of business on February 12, 1999 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.
Under the Pennsylvania Business Corporation Law of 1988, as amended, and
the Company's By-Laws, the presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast on a particular matter constitutes a quorum to take action at
a shareholders' meeting. Shares which are present, or represented by a proxy,
will be counted for quorum purposes regardless of whether the holder of the
shares or proxy fails to vote on a matter ("Abstentions") or whether a broker
with discretionary authority fails to exercise its discretionary authority to
vote shares with respect to the matter ("Broker Non-Votes"). The affirmative
vote of at least a majority of the votes cast at the Annual Meeting of
Shareholders by all shareholders entitled to vote thereon is required to adopt
any proposal. For voting purposes, only shares voted either for or against the
adoption of a proposal or the election of directors, and neither Abstentions
nor Broker Non-Votes, will be counted as voting in determining whether a
proposal is approved or a director is elected. As a consequence, Abstentions
and Broker Non-Votes will have no effect on the adoption of a proposal or the
election of a director.
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 12, 1999, there were outstanding
7,825,888 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 12, 1999, 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>
Marie B. Dillin -- 694,428(2)(4)(5)(6) 9
1408 S. Highland Park Drive
Lake Wales, FL 33853
DePrince, Race & Zollo, Inc. -- 564,287 7
201 S. Orange Ave., Suite 850
Orlando, FL 32801
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
-------------------------------------------------------------
Name of Director, Nominee Percent of
and/or Executive Officer Direct Indirect Shares(1)
- ------------------------------------- ------------------------ ---------------------------------- -----------
<S> <C> <C> <C>
Fred C. Aldridge, Jr. 56,045(10) -- *
Philip J. Baur, Jr. 70,323(10) 147,441(2)(3) 3
G. Fred DiBona, Jr. 6,625(10) -- *
James L. Everett, III 30,614(10) -- *
Nelson G. Harris 36,868(10) 31,256(7) *
John M. Pettine 55,244(9) 19,812(8) *
Judith M. von Seldeneck 6,875(10) -- *
Carl S. Watts 174,397(9) -- 2
William E. Mahoney 17,750(9) -- *
W. Dan Nagle 39,385(9) -- *
Paul M. Woite 19,503(9) -- *
All Directors and Executive Officers
as a Group (11 persons) 513,629(9)(10) 198,509(2)(3)(7)(8) 9
</TABLE>
* Representing less than 1% of the outstanding stock.
- ------------
(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 98,570 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.
(3) Includes (i) 15,271 shares in a trust of which Philip J. Baur, Jr. has
sole voting and investment power, (ii) 13,492 shares owned by the
Philippian Foundation, a charitable foundation of which Mr. Baur is
trustee and has sole voting and investment power and (iii) 13,483 shares
owned by Mr. Baur's spouse. Also includes 6,625 shares held in two trusts
of which Mr. Baur and First Union National Bank are co-trustees and share
investment power. Mr. Baur has sole power to vote all shares held in these
two trusts.
(4) A total of 472,504 shares are held in three trusts created under the will
of Philip J. Baur, deceased, of which First Union National 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 3,000 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. Marie B. Dillin has sole power to vote all shares
held in the trust.
(6) Includes 120,354 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.
(7) Represents 31,256 shares owned by Mr. Harris' spouse.
(8) Represents 19,812 shares owned by Mr. Pettine's spouse.
(9) Includes presently exercisable options for 37,875, 151,750, 17,750, 32,750
and 15,250 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, 1994 Long Term Incentive Plan and 1997 Long
Term Incentive Plan.
(10) Includes (i) presently exercisable replacement options for 20,046 shares
granted to Messrs. Aldridge and Everett, respectively, under the Company's
1993 Replacement Option Plan (P & J Spin-Off) and (ii) presently
exercisable options granted by the Board of Directors of 5,625 shares each
for Messrs. Aldridge, Baur, DiBona, Everett, and Harris and Ms. von
Seldeneck. At its meeting on December 20, 1996 the Board granted to each
non-employee director of the Company options to purchase 9,375 shares of
the Company's Common Stock, par value $0.50 per share, at an option
exercise price equal to the closing price of the Common Stock on the New
York Stock Exchange on the date of grant and exercisable in five equal
installments beginning on the date of grant.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS -- PROPOSAL NO. 1
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 2002. The Company's Articles of Incorporation and By-Laws, as
amended by the Shareholders at the Annual Meeting held on April 24, 1998,
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 2000 and Class 3 directors will hold office until the Annual
Meeting in 2001, with the members of each class to hold office 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. Aldridge,
DiBona, 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
2002):
Fred C. Aldridge, Jr. (age 65) -- Mr. Aldridge was elected a Director in
April, 1981. He retired as a partner from the Philadelphia law firm of
Stradley, Ronon, Stevens & Young, LLP, counsel to the Company, on December 31,
1997. Mr. Aldridge continues to practice law and to represent the Company as
outside legal counsel. Mr. Aldridge is 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 48) -- Mr. DiBona was elected a Director in
April, 1996. He has been President and Chief Executive Officer of Independence
Blue Cross since 1990. He is also a director of Philadelphia Suburban
Corporation, Magellan Health Services, Inc., PECO Energy Company and Eclipsys
Corporation and a past Chairman of the Blue Cross and Blue Shield Association.
John M. Pettine (age 56) -- Mr. Pettine was elected a Director in April,
1992. Mr. Pettine was elected Executive Vice President and Chief Financial
Officer of the Company in December, 1998. He previously served as Vice
President and Chief Financial Officer since April, 1991. He is a Director of
PrimeSource Corporation.
DIRECTORS -- CLASS 2 (TERM EXPIRES AT ANNUAL MEETING IN 2000):
James L. Everett, III (age 72) -- 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 72) -- 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 Rittenhouse Trust Company, Penn
Fishing Tackle Mfg. Co. and Pierce-Phelps, Inc.
Carl S. Watts (age 55) -- Mr. Watts was elected Chairman of the Board on
January 23, 1998. He was elected President and Chief Executive Officer,
effective May 1, 1992 and was elected President of the Company in February,
1991.
DIRECTORS -- CLASS 3 (TERM EXPIRES AT ANNUAL MEETING IN 2001):
Philip J. Baur, Jr. (age 68) -- 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 from 1981 to January 1998. He is a Director of PrimeSource
Corporation.
4
<PAGE>
Judith M. von Seldeneck (age 58) -- 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 and subsidiary of Modis
Professional Services. Mrs. von Seldeneck is also a Director of First Union
Foundation Board, Keystone Insurance Company and AAA MidAtlantic.
During the fiscal year ended December 26, 1998, six scheduled meetings of
the Board of Directors were held. In addition, an aggregate of seven meetings
of the committees of the Board of Directors were held in that period.
Attendance at the Board of Directors meetings and committee meetings was 100%
by all directors during 1998. Each director attended all meetings of the Board
of Directors and every meeting of each committee 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 1998 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 amount of the annual retainer
fee in effect on the date the director ceases to be a director (but not less
than $16,000 for Directors serving on June 30, 1993). 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 First Union National
Bank 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 Fred C.
Aldridge, Jr., Philip J. Baur, Jr. and G. Fred DiBona, Jr. are members of the
Committee. During the fiscal year ended December 26, 1998, 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 G. Fred DiBona, Jr., and Nelson G.
Harris are members of the Committee. During the fiscal year ended December 26,
1998, there was one meeting 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, 1994 Long Term Incentive Plan and
1997 Long Term Incentive Plan (collectively, the "Plans") and may grant options
to certain executives under the 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 26, 1998, there was one
meeting of the Long Term Incentive Plan Committee. At its meeting the Committee
concluded that consideration of options to purchase shares of the Company's
Common Stock under the Plans be deferred to the first quarter of 1999.
5
<PAGE>
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 26, 1998, there were two meetings of the Executive Committee.
The Board of Directors has a standing Nominating Committee charged with
the responsibility of making its 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, 1999 for nominations to be considered at the 2000
Annual Meeting to be held in April, 2000. Carl S. Watts is the Chairman of the
Nominating Committee and Philip J. Baur, Jr. and Nelson G. Harris are members
of the Committee. The Committee met on January 22, 1999, to consider and
recommend the candidates to be nominated for election at this meeting.
EXECUTIVE OFFICERS (Not Also Directors):
William E. Mahoney (age 59) -- 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 52) -- Mr. Nagle was elected Vice President, Route and
Food Service Operations, in December, 1998. He joined the Company in 1984 as
Director of Marketing, became Director of National Sales in 1986 and Vice
President, Sales and Marketing, in November, 1989.
Paul M. Woite (age 59) -- 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.
Gary G. Kyle (age 44) -- Mr. Kyle was elected Vice President, Marketing
and National Sales, in December, 1998. He joined the Company in 1986 and became
Director of Marketing in July, 1992.
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, December 27, 1997 and
December 26, 1998.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long-term
Name Annual Compensation Compensation (2)
and ---------------------------------- -----------------
Principal Stock All Other
Position Year Salary Bonus Options Compensation (3)
- ------------------ ------ ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 1998 $350,000 $168,750 -- $4,897
Chairman, 1997 310,646 225,000 70,000 5,871
President & CEO 1996 298,500 150,000 35,000 5,574
J. M. Pettine 1998 178,000 70,125 -- 541
Exec. Vice Pres. 1997 163,838 93,500 15,000 541
& CFO 1996 158,000 77,000 7,500 541
W. D. Nagle 1998 158,100 60,000 -- 2,681
Vice Pres., 1997 151,307 80,000 10,000 3,123
Route & Food 1996 146,000 70,000 7,500 2,987
Serv. Operations
P. M. Woite 1998 146,000 53,250 -- 541
Vice Pres., 1997 134,877 71,000 10,000 541
Manufacturing 1996 130,000 52,000 7,500 541
W. E. Mahoney 1998 149,926 43,000 -- 3,067
Vice Pres., 1997 144,292 86,000 10,000 2,996
Human Res. 1996 139,000 76,000 7,500 2,869
</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) In addition to the stock options shown, at year-end, P. M. Woite held 704
shares of restricted stock, which had a market value of $10,384.
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 1998 Messrs. Watts, Pettine, Nagle, Woite and Mahoney each
received contributions of $450 under the Thrift Plan and imputed values of
$4,447, $91, $2,231, $91 and $2,617, respectively, for term life insurance
premiums.
OPTION GRANTS IN LAST FISCAL YEAR
During fiscal year 1998, there were no options to purchase shares of the
Company's Common Stock granted to the executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal
year 1998 by the named executive officers and the value of such officers'
unexercised options at December 26, 1998.
7
<PAGE>
TASTY BAKING COMPANY
OPTIONS EXERCISED
FISCAL 1998
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in-the-Money
Number of Options at Fiscal Year-End Options at Fiscal Year-End (1)
Options Value ----------------------------------------- -------------------------------------------
Executive Exercised Realized Total Exercisable Unexercisable Total Exercisable Unexercisable
- --------------- ----------- ---------- --------- ------------- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. S. Watts 0 0 220,000 151,750 68,250 $ 575,625 $ 485,063 $ 90,563
J. M. Pettine 8,125 75,644 52,500 37,875 14,625 $ 143,438 $ 124,031 $ 19,406
W. D. Nagle 0 0 44,375 32,750 11,625 $ 131,719 $ 112,313 $ 19,406
W. E. Mahoney 0 0 29,375 17,750 11,625 $ 72,094 $ 52,688 $ 19,406
P. M. Woite 0 0 28,750 15,250 13,500 $ 69,188 $ 42,188 $ 27,000
</TABLE>
(1) These columns represent the difference on December 26, 1998 between the
market price of the Company stock ($14.75) and the option exercise price.
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(1)
-------------- --------------------
$ 125,000 $ 40,000
150,000 51,000
175,000 62,500
200,000 73,500
225,000 85,000
250,000 96,000
300,000 118,500
350,000 141,000
(1) The amounts listed in this table include pension benefits paid by the
Company plans only and do not include Social Security amounts to which
executive officers may be entitled.
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 p. 7). Benefits under the plan are calculated as a percentage of the
average 60 highest consecutive calendar months compensation paid by the Company
or subsidiary, as the case may be, during the last 120 calendar months of
employment, which percentage depends on the employee's total number of years of
service. Benefits under the pension plan are coordinated with Social Security
and are presently restricted under Federal tax law to a maximum of $130,000 per
year. Messrs. Watts, Pettine, Nagle, Woite and Mahoney have 313/4, 261/4,
143/4, 351/2 and 261/3 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 consecutive 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
8
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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 First Union
National Bank 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, Mahoney and Woite will receive
annually for three years a minimum of $360,000, $198,000, $163,100, $155,500
and $150,000, 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.
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, 1994 Long Term Incentive Plan and 1997 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, and 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. Adjustments to Executive
Compensation are frequently most appropriately made through the award of bonus
payments under the Company's Management Incentive Plan rather than through
significant adjustments to the Executive's base salary. The Committee exercises
business judgment based on all of these criteria and the purposes of the
executive compensation program. The Long Term Incentive Plan Committee advised
the Compensation Committee that consideration of options to purchase shares of
the Company's Common Stock has been deferred to the first quarter of 1999. The
Compensation Committee concluded that it was appropriate to award bonus
compensation to executives under the Company's Management Incentive Plan in
amounts reduced by 25% from the amounts paid in 1997.
9
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Compensation of the Chief Executive Officer
Mr. Watts, Chairman, 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, Chief
Executive Officer on May 1, 1992 and Chairman of the Board on January 23, 1998.
For fiscal year 1998, Mr. Watts had a base salary of $350,000. No stock options
were awarded for fiscal year 1998. The Compensation Committee determined that
Mr. Watts should be awarded a bonus of $168,750 for 1998 under the Management
Incentive Plan, which represents a 25% reduction from the 1997 amount, and that
his base salary for 1999 should be increased from $350,000 to $360,000.
In reviewing Mr. Watts' compensation for 1998 and determining its
recommendation of Mr. Watts' bonus compensation for 1998 and base salary
adjustment for 1999, the Committee considered shareholder total return in 1998,
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 1998 as the Company's Chief Executive Officer.
The Committee noted that Company sales and net income had not met
expectations for 1998, although from an historical perspective, sales were the
best in the Company's history. The Committee considered that these results were
caused by an industry-wide softness in sales and competitive pressures
necessitating increased promotions. Notwithstanding these challenges, the
Company has expanded its national sales and launched a food service program
which have had a short term negative impact on earnings, but should produce
positive results in the future.
The Committee reviewed each of the specific goals and criteria which had
been established for Mr. Watts for fiscal year 1998 and concluded that overall
Mr. Watts had done an outstanding job as Chief Executive Officer of Tasty
Baking Company in 1998 despite significant challenges on many fronts. Taking
into consideration all of the circumstances referred to in this Report, the
Committee concluded that it was appropriate to award Mr. Watts the bonus
compensation referred to above and that his base salary for 1999 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 1998 was formerly an Executive Officer of the Company
until his retirement on May 1, 1992.
10
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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, Inc., Interstate Bakeries Corp., 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.
[GRAPHIC OMITTED]
PEER WILSHIRE
AS OF TASTY GROUP 5000
---------- ------- ------- ---------
12/31/93 100 100 100
12/31/94 109 88 100
12/31/95 105 95 136
12/31/96 125 171 165
12/31/97 224 256 217
12/31/98 176 226 268
Assumes $100 invested on December 31, 1993 in Tasty Baking Company Common
Stock, the Wilshire 5000 Index and Peer Group Common Stock. Total shareholder
returns assume reinvestment of dividends. The stock price performance shown
above is not necessarily indicative of future price performance.
11
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS -- PROPOSAL NO. 2
Shareholders will be asked to approve the selection by the Company of
PricewaterhouseCoopers LLP as independent certified public accountants for the
fiscal year ending January 1, 2000. PricewaterhouseCoopers LLP 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
PricewaterhouseCoopers LLP 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 1999, but the selection of other independent auditors will be
considered in future years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PRICEWATERHOUSE
COOPERS LLP.
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 2000 ANNUAL MEETING
Shareholders of the Company are entitled to submit proposals on matters
appropriate for shareholder action consistent with regulations of the
Securities and Exchange Commission ("SEC") and the Company's By-Laws. Should a
shareholder wish to have a proposal considered for inclusion in the proxy
statement for the Company's 2000 Annual Meeting, under Rule 14a-8 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), such proposal
must be received by the Company on or before December 1, 1999.
In connection with the Company's 2000 Annual Meeting and pursuant to Rule
14a-4 under the Exchange Act, if the shareholder's notice is not received by
the Company on or before February 7, 2000, the Company (through management
proxy holders) may exercise discretionary voting authority when the proposal is
raised at the annual meeting without any reference to the matter in the proxy
statement.
The above summary, which sets forth only the procedures by which business
may be properly brought before and voted upon at the Company's Annual Meeting,
is qualified in its entirety by reference to the Company's By-Laws.
All shareholder proposals and notices should be directed to the Secretary
of the Company at 2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129.
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 26, 1998 may be obtained, without charge, by any shareholder,
upon written request directed to Ronald O. Whitford, Jr., Secretary, Tasty
Baking Company, 2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129.
By Order of the Board of Directors
Ronald O. Whitford, Jr.
Secretary
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
Tasty Baking Company
April 23, 1999
* Please Detach and Mail in the Envelope Provided *
- --------------------------------------------------------------------------------
A |---| Please mark your
| X | votes as in this
|---| example.
1. ELECTION OF DIRECTORS FOR WITHHELD
[ ] [ ]
For, except vote withhold from the following nominee(s)
- -------------------------------------------------------
Nominees: Class 1
Fred C. Aldridge, Jr.
G. Fred DiBona, Jr.
John M. Pettine
2. Approval of the selection of FOR AGAINST ABSTAIN
PricewaterhouseCoopers [ ] [ ] [ ]
LLP as independent public
accountants for the fiscal
year ending January 1, 2000.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjustment 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.
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.)
<PAGE>
TASTY BAKING COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for the Annual Meeting of Shareholders, April 23, 1999 at 11:00 A.M.
The undersigned hereby constitutes and appoints Carl S. Watts and John M.
Pettine, 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 adjourments 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)
