<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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> 2
TASTY BAKING COMPANY
2801 HUNTING PARK AVENUE
PHILADELPHIA, PENNSYLVANIA 19129
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2000
------------------------
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 28, 2000, 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 2003, 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
December 30, 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 14, 2000,
will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
RONALD O. WHITFORD, JR., Esq.
Secretary
March 31, 2000
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> 3
TASTY BAKING COMPANY
2801 HUNTING PARK AVENUE
PHILADELPHIA, PENNSYLVANIA 19129
215-221-8500
------------------------
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 2000
------------------------
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 28, 2000 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 1999 Annual Report, including Consolidated Balance
Sheets as of December 25, 1999 and December 26, 1998 and Consolidated Statements
of Operations and Retained Earnings, Changes in Capital Accounts and Cash Flows
for the fiscal years ended December 25, 1999, December 26, 1998, and December
27, 1997, have been mailed on or before March 31, 2000 to each shareholder of
record at the close of business on February 14, 2000.
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 1999 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, Finance, 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> 4
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 14, 2000 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 hereinafter
described.
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 14, 2000, there were outstanding
7,823,348 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, 2000, 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(1)
NAME AND ADDRESS OF -------------------------------------------- PERCENT OF
BENEFICIAL OWNER DIRECT INDIRECT SHARES(1)
---------------- ------ -------- ----------
<S> <C> <C> <C>
Marie B. Dillin -- 686,428(2)(4)(5)(6) 9
1408 S. Highland Park Drive
Lake Wales, FL 33853
DePrince, Race & Zollo, Inc. -- 629,737 8
201 S. Orange Ave., Suite 850
Orlando, FL 32801
Wynnefield Group(11) -- 398,061 5
One Penn Plaza, Suite 4720
New York, NY 10119
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
NAME OF DIRECTOR AND/OR ----------------------------------------- PERCENT OF
NOMINEE AND EXECUTIVE OFFICER DIRECT INDIRECT SHARES(1)
----------------------------- ------ -------- ----------
<S> <C> <C> <C>
Fred C. Aldridge, Jr. 57,545(10) -- *
Philip J. Baur, Jr. 68,581(10) 147,441(2)(3) 3
G. Fred DiBona, Jr. 8,125(10) -- *
James L. Everett, III 32,114(10) -- *
Nelson G. Harris 38,368(10) 31,256(7) *
John M. Pettine 64,994(9) 19,812(8) 1
Judith M. von Seldeneck 8,375(10) -- *
Carl S. Watts 252,647(9) -- 3
William E. Mahoney 25,500(9) -- *
W. Dan Nagle 47,135(9) -- *
Paul M. Woite 29,128(9) -- *
All Directors and Executive Officers
as a Group (13 persons) 677,197(9)(10) 198,555(2)(3)(7)(8) 11
</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 as of December 31, 1999. 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 2,500 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 trusts.
(6) Includes 112,854 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 47,625, 230,000, 25,500, 40,500
and 24,875 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
3
<PAGE> 6
(ii) presently exercisable options granted by the Board of Directors of
7,125 shares each for Messrs. Aldridge, Baur, DiBona, Everett and Harris
and Mrs. von Seldeneck.
(11) Represents the aggregate shares and percent of beneficial share ownership
for Wynnefield Partners Small Cap Value, L.P., Wynnefield Small Cap Value
Offshore Fund, Ltd., and Wynnefield Small Cap Value L.P. I (collectively,
the "Wynnefield Group").
DIRECTORS AND EXECUTIVE OFFICERS -- PROPOSAL NO. 1
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 2003. 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 1 directors will hold office until the Annual Meeting of Shareholders in
2002 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. 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 2003):
James L. Everett, III (age 73) -- 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 73) -- Mr. Harris was elected a Director of Tasty
Baking Company in April, 1979, President of the Company in September, 1979,
President and 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 56) -- 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 1 (TERM EXPIRES AT ANNUAL MEETING IN 2002):
Fred C. Aldridge, Jr. (age 66) -- 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. He is a Director of PrimeSource
Corporation.
G. Fred DiBona, Jr. (age 49) -- Mr. DiBona 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.
4
<PAGE> 7
John M. Pettine (age 57) -- 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 3 (TERM EXPIRES AT ANNUAL MEETING IN 2001):
Philip J. Baur, Jr. (age 69) -- 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.
Judith M. von Seldeneck (age 59) -- 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, Triple A MidAtlantic, Greater Philadelphia Chamber
of Commerce, and Caron Foundation.
During the fiscal year ended December 25, 1999, seven scheduled meetings of
the Board of Directors were held. In addition, an aggregate of fifteen meetings
of the committees of the Board of Directors were held in that period. Attendance
at the Board of Directors meetings and committee meetings averaged 98% among all
directors during 1999. Each director attended 90% or more of the aggregate
number of meetings of the Board of Directors and committees on which he or she
served.
During the Company's last fiscal year, the Company paid Mr. Aldridge
$75,000 in consideration for legal services rendered to the Company.
During fiscal year 1999 the Company paid an annual retainer fee of $15,000
to non-officer directors and $16,000 to committee chairmen. Non-officer
directors were paid a fee of $1,000 for each meeting of the Board of Directors
or committee of the Board of Directors attended. 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 directors' retirement benefits in the event of a
change in control of the Company.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
At its meeting on March 26, 1999, upon the recommendation of management,
the Board determined that it was in the best interests of the Company and its
shareholders to provide non-employee members of the Board with stock-based
incentive compensation to attract and retain qualified directors and further
align the interests of the directors with those of the 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 equal to the closing price of the Common
Stock on the New York Stock Exchange as of the date of grant, March 26, 1999.
The closing price of the Common Stock on March 26, 1999 was $11.50. These
options become 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
5
<PAGE> 8
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 25, 1999, 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 25,
1999, there were 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 1991 Long Term
Incentive Plan, 1994 Long Term Incentive Plan and 1997 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 25, 1999, 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 25, 1999, 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, 2000 for nominations to be considered at the 2001 Annual Meeting to
be held in April 2001. 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 28, 2000, to consider and recommend the candidates to
be nominated for election at this meeting.
EXECUTIVE OFFICERS (NOT ALSO DIRECTORS):
Daniel J. Decina (age 49) -- Mr. Decina was elected Vice President,
Finance, in January, 2000. He joined the Company in 1974 and became Treasurer in
1991 and Treasurer and Controller in 1994.
Gary G. Kyle (age 45) -- Mr. Kyle was elected Vice President, National
Sales and Marketing, in December, 1998. He joined the Company in 1986 and became
Director of Marketing in July, 1992.
William E. Mahoney (age 60) -- 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 53) -- 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.
6
<PAGE> 9
Paul M. Woite (age 60) -- 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.
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 27, 1997, December 26, 1998 and December
25, 1999.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION(2)
---------------------------- ---------------
STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) OPTIONS COMPENSATION(4)
- --------------------------- ---- -------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 1999 $360,000 -- 50,000 $4,793
Chairman, President & CEO 1998 350,000 $168,750 -- 4,897
1997 310,646 225,000 70,000 5,871
J. M. Pettine 1999 198,000 -- 15,000 530
Exec. Vice Pres. & CFO 1998 178,000 70,125 -- 541
1997 163,838 93,500 15,000 541
W. D. Nagle 1999 163,100 -- 10,000 2,741
Vice Pres., Route & Food 1998 158,100 60,000 -- 2,681
Serv. Operations 1997 151,307 80,000 10,000 3,123
W. E. Mahoney 1999 155,500 -- 10,000 2,634
Vice Pres., Human Res. 1998 149,926 43,000 -- 3,067
1997 144,292 86,000 10,000 2,996
P. M. Woite 1999 150,000 -- 10,000 530
Vice Pres., Manufacturing 1998 146,000 53,250 -- 541
1997 134,877 71,000 10,000 541
</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 Mr. Woite held 352
shares of restricted stock under the Management Stock Purchase Plan which
had a market value of $3,058. Restrictions will lapse by October 19, 2000.
Mr. Woite receives dividends on these shares.
(3) The Compensation Committee did not award any cash bonuses under the terms of
the Company's Management Incentive Plan for 1999. On December 17, 1999 the
Board of Directors conditionally granted shares of Company Common Stock to
executive officers and managers which will be distributed in one-third
installments in the event that the Company's stock price achieves the target
prices of $12, $14, and $16 for five consecutive days prior to December 17,
2002 (see p. 10). The closing price of the Company's Common Stock on
December 17, 1999 was $9.00. No shares have been earned under these
conditional stock grants as of the date of this Proxy Statement.
(4) 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 1999 Messrs. Watts, Pettine, Nagle, Mahoney and Woite each
received contributions of $450 under the Thrift Plan and imputed values of
$4,343, $80, $2,291, $2,184 and $80, respectively, for term life insurance
premiums.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on fiscal year 1999 grants of
options to the named executive officers to purchase shares of the Company's
Common Stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR(2) PRICE/SHARE DATE PRESENT VALUE(3)
- ---- ---------- -------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
C. S. Watts 50,000 36.63% $11.50 3/26/2009 $128,500
J. M. Pettine 15,000 10.99 11.50 3/26/2009 38,550
W. D. Nagle 10,000 7.33 11.50 3/26/2009 25,700
W. E. Mahoney 10,000 7.33 11.50 3/26/2009 25,700
P. M. Woite 10,000 7.33 11.50 3/26/2009 25,700
</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 136,500 shares to key executives in
fiscal year 1999.
(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 5.11%; annual dividend
yield of 3.34%; and volatility of 26.18%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal year
1999 by the named executive officers and the value of such officers' unexercised
options at December 25, 1999.
TASTY BAKING COMPANY
OPTIONS EXERCISED
FISCAL 1999
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
NUMBER FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
OF OPTIONS VALUE ------------------------------------- -----------------------------------
EXECUTIVE EXERCISED REALIZED TOTAL EXERCISABLE UNEXERCISABLE TOTAL EXERCISABLE UNEXERCISABLE
- --------- ---------- -------- ------- ----------- ------------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. S. Watts 0 0 270,000 230,000 40,000 $-- $-- $--
J. M. Pettine 0 0 67,500 47,625 19,875 -- -- --
W. D. Nagle 0 0 54,375 40,500 13,875 -- -- --
W. E. Mahoney 0 0 39,375 25,500 13,875 -- -- --
P. M. Woite 0 0 38,750 24,875 13,875 -- -- --
</TABLE>
- ---------------
(1) Since the market price of the Company stock ($8.6875) on December 25, 1999
was less than the option exercise price for all outstanding stock options,
the options had no value at fiscal year-end.
8
<PAGE> 11
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.
<TABLE>
<CAPTION>
FINAL
AVERAGE YEARS OF SERVICE
REMUNERATION 15 OR MORE YEARS(1)
- ------------ -------------------
<S> <C>
$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
</TABLE>
- ---------------
(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 $135,000 per
year. Messrs. Watts, Pettine, Nagle, Woite and Mahoney have approximately
32 3/4, 27 1/4, 15 3/4, 36 1/2 and 27 1/3 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 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
Certain key executives have entered into Employment Agreements with the
Company which contain termination and change of control provisions. In 1988,
Messrs. Watts, Pettine, Nagle and Mahoney entered into Employment Agreements
which provide that they will receive annually for three years a minimum of
9
<PAGE> 12
$371,000, $204,000, $168,000 and $160,200 plus bonus, respectively, upon
termination of their employment under the following circumstances: (a)
termination by the Company without three-years prior notice other than for
cause, (b) termination by the executive because his authority, responsibilities
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. These payments would be in addition to any other
damages which the executives may suffer as a result of such termination. In
1997, Mr. Woite entered into an Employment Agreement with the Company which
provides that he will receive an amount equal to 299% of a minimum of $154,500
plus bonus upon termination of his employment within two years of a Change of
Control of the Company where such termination is without cause or under the
circumstances set forth in clauses (b) and (c) above. A Change of Control for
these purposes means any change in control of the Company which would be
required to be reported to the Securities and Exchange Commission pursuant to
Schedule 14A of Regulation 14A, or which results in any person or entity not
already a beneficial owner of the Company at the time of the execution of the
agreement becoming a beneficial owner of 25% or more of the combined voting
power of the outstanding securities of the Company, or if during any two
consecutive year periods, the directors at the beginning of such periods cease
for any reason during the two-year period to constitute a majority of the Board
of Directors of the Company.
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 cash
bonus which may be awarded under the Company's Management Incentive Plan and
awards of Company stock or stock options under the Company's 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. 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, 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.
Under the Company's Management Incentive Plan, cash bonuses are paid upon
the attainment of specified financial performance objectives. In 1999, the
specified objectives were not achieved and no cash bonuses were awarded under
the Plan. In order to provide management with the opportunity to earn
compensation in lieu of a cash bonus for 1999 and to provide an incentive to
management which is earned as the market value of the Company Common Stock
increases, the Committee recommended that the Board
10
<PAGE> 13
conditionally grant 79,304 shares of Company Common Stock to the executive
officers and managers eligible to participate in the Plan. Pursuant to the terms
of the conditional stock grant, shares will be distributed in one-third
installments only if the Company's stock price reaches the target prices of $12,
$14, and $16 for five consecutive days prior to December 17, 2002. The Committee
and the Board determined that this grant was in the best interests of the
Company and its shareholders in order to provide the executive officers and
managers with performance incentives which further align their interests with
those of shareholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Watts, Chairman, President and Chief Executive Officer of the Company,
joined the Company in 1967 and became President in February 1991, Chief
Executive Officer in 1992 and Chairman of the Board in 1998. For fiscal year
1999, Mr. Watts had a base salary of $360,000. In March 1999, he was awarded
50,000 stock options valued at $11.50 per share (see p. 8) under the 1997 Long
Term Incentive Plan by the Plan Committee based upon the Company's 1998
performance. The Plan Committee did not award stock options to Mr. Watts at the
end of 1999. The Compensation Committee determined that Mr. Watts was not
eligible to receive a cash bonus for 1999 under the Management Incentive Plan
(see preceding paragraph) and that his base salary for 2000 should be increased
from $360,000 to $371,000 reflecting a 3% increase comparable to the average
wage and salary increase for all Company employees.
In reviewing Mr. Watts' compensation for 1999 and determining its
recommendation of Mr. Watts' bonus compensation for 1999 and base salary
adjustment for 2000, the Committee considered shareholder total return in 1999,
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 1999 as the Company's Chief Executive Officer.
The Committee noted that Company sales and net income had not met
expectations for 1999, although from an historical perspective, sales were the
second best in the Company's history. The Committee considered that these
results were caused by aggressive promotion efforts by competitors, an unusually
hot summer, and difficulties with the modernization of the Hunting Park Avenue
bakery. Notwithstanding these challenges, the Company has made significant
progress in expanding its national sales and food service programs through the
execution of sales distribution agreements with national retailers and
wholesalers, including Aramark, Save-A-Lot and Wal-Mart.
The Committee reviewed each of the specific goals and criteria which had
been established for Mr. Watts for fiscal year 1999. Taking into consideration
all of the circumstances referred to in this Report, the award of stock options
by the Long Term Incentive Plan Committee in March 1999 and the decision by that
Committee not to grant any option awards at the end of 1999, the Compensation
Committee concluded that it was appropriate not to award Mr. Watts a cash bonus
as referenced above and that his base salary for 2000 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 1999 was formerly an Executive Officer of the Company
until his retirement on May 1, 1992.
11
<PAGE> 14
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,
(ii) the Russell 2000 and (iii) 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.
The Company has included the returns for the Russell 2000 in this year's
performance graph because it intends to continue to use it as the comparison
index in place of the Wilshire 5000. The Russell 2000 index reflects the
performance of the 2000 largest U.S. companies by market capitalization while
the Wilshire 5000 index reflects the performance of over 7000 U.S. stocks. The
Company believes the Russell 2000 index more closely measures the performance of
it and its peer group members since its peer group members are, or would qualify
to be, represented within that index and the Company's business cycles follow
those of its peers. The Wilshire 5000 index reflects a much broader market of
all U.S. headquartered stocks, including midcap and smallcap companies. As a
result, it is more of an indicator of the performance of the overall market and
less of an indicator of the segment within which the Company operates.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
TASTY PEER GROUP WILSHIRE 5000 RUSSELL 2000
----- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Dec.-94 100.00 100.00 100.00 100.00
Dec.-95 96.00 112.00 137.00 126.00
Dec.-96 114.00 202.00 165.00 145.00
Dec.-97 207.00 303.00 217.00 175.00
Dec.-98 167.00 273.00 268.00 169.00
Dec.-99 96.00 186.00 331.00 202.00
</TABLE>
<TABLE>
<CAPTION>
PEER WILSHIRE RUSSELL
AS OF TASTY GROUP 5000 2000
----- ----- ----- -------- -------
<S> <C> <C> <C> <C>
12/31/94 100 100 100 100
12/31/95 96 112 137 126
12/31/96 114 202 165 145
12/31/97 207 303 217 175
12/31/98 167 273 268 169
12/31/99 96 186 331 202
</TABLE>
Assumes $100 invested on December 31, 1994 in Tasty Baking Company Common
Stock, the Wilshire 5000 Index, the Russell 2000 Index and the 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.
12
<PAGE> 15
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 December 30, 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 2000, but the selection of other independent auditors will be
considered in future years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
PRICEWATERHOUSECOOPERS 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 2001 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 2001 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, 2000.
In connection with the Company's 2001 Annual Meeting and pursuant to Rule
14a-4 under the Exchange Act, if the shareholder's notice of submission of a
proposal for the 2001 Annual Meeting is not received by the Company on or before
February 14, 2001, 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 25, 1999 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
13
<PAGE> 16
TASTY BAKING COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for the Annual Meeting of Shareholders, April 28, 2000 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 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> 17
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
Tasty Baking Company
April 28, 2000
Please Detach and Mail in the Envelope Provided
/X/ Please mark your votes as in this example.
FOR WITHHELD
1. ELECTION OF DIRECTORS. / / / /
NOMINEES: Class 2 James L. Everett, III
Nelson G. Harris
Carl S. Watts
FOR AGAINST ABSTAIN
2. Approval of the selection of
PricewaterhouseCoopers LLP as / / / / / /
independent public accountants
for the fiscal year ending
December 30, 2000.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 AND IN ACCORDANCE WITH THE INSTRUCTIONS OF THE BOARD OF
DIRECTORS ON ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURES DATE
-------------------------------------------- ---------------------
(NOTE: 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.)
