August 4, 2010

To Our Valued Stockholders:

Four years ago, in fiscal 2007, we embarked upon a new corporate-wide business strategy known as “BEST Brand Builders,” which consists of five key elements: Win Together as a Team, Consistently Drive Sales Growth, Improve Margins with an Eye on Customer Satisfaction, Be the BEST at Operations Execution and Increase Returns on Invested Capital. We believe this strategy positions us to realize our vision of becoming “best in class” in all of our food businesses: Bob Evans Restaurants, Mimi’s Café, Bob Evans Food Products and Owens Foods.

The results were immediately apparent, as we have improved our operating results in fiscal 2007 and in each successive year since then. You can see the most recent evidence in our financial performance during fiscal 2010 — a year in which we improved our adjusted operating income (excluding special items) for the fifth consecutive year. Productivity initiatives in the past year — particularly in cost of sales, labor and SG&A — helped offset negative leverage from lower sales in the restaurant segment. The food products segment’s profitability for the year exceeded our expectations, due largely to a strong first half and lower full-year sow costs relative to fiscal 2009.

We believe we have successfully created additional stockholder value in fiscal 2010, and I am confident that our Brand Builders strategy has positioned us to deliver improved results going forward.

Thank you for your support of Bob Evans Farms. I look forward to communicating with you throughout our 2011 fiscal year.

Sincerely,

Steven A. Davis
Chairman of the Board and Chief Executive Officer

3776 S. High St.
Columbus, Ohio 43207

How do I vote?

If you are a stockholder of record, you can vote in person at the annual meeting or by proxy. There are three ways to vote by proxy:

	•		Internet — You can vote over the Internet at www.proxyvote.com ;
	•		Telephone — If you are located in the United States, you may vote by telephone by calling (800) 690-6903; or
	•		Mail — If you received your proxy materials by mail, you can vote by mail by completing, signing and dating the enclosed proxy card and returning it promptly in the envelope provided.

The deadline for voting through the Internet or by telephone is 11:59 p.m. Eastern Time, on September 12, 2010. If you vote through the Internet, you may incur costs associated with electronic access, such as usage charges from Internet access providers and telephone companies.

If you hold your shares in street name, you should follow the voting instructions provided to you by the organization that holds your shares. If you plan to attend the annual meeting and vote in person, ballots will be available. If your shares are held in the name of your broker, bank or other stockholder of record, you must bring an account statement or a letter from the stockholder of record indicating that you were the beneficial owner of the shares on July 15, 2010.

What if my shares are held through the Bob Evans 401(k) plan?

If you participate in our 401(k) plan and have money invested in the Bob Evans common stock fund, you can instruct the trustee of the 401(k) plan how to vote those shares. If you do not instruct the trustee how to vote, then the shares you hold through the 401(k) plan will not be voted at the annual meeting.

How will my shares be voted?

If you vote by mail, through the Internet, by telephone or in person, your shares will be voted as you direct. We recommend the following:

	•		FOR the election of each of the director nominees listed under “Proposal 1: Election of Directors;”
	•		FOR the amendments to our Amended and Restated Bylaws (“Bylaws”) to provide that all directors will be elected annually, as described under “Proposal 2: Approval of Amendments to Bylaws to Provide for Annual Election of All Directors;”
	•		FOR the Company proposal to reduce the stockholder approval threshold required to amend Section 3.01 of our Bylaws from 80 percent of our outstanding common shares to a simple majority, as described under “Proposal 3: Approval of Amendment to Bylaws to Reduce Stockholder Approval Threshold Required to Amend Section 3.01 of Our Bylaws;”
	•		FOR ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm, as described under “Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm;” and
	•		FOR the adoption of the Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan as described under “Proposal 5: Adoption of the Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan.”

If you submit a valid signed proxy prior to the annual meeting, but do not complete the voting instructions, your shares will not be voted at the annual meeting on the above items.

Can other matters be decided at the annual meeting?

On the date this proxy statement was printed, we did not know of any matters to be raised at the annual meeting other than those included in this proxy statement. If you submit a valid proxy and other matters are properly presented for consideration at the annual meeting, then the individuals appointed as proxies by our Board will have the discretion to vote on those matters for you.

May I revoke or change my vote?

Yes, you may revoke or change your vote in any of the following ways:

	•		sending written notice to our Corporate Secretary at 3776 S. High St., Columbus, Ohio 43207, which must be received prior to the annual meeting;
	•		submitting a later-dated proxy, which we must receive prior to the annual meeting;
	•		casting a new vote through the Internet or by telephone before 11:59 p.m. Eastern Time, on September 12, 2010; or
	•		attending the annual meeting and revoking your proxy in person if you are the stockholder of record of your shares.

If your shares are held in street name and you wish to revoke your proxy, you should follow the instructions provided to you by the record holder of your shares. If you wish to revoke your proxy in person at the meeting, you must bring an account statement or letter from the stockholder of record indicating that you were the beneficial owner of the shares on July 15, 2010. Attending the annual meeting will not, by itself, revoke your proxy.

How can I get electronic access to the proxy materials?

If you received your annual meeting materials by mail, we strongly encourage you to conserve natural resources and help reduce our printing and processing costs by signing up to receive future proxy materials via e-mail or the Internet. The Notice will provide you with instructions how to:

	•		view our proxy materials for the annual meeting on the Internet; and
	•		instruct us to send our future proxy materials to you electronically by e-mail.

If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy-voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

Who pays the cost of proxy solicitation?

We will pay the expenses of soliciting proxies, other than the Internet access and telephone usage charges you may incur if you access our proxy materials or vote through the Internet. Our employees, as well as employees of our proxy solicitor, The Altman Group, may solicit proxies by further mailings, by telephone, electronic mail, facsimile or by personal contact. Our employees will not receive any additional compensation for these solicitations. We have agreed to compensate The Altman Group approximately $8,500, plus reimbursement of expenses for their services to aid in the solicitation of proxies with respect to shares held by broker/dealers, financial institutions, and other custodians, fiduciaries and nominees. We may however pay additional sums to The Altman Group if deemed necessary to assist in this solicitation. We will also pay the standard charges and expenses of brokers, banks and other stockholders of record for forwarding proxy materials to the beneficial owners of our stock.

What constitutes a quorum?

We must have a quorum at the annual meeting in order to vote on the proposals. Under our Bylaws, a quorum is the presence at the annual meeting, in person or by proxy, of a majority of the outstanding shares of common stock entitled to vote at the annual meeting. Abstentions and “broker non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A “broker non-vote” occurs when a stockholder of record, such as a broker or bank, does not vote on a proposal because it has not received voting instructions from the beneficial owner and does not have discretionary authority to vote on that proposal.

What are the voting requirements to elect the directors and to approve the other proposals discussed in the proxy statement?

Proposal 1: Election of Directors

Starting this year, voting for directors is no longer considered “routine” and your broker no longer has discretion to vote your shares in director elections. If you hold your shares in street name, it is very important that you direct the broker how to vote your shares in the election of our directors.

At the request of our stockholders, we amended our Bylaws to implement majority voting for uncontested director elections. Under this procedure, a majority of the votes cast at the annual meeting with respect to that director’s election must be voted “for” the election of the nominee for that nominee to be elected. Abstentions and broker non-votes will not be counted as votes “for” or “against” the election of the director. For more information on majority voting, see “Proposal No. 1: Election of Directors.”

Proposal 2 — Approval of Amendments to Bylaws to Provide for Annual Election of All Directors, and Proposal 3 — Approval of Amendment to Bylaws to Reduce Stockholder Approval Threshold Required to Amend Section 3.01 of Our Bylaws

Under our Bylaws, at least 80 percent of the outstanding shares of our common stock must be voted “for” the Company proposals to amend our Bylaws. Abstentions and broker non-votes will have the same effect as votes “against” these proposals.

Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm

Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm requires the affirmative vote of the majority of the common shares present at the annual meeting. If you are a beneficial owner, the holder of record of your stock has discretionary authority to vote your shares on the ratification of Ernst & Young LLP as our independent registered public accounting firm, even if it does not receive voting instructions from you.

Proposal 5 — Adoption of the Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan

Approval of the 2010 Plan requires the affirmative vote of the majority of the common shares present at the annual meeting. Abstentions are considered present and have the effect of a vote “against.” Broker non-votes are not treated as present for the purpose of determining whether the stockholders have approved that matter.

What is “householding” and how does it affect me?

We have adopted a procedure approved by the SEC called “householding.” This procedure reduces our printing costs and postage fees. Under this procedure, stockholders of record who share the same address and last name will receive only one copy of the Notice and/or one set of our proxy materials, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. Stockholders who participate in householding will continue to have separate proxies and have the right to vote separately. Also, householding will not affect the payment of dividends in any way.

If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our Notice or proxy materials and you wish to receive only a single copy of these documents for your household, please contact our transfer agent, American Stock Transfer, at (866) 714-7298. If you currently participate in householding and wish to receive a separate copy of our Notice or proxy materials, we will send you a separate copy upon your written request to American Stock Transfer. You may also contact American Stock Transfer if you wish to receive separate copies of the Notice or proxy materials in the future.

Beneficial owners can request information about householding from their banks, brokers or other stockholders of record.

The following table summarizes, as of July 15, 2010, the amount of our common stock beneficially owned by each director, each individual named in the “Summary Compensation Table,” and by all of our current directors and executive officers as a group:

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16 of the Securities Exchange Act of 1934 requires that our directors and executive officers and any person or entity holding more than 10 percent of our outstanding common stock report their initial ownership of our common stock, and any subsequent changes in their ownership, to the SEC. Specific due dates have been established by the SEC, and we are required to disclose in this proxy statement any late reports.

We believe, based on a review of (1) Section 16(a) ownership reports filed on behalf of these individuals for their transactions during fiscal 2010 and (2) documentation received from one or more of these individuals that no annual Form 5 reports were required to be filed for them for fiscal 2010, that all SEC filing requirements were met.

Detailed information on each Board committee is contained in the section captioned “CORPORATE GOVERNANCE, Board Committees and Charters,” below.

We believe that a combined Chairman and Chief Executive Officer position, together with independent chairs for each of our Board committees, a Lead Independent Director, regularly scheduled executive sessions of the Board and regularly scheduled meetings of the non-management directors, is the most appropriate Board leadership structure for us at this time. This structure demonstrates to all of our stakeholders, including our stockholders, that our Board is committed to engaged, independent leadership and the performance of its responsibilities. Experienced and independent directors, sitting on various committees with independent chairpersons, oversee our operations, risks, performance, executive compensation and business strategy. We have also added several new independent directors since Mr. Davis was appointed to both the Chairman and Chief Executive Officer positions in order to enhance the independence and diversity of our Board. These new directors are Mr. Williams, Ms. Mallesch, Mr. Stockton and Dr. Gee.

The Board believes strongly that combining the Chairman and Chief Executive Officer positions takes advantage of the talent and knowledge of Mr. Davis, the person whom the Board recognizes as the “leader” of the modern day Bob Evans Farms, and effectively combines the responsibilities for strategy development and execution with management of day-to-day operations. It also reduces the potential for confusion or duplication of efforts and provides clear leadership for our entire organization, including providing the greatest opportunity for the Board to work directly with Mr. Davis.

The Board believes that its strong governance practices, including its supermajority of independent directors and its clearly defined Lead Independent Director responsibilities, provide an effective balance to the combination of the Chairman and Chief Executive Officer positions. The Board may determine in the future, as it has done in the past, that circumstances warrant separation of the Chairman and Chief Executive Officer positions. The Board believes, however, the current structure is the most appropriate for us today.

Voting Standards for Director Elections

Our Bylaws and Corporate Governance Principles provide that, in uncontested elections (i.e., elections where the number of nominees is the same as the number of Board seats available), directors are elected by a majority of the votes cast. This means that more than 50 percent of the shares voted at the annual meeting must be cast in favor of the election of that director. Abstentions and broker non-votes do not count as votes cast.

Our Bylaws provide that before any incumbent director may be nominated for re-election by the Board, he or she must submit an irrevocable resignation, which would become effective if:

	•		the director does not receive more than 50 percent of the votes cast at the annual meeting, and
	•		the Board accepts the resignation in accordance with policies and procedures adopted by the Board for such purposes.

If an incumbent director does not receive a majority of the votes cast, the Nominating and Corporate Governance Committee and the Board will consider whether to accept the director’s resignation in light of the best interests of our Company and our stockholders. When making this decision, the Nominating and Corporate Governance Committee and the Board may consider any factors they determine to be appropriate and relevant, including any stated reasons why stockholders voted against the incumbent director (and any alternatives for addressing those reasons) and whether the loss of the director would:

	•		eliminate a financial expert from the Audit Committee;
	•		cause the Board to have less than a majority of independent directors;
	•		cause us to fail to satisfy NASDAQ listing requirements;
	•		result in our default or breach under any loan covenants or other material contracts; or
	•		trigger a significant payment by us under an employment contract or other contract.

The Board expects that an unsuccessful incumbent would voluntarily agree not to participate in any meetings of the Nominating and Corporate Governance Committee and the Board regarding his or her resignation. The Board must decide whether to accept or reject the director’s resignation within 90 days after receipt of the certified final stockholder vote for the election of directors. Within four business days following acceptance or rejection of the resignation, we would file a report with the SEC on Form 8-K discussing the Board’s decision and rationale.

Information Regarding Nominees for Election and Incumbent Directors

At the 2010 annual meeting, four Class III directors will be nominated for election. Based on the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Messrs. Gasser, Ingram and Stockton, as well as Dr. Gee, for re-election as Class III directors. If elected, these four individuals will each serve for a three-year term. However, if our stockholders approve Proposal 2 to provide for the annual election of all directors, the nominees will be elected to a one-year term expiring at our 2011 annual meeting.

The following table shows the nominees for election to the Board, the directors whose terms in office will continue after the annual meeting, and information about each nominee and continuing director. In the determination of whether to nominate a person for our Board, the items discussed in “CORPORATE GOVERNANCE; Board Committees and Charters, Nominating and Corporate Governance Committee” are generally considered.

CORPORATE GOVERNANCE

Board Responsibilities

The Board oversees, counsels and directs management in the long-term interests of our Company and our stockholders. The primary responsibilities of the Board and its committees include:

	•		Strategy: The Board actively works with management to develop annual and long-term strategies for our business. The Board evaluates, approves and monitors the achievement of our business, strategic and financial objectives, plans and actions.
	•		Leadership and Succession Planning: The Board and the Compensation Committee are responsible for the selection, evaluation and compensation of our directors and executive officers, including our Chairman and Chief Executive Officer. The Board and the Nominating and Corporate Governance Committee also work with management in the development of succession plans for our directors and executive officers.
	•		Operating Performance: The Board regularly monitors our operational execution and financial performance, and discusses improvements and changes when appropriate. The Board holds management

			accountable for the execution of our strategic plans. The Board and the Audit Committee also work with management in the assessment and mitigation of our major risk factors.
	•		Governance: The Board and the Nominating and Corporate Governance Committee oversee the establishment, implementation and maintenance of policies, practices and procedures to ensure that our business is conducted with the highest standards of ethical conduct and in conformity with applicable laws.

The Board has designated Mr. Gasser as its “Lead Independent Director” to coordinate the activities of the other independent directors and to perform other functions that will serve the best interests of our Company and our stockholders. The Lead Independent Director’s specific responsibilities are described under “PROPOSAL 1: ELECTION OF DIRECTORS; Board Leadership Structure,” above.

The independent directors meet in executive sessions, without management and the non-independent directors, at the conclusion of each Board meeting and at other times they deem necessary or appropriate. The Lead Independent Director presides at these sessions.

Director Independence

Our Board follows the rules of The NASDAQ Stock Market LLC (“NASDAQ”) in determining whether our directors are “independent.” The NASDAQ rules contain both bright-line, objective tests and a subjective test for determining who is an independent director. The objective tests provide specific situations where a director will not be considered independent. For example, a director is not independent if he or she is employed by us or is a partner in or executive officer of an entity to which we made, or from which we received, payments in the current or any of the past three fiscal years that exceed five percent of the recipient’s consolidated gross revenues for that year. The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

All of our non-employee directors qualify as independent under the objective tests. In evaluating independence under the subjective test, the Board reviewed and discussed all relevant facts and circumstances, including information provided by the directors and management regarding each non-employee director’s business and personal activities as they relate to us. The Board considered transactions between us and entities associated with the independent directors or members of their immediate family. These transactions were reviewed in the context of the NASDAQ objective tests, the special standards established by the SEC for members of audit committees, and the special standards established by the SEC and the Internal Revenue Service for compensation committee members.

The Board reviewed the following transactions in its independence determinations:

Relationships between the Nationwide Companies and Us.

Ms. Mallesch served as Senior Vice President and Chief Financial Officer-PCIO of each of Nationwide Mutual Insurance Company (“NMIC”), Nationwide Mutual Fire Insurance Company, Nationwide Assurance Company and Nationwide Property and Casualty Insurance Company and Senior Vice President and Chief Financial Officer of Nationwide Insurance Company of Florida, all of which are property-casualty insurance companies. NMIC is the ultimate majority parent company of Nationwide Financial Services, Inc., which is the holding company for Nationwide Life Insurance Company and other companies that comprise the domestic life insurance and retirement savings operations of the Nationwide group of companies (collectively the “Nationwide Companies”).

Ms. Mallesch retired from all of her positions with the Nationwide Companies effective December 31, 2009.

In July 2008, the Nationwide Companies acquired $15.0 million of our Series B 4.61% senior notes (the “Senior Notes”). The original total principal amount of the Senior Notes was $30.0 million. The Senior Notes mature on July 28, 2013.

During fiscal 2010, the Nationwide Companies held the Senior Notes and we timely made all required principal and interest payments to the Nationwide Companies. Further, we are in compliance with all covenants of the Senior

Notes. At the end of fiscal 2010, the outstanding principal amount of the Senior Notes held by the Nationwide Companies was approximately $5.0 million.

Prior to her nomination to our Board, and in the periods subsequent through December 31, 2009, the Nominating and Corporate Governance Committee and the Board determined that the aspects of the Senior Notes relationship was not material and would not interfere with Ms. Mallesch’s independent judgment in carrying out her responsibilities as a director for a variety of reasons: (1) the purchase of the Senior Notes by the Nationwide Companies was made before her election to our Board; (2) the terms of the purchase, as well as the payments under the Senior Notes, are the same as for the other holders of the Senior Notes; (3) Ms. Mallesch was not involved in the decision by the Nationwide Companies to either purchase or to continue to hold the Senior Notes; (4) the type of payments made by us to the Nationwide Companies in respect to the Senior Notes under the NASDAQ rules specifically state they will not preclude a determination of independence; (5) the aggregate amount of the payments made by us to the Nationwide Companies during fiscal 2010 in respect of the Senior Notes represented less than one percent of the consolidated gross revenues for the last fiscal year of the Nationwide Companies; and (6) Ms. Mallesch does not have a material direct or indirect interest in any of the transactions.

Relationships between The Ohio State University and Us and our Affiliates.

Since August 1, 2007, Dr. Gee has been the President of The Ohio State University (“University”).

Since July 1, 2007, we have been a party to a sponsorship agreement with Sodexo, Inc., which acts as the agent and manager for the University’s concessions. Per the terms of the agreement, we paid $115,000 to Sodexo, Inc. in each of fiscal 2008 and 2009, $148,000 for fiscal 2010, and will pay $148,000 in fiscal 2011. Our name and logo appear on signage at certain of the University’s athletic facilities and on concession boards where Sodexo, Inc. serves our products. We also receive the exclusive right to sell our products in several of the University’s athletic facilities and certain promotional rights to use the University’s name and athletic trademarks.

During fiscal 2010, we and several of our directors and management group made approximately $155,346 and $20,000, respectively, in charitable contributions to the University.

In addition, Ms. Krueger has pledged to donate $1.0 million to the University’s James Cancer Hospital through 2015 and chairs the capital raising campaign for the James Cancer Hospital. Mr. Davis has pledged to donate $75,000 to the University over a five-year period beginning in 2010. The James Foundation is affiliated with the University, but is not controlled by the University.

Ms. Krueger and Mr. Ingram serve on a voluntary unpaid basis on the OSU Foundation Board and the James Foundation Board, and Mr. Davis serves on a voluntary unpaid basis on the James Foundation Board. Certain of our directors also serve on a voluntary unpaid basis as members of the boards of various affiliates of the University.

The Board determined that these relationships and transactions did not interfere with Dr. Gee’s independent judgment in carrying out his responsibilities as a director because the Board concluded that our transaction with Sodexo, Inc. occurred in the ordinary course of business because and the terms were negotiated at arm’s length. The aggregate cost of the sponsorship transaction is relatively small and has similar terms as other third parties who have entered into similar agreements with the University. The charitable contributions and volunteer work by us and some of our directors are voluntary civic contributions. Further, we are not aware of our Company or any of our directors receiving any benefits for the charitable and civic contributions. Finally, Dr. Gee does not have a material direct or indirect interest in any of the transactions.

Relationships between Grief, Inc. and Us.

On March 19, 2009, we entered into a sale agreement and a joint ownership agreement with a subsidiary of Grief, Inc. for our corporate aircraft. Pursuant to the sale agreement, we sold to Grief’s subsidiary 49 percent of the aircraft for approximately $2.4 million, which equaled 49 percent of the aircraft’s fair market value as determined by an independent third party appraisal. The joint ownership agreement controls the use and sharing of the aircraft and related expenses. Fixed expenses are shared on a pro rata basis and variable expenses are based upon the number of flight hours used. We are responsible for the day-to-day management of the aircraft’s use, storage, maintenance repair and scheduling. Each party has the right to terminate the joint ownership agreement for any reason upon

120 days prior written notice. Upon termination, Greif is obligated to sell its ownership interest to us based on the fair market value of the aircraft at the time of the sale.

The Board determined that this relationship and transaction did not interfere with Mr. Gasser’s independent judgment in carrying out his responsibilities as a director because none of our officers or directors, nor Mr. Gasser, has a direct or indirect material interest in this transaction or the joint ownership arrangement. The purchase price was based upon an independent third party appraisal, as would a repurchase. All variable expenses are charged on a cost basis and attributed to that party’s use of the aircraft. The transaction and arrangement is beneficial to both companies by reducing the overall costs of aircraft ownership through the joint ownership agreement.

Board Committees and Charters

The Board appoints the members of its committees and delegates various responsibilities and authority to its committees. The Board currently has standing Audit, Compensation, Finance and Nominating and Corporate Governance Committees. The Board has determined that each member of these committees is an independent director with the exception of Mr. Corbin who sits on the Finance Committee. Each Board committee has a written charter approved by the Board. Copies of each charter are posted on our Web site, www.bobevans.com, in the “Investors” section under “Corporate Governance.” Each committee has the power to, as it deems necessary, engage outside experts, advisers and counsel to assist it in its work.

The following table identifies our current committee members and indicates the number of meetings held in person or by telephone by each committee during fiscal 2010.

Audit Committee. The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee’s primary responsibilities include:

	•		overseeing our accounting and financial reporting processes, audits of our consolidated financial statements and our internal audit function;
	•		directly appointing, compensating and overseeing our independent registered public accounting firm;
	•		assessing our risk management processes;
	•		instituting procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and
	•		assisting the Board in the oversight of internal control over financial reporting.

The Audit Committee also reviews and pre-approves all audit services and permitted nonaudit services provided by our independent registered public accounting firm to us or any of our subsidiaries and ensures that we do not engage our independent registered public accounting firm to perform any services prohibited by any applicable law, rule or regulation.

The Board has determined that each member of the Audit Committee is independent, including under the special standards established by the SEC for members of audit committees. Each member of the Audit Committee is able to read and understand fundamental financial statements, including our balance sheets, income statements and cash flow statements. The Board has also determined that Ms. Mallesch qualifies as an “audit committee financial expert” under SEC rules.

The Audit Committee’s responsibilities and activities are described in detail in the Audit Committee’s charter and under the “Audit Committee Report” contained in this proxy statement.

Compensation Committee. The purpose of the Compensation Committee is to discharge the Board’s responsibilities relating to compensation of our directors and executive officers. The Compensation Committee’s primary responsibilities include:

•

reviewing with management and approving the general compensation policy for our executive officers and directors;

	•		ensuring that our “pay for performance” compensation philosophy is executed with employees throughout our organization;
	•		reviewing and approving the compensation of our executive officers in light of goals and objectives approved by the Compensation Committee;
	•		administering our stock-based compensation plans and approving stock-based awards;
	•		assessing our Company’s compensation risk management processes;
	•		evaluating the need for, and terms of, change in control and employment/severance contracts with our executive officers; and
	•		reviewing and making recommendations to the Board with respect to incentive compensation plans and stock-based compensation plans in accordance with applicable laws, rules and regulations.

The Board has determined that each member of the Compensation Committee is independent, and is also a “non-employee director” under SEC rules and an “outside director” under applicable tax laws and regulations.

For more information on the responsibilities and activities of the Compensation Committee, including its process for determining executive compensation and the role of our executive officers in that process, see the “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Executive Compensation” disclosures contained in this proxy statement, as well as the Compensation Committee’s charter.

The Compensation Committee has retained the services of Towers Watson & Co. (“Towers Watson”), a consulting firm, to assist the Compensation Committee with its responsibilities. Towers Watson reports directly to the Compensation Committee with respect to executive compensation consulting services. For more information regarding the role of the compensation consultant, see the “Compensation Discussion and Analysis” contained in this proxy statement.

Finance Committee. The Finance Committee reviews and recommends matters related to our capital structure, including the issuance of debt and equity securities; banking arrangements, including the investment of corporate cash; and management of the corporate debt structure. In addition, the Finance Committee reviews and approves finance and other cash management transactions . The Finance Committee is also responsible for overseeing and advising the Board on:

	•		assessing capital expenditures, operating income, cash flow, cash management and working capital;
	•		reviewing investment strategies and policies;
	•		assessing adjustments to the Company’s capital structure;
	•		assessing annual and five-year capital plans and specific capital plan investments;
	•		assessing financial aspects of insurance and risk management;
	•		reviewing tax planning and compliance; and
	•		reviewing financial aspects of proposed mergers, acquisitions, divestitures, strategic investments, collaborations and joint ventures.

Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to identify and recommend to the Board qualified individuals for nomination, election or appointment as directors, and to provide recommendations regarding management succession. The Nominating and Corporate Governance Committee is also responsible for overseeing and advising the Board on corporate governance matters and practices, including:

•

developing, reviewing and assessing corporate governance guidelines and principles;

	•		reviewing and assessing our compliance with SEC and NASDAQ rules and other applicable legal requirements pertaining to corporate governance;
	•		reviewing and making recommendations to the Board and management regarding our organizational structure and succession plans for our executive officers;
	•		reviewing procedures designed to identify and, when appropriate, approving related person transactions; and
	•		recommending to the Board changes to committee structure and functions as the Nominating and Corporate Governance Committee deems advisable.

The Nominating and Corporate Governance Committee’s charter describes its responsibilities and activities in detail.

In carrying out its responsibilities to identify and evaluate director nominees, the Nominating and Corporate Governance Committee may consider any factors it deems appropriate when considering candidates for the Board, including, without limitation: judgment, skill, diversity, independence, accountability, strength of character, experience with businesses and organizations of comparable size, experience with a publicly traded company, professional accomplishments, experience and skill relative to other Board members, desirability of the candidate’s membership on the Board and any committees of the Board, demonstrated leadership ability, existing relationships with us and potential conflicts of interest and the ability to represent our stockholders. While the Board does not have a formal policy on diversity, the Nominating and Corporate Governance Committee takes into account the existing diversity reflected in the members of the Board, including their professional experience, skills, backgrounds and viewpoints, as well as in gender, ethnicity and national origin. Depending on the current needs of the Board, certain factors may be weighed more or less heavily by the Nominating and Corporate Governance Committee. In considering candidates for the Board, the Committee will evaluate the entirety of each candidate’s credentials. However, there are no specific minimum qualifications that must be met by a Nominating and Corporate Governance Committee-recommended nominee. Nevertheless, the Nominating and Corporate Governance Committee does believe that all members of the Board should have the highest character and integrity, a formal college education, business experience, a reputation for working constructively with others, sufficient time to devote to Board matters and no conflict of interest that would interfere with performance as a director.

The Nominating and Corporate Governance Committee considers candidates recommended by our stockholders and evaluates them using the same criteria as for other candidates. The Nominating and Corporate Governance Committee also has used, and may in the future use, third party search firms to identify potential director candidates.

A stockholder who wants to recommend a prospective nominee for consideration by the Nominating and Corporate Governance Committee should submit the candidate’s name, address and qualifications to our Vice President, General Counsel and Corporate Secretary at Bob Evans Farms, Inc., 3776 S. High St., Columbus, Ohio 43207.

Board Role in Risk Oversight

Our Board has overall responsibility for risk oversight with a focus on the most significant risks facing our Company. Not all risks can be dealt with in the same way. Some risks may be easily perceived and controllable, and other risks are unknown; some risks can be avoided or mitigated by particular behavior, and some risks are unavoidable as a practical matter. For some risks, the potential adverse impact would be minor, and, as a matter of business judgment, it may not be appropriate to allocate significant resources to avoid the adverse impact. In other cases, the adverse impact could be significant, and it is prudent to expend resources to seek to avoid or mitigate the potential adverse impact. Sometimes a higher degree of risk may be acceptable because of a greater perceived potential for a return on our investment.

Management is responsible for:

	•		identifying risk and risk controls related to significant business activities;
	•		mapping the risks to our strategy; and
	•		developing programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential return and the appropriate manner in which to control risk.

The Board implements its risk oversight responsibilities by having management provide periodic reports on the significant risks that we face and how we control or mitigate risk, if and when appropriate. In some cases, risk oversight is addressed as part of the full Board’s engagement with the Chief Executive Officer and management. In other cases, a Board committee is responsible for oversight of specific risk topics. For example,

	•		the Audit Committee oversees our enterprise risk management program, as discussed in greater detail below, as well as issues related to internal control over financial reporting;
	•		the Nominating and Governance Committee oversees issues related to our governance structure, corporate governance matters and processes and risks arising from related person transactions, as well as issues related to management succession;
	•		the Finance Committee oversees issues related to our capital and debt structure; and
	•		the Compensation Committee oversees risks related to compensation programs, as discussed in greater detail below.

Presentations and other information for the Board and its committees generally identify and discuss relevant risk and risk control; and the Board members assess and oversee the risks as a part of their review of our related business, financial or other activities.

We have a formal enterprise risk management program which is monitored by our Audit Committee. Management, through its Enterprise Risk Management (“ERM”) Working Group and ERM Oversight Committee completed a comprehensive enterprise risk management review, in which the identification of enterprise level risks and mitigation processes were the primary topics. This review was overseen by the Audit Committee with the exception of the risks related to compensation programs, which was overseen by the Compensation Committee, including a joint meeting of the Audit and Compensation Committees. These Committees, as well as the full Board, will continue to monitor enterprise risk management and will receive periodic updates on enterprise risk management. The Audit Committee receives quarterly ERM updates, while the Board receives ERM updates at least twice per year. The Compensation Committee completes an annual compensation risk assessment.

Consistent with new SEC disclosure requirements, management has assessed our compensation programs and has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. The Compensation Committee oversaw this assessment. In particular, in management reaching its conclusion, the compensation of all executive and management level employees was reviewed in light of the following areas of risk:

	•		business unit that carries a significant portion of our risk profile;
	•		business unit whose compensation structure is significantly different;
	•		business unit that is significantly more profitable; and
	•		business unit whose compensation expense is a significant percentage of revenue.

We do not believe that any of these specific areas apply to our compensation policies and practices in any meaningful manner.

Board Meetings and Attendance at Annual Meetings of Stockholders

The Board and its committees meet throughout the year on a set schedule and also hold special meetings and act by written consent from time to time as appropriate. The Board held six meetings during fiscal 2010. Each director is expected to attend each meeting of the Board and the committees on which he or she serves. In fiscal 2010, every director attended at least 75 percent of the meetings of the Board and the committees on which he or she served held during his or her time of service. According to our Corporate Governance Principles, each director is expected to

attend each annual meeting of our stockholders. All of our then incumbent directors attended our last annual meeting of stockholders held on September 14, 2009.

Directors Serving on Boards of Other Public Companies

To ensure that directors have sufficient time to devote to Board matters, our Corporate Governance Principles provide that directors and nominees may not serve on the boards of more than three other publicly traded companies. The following directors are also directors of other publicly traded companies, or have served in this capacity during the last five years.

Resignation/Retirement of Directors

When a director’s principal occupation or business association changes substantially from the position he or she held when originally invited to join the Board, the director must tender a letter of resignation to the Board and the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will consider whether the director’s new occupation or retirement is consistent with the rationale for originally selecting that individual, the guidelines for Board membership (e.g., independence) and the current needs of the Board. The Nominating and Corporate Governance Committee will recommend action to be taken by the Board regarding the resignation based on the circumstances of retirement, if that is the case, or in the case of a new position, the responsibility, type of position and industry involved. A director may not stand for re-election to the Board after his or her 70th birthday.

Stockholder Communications with the Board of Directors

The Board believes it is important for stockholders to have a process to communicate with the Board, committees of the Board and individual directors. Any stockholder may contact the Board or any member or committee of the Board by writing to them at:

Bob Evans Farms, Inc.
c/o Vice President, General Counsel and Corporate Secretary
3776 S. High St.
Columbus, Ohio 43207

E-mails may also be sent to the Audit Committee at audit.comm@bobevans.com.

Stockholders should note that:

	•		All questions and concerns regarding accounting, internal accounting controls or auditing matters are promptly forwarded to the Audit Committee for review and investigation.
	•		All other communications are initially reviewed by our Vice President, General Counsel and Corporate Secretary. The Lead Independent Director is promptly notified of any such communication that alleges misconduct on the part of top management or raises legal, ethical or compliance concerns about our policies or practices.
	•		The Chairman of the Board receives copies of all other Board-related communications on a periodic basis.

Typically, communications unrelated to the duties and responsibilities of the Board are not forwarded to the directors, such as product complaints and inquiries, new product and location suggestions, résumés and other forms of job inquiries, opinion surveys and polls, business solicitations or advertisements, junk mail and mass mailings.

Code of Conduct

The Board has reviewed and adopted a Code of Conduct that sets forth standards regarding honest and ethical conduct, full and timely disclosure and compliance with law. The Code of Conduct embodies our expectations for ethical behavior, based on our BEST ^® Brand Builders and built around our corporate values. The Code of Conduct applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer and controller. A copy of the Code of Conduct is available on our Web site, www.bobevans.com, in the “Investors” section under “Corporate Governance.” Amendments to the Code of Conduct or waivers of the Code of Conduct granted to executive officers and directors will also be disclosed on our Web site within five days following the date of the amendment or waiver.

Director Compensation for Fiscal 2010

All non-employee directors receive a $3,000 monthly cash retainer and the Lead Independent Director receives an additional $20,000 annual retainer. Mr. Davis does not receive fees for his Board service.

Our director compensation program currently provides that each non-employee director will receive an annual award of our common stock with a grant date value of approximately $100,000 (calculated using the closing price of our common stock on the grant date). Directors who are eligible to retire from the Board (i.e., a director who reaches age 55 with at least 10 years of service or the sum of the director’s age and years of service equals at least 70 with at least 10 years of service) receive whole shares without holding requirements or restrictions on transfer while directors who are not eligible to retire receive restricted stock. The stock awards are made as soon as practicable following our annual meeting of stockholders.

Non-employee directors receive $2,000 for each Board meeting they attend and $1,750 for each committee meeting they attend. Each non-employee director who serves as the chair of a Board committee is also paid a monthly retainer of $625 per committee chairmanship.

Directors are also reimbursed for out-of-pocket expenses for travel to and from Board and committee meetings. Non-employee directors who undertake special projects and assignments at the request of the Chairman of the Board are compensated on a per diem rate of $1,000 plus expenses.

We maintain a life insurance policy with a death benefit of $50,000 on behalf of each non-employee director. We also offer group health insurance to our non-employee directors. Messrs. Corbin and Lucas and Mses. Krueger and Mallesch have elected to participate in our group health insurance plan on the same terms as our employees (i.e., we pay the employer portion of their health insurance premiums and the participating directors pay the employee portion of the health insurance premiums). Upon retirement, participants in our group health insurance plan must pay all health insurance premiums, including the employer portion that we pay prior to retirement. We have agreed to pay Mr. Lucas and Ms. Krueger a lump sum amount upon their retirement from the Board equal to a portion of the anticipated cost of the employer portion of their post-retirement health insurance premiums as determined by an actuary.

In May 2010, we adopted the Bob Evans Farms, Inc. 2010 Director Deferral Program (“Director Deferral Program”). It is a nonqualified, unfunded plan designed to provide our non-employee directors with the opportunity to defer compensation and receipt of shares of common stock associated with future grants of restricted stock units, performance share awards and certain other stock-based awards on a pre-tax basis. Due to its recent adoption, none of the directors has currently deferred any compensation into the Director Deferral Program. The right of participants to receive their distributions from the Director Deferral Program are not secured or guaranteed, but remain as part of our general liabilities.

Due to his employment with us, Mr. Davis did not qualify as a non-employee director and did not receive compensation for his service as a director. The compensation received by Mr. Davis as an employee is shown in the Summary Compensation Table included in this proxy statement. The following table sets forth the compensation earned by our non-employee directors during fiscal 2010.

COMPENSATION DISCUSSION AND ANALYSIS

What are the objectives of Bob Evans’ executive compensation program?

The overall goal of our executive compensation program is the same as our goal for operating our Company — to maximize value for our stockholders over time by aligning the financial interests of our executive officers and our stockholders. We seek to achieve this goal by striving to provide “pay for performance.” We use the following objectives to guide our overall approach for determining pay for our officers and to monitor and manage compensation:

	•		Focusing our executive officers on increasing value for our stockholders through the achievement of our strategic plan;
	•		Competing effectively with other restaurant or food products companies and comparably sized businesses for executive talent; and
	•		Recognizing and rewarding individual achievements while supporting our team-based culture.

What is the executive compensation program designed to reward?

Our executive compensation program is designed to reward performance, including total company, business unit and individual performance. More than half of each executive officer’s potential, total annual compensation is comprised of an annual cash performance bonus and stock-based incentive compensation, each of which we describe in more detail below. We base all annual cash performance bonuses and most stock-based incentive compensation solely upon the achievement of performance goals derived from key business metrics associated with our strategic plan and our BEST ^® (Bob Evans Special Touch) Brand Builders:

	•		Win Together as a Team;
	•		Consistently Drive Sales Growth;
	•		Improve Margins With an Eye on Customer Satisfaction;
	•		Be the BEST at Operations Execution; and
	•		Increase Returns on Invested Capital.

The performance goals and the related awards are designed to motivate our executive officers to accomplish financial and strategic business objectives and to perform at the highest level. Our executive compensation program is also designed to attract and retain key executives by paying salaries and benefits that are competitive in the restaurant industry.

Does Bob Evans compare the compensation of its executive officers to the compensation paid by other companies?

Yes. When we make compensation decisions, we compare the compensation of our executive officers to the compensation of similarly positioned executives at other companies to gain a general understanding of current market compensation practices for these positions. We generally target each element of our executive officers’ compensation to be within 15 percent of the market median (50th percentile) of the restaurant industry. We use market compensation information only as a reference point to review whether our compensation practices are consistent with the market so we can keep and attract executive talent. Consistency with market compensation is not the only factor we consider in setting compensation.

We believe that each executive officer’s compensation can be set at a level above or below the market median of the restaurant industry depending on several factors, such as our Company’s performance, the individual’s performance, the individual’s current and potential future role with us, and whether the individual’s compensation is fair and equitable as compared to our other executive officers’ compensation. Based on market data, we believe that compensation within the restaurant industry tends to be somewhat lower than the broader general industry segment. As a result, when we need to hire a new executive or retain an executive whose position is not specifically tied to the restaurant industry, we may need to pay that executive more than the market median for that position within the restaurant industry and review the compensation for that position in the overall market.

We strongly believe that target compensation under our incentive plans should allow for above-median compensation for exceptional performance, as well as below-median compensation when performance falls below our expectations.

Towers Watson, our compensation consultant, periodically provides the Compensation Committee with a report that compares each element of our executive officers’ compensation (i.e., base salary, target cash bonus and target stock-based compensation) to that of their counterparts in the restaurant industry using information from the annual Hay Group Chain Restaurant Compensation Association Survey. Additionally, for executive officers whose positions are not specific to the restaurant industry, the report compares their compensation to a broader general industry segment using information from the Towers Watson Executive Compensation Database. This information provides the Compensation Committee with a general understanding of current compensation practices for our executive officer positions that are not specific to the restaurant industry. The Compensation Committee elected not to receive the report in fiscal 2010 because none of our officers received base salary increases or had the other compensation components change, except for certain officers who were promoted or who joined us during fiscal 2010.

We compare the compensation of our food products officers to officers with similar positions at companies in the restaurant industry, not the food products industry. We do this because many food products companies are subsidiaries of large corporate conglomerates that have much higher market capitalizations than we do. We also do not believe that sufficient information is available about the compensation offered by food products companies to their executive officers to create a food products peer group or to draw meaningful compensation comparisons. However, based on information provided to us by our compensation consultant, we believe that the levels of executive officer compensation within the food products and restaurant industries are similar.

The Compensation Committee also compares the compensation of our Chief Executive Officer and Chief Financial Officer to the compensation paid to officers holding these positions at a specific group of peer companies established by the Compensation Committee with the assistance of our compensation consultant. The Compensation Committee, with the assistance of our compensation consultant, reviews the companies included in the peer group periodically to ensure that they are still relevant for comparative purposes. For fiscal 2010, our peer group consisted of the following 31 companies: BJ’s Restaurants, Inc.; Brinker International, Inc.; Buffalo Wild Wings, Inc.; California Pizza Kitchen, Inc.; Carrol’s Restaurant Group, Inc.; CBRL Group, Inc.; Cheesecake Factory, Inc.; CKE Restaurants, Inc.; Darden Restaurants, Inc.; Del Monte Foods, Co.; Denny’s Corp.; DineEquity, Inc.; Domino’s Pizza, Inc.; Famous Dave’s of America, Inc.; Frisch’s Restaurants, Inc.; Hain Celestial Group, Inc.; J.M. Smucker Co.; Lance, Inc.; Landry’s Restaurants, Inc.; McCormick & Company, Inc.; McDonald’s Corp.; O’Charley’s, Inc.; P.F. Chang’s China Bistro, Inc.; Panera Bread, Co.; Papa John’s International, Inc.; Red Robin Gourmet Burgers, Inc.; Ruby Tuesday, Inc.; Sanderson Farms, Inc.; Steak n Shake Co.; Triarc Companies, Inc. (now known as Wendy’s/Arby’s Group, Inc.); and YUM! Brands, Inc. We refer to this group of companies as our “Peer Group.”

Although the Peer Group consists primarily of restaurant companies, it also includes six consumer products companies (i.e., Del Monte Foods, Co.; Hain Celestial Group, Inc.; J.M. Smucker, Co.; Lance, Inc.; McCormick & Company, Inc.; and Sanderson Farms, Inc.). In April 2010, CKE Restaurants announced that it had agreed to be acquired. As a result, CKE Restaurants has been removed from the Peer Group for fiscal 2011 and it will not be replaced.

We believe that the Peer Group, as a whole, adequately represents the general business sectors in which we operate. We selected each company within the Peer Group because of:

	•		its relative leadership position in the restaurant or consumer products industry;
	•		the market it serves (e.g., family dining, casual dining, etc.);
	•		its revenue and market capitalization; and
	•		the complexity of its business.

How is executive compensation determined?

Under its charter, our Compensation Committee has the sole authority to determine all elements of compensation of our executive officers, including the executive officers listed in the “Summary Compensation Table.” We refer to the executive officers listed in the Summary Compensation Table as our “named executives.” Additionally, the Compensation Committee is responsible for administering our 2006 Equity and cash Incentive Plan (the “2006 Plan”) and has sole authority to grant stock-based awards to our executive officers. If our stockholders adopt the Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan (the “2010 Plan”), as proposed under Proposal 5, the Compensation Committee will be responsible for administering the 2010 Plan.

Our Chief Executive Officer, Executive Vice President — Human Resources, and representatives of our compensation consultant regularly attend Compensation Committee meetings. They also work closely with the Compensation Committee Chair in establishing and prioritizing projects, and setting meeting agendas. Management also prepares reports and other materials for each Compensation Committee meeting.

In setting executive compensation, the Compensation Committee holds discussions with our Chief Executive Officer, Executive Vice President — Human Resources, and representatives of our compensation consultant. Management makes recommendations regarding annual performance goals and targets for the Compensation Committee’s consideration and approval. Our Chief Executive Officer, with the assistance of business unit leaders and our Human Resources Department, provides the Compensation Committee with a performance assessment of all executive officers (other than himself) and makes specific recommendations to the Compensation Committee regarding their compensation.

The Compensation Committee uses a formal performance planning and evaluation process for our Chief Executive Officer. At the start of each fiscal year, Mr. Davis creates objectives and development goals for himself and submits them to the Compensation Committee Chair and the Lead Independent Director. The Compensation Committee Chair and the Lead Independent Director, with input from the other independent directors, then prepare final objectives and development goals, which are submitted to the Compensation Committee for its approval.

Throughout fiscal 2010, the Compensation Committee Chair and the Lead Independent Director had informal discussions with Mr. Davis regarding his performance. At the end of the fiscal year, Mr. Davis provided a written self-assessment of his performance to the Board. Additionally, each independent director completed a written evaluation of Mr. Davis’ performance using an evaluation form adopted by the Compensation Committee. The evaluation form rated Mr. Davis’ performance based on: (1) our financial performance; (2) his strategic planning, vision and leadership; (3) relationship management; and (4) personal and professional development. The Compensation Committee Chair and the Lead Independent Director then prepared a formal evaluation of Mr. Davis’ performance using the self-assessment and the evaluation forms completed by the independent directors. The Compensation Committee in setting Mr. Davis’ compensation and performance goals for fiscal 2011 took this information into consideration.

How does the Compensation Committee keep track of how much Bob Evans’ executive officers are paid?

When making compensation decisions, the Compensation Committee reviews tally sheets prepared for each of our named executives by our compensation consultant. The purpose of these tally sheets is to bring together, in one place, all of the elements of compensation for our named executives. Each tally sheet contains the annual dollar value of each component of the named executive’s compensation, including base salary, annual cash performance bonus, stock-based compensation, perquisites and retirement benefits. This information is provided for the last two fiscal years so the Compensation Committee can compare the year-over-year differences in each component of compensation.

What are the elements of Bob Evans’ executive compensation program?

Our executive compensation program consists of the following elements:

•

Annual base salaries;

	•		Annual cash performance bonuses;
	•		Stock-based incentive compensation under our “performance incentive plan;”
	•		Retirement benefits;
	•		Severance benefits related to a change in control; and
	•		Perquisites and other employee benefits.

We believe that each element of our executive compensation program is essential to meeting the program’s overall objectives. We have not adopted a formula to allocate total compensation among these elements. However, the program’s focus on company, business unit and individual performance results in a strong emphasis on performance-based incentive compensation (i.e., “pay for performance”).

In fiscal 2010, the Compensation Committee implemented a new element of Mr. Davis’ compensation program, which provides for an award of a one-time long-term performance based incentive. This new aspect of Mr. Davis’ compensation is described in this Compensation Disclosure and Analysis.

Why does Bob Evans pay base salaries, annual cash performance bonuses and stock-based incentive compensation and how is the amount of each of these elements determined?

Annual Base Salaries. Base salaries are primarily used to attract and retain the executives we need to accomplish our business objectives. When determining the base salaries of our executive officers, the Compensation Committee considers the:

	•		importance of the executive officer’s job function;
	•		executive officer’s scope of responsibility;
	•		executive officer’s experience and tenure;
	•		performance of our Company and the executive officer’s business unit;
	•		executive officer’s individual performance and potential for future advancement; and
	•		market median base salary for similarly positioned executives in the restaurant industry (except for executive officers with positions that are not specific to the restaurant industry, for which the market median base salary for the broader general industry segment is also considered).

The Compensation Committee has not assigned any specific weighting to these factors, and the relevance of each factor varies from individual to individual.

The following table shows the fiscal 2010 base salary of for each of our named executives.

In setting the named executives’ base salaries for fiscal 2010, the Compensation Committee considered all of the factors described above. In light of the ongoing economic recession, the difficult business environment for restaurant companies, and the challenges posed to the Food Products Division by sustained high sow prices, Mr. Davis recommended that none of our officers receive a base salary increase in fiscal 2010, except for certain officers who were promoted or who joined us in fiscal 2010. The Compensation Committee agreed with this recommendation and Messrs. Davis, Townsley, Brownlee, Hicks and Radkoski did not receive base salary increases in fiscal 2010.

Effective September 14, 2009, Mr. Spornhauer received a 24 percent base salary increase due to his promotion to Chief Financial Officer and his outstanding performance as our Senior Vice President — Finance, Controller and Assistant Secretary. The Compensation Committee determined that the base salary increase was appropriate given the increased scope of Mr. Spornhauer’s responsibilities, as well as compensation paid to executives in similar positions in the restaurant industry.

Annual Cash Performance Bonuses. The annual cash performance bonus is an “at-risk” bonus designed to motivate our executive officers to achieve performance goals derived from our strategic plan. These performance goals consist of goals tied to objective company and business unit performance measures, as well as individual performance goals tied to strategic plan initiatives.

At the beginning of each fiscal year, the Compensation Committee establishes a set of performance goals and a target cash bonus for each executive officer. Each target cash bonus is set as a percentage of the executive officer’s base salary. The Compensation Committee sets cash bonus targets based on the recommendation of the Chief Executive Officer and the Executive Vice President — Human Resources, as well as each executive officer’s job function and performance. The Compensation Committee also considers the market median bonus opportunity for executives in similar positions in the restaurant industry (except for executive officers with positions that are not specific to the restaurant industry, for which the market median bonus opportunity for the broader general industry segment is also considered).

The amount of the cash bonus ultimately paid depends on the extent to which the performance goals are achieved because we establish minimum, target and maximum performance targets. Our named executives can receive anywhere from 0 to 200 percent of their target cash bonuses (i.e., a sliding scale is used with 0 percent payout for performance below the minimum, 100 percent payout for performance at target, and 200 percent payout for performance at or above the maximum).

For fiscal 2010, the Compensation Committee initially set cash bonus targets for our named executives at 55 percent to 100 percent of their annual base salaries. The fiscal 2010 cash bonus targets for Messrs. Townsley (55 percent), Brownlee (70 percent), Hicks (55 percent), and Radkoski (60 percent) were unchanged from fiscal 2009 because the Compensation Committee determined that the existing targets provided an appropriate incentive opportunity, as well as the ongoing economic recession, the difficult business environment for restaurant companies, and the challenges posed to the Food Products Division by sustained high sow prices. Mr. Spornhauer’s cash bonus target was increased from 40 percent to 60 percent of his base salary when he was promoted to Chief Financial Officer effective September 14, 2009.

The following table shows for each of our named executives: the value of his fiscal 2010 target cash bonus, the amount of the cash bonus actually paid in June 2010, and the performance goals, weighting and goal attainment level:

Stock-Based Incentive Compensation. The Compensation Committee believes that stock-based incentive compensation represents the best method to link management objectives and stockholders’ interests because it focuses our executive officers on creating long-term stockholder value. Our stock-based incentive compensation program is called the “performance incentive plan.” The performance incentive plan has two primary goals:

	•		to align the financial interests of our executive officers and stockholders to maximize long-term stockholder value; and
	•		to retain the key executives we need to drive our long-term business success.

Each fiscal year, the amount of stock-based compensation that each of our named executives can receive under the performance incentive plan is equal to a percentage of the named executive’s base salary determined by the Compensation Committee at the beginning of the fiscal year. The Compensation Committee sets each executive officer’s target stock-based incentive compensation based on the recommendation of the Chief Executive Officer and the Executive Vice President — Human Resources, each executive’s job function, performance and future potential, as well as the market median stock-based compensation opportunity for executives in similar positions in the restaurant industry (except for executive officers with positions that are not specific to the restaurant industry, for whom the market median stock-based compensation opportunity for the broader general industry segment is also considered).

Historically under the performance incentive plan, each executive officer would receive, after the end of the fiscal year, a grant of stock options with a value equal to 25 percent of his or her target stock-based incentive compensation (calculated using the closing price of our common stock on NASDAQ on the grant date, the Black Scholes valuation model, and a discount based on vesting requirements). The stock options are only valuable if the price of our stock increases after the grant date. The options also supported our goal of retaining key executives because they became exercisable in installments over a three-year period, beginning on the first anniversary of the grant date. The remaining 75 percent of each executive officer’s target stock-based incentive compensation consisted of performance-based restricted stock.

Starting in fiscal 2011, 100 percent of each executive officer’s target stock-based incentive compensation will consist of performance-based restricted stock, which is awarded after the end of the fiscal year. This portion of stock-based incentive compensation is “at risk” because the named executive must meet objective performance goals established by the Compensation Committee at the beginning of the fiscal year in order to receive the restricted stock award. These objective performance goals are tied to company and business unit performance metrics derived from our strategic plan and our BEST ^® Brand Builders. The amount of stock-based compensation granted depends on the extent to which the performance goals are achieved because we establish minimum, target and maximum performance targets. Our executive officers can receive anywhere from 0 to 150 percent of the at-risk portion of their target stock-based incentive compensation (i.e., a sliding scale is used with no award for performance below the minimum, 100 percent award for performance at target, and 150 percent award for performance at or above the maximum). The Compensation Committee believes that granting performance-based restricted stock is an appropriate form of incentive compensation because the value of the restricted stock is tied directly to our performance.

Additionally, granting restricted stock when performance goals are achieved supports our goal of retaining key executives because the restricted stock vests over a three-year period beginning on the first anniversary of the grant date. If an executive officer’s employment with us terminates before the restricted stock vests, he or she will forfeit the award. There are some limited exceptions where the stock will still vest if the termination of employment is due to death or disability.

The Compensation Committee set fiscal 2010 target stock-based incentive compensation for our named executives, other than Mr. Spornhauer, at 75 percent to 250 percent of their base salaries. The target stock-based incentive compensation targets for Messrs. Davis (250%), Townsley (95%), Brownlee (150%), Hicks (75%) and Radkoski (105%) were unchanged from fiscal 2009 because the Compensation Committee determined that the existing targets provided an appropriate incentive opportunity, as well as the ongoing economic recession, the difficult business environment for restaurant companies, and the challenges posed to the Food Products Division by sustained high sow prices. In September 2009, the Compensation Committee increased Mr. Spornhauer’s target stock-based incentive compensation for fiscal 2010 from 43 percent to 105 percent of his base salary due to his promotion to Chief Financial Officer, Treasurer and Assistant Secretary and his outstanding performance.

The following table shows for each of our named executives the value of his fiscal 2010 target stock-based compensation as well as the related performance goals and goal attainment level:

2010 Stock-Based Compensation Table

In addition to the stock-based incentive compensation under our performance incentive plan described above, Mr. Davis’ compensation package includes an additional stock-based compensation component. During fiscal 2010, we entered into an amended and restated employment agreement with Mr. Davis that provides for the award of performance shares to Mr. Davis based on our performance over the five-year period beginning in fiscal 2010 through fiscal 2014 (the “Five-Year Performance Period”). The purpose of this long-term performance-based incentive (“LTPBI”) is to increase stockholder value by establishing additional compensation incentives for Mr. Davis which are linked directly to our long-term performance. The details of Mr. Davis’ employment agreement, including the LTPBI, are described under “Employment Agreement — Steven A. Davis.”

At the beginning of each fiscal year included in the Five-Year Performance Period, Mr. Davis is granted a number of performance shares equal to 125 percent of his base salary, divided by the average closing price of our stock for the trading days in the 180-day period that precedes the seventh day before the date of the grant. Under this formula, Mr. Davis was granted 44,151 performance shares (125 percent multiplied by his fiscal 2010 base salary of $770,000 divided by an average stock price of $21.80) at the beginning of fiscal 2010. The performance shares granted are added to a “Potential Award Pool” at the end of each fiscal year if we achieve the net income growth objectives established by the Compensation Committee at the outset of that fiscal year. For fiscal 2010, the Compensation Committee determined that Mr. Davis’ grant of 44,151 performance shares would be added to the Potential Award Pool only if our fiscal 2010 net income growth was greater than or equal to 8 percent or the 50 ^th percentile net income growth of our Peer Group. The Compensation Committee approved adding Mr. Davis’ fiscal 2010 grant of 44,151 performance shares to the Potential Award Pool because our fiscal 2010 net income growth was 13.3 percent higher than our fiscal 2009 net income.

In order for Mr. Davis to receive any of the performance shares in the Potential Award Pool at the end of fiscal 2014, our annual average total stockholder return (“TSR”) over the Five-Year Performance Period must be equal to or greater than the 50 ^th percentile as compared to our Peer Group. Our fiscal 2010 TSR was in the 22 ^nd percentile as compared to our Peer Group. Therefore, our performance currently does not qualify Mr. Davis for the award of his performance shares at the end of 2014.

What retirement benefits does Bob Evans provide to its executives?

Our Compensation Committee and management believe that it is important to provide post-retirement benefits to employees who reach retirement age. Our retirement benefits consist of the following components:

401(k) Plan. We maintain a 401(k) tax-qualified retirement savings plan. All of our employees who are age 19 or older are eligible to participate in the 401(k) plan after they complete 1,000 hours of service. Our executive officers participate in the 401(k) plan on the same basis as our other employees.

Our 401(k) plan operates on a calendar year. Currently, any company match of employee contributions will be based on our financial performance. For calendar year 2009 (which included part of our fiscal 2009 and fiscal 2010 years), the Board approved a matching contribution of $.52 on the dollar for the first six percent of compensation contributed to the 401(k) plan. This matching contributed was based on our earnings during calendar year 2009. Any future matching contributions to the 401(k) plan will continue to be based upon our financial performance. Employee contributions to the 401(k) plan vest immediately, while our matching contributions vest in increments based on years of service (with participants being 100 percent vested after 6 years of service).

The IRS places limits on amounts that “highly compensated employees,” like our executive officers, may contribute to 401(k) plans. These limits generally mean that our employees who made $110,000 or more in calendar year 2009 cannot contribute more than four percent of their compensation or $9,800, whichever is less, to the 401(k) plan in calendar year 2010. Also, because of these limits, our matching contributions to the 401(k) plan accounts of highly compensated employees in calendar year in 2009 could not be larger than $4,600 (we expect the limit for 2010 to be a similar amount). Our matching contributions to the 401(k) accounts of our named executives are included in the “All Other Compensation” column of the “Summary Compensation Table” and in the “All Other Compensation” table.

Employees can elect to receive their 401(k) plan account balances in a lump sum or in installments spread over a maximum of 10 years. Employees will receive a distribution upon normal retirement (age 62), early retirement (age 55 with at least six years of service), death, disability or termination of employment. They may also receive distributions while they are still employed if they suffer a financial hardship or reach age 62.

Executive Deferral Plan. We maintain an executive deferral plan, which is a nonqualified deferred compensation plan intended to supplement our 401(k) plan. Our deferral plan allows certain management and highly compensated employees to defer a portion of their base salaries and up to 100 percent of their cash bonuses into the plan before most taxes are withheld. For calendar year 2009 (which includes part of our fiscal 2009 and fiscal 2010 years), the Board approved a matching contribution of $.52 on the dollar for the first six percent of compensation contributed to the executive deferral plan. This matching contributed was based on our earnings during calendar year 2009.

We believe the executive deferral plan promotes personal savings and helps offset contribution limits under our 401(k) plan. The primary benefit to participants of this plan is that most taxes are deferred until the money is distributed from the plan, so savings accumulate on a pre-tax basis. We believe our deferral plan benefits our stockholders by promoting employee retention. We also believe we need to offer this type of plan to compete effectively for executive talent because many other companies offer this type of plan. For a more detailed description of the deferral plan and information regarding contributions to the deferral plan, please refer to the “Nonqualified Deferred Compensation” table and accompanying explanation.

Supplemental Executive Retirement Plan. We maintain a supplemental executive retirement plan or “SERP” for certain management and highly compensated employees, including our executive officers. The SERP is a nonqualified defined contribution plan designed to supplement the retirement benefits of its participants. The SERP is designed to pay a participant, who retires after the participant’s 62nd birthday with an annual target benefit up to 55 percent of the participant’s final average earnings (depending on years of service) when combined with our contributions to the participant’s 401(k) plan account and 50 percent of the participant’s Social Security benefit. We believe the SERP is a powerful employee retention tool because, in general, participants will forfeit a significant element of their compensation that they have accrued over their careers with Bob Evans if their employment with us ends prior to their retirement. For a more detailed description of the SERP and information regarding contributions to the deferral plan, please refer to the “Nonqualified Deferred Compensation” table and accompanying explanation.

In June 2009, our Board amended the SERP to preclude the addition of new participants. The Compensation Committee recommended this amendment to the Board based upon its assessment that the SERP was no longer a necessary tool for recruiting new executive talent. The Compensation Committee concluded that it was appropriate for us to continue to make contributions to the accounts of existing SERP participants because it is an effective tool for retaining these executives and these participants relied upon their participation in the SERP when deciding to join us and/or remain in our employ.

Donald J. Radkoski Retirement. In connection with his retirement on April 30, 2010, we agreed to pay Mr. Radkoski a lump sum payment of $524,487, less appropriate tax withholding amounts. This payment represented: (1) six months of his base salary; (2) one week of his base salary for every two years that he served as an employee; (3) Mr. Radkoski’s fiscal 2010 annual cash performance bonus based on the actual level of achievement of his performance goals; (4) the value of Mr. Radkoski’s fiscal 2011 vacation; and (5) the amount of the contribution we would need to make to our Retiree Health Insurance Plan to cover Mr. Radkoski for six months, plus a payment to reimburse Mr. Radkoski for the taxes associated with the health insurance payment. Mr. Radkoski also received his accrued benefits and vested awards under our compensation plans and programs, as determined under the terms of each such plan and program.

In consideration of the payments and benefits he received under the Retirement Agreement, Mr. Radkoski released us from any and all claims, demands and liabilities of any kind whatsoever, and he agreed not to disclose any of our confidential information or trade secrets. The Retirement Agreement also prohibits Mr. Radkoski from (a) engaging in or rendering, or agreeing to engage in or render, any services to any “Competing Business” which is any business in North America that (i) is engaged in the family or casual dining restaurant industry; (ii) offers products that compete with products offered by us; (iii) offers products that compete with products we have took substantial steps toward launching during his employment with us; or (iv) is engaged in a line of business that competes with any line of business that we enter into, or have taken substantial steps to enter into, during Mr. Radkoski’s employment with us; and (b) soliciting or hiring our employees for a period of one year following his retirement. The Compensation Committee determined that this retirement package was appropriate because of Mr. Radkoski’s long and distinguished career, which included 30 years of service with us. Additionally, Mr. Radkoski’s retirement agreement is consistent with severance packages historically given to other executive officers.

Does Bob Evans provide any of its executive officers with severance or change in control benefits?

Yes, under the terms of our equity-based compensation plans, our employment agreement with Mr. Davis and our change in control agreements, our named executives are entitled to payments and benefits under certain circumstances, including a termination of employment in connection with a change in control. These arrangements are described in detail under “Employment Agreement — Steven Davis” and “Change in Control Arrangements.” A table showing the incremental compensation that would have been payable to our named executives at the end of fiscal 2010 under various termination of employment scenarios is located under the heading “Potential Payouts upon Termination or Change-in-Control” later in this proxy statement.

The change in control agreements are designed to retain key executives during the period in which a transaction involving a change in control is being negotiated or during a period in which a hostile takeover is being attempted. We believe that our operations and the value of our Company could be adversely affected if the officers who have change in control agreements left us during or immediately after our acquisition by another company.

Does Bob Evans provide its executives with perquisites?

We provide a limited number of perquisites to our executive officers. The value and type of perquisites provided to our named executives in fiscal 2010 are included in the “All Other Compensation” column of the “Summary Compensation Table,” and the “All Other Compensation” table.

All of our officers, including the named executives, are provided with a monthly car allowance or a company car. The Compensation Committee approves the car policy at the beginning of each fiscal year. We think this benefit is appropriate because we expect our officers to spend time in the field visiting our restaurants, food products plants, customers and key suppliers.

We share the use of an airplane with another company through a co-ownership arrangement. We do this in order to provide efficient cost effective travel options for our employees, including our named executives. We generally do not allow our employees personal use of the airplane.

What other benefits does Bob Evans provide to its executives?

All of our executive officers are eligible to participate in our employee benefit programs, including life, health and dental insurance plans, on the same terms as our other full time employees.

Does Bob Evans have a policy for granting equity awards?

We have a formal “Equity Award Granting Policy.” Among other things, the policy:

	•		states that the exercise price of all equity awards will be the closing price of our stock on the grant date;
	•		provides that equity awards cannot be granted when we are in possession of material, non-public information;
	•		states that the Compensation Committee or the full Board must approve all equity awards at a meeting (not by written consent); and

•

sets forth specific procedures for issuing and documenting equity awards.

Historically, we have granted stock options and restricted stock to our officers and directors at a fixed time every year — the date of the regularly scheduled Compensation Committee meeting in June (unless our trading window is closed, in which case the grant of awards is delayed until the window opens). We schedule the June meeting to occur after we release our fiscal year-end financial results and sufficient time has elapsed for the public to absorb our results. We make annual equity awards to members of our Board in accordance with our Director Compensation Program. These awards are issued on the date directors are elected at our annual meeting of stockholders in September (unless our trading window is closed, in which case the grant of awards is delayed until the window opens). The annual meeting of stockholders is also scheduled to occur after the release of our year-end and first quarter financial results.

We do not “backdate” equity awards. Also, our current stock-based compensation plan prohibits repricing equity awards without stockholder approval. Should the 2010 Plan be adopted by the stockholders, it also prohibits repricing of equity awards.

What is the role of the compensation consultant?

The Compensation Committee has engaged Towers Watson to provide compensation consulting services. The role of the compensation consultant is to make sure the Compensation Committee has the objective information and expertise necessary to make informed decisions that are in the best long-term interests of our business and stockholders. The compensation consultant also keeps the Compensation Committee informed as to compensation trends and developments affecting public companies in general and our industries in particular. A representative of Towers Watson usually attends sessions of the Compensation Committee that deal with executive compensation matters.

Towers Watson has assisted the Compensation Committee since the end of 2004 with specific projects, including the periodic comparison of our executive officer and director compensation to market compensation practices and the design of the performance incentive plan. During fiscal 2010, Towers Watson worked with the Compensation Committee on a number of compensation projects, including:

	•		reviewing and analyzing our compensation programs;
	•		developing methods for further aligning our compensation program with our compensation philosophy;
	•		reviewing the Peer Group;
	•		assisting with a review of our compensation programs and making recommendations regarding possible changes to those programs; and
	•		keeping the Compensation Committee informed of recent trends and developments in officer and director compensation, as well as legislation impacting executive compensation.

Towers Watson has also been engaged by management for certain services unrelated to executive compensation consulting, primarily consulting services related to our health care plan and our other health and welfare plans. Management is required to obtain the prior approval of the Compensation Committee Chair before engaging Towers Watson for any services. In fiscal 2010, the Compensation Committee Chair approved our engagement of Towers Watson for consulting services related to our health care plan and certain other health and welfare plans. We understand, based on information provided to us by Towers Watson, that there is an internal separation between the Towers Watson group providing health and welfare services to us and the Towers Watson group providing consulting services to the Compensation Committee on executive compensation matters, which has a policy prohibiting these groups from sharing information regarding our Company.

In fiscal 2010, Towers Watson was paid directly and indirectly approximately $217,000 for executive compensation consulting services. During the same period, it was paid directly and indirectly approximately $691,000 for additional services provided to us unrelated to executive compensation, including services related to our health care plans and health and welfare plans.

We have a “commission recapture” arrangement with Towers Watson. This is a standard practice for companies and is beneficial for us. Towers Watson receives a rebate from third parties on commissions they are paid by us for products and coverage related to our health care plans, life and disability plans and health and welfare plans. Towers Watson credits the recaptured commissions received by it from the third parties against the amounts we owe to Towers Watson for services related to our health care plans and health and welfare plans. In fiscal 2010, the commission recapture credit was $578,061. As such, while Towers Watson performed services for us related to our health care plans and health and welfare plans with a value of $690,928, the amount we actually paid Towers Watson for these services was approximately $112,687.

Does Bob Evans have stock ownership requirements?

Yes, we implemented stock ownership guidelines for our directors and named executives in 2005. We believe the guidelines further align the motivations and interests of our directors and officers with the interests of our stockholders. The guidelines ensure that the individuals responsible for our stewardship and growth have a significant personal stake in our performance and progress.

The ownership guidelines for our officers vary based on the officer’s pay and position. The following table shows our current stock ownership guidelines:

We count shares beneficially owned, as well as unvested restricted stock and phantom stock/share equivalent units held beneficially through our 401(k) plan, the dividend reinvestment plan and under our Company’s deferred compensation program toward these requirements. We do not, however, count unexercised options toward the ownership requirements.

Each of our officers and directors is expected to meet 50 percent of the applicable requirement within three years and 100 percent of the requirement within five years from the later of (1) the implementation of the revised guidelines; (2) his/her election as an officer or director; or (3) his/her promotion to a position with a higher ownership requirement. The number of shares owned by each of our directors and named executives as of July 15, 2010, is shown in the table under the heading “Stock Ownership of Certain Beneficial Owners and Management.”

What is the potential impact of executive misconduct on compensation?

If the Board were to determine that an executive officer harmed us through fraud or intentional misconduct, the Board would take action to remedy the misconduct, prevent its occurrence in the future and impose appropriate discipline, which might include termination of employment or suing the executive officer for breach of fiduciary duty. Our 2006 Plan provides that all outstanding awards under the 2006 Plan will be forfeited if an employee’s service is terminated for cause, as would the terms of the 2010 Plan if adopted by the stockholders. Additionally, if our Chief Executive Officer or Chief Financial Officer were to engage in misconduct that resulted in a financial restatement for material non-compliance with securities laws, they would be required by law to reimburse us for bonuses, other incentive compensation, and profits from sales of our stock.

The Compensation Committee has adopted an Executive Compensation Recoupment Policy (the “Recoupment Policy”). Each executive officer has executed an agreement acknowledging their understanding of the Recoupment Policy. Under the Recoupment Policy, we may recoup annual cash bonuses, stock-based awards, performance-based compensation, and any other forms of cash or equity compensation (other than salary) paid to our executive officers under certain circumstances. The Recoupment Policy will apply in the event of a restatement of our previously issued financial statements as a result of error, omission, fraud or noncompliance with financial reporting requirements. The Compensation Committee will review the facts and circumstances underlying the restatement (including any potential wrongdoing and whether the restatement was the result of negligence or intentional or gross misconduct) and may, in its discretion, direct that we attempt to recover all or a portion of the compensation paid to an executive officer (other than salary) with respect to any fiscal year in which our financial results are negatively affected by the restatement. Recoupment may include, but is not limited to, reimbursement by the executive officer of the amount of cash bonuses received, cancellation or forfeiture of outstanding stock-based compensation and the payment to us of stock sale proceeds.

In any instance in which the Compensation Committee concludes that an executive officer engaged in an act of fraud or misconduct that contributed to the need for a financial restatement, the Compensation Committee may, in its discretion, recover, and the executive officer will forfeit or repay, all of the executive officer’s compensation (other than salary) for the relevant period, plus a reasonable rate of interest.

Does Bob Evans consider tax and accounting implications when making compensation decisions?

Yes, the Compensation Committee considers the financial reporting and tax consequences to us of compensation paid to our executive officers when it determines the overall level of compensation and mix of compensation components. The Compensation Committee generally seeks to balance the goal of providing our executive officers with appropriate compensation with the need to maximize the deductibility of compensation.

Section 162(m) of the Internal Revenue Code prohibits us from claiming a deduction on our federal income taxes for compensation in excess of $1,000,000 per taxable year paid to our Chief Executive Officer and our three other most highly compensated executive officers (but excluding our Chief Financial Officer) who are employed at the end of the fiscal year. There is an exception to this rule for compensation that qualifies as “performance-based,” which means that the compensation is only paid if the executive officer’s performance meets pre-established objective goals based on performance criteria approved by our stockholders.

We do not have a policy requiring all compensation to be deductible under Section 162(m) because the Compensation Committee believes there may be circumstances under which it is appropriate to forgo deductibility. However, we designed the annual cash performance bonus and stock-based compensation components of our executive compensation program to qualify as performance-based compensation by setting goals that are based on the performance criteria approved by our stockholders as part of our 2006 Plan (with limited exceptions for some individual performance goals). The 2010 Plan also includes performance criteria for performance-based compensation. We were able to deduct all of the compensation we paid in fiscal 2010.

Our change in control agreements provide that if any portion of the payments and benefits owed would be considered “excess parachute payments” under Section 280G(b)(1) of the Internal Revenue Code and subject to excise tax, we will either reimburse the officer for the amount of tax owed or reduce the officer’s payments to an amount which is $1 less than the amount that would be an excess parachute payment. We will select the alternative that provides the officer with a greater after-tax amount.

We have amended our compensation plans to comply with Section 409A of the Internal Revenue Code. Section 409A is intended to eliminate perceived abuses related to the timing of elections and distributions, as well as the acceleration of payments, under nonqualified retirement plans and other nonqualified deferred compensation arrangements.

What significant actions has the Compensation Committee taken since the end of fiscal 2010?

Since the end of fiscal 2010, our Compensation Committee has reviewed the performance of our Company and our officers for fiscal 2010, including the extent to which the performance goals set at the beginning of the fiscal year were met. Based on this review, the Compensation Committee approved the annual cash bonuses and long-term incentive awards outlined in the tables above.

Our Compensation Committee also established fiscal 2011: (1) base salaries; (2) annual cash bonus targets and related performance goals; and (3) target stock-based compensation and related performance goals under the performance incentive plan for our executive officers.

The table below sets forth the fiscal 2011 target annual cash bonus (as a percentage of annual base salary) and associated performance goals established by the Compensation Committee for each named executive:

2011 Target Annual Cash Bonus Table

The table below sets forth the target stock-based incentive compensation (as a percentage of annual base salary) and performance goals established by the Compensation Committee for each named executive under the performance incentive plan for fiscal 2011:

On June 18, 2009, we entered into an amended and restated employment agreement with Mr. Davis, which was effective as of May 1, 2009. Among other items, the amended and restated employment agreement provides for the award of a one-time long-term performance-based incentive to Mr. Davis. The purpose of this long-term performance-based incentive is to increase stockholder value by establishing additional compensation incentives for Mr. Davis that are linked directly to our performance over the five-year period beginning in fiscal year 2010 through 2014. The amended and restated employment agreement and the long-term performance-based incentive are described in detail under “Employment Agreement — Steven A. Davis.” Pursuant to the long term performance based incentive, the Compensation Committee approved adding Mr. Davis’ 2010 grant to his award pool and further a grant of 33,067 shares contingent on achievement of 2011 performance targets.

All Other Compensation Table for Fiscal 2010

The following table describes each component of the “All Other Compensation” column in the “Summary Compensation Table” above for fiscal 2010.

Grants of Plan-Based Awards for Fiscal 2010

The following table presents information on stock awards granted to each of the named executives during fiscal 2010. The target stock-based incentive compensation discussed in the “Stock-Based Incentive Compensation” section of our “Compensation Discussion and Analysis” includes the aggregate target grants of both stock options and stock awards under our performance incentive plan. The “Estimated Possible Payouts Under Incentive Plan Awards” columns (Threshold, Target and Maximum) of our “Grants of Plan-Based Awards for Fiscal 2010” table only include possible payouts of stock awards under our performance incentive plan. As a result, the Value of Target Stock-Based Compensation for fiscal 2010 disclosed in the table set forth in the “Stock-Based Incentive Compensation” section of our “Compensation Discussion and Analysis” is larger than the value of the Target disclosed in the “Estimated Possible Payouts Under Incentive Plan Awards” column of our “Grants of Plan-Based Awards for Fiscal 2010” table.

Outstanding Equity Awards at 2010 Fiscal Year-End

The following table provides information on the options and stock awards held by the named executives at the end of fiscal 2010 and the option and stock awards made to the named executives in June 2010 for fiscal 2010 performance. Each grant is shown separately for each named executive. The vesting schedule for each grant is shown following this table based on the option or stock award grant date. The market value of the stock awards is based on the closing price of our stock on NASDAQ on April 30, 2010, which was $30.93. For additional information about the options and stock awards, see the description of our stock-based compensation in the “Compensation Discussion and Analysis” above.