To Our Valued Stockholders:

 

Three years ago, we introduced a corporate-wide strategic approach to our business known as our “BEST Brand Builders” strategy, 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 the national potential of our premium regional brands: Bob Evans Restaurants, Mimis Café, Bob Evans Food Products and Owens Foods.

 

After three years, I can say with certainty that our strategy is working. You can see the most recent evidence in our financial performance during fiscal 2009 — a year where we overcame a multitude of challenges to deliver solid results. Excluding non-operating items, our fiscal 2009 operating income exceeded our expectations, due primarily to a very strong fourth-quarter performance, especially at Bob Evans Restaurants.

 

The Bob Evans Restaurants division posted impressive results in fiscal 2009 due to lower cost of sales and well-controlled labor costs, despite slightly negative same-store sales. Sales at Mimis Cafe were disappointing in a difficult consumer environment, but we have a new management team in place that is making changes geared to generate improved future results. And while high sow costs affected the food products segment, our overall performance was solid, especially considering the challenges we faced.

 

In conclusion, we believe we were successful in creating additional stockholder value in fiscal 2009, and I am confident that our Brand Builders strategy has us well positioned to deliver improved results going forward.

 

Thank you for your support of Bob Evans Farms. I look forward to communicating with you as we strive to produce continued strong results in fiscal 2010.

 

Sincerely,

 

 

Steven A. Davis

Chairman of the Board and Chief Executive Officer

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 14, 2009
10:00 a.m. Eastern Time
Bob Evans Farms, Inc. Technical and Training Center
3700 S. High Street
Columbus, Ohio 43207

 

 

Dear Stockholder:

 

We invite you to attend the 2009 Annual Meeting of Stockholders of Bob Evans Farms, Inc. The meeting will be held on Monday, September 14, 2009, at 10:00 a.m. Eastern Time at the Bob Evans Farms, Inc., Technical and Training Center, 3700 S. High Street, Columbus, Ohio 43207. A map is included on the back cover of the proxy statement. Doors will open at 9:00 a.m.

 

Business for the meeting includes:

 

(1) Electing the three director nominees named in our proxy statement;

 

 

The proxy statement accompanying this notice describes each of these items in detail. We have not received notice of any other matters that may be properly presented at the meeting.

 

The Board of Directors has set July 16, 2009, as the record date for the meeting. This means that only stockholders of record at the close of business on that date are entitled to vote in person or by proxy at the meeting.

 

We have elected to take advantage of Securities and Exchange Commission rules that allow us to provide proxy materials to our stockholders on the Internet. On or about the date of this letter, we began mailing a Notice of Internet Availability of Proxy Materials to stockholders of record at the close of business on July 16, 2009. At the same time, we provided those stockholders with Internet access to our proxy materials and filed our proxy materials with the Securities and Exchange Commission. We believe furnishing proxy materials to our stockholders on the Internet allows us to provide our stockholders with the information they need, while decreasing our printing and delivery costs and reducing the environmental impact of our annual meeting. If you plan to attend the annual meeting in person, please read the back cover of the proxy statement for important information about admission requirements for the annual meeting.

 

Your vote is very important. Please vote as soon as possible, even if you plan to attend the annual meeting.

 

By Order of the Board of Directors,

 

 

Mary L. Garceau

Vice President, General Counsel and

  Corporate Secretary

 

Columbus, Ohio

August 4, 2009

 

3776 S. High St.
Columbus, Ohio 43207

 

PROXY STATEMENT

 

 

When and where will the annual meeting be held?

 

The annual meeting will be held on Monday, September 14, 2009, at 10:00 a.m. Eastern Time, at the Bob Evans Farms, Inc. Technical and Training Center, which is located at 3700 S. High Street, Columbus, Ohio 43207.

 

Why did I receive these proxy materials?

 

You have received these proxy materials because our Board of Directors (our “Board”) is soliciting a proxy to vote your shares at our 2009 Annual Meeting of Stockholders. This proxy statement contains information that we are required to provide to you under the rules of the Securities and Exchange Commission (the “SEC”) and that is intended to assist you in voting your shares.

 

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?

 

As permitted by SEC rules, we are making this proxy statement and annual report available to our stockholders electronically through the Internet. On August 4, 2009, we began mailing to our stockholders of record at the close of business on July 16, 2009, a Notice of Internet Availability of Proxy Materials (the “Notice”), which contains instructions on how to access this proxy statement and our annual report online. If you received a Notice by mail, you will not receive printed copies of our proxy materials in the mail unless you request them. Instead, the Notice has instructions on how you can access and review all of the important information contained in the proxy statement and annual report through the Internet. The Notice also contains instructions on how you may submit your proxy through the Internet. If you received a Notice in the mail and would like to receive printed copies of our proxy materials, you should follow the instructions included in the Notice for requesting them.

 

Will the annual meeting be Webcast?

 

Yes, our annual meeting will be Webcast. You can access the Webcast beginning at 9:30 a.m. Eastern Time, on September 14, 2009, by visiting the “Investors” section of our Web site, www.bobevans.com. An archived copy of the Webcast also will be available on our Web site for one year following the annual meeting.

 

Who may vote at the annual meeting?

 

Our Board has set July 16, 2009, as the record date for the annual meeting. This means that only stockholders of record at the close of business on that date are entitled to vote at the annual meeting or any adjournment(s) of the annual meeting. At the close of business on July 16, 2009, there were [          ] shares of our common stock, par value $.01 per share, outstanding. Each share of common stock entitles the holder to one vote on each item to be voted upon at the annual meeting.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

If your shares are registered directly in your name, you are considered the “stockholder of record” of those shares. We sent the Notice directly to all stockholders of record. Alternatively, if your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, which is sometimes called “street name,” then you are the “beneficial owner” of those shares, and the Notice was forwarded to you by that organization. The organization holding your shares is the stockholder of record for purposes of voting the shares at the annual meeting. As the beneficial owner, you have the right to direct that organization how to vote the shares held in your account by following the voting instructions the organization provides to you.

 

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:

 

 

The deadline for voting through the Internet or by telephone is 11:59 p.m. Eastern Time, on September 13, 2009. 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 16, 2009.

 

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

 

 

 

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:

 

 

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 16, 2009. 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:

 

 

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 transfer agent, American Stock Transfer and Trust Company, may solicit proxies by further mailings, by telephone, electronic mail, facsimile or by personal contact, without receiving any additional compensation. 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 are the voting requirements to elect the directors and to approve the other proposals discussed in the proxy statement?

 

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.

 

If you are a beneficial owner, the holder of record of your stock has discretionary authority to vote your shares on the election of directors and the ratification of Ernst & Young LLP as our independent registered public accounting firm, even if it does not receive voting instructions from you.

 

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. 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.”

 

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

 

Under our Bylaws, the number of votes cast “for” must exceed the number of votes cast “against” the ratification of Ernst & Young LLP as our independent registered public accounting firm. Abstentions and broker non-votes will not be counted as votes “for” or “against” this proposal.

 

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 dividend check mailings 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.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table shows the stockholders known to us to be the beneficial owners of more than five percent of our outstanding common stock as of July 16, 2009.

 

 

 

 

The following table summarizes, as of July 16, 2009, 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 of the Securities Exchange Act of 1934 requires that our directors and executive officers and any person or entity holding more than ten 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.

 

Other than a delinquent Form 4 filed by Mr. Lucas on December 11, 2008, with respect to his sale of 5,000 shares of our common stock on December 8, 2008, we believe, based on a review of (1) Section 16(a) ownership reports filed on behalf of these individuals for their transactions during fiscal 2009 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 2009, that all SEC filing requirements were met.

PROPOSAL 1: ELECTION OF DIRECTORS

 

Our Bylaws state that the number of directors will be determined by the Board, which has set the number at ten. Based on our Bylaws, the directors are divided into three classes with Class I and II each consisting of three directors and Class III consisting of four directors. Each class of directors serves for a three-year term when elected. However, if our stockholders approve Proposal 2 to provide for the annual election of all directors, all directors standing for election, beginning with this annual meeting of stockholders, will be elected to one-year terms.

 

The shares of common stock represented by all valid proxies will be voted as instructed or, if no instructions are given, will be voted for the election of the Board’s nominees. We believe that all of the nominees will be available and able to serve if elected to the Board. However, if a nominee becomes unavailable or unable to serve, the individuals selected by the Board as proxies will have discretion to vote for the remaining nominees, as well as any person nominated as a substitute by the Board.

 

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:

 

 

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:

 

 

 

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.

 

At the 2009 annual meeting, three Class II directors will be nominated for election. Based on the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Larry C. Corbin, Steven A. Davis and Paul S. Williams for re-election as Class II directors. If elected, these three 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 instead elected to a one-year term expiring at our 2010 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.

 

 

 

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:

 

 

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 to:

 

 

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.

 

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:

 

 

 

 

Based on this review, the Board determined that Michael J. Gasser, Dr. E. Gordon Gee, E.W. (Bill) Ingram III, Cheryl L. Krueger, G. Robert Lucas II, Eileen A. Mallesch, Bryan G. Stockton and Paul S. Williams all qualify as independent directors.

 

The Board appoints the members of its committees and delegates various responsibilities and authority to its committees. The Board currently has standing Audit, Compensation, and Nominating and Corporate Governance Committees. The Board has determined that each member of these committees is an independent director. 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 by each committee during fiscal 2009.

 

 

 

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:

 

 

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 Michael J. Gasser and Eileen A. Mallesch each qualify 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 and to provide recommendations regarding management succession. The Compensation Committee’s primary responsibilities include:

 

 

 

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 Perrin, a consulting firm, to assist the Compensation Committee with its responsibilities. Towers Perrin reports directly to the Compensation Committee. For more information regarding the role of the compensation consultant, see the “Compensation Discussion and Analysis” contained in this proxy statement.

 

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. The Nominating and Corporate Governance Committee is also responsible for overseeing and advising the Board on corporate governance matters and practices, including:

 

 

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 the Company and potential conflicts of interest and the ability to represent the Company’s stockholders. 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 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. Dr. Gee was recommended to the Nominating and Corporate Governance Committee by Messrs. Davis and Lucas and by Ms. Krueger.

 

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.

 

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 seven meetings during fiscal 2009. Each director is expected to attend each meeting of the Board and the committees on which he or she serves. In fiscal 2009, 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 8, 2008.

 

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 public companies. The following directors are also directors of other public companies:

 

Steven A. Davis — CenturyTel, Inc. and Walgreen Co.

Michael J. Gasser — Greif, Inc.

Dr. E. Gordon Gee — Hasbro, Inc.

Paul S. Williams — State Auto Financial Corporation and Compass Minerals International, Inc.

 

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.

 

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:

 

 

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.

 

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 2009

 

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 Ms. Krueger 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.

 

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 2009. Dr. Gee is not included in the table because he did not serve on the Board during fiscal 2009.

 

 

 

 

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 the 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:

 

 

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:

 

 

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 the 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.

For fiscal 2009, Towers Perrin, our compensation consultant provided the Compensation Committee with a report that compared 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 2007 Chain Restaurant Compensation Association Survey (the “2007 Chain Restaurant Survey”). This survey included compensation information from approximately 100 companies representing 185 restaurant concepts. The systemwide revenue reported by survey participants ranged from less than $3 million to over $25 billion, with a median of $355.1 million. Additionally, for executive officers whose positions are not specific to the restaurant industry, the report compared their compensation to a broader general industry segment using information from the 2007 Towers Perrin Executive Compensation Database. This information provided 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 Towers Perrin Executive Compensation Database includes information from 803 companies across all industries, including information on more than 165 executive and senior management positions in 15 functional areas.

 

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.

 

With respect to the named executives’ fiscal 2009 compensation, we compared each element of compensation for Messrs. Davis, Radkoski, Williams, Pulido, Townsley and Hicks to the elements of compensation for similar positions in the restaurant industry using information from the 2007 Chain Restaurant Survey. Because Mr. Radkoski’s position is not specific to the restaurant industry, we also compared each element of his compensation to a broader general industry segment using information from the Towers Perrin Executive Compensation Database.

 

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 annually to ensure that they are still relevant for comparative purposes. For fiscal 2009, 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.”

 

The Peer Group consists primarily of restaurant companies. The Compensation Committee added 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.) to the Peer Group for fiscal 2009 to provide some means of comparison for our retail food products business. 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:

 

 

 

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 (which we refer to as the “2006 Plan”), and has sole authority to grant stock-based awards to our executive officers under the 2006 Plan.

 

Our Chief Executive Officer, Chief Financial Officer, Senior Vice President - Human Resources, Vice President and General Counsel, 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, Senior 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.

 

In view of the economic recession, the Compensation Committee has reviewed the design and operation of our incentive compensation programs with management. This review included the performance goals required to be achieved for threshold, target and maximum levels of cash and equity-based incentive payments, as well as the corresponding potential payouts. Based on this review, the Compensation Committee does not believe that our cash and equity-based compensation programs provide our executive officers with the incentive to engage in business activities that would threaten the value of the company or the investments of our stockholders and other constituents.

 

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 2009, 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. This information was taken into consideration by the Compensation Committee in setting Mr. Davis’ compensation and performance goals for fiscal 2010.

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:

 

 

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”).

 

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:

 

 

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 for each of our named executives his fiscal 2009 base salary and the percentage change in his base salary from fiscal 2008.

 

 

 

 

In setting the named executives’ base salaries for fiscal 2009, the Compensation Committee considered all of the factors described above, as well as the target level base salary increase for all of our corporate office employees in good standing, which was 3.5 percent. The Compensation Committee approved a 4.53 percent base salary increase for Mr. Davis because his performance and leadership skills were deemed to be outstanding. Mr. Williams received a 3 percent base salary increase because his performance largely met expectations. The salary increases for Messrs. Radkoski and Hicks exceeded the target base salary increase because the Compensation Committee determined that their performance surpassed expectations. Mr. Townsley’s 10 percent increase was attributable to the Compensation Committee’s assessment of his outstanding leadership and his promotion to President — Food Products. The Compensation Committee determined that the salary increase was warranted to bring Mr. Townsley’s base salary in line with the other executive officers in a president-level position. Mr. Pulido received a 3 percent salary increase. The Compensation Committee was pleased with his performance and determined that the size of the salary increase was appropriate given that he joined Bob Evans in late fiscal 2008.

 

In January 2009, we announced a series of organizational changes in our Restaurant Division, including Mr. Williams’ retirement effective March 2, 2009. We used his retirement as an opportunity to realign our management structure and divided the responsibilities of Mr. Williams’ position as President — Bob Evans Restaurants between two newly created positions: a President and Chief Restaurant Operations Officer responsible for both Bob Evans Restaurants and Mimi’s Café and a President and Chief Concept Officer — Bob Evans Restaurants. Additionally, Mr. Pulido’s position was changed from President — Mimi’s Café to President and Chief Concept Officer — Mimi’s Café. The President and Chief Concept Officer positions at both Bob Evans Restaurants and Mimi’s Café concentrate primarily on the overall growth and development of our restaurant concepts, with particular focus on increasing sales and new restaurant development. The President and Chief Restaurant Operations Officer concentrates on standardizing operations processes and procedures across both restaurant concepts, as well as identifying additional opportunities for purchasing synergies by consolidating the vendors and purchased items of the two restaurant concepts.

 

In connection with this realignment, Mr. Hicks was promoted from Executive Vice President — Bob Evans Restaurant Operations to President and Chief Concept Officer — Bob Evans Restaurants due to his outstanding performance and leadership potential in the new position. The Compensation Committee increased

Mr. Hicks’ annual base salary for the remainder of fiscal 2009 to $330,000, an increase of $40,341 over his previous base salary. The Compensation Committee determined that the base salary increase was appropriate given the increased scope of Mr. Hicks’ responsibilities, as well as compensation paid to executives in similar positions in the restaurant industry. Mr. Pulido’s base salary was not altered in connection with the change in his position because the scope of his responsibilities did not change significantly and his existing base salary was consistent with that paid to executives in similar positions in the restaurant industry.

 

The fiscal 2009 base salaries established by the Compensation Committee for Messrs. Davis, Radkoski, Williams, Townsley and Pulido fell within 15 percent of the market median for their comparable positions in the 2007 Chain Restaurant Survey. Messrs. Davis’ and Radkoski’s base salaries also fell within the 15 percent range of the market median for their positions in the Peer Group. Mr. Hicks’ base salary exceeded the market median for his comparable position in the 2007 Chain Restaurant Survey, but the Compensation Committee determined that Mr. Hicks’ base salary was appropriate based upon the importance and scope of his responsibilities, his experience and tenure, his outstanding performance and his potential for future advancement.

 

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 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 2009, the Compensation Committee initially set cash bonus targets for our named executives at 45 percent to 100 percent of their annual base salaries. The fiscal 2009 cash bonus targets for Messrs. Radkoski (60 percent), Williams (65 percent), Townsley (55 percent), Hicks (45 percent) and Pulido (55 percent), were unchanged from fiscal 2008. Mr. Davis’ cash bonus target was increased from 75 percent to 100 percent of his base salary. The Compensation Committee determined that this increase was warranted to further incent Mr. Davis to lead the company’s financial performance and the execution of strategic plan imperatives. Additionally, the Compensation Committee considered data from the Peer Group which indicated that Mr. Davis’ previous target cash bonus opportunity of 75 percent was below the median for chief executive officers of Peer Group companies.

 

In January 2009, the Compensation Committee increased Mr. Hicks’ target cash bonus for the remainder of fiscal 2009 from 45 percent to 55 percent of his base salary. The Compensation Committee determined that this increase was consistent with Mr. Pulido’s target cash bonus for a similar position, and the additional responsibilities of Mr. Hicks’ new position.

 

The fiscal 2009 target cash bonuses established by the Compensation Committee for Messrs. Davis, Radkoski, Townsley and Pulido fell within 15 percent of the market median for their comparable positions in the 2007 Chain Restaurant Survey. Messrs. Davis’ and Radkoski’s fiscal 2009 target cash bonuses also fell within 15 percent of the market median for their positions in the Peer Group. Messrs. Williams’ and Hicks’

fiscal 2009 target cash bonuses exceeded the market median for their comparable positions in the 2007 Chain Restaurant Survey, largely due to their experience and tenure with the company.

 

The following table shows for each of our named executives: the value of his fiscal 2009 target cash bonus, the amount of the cash bonus actually paid (in June 2009), 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:

 

 

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, 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).

Under the performance incentive plan, each executive officer receives, 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 Compensation Committee believes that this grant of stock options is an appropriate form of incentive compensation because the value of the stock options is inherently tied to our performance. The stock options are only valuable if the price of our stock increases after the grant date. The options also support our goal of retaining key executives because they become 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 consists of performance-based restricted stock (or unrestricted stock if the named executive is eligible to retire, as explained below), 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 have met 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).

 

We believe granting restricted stock (when performance goals are achieved) to executive officers who are not eligible to retire 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 exceptions in the 2006 Plan where the stock will still vest if the termination of employment is due to death or disability.)

 

If an employee who participates in the performance incentive plan is eligible to retire and the employee achieves his or her performance goals, we grant that employee stock, without any restrictions or vesting requirements. We were concerned that if we granted restricted stock to an employee who is eligible to retire, he or she may have to pay taxes on the restricted stock at the time of grant, even though the employee would not actually receive the stock until it vested or the employee retired. Therefore, we decided that it was appropriate to grant unrestricted, fully-vested stock to retirement eligible participants in order to align receipt of the stock with the taxable event.

 

The Compensation Committee set fiscal 2009 target stock-based incentive compensation for our named executives at 75 percent to 250 percent of their base salaries. The target stock-based incentive compensation for Messrs. Davis, Radkoski, Williams, Hicks and Pulido was unchanged from fiscal 2008 because the Compensation Committee determined that the existing targets provided an appropriate incentive opportunity. The Compensation Committee increased Mr. Townsley’s target stock-based incentive compensation for fiscal 2009 from 75 percent to 85 percent of his base salary due to his outstanding performance and his promotion to President-Food Products.

 

The cash value of the fiscal 2009 stock-based compensation targets established by the Compensation Committee for Messrs. Davis, Radkoski and Pulido fell within 15 percent of the market median for their positions in the 2007 Chain Restaurant Survey. Messrs. Davis’ and Radkoski’s fiscal 2009 stock-based compensation targets also fell within 15 percent of the market median for their positions in the Peer Group. Messrs. Williams’ and Townsley’s fiscal 2009 stock-based compensation targets fell below the 15 percent range of the market median for their comparable positions in the 2007 Chain Restaurant Survey, but the Compensation Committee determined that the targets were appropriate. Mr. Hicks’ fiscal 2009 target stock-based compensation exceeded the 15 percent range of the market median of the 2007 Chain Restaurant Survey. The Compensation Committee determined that this was appropriate based upon the importance and scope of

his responsibilities, his experience and tenure, as well as his outstanding performance and potential for future advancement.

 

The following table shows for each of our named executives the value of his fiscal 2009 target stock-based compensation as well as the related performance goals and goal attainment level:

 

 

 

 

 

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. Historically, we have matched employee contributions $.50 on the dollar for the first six percent of compensation contributed. However, our Board has discretion to change the rate of our matching contributions at any time. For calendar year 2008, the Board approved the traditional company match for employee contributions, as described above. For calendar year 2009 (which includes part of our fiscal 2009 and fiscal 2010 years), the Board determined that any company match of employee contributions will be based on 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 $100,000 or more in calendar year 2008 cannot contribute more than 4 percent of their compensation or $9,200, whichever is less, to the 401(k) plan in calendar year 2009. Also, because of these limits, our matching contributions to the 401(k) plan accounts of highly compensated employees in calendar year 2009 may not be larger than $4,600. 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.

 

Roger Williams’ Retirement Package.   We entered into a Retirement Agreement with Mr. Williams in connection with his retirement on March 2, 2009. Under the terms of the Retirement Agreement, we paid Mr. Williams a lump sum payment of $761,428.00, less appropriate tax withholding amounts. This payment included: (1) six months of his base salary; (2) one week of his base salary for every two years that he was an employee of the company; (3) a prorated portion of Mr. Williams’ fiscal 2009 annual cash performance bonus based on the level of achievement of his prorated performance goals as of the end of the third quarter of fiscal 2009; (4) the value of Mr. Williams’ unused vacation; and (5) the amount of the contribution we would need to make to our Retiree Health Insurance Plan to cover Mr. Williams for six months, plus a payment to reimburse Mr. Williams for the taxes associated with the health insurance payment. Mr. Williams 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. Williams 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. Williams from (a) working for any business engaged in the development or

operation of a family dining restaurant or the manufacture or sale of food products that are the same or similar to those currently manufactured or sold by Bob Evans and (b) soliciting or hiring Bob Evans’ employees for a period of one year following his retirement. The Compensation Committee determined that this retirement package was appropriate because of Mr. Williams’ long and distinguished career, which included 42 years of service with Bob Evans. Additionally, Mr. Williams’ retirement package is consistent with severance packages historically given to other executive officers.

 

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. Historically, we have matched employee contributions $.50 on the dollar for (1) the first six percent of compensation contributed less (2) the actual deferral percentage for each highly compensated employee calculated under the 401(k) plan. However, our Board has discretion to change the rate of our matching contributions at any time. For calendar year 2008, the Board approved the traditional company match for employee contributions, as described above. For calendar year 2009 (which includes part of our fiscal 2009 and fiscal 2010 years), the Board determined that any company match of employee contributions will be based on our financial performance.

 

We believe the 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 a maximum of 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.

 

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 2009 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 the company could be adversely affected if the officers who have change in control agreements left us during or immediately after an acquisition of Bob Evans by another company.

 

Does Bob Evans provide its executives with perquisites?

 

We provide a limited number of perquisites to our executive officers. The perquisites provided to our named executives in fiscal 2009 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 and retailers.

 

We generally do not allow our employees personal use of our company airplane. Mr. Davis was permitted to have limited personal use of the company airplane in fiscal 2009. We allow family members to accompany employees on business trips using the company airplane if room is available. Generally, we do not incur any additional costs for allowing family members to accompany employees on business trips. Any incremental costs we incurred for personal use of the company airplane in fiscal 2009, 2008 or 2007 are included in the “All Other Compensation” column of the “Summary Compensation Table.”

 

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 employees.

 

Does Bob Evans have a policy for granting equity awards?

 

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

 

 

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 2006 Plan prohibits repricing equity awards without stockholder approval.

Who is the Compensation Committee’s compensation consultant?

 

The Compensation Committee has engaged Towers Perrin 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.

 

Towers Perrin 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 2009, Towers Perrin worked with the Compensation Committee and management on a number of compensation projects, including: