UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

EINSTEIN NOAH RESTAURANT GROUP, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

PROXY STATEMENT

2010 ANNUAL REPORT

555 Zang Street, Suite 300

Lakewood, Colorado 80228

March 25, 2011

Dear Stockholder:

You are cordially invited to the 2011 Annual Meeting of Stockholders of Einstein Noah Restaurant Group, Inc. to be held on May 3, 2011 at 9:00 a.m., Mountain Time, at our offices located at 555 Zang Street, Suite 300, Lakewood, Colorado 80228.

At the Annual Meeting, you will be asked to consider and vote upon proposals (1) to elect six nominees named herein as directors to serve until the 2012 Annual Meeting of Stockholders, and until their respective successors are elected and qualified; (2) to approve the amended and restated Equity Plan for Non-Employee Directors; (3) to approve the 2011 Omnibus Incentive Plan; (4) to approve, by a non-binding advisory vote, the compensation of the Company’s executive officers; (5) to recommend, by a non-binding advisory vote, the frequency of the advisory vote on the compensation of the Company’s executive officers; and (6) to ratify the appointment of Grant Thornton LLP, an independent registered public accounting firm, as our independent auditors for the fiscal year ending January 3, 2012.

Whether or not you are able to attend the Annual Meeting, I urge you to complete, sign, date and return the enclosed proxy card as promptly as possible in the postage paid envelope provided, as a quorum of the stockholders must be present, either in person or by proxy, in order for the Annual Meeting to take place. Stockholders of record may also vote by telephone or Internet by following the instructions on the enclosed proxy card.

I would appreciate your immediate attention to the mailing of this proxy.

555 Zang Street, Suite 300

Lakewood, Colorado 80228

Notice of Annual Meeting of Stockholders To Be Held on May 3, 2011

You are cordially invited to attend the annual meeting of stockholders of Einstein Noah Restaurant Group, Inc., which will be held at our offices at 555 Zang Street, Suite 300, Lakewood, Colorado 80228 on May 3, 2011 at 9:00 a.m., Mountain Time, for the following purposes:

The close of business on March 15, 2011 has been set as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and any and all adjournments.

It is important that your shares be represented at the Annual Meeting regardless of the size of your holdings. Whether or not you expect to attend the Annual Meeting, please complete, date and sign the enclosed proxy and return it in the envelope provided for that purpose, which does not require postage if mailed in the United States. Stockholders of record may also vote by telephone or Internet by following the instructions on the enclosed proxy card. If you choose to attend the Annual Meeting, you may still vote your shares in person even though you have previously returned your proxy by mail, telephone or Internet. If your shares are held in a bank or brokerage account, please refer to the materials provided by your bank or broker for voting instructions. The proxy is revocable at any time prior to its use.

Please note that the rules governing brokers have changed recently. Brokers may not vote your shares on the election of directors or any other non-routine matters if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted.

Rhonda J. Parish

Secretary

Lakewood, Colorado

March 25, 2011

YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED

PROXY CARD AND RETURN IT PROMPTLY. YOUR PROXY IS

REVOCABLE AT ANY TIME PRIOR TO ITS USE.

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting to be held on May 3, 2011.

A copy of this proxy statement and our annual report to stockholders are available to you on the internet at http://www.RRDEZProxy.com/2011/ENRG.

EINSTEIN NOAH RESTAURANT GROUP, INC.

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

May 3, 2011

The accompanying proxy is solicited by the board of directors of Einstein Noah Restaurant Group, Inc., a Delaware corporation (the Company), for use at the 2011 Annual Meeting of Stockholders to be held at our principal executive offices located at 555 Zang Street, Suite 300, Lakewood, Colorado 80228, on May 3, 2011, at 9:00 a.m., Mountain Time, and at any and all adjournments and postponements thereof (the Annual Meeting). The proxy may be revoked at any time before it is voted. If no contrary instruction is received, signed proxies returned by stockholders will be voted in accordance with the board of directors’ recommendations.

This proxy statement and accompanying proxy card are first being sent to stockholders on or about March 29, 2011.

Shares Outstanding and Voting Rights

Our board of directors fixed the close of business on March 15, 2011 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting. Our only outstanding voting stock is our common stock, $0.001 par value per share, of which 16,687,215 shares were outstanding as of the close of business on the record date. Each outstanding share of common stock is entitled to one vote.

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to us (Attention: Secretary) a written notice of revocation or a duly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not in itself constitute the revocation of a proxy.

At the Annual Meeting, stockholders will vote on proposals to elect six nominees named herein as directors to serve until the 2012 Annual Meeting of Stockholders, and until their respective successors are elected and qualified (Proposal 1); to approve the amended and restated Equity Plan for Non-Employee Directors (Proposal 2); to approve the 2011 Omnibus Incentive Plan (Proposal 3); to approve, by a non-binding advisory vote, the compensation of the Company’s executive officers (Proposal 4); to recommend, by a non-binding advisory vote, the frequency of the advisory vote on the compensation of the Company’s executive officers (Proposal 5); and to ratify the appointment of Grant Thornton LLP, an independent registered public accounting firm, as our independent auditors for the fiscal year ending January 3, 2012 (Proposal 6).

Stockholders representing one-third in voting power of the shares of stock outstanding and entitled to vote must be present or represented by proxy in order to constitute a quorum to conduct business at the Annual Meeting. With respect to the election of directors, our stockholders may vote in favor of the nominees, may withhold their vote for all of the nominees, or may withhold their vote as to specific nominees. Under the Delaware General Corporation Law (DGCL) and our restated certificate of incorporation, the affirmative vote of the holders of a majority in voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon is required to approve Proposals 1, 4 and 6. The affirmative vote of the holders of a majority of the votes cast is required to approve Proposals 2 and 3. With respect to Proposal 5, the option that receives the highest number of votes cast will be the frequency considered to have been selected by the stockholders.

Abstentions may be specified on all proposals and will be counted as present for the purposes of the proposal for which the abstention is noted. A vote withheld for a nominee in the election of directors will have the same effect as a vote against the nominee. An abstention with respect to Proposal 5 will have no effect on the

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outcome of the vote. For purposes of determining whether any of the other proposals has received the requisite vote, where a stockholder abstains from voting, it will have the same effect as a vote against the proposal.

Although the advisory votes on executive compensation and on the frequency of the advisory vote on executive compensation are non-binding as provided by law, the Company’s board of directors and compensation committee will review the results of the votes and the outcome will be given due consideration by the board of directors and compensation committee in their discretion concerning executive compensation and frequency of the advisory vote.

The independent tabulator appointed for the Annual Meeting will tabulate votes cast by proxy or in person at the Annual Meeting. For the purposes of determining whether a proposal has received the requisite vote of the holders of the common stock in instances where brokers are prohibited from exercising or choose not to exercise discretionary authority for beneficial owners who have not provided voting instructions (so-called broker non-votes), those shares of common stock will not be included in the vote totals and, therefore, will have no effect on the vote on any of the proposals. Pursuant to the FINRA Conduct Rules, brokers who hold shares in street name have the authority, in limited circumstances, to vote on certain items when they have not received instructions from beneficial owners. A broker will only have such authority if:

Prior to 2010, the election of directors was considered a routine matter for which brokers were permitted to vote shares without customer direction, however brokers are no longer permitted to vote shares for the election of directors in this manner. Brokers also will not be permitted to vote shares with respect to the advisory votes on executive compensation or frequency without customer direction. Therefore, we urge you to give voting instructions to your broker on all six proposals. Shares that are not voted by a broker given the absence of customer direction are called “broker non-votes.” Broker non-votes are not considered votes for or against a proposal and therefore will have no direct impact on any proposal. Under these rules, absent authority or directions described above, brokers will not be able to vote on Proposals 1 through 5, which are considered non-routine matters. Proposal 6 is a routine proposal on which a broker or other nominee is generally empowered to vote. Accordingly, no broker non-votes will likely result from this proposal.

Costs of Solicitation

We will pay the cost of soliciting proxies for the Annual Meeting. Proxies may be solicited by our regular employees, without additional compensation, in person, or by mail, courier, telephone or facsimile. We may also make arrangements with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons. We may reimburse such brokerage houses, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith.

Annual Report

Our 2010 Annual Report on Form 10-K, including consolidated financial statements as of and for the year ended December 28, 2010, is being distributed to all stockholders entitled to vote at the Annual Meeting together with this proxy statement, in satisfaction of the requirements of the Securities and Exchange Commission (the SEC). Additional copies of the Annual Report are available at no charge upon request. To obtain additional copies of the Annual Report, please contact us at 555 Zang Street, Suite 300, Lakewood, Colorado 80228, Attention: Secretary, or at telephone number (303) 568-8000. The Annual Report does not form any part of the materials for the solicitation of proxies. In addition, a copy of this proxy statement and our annual report to stockholders are available to you on the internet at http://www.RRDEZProxy.com/2011/ENRG.

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VOTING SECURITIES AND PRINCIPAL HOLDERS

As of March 15, 2011, we had 16,687,215 shares of common stock outstanding, which are our only outstanding voting securities. The following table sets forth information regarding the beneficial ownership of our common stock as of March 15, 2011, by:

Unless otherwise indicated below, the address of each person listed below is 555 Zang Street, Suite 300, Lakewood, Colorado 80228.

BENEFICIAL OWNERSHIP

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Pledge of Shares

In the ordinary course of its business, prime brokers for Greenlight Capital, L.L.C. and its affiliates (Greenlight) have taken a security interest in Greenlight’s shares in the Company. In the event that the prime brokers were to exercise remedies under the security interests, a change of control of the Company could occur.

To our knowledge, none of our officers or directors has pledged any of his or her shares.

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PROPOSAL 1

ELECTION OF DIRECTORS

Our board of directors currently consists of six directors and the board has nominated six directors for election at the Annual Meeting to serve until the 2012 Annual Meeting of Stockholders, and until their respective successors are duly elected and qualified. Our restated certificate of incorporation authorizes three to nine directors, as determined by the board, and all directors are to be elected annually. Stockholders are not entitled to cumulate votes in the election of directors and may not vote for a greater number of persons than the number of nominees named.

We are soliciting proxies in favor of the re-election of each of the nominees identified below. We intend that all properly executed proxies will be voted for these six nominees unless otherwise specified. All nominees have consented to serve as directors, if elected. If any nominee is unwilling to serve as a director at the time of the Annual Meeting, the persons who are designated as proxies intend to vote, in their discretion, for such other persons, if any, as may be designated by the board of directors. The proxies may not vote for a greater number of persons than the number of nominees named. As of the date of this proxy statement, the board of directors has no reason to believe that any of the persons named below will be unable or unwilling to serve as a nominee or as a director if elected. Greenlight has indicated its intention to vote in favor of each of the nominees.

Information About the Nominees

The names of the nominees, their ages as of March 15, 2011, and other information about them are set forth below:

Michael W. Arthur. Mr. Arthur, 71, was appointed to the board of directors in October 2004. Since 1990, Mr. Arthur has headed Michael Arthur and Associates, a consulting and interim management firm specializing in restructurings, business development, and strategic, financial, marketing and branding strategies. During their restructurings, he served as CEO of California Federal Bank and financial advisor to Long John Silver’s Restaurants. Prior to 1990, Mr. Arthur served as Executive Vice President and Chief Financial Officer for Sizzler Restaurants and Pinkerton Security; Vice President of Marketing for Mattel Toys; and also served in various other management roles for D’Arcy, Masius, Benton & Bowles Advertising and Procter and Gamble. He also serves on the board of directors of the Alzheimers Association. Mr. Arthur has a B.A. degree from Johns Hopkins University and attended the Wharton Graduate School of Business.

The board of directors believes that Mr. Arthur’s CEO, CFO and marketing experience in retail, banking and the restaurant industry make him a well-qualified candidate for a director of the Company.

E. Nelson Heumann. Mr. Heumann, C.F.A., 53, has served as our director since May 2004 and as Chairman of the Board since October 2004. Mr. Heumann retired from Greenlight Capital, Inc., an investment management firm, in February 2011. He joined Greenlight Capital, Inc. in March 2000 and was made a managing member of Greenlight Capital, L.L.C. in January 2002. Prior to joining Greenlight, he served as director of distressed investments at SG Cowen from January 1997 to January 2000. From 1990 to January 1997, Mr. Heumann was a director responsible for distressed debt research and trading at Schroders. Prior to that, he was vice-president of bankrupt and distressed debt research for Merrill Lynch. Earlier in his career, Mr. Heumann was employed with Claremont Group, a leveraged buyout firm, and Value Line. He graduated from Louisiana State University in 1980 with a B.S. in Mechanical Engineering and in 1985 with an M.S. in Finance.

The board of directors believes that Mr. Heumann’s experience in investments and finance makes him a well-qualified candidate for a director of the Company.

Frank C. Meyer. Mr. Meyer, 67, has served as our director since May 2004 and is a private investor. He was chairman of Glenwood Capital Investments, LLC, an investment advisory firm he co-founded, from January 1988 to January 2004. Since 2000, Glenwood has been a wholly owned subsidiary of the Man Group, plc, an

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investment advisor based in England specializing in alternative investment strategies. Mr. Meyer also serves on the board of directors of United Capital Financial Partners, Inc., a firm that converts transaction-oriented brokers into fee-based financial planners, Fifth Street Finance Corp., a mezzanine lender to corporations, and Ferox, a family of convertible hedge funds. Mr. Meyer holds an M.B.A. from the University of Chicago and began his career at the University’s School of Business as an instructor of statistics.

The board of directors believes that Mr. Meyer’s experience in investments and finance makes him a well-qualified candidate for a director of the Company.

Thomas J. Mueller. Mr. Mueller, 59, was appointed to the board of directors in December 2007. He has been the President and Partner of Mueller Consulting Inc., a consulting firm specializing in the restaurant industry, since 2006. From 2000 to 2006, Mr. Mueller served as President and Chief Operating Officer of Wendy’s International, Inc., the third largest restaurant hamburger chain in the quick service franchise industry. He began his career at Wendy’s in 1998 as the Senior Vice President, Special Projects. From 1995 to 1997, Mr. Mueller was Senior Vice President of Operations—North America, for Burger King Corporation, where he began his career as a restaurant manager in 1973. Mr. Mueller attended State University of New York at Fredonia and is vice chairman of the Board of Trustees of Ohio Dominican University.

The board of directors believes that Mr. Mueller’s experience in the restaurant and franchise industry makes him a well-qualified candidate for a director of the Company.

Jeffrey J. O’Neill. Mr. O’Neill, 54, was named President and Chief Executive Officer and appointed to our board of directors in December 2008. In May 2005, Mr. O’Neill joined Priszm Income Fund in Toronto, Ontario, Canada and served as its President and Chief Operating Officer until being named Chief Executive Officer in January 2008 and serving in that capacity until October 2008. Priszm Income Fund owns and operates 465 quick service and quick casual restaurants (KFC, Taco Bell and Pizza Hut) across seven Canadian provinces. From 1999 until 2005, Mr. O’Neill was employed by PepsiCo. He served as President of PepsiCola Canada from March 1999 to January 2003 and from February 2003 through March 2005 he was Vice President of Sales for Quaker Foods USA as part of the integration of the Quaker Oats Company after the acquisition by PepsiCo. He holds an Honors Bachelor of Commerce Degree from the University of Ottawa and is currently a Board member of Rocky Vista Medical School in Denver, Colorado and the Healthy Weight Commitment Foundation headquartered in Washington, D.C.

The board of directors believes that Mr. O’Neill’s CEO, restaurant and franchise experience make him a well-qualified candidate for a director of the Company.

S. Garrett Stonehouse, Jr. Mr. Stonehouse, 41, has served as our director since February 2004. He has been a principal and founding partner of MCG Global, LLC, a private equity investment firm in Stratford, CT, since 1995. Mr. Stonehouse is also the chairman of the board of directors of Denver-based Imperial Headwear, Inc. and a member of the board of directors of Boston-based Global Novations, LLC. Prior to co-founding MCG Global, he was vice president of Fidelco Capital Group. Before joining Fidelco in 1994, he held various positions with GE Capital. Mr. Stonehouse received a B.A. degree from Boston College in economics and mathematics.

The board of directors believes that Mr. Stonehouse’s experience in investments and finance makes him a well-qualified candidate for a director of the Company.

Nomination of Directors

The nominees for re-election to our board at the Annual Meeting were formally nominated by the full board of directors consisting of Messrs. Arthur, Heumann, Mueller, Meyer, O’Neill and Stonehouse. The Company does not have a standing nominating committee or committee performing similar functions because Greenlight owns approximately 64.3% of our common stock as of the record date and can therefore elect all of our directors without the vote of any other stockholder. Although the board will consider nominees recommended by

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stockholders, since Greenlight owns approximately 64.3% of the voting stock and, as such, the Company is a “controlled company”, the board has not established any specific procedures for stockholders to follow to recommend potential director nominees for consideration. Messrs. Arthur, Heumann, Meyer, Mueller, O’Neill and Stonehouse participated in the consideration of director nominees.

As our majority stockholder, Greenlight identifies qualified individuals to be considered for our board of directors. Greenlight’s goal is to create a balance of diverse knowledge, experience, and interest among the board members, and Greenlight evaluates potential candidates accordingly. Our board assesses director candidates for their character, judgment, business experience and acumen. At a minimum, a director candidate must possess personal and professional integrity, sound judgment and forthrightness. A director candidate must also have sufficient time and energy to devote to the affairs of the Company and be free from conflicts of interest with the Company. There are no specific weights assigned to any particular criteria and no particular criterion is necessarily applicable to all prospective director candidates. For a discussion of the specific backgrounds and qualifications of our current director nominees, see “Information About the Nominees” above.

Leadership and Board Composition

Currently, E. Nelson Heumann, a retired employee of Greenlight, serves as the chairman of our board of directors and Jeffrey J. O’Neill serves as our President and Chief Executive Officer. The Company has determined that this current leadership structure is appropriate given that Greenlight is our majority stockholder and can elect all of the members of our board of directors without the approval of any other stockholder. Our board of directors has determined that Michael W. Arthur, Frank C. Meyer, Thomas J. Mueller and S. Garrett Stonehouse, Jr., all current directors, qualify as “independent” directors under the rules promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act), and by the Nasdaq Stock Market. There are no family relationships among any of our executive officers, directors or nominees for director.

Greenlight currently owns shares of our common stock sufficient to elect all of the members of our board of directors without the approval of any other stockholder.

Board’s Role in Risk Oversight

The board of directors is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the board, as disclosed in the descriptions of each of the committees below, but the full board has retained responsibility for general oversight of risks. The board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

Meetings of the Board of Directors and Committees

The board of directors held ten meetings during fiscal 2010 and took action by written consent on one occasion. During fiscal 2010, no director then in office attended fewer than 75% of the aggregate total number of meetings of the board of directors held during the period in which he was a director and of the total number of meetings held by all of the committees of the board of directors on which he served. The two standing committees of the board of directors are the audit committee and the compensation committee.

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The following table shows the membership and number of meetings held by the board and each committee during fiscal 2010:

DIRECTOR COMMITTEE MEMBERSHIP AND MEETINGS

We have not established a policy on director attendance at annual stockholders’ meetings; however, all but one of our directors then in office attended our last Annual Meeting held in May 2010.

Our board of directors has not established a formal process for our stockholders to communicate directly with the board because of the fact that Greenlight owns approximately 64.3% of our common stock as of the record date, and, as a result, it was not deemed necessary or appropriate. Our audit committee has established a process for communicating complaints regarding accounting or auditing matters. Any such complaints received on the established hotline or submitted to the Chief Compliance Officer are promptly forwarded to the audit committee to take such action as may be appropriate.

Audit Committee

Michael W. Arthur (chairman), Frank C. Meyer and S. Garrett Stonehouse, Jr. are the current members of the audit committee. Each of them is “independent” as required by the rules promulgated by the SEC under the Exchange Act, and by the Nasdaq Stock Market. Each of them also meets the financial literacy requirements of the Nasdaq Stock Market. Our board of directors has determined that Mr. Arthur qualifies as an “audit committee financial expert” as defined by the rules promulgated by the SEC.

The audit committee is primarily concerned with monitoring:

The audit committee also is responsible for handling complaints regarding our accounting, internal accounting controls or auditing matters. The audit committee’s responsibilities are set forth in its charter which was last amended in February 2010 and is reviewed annually. The charter is available on our website at www.einsteinnoah.com. There were 4 meetings of the audit committee during fiscal 2010.

Compensation Committee

S. Garrett Stonehouse, Jr. (chairman), Thomas J. Mueller and Michael W. Arthur are the current members of the compensation committee. Each of the current members is “independent” as defined in the rules promulgated by the SEC under the Exchange Act and by the Nasdaq Stock Market. This committee is primarily concerned with determining the compensation of our employees generally and approving compensation of our executive officers. The committee does not establish or recommend compensation for our independent directors; that compensation is approved by the board of directors as a whole.

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The compensation committee’s responsibilities are set forth in its charter. The charter was most recently updated in February 2008 and is reviewed annually. The committee’s charter is posted on our website at www.einsteinnoah.com. The responsibilities as outlined in the charter are:

There were six meetings of the compensation committee during fiscal 2010.

The compensation committee chairman, in consultation with senior management, sets the agenda for compensation committee meetings. The Corporate Secretary has attended meetings of the compensation committee to provide appropriate record keeping. The committee has also invited the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Concept Officer and Vice President—Human Resources to attend certain compensation committee meetings. These individuals may attend compensation committee meetings but would not attend executive sessions.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is an officer or employee of the Company. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Vote Required

Directors will be elected by the affirmative vote of the holders of a majority in voting power of the shares present in person or by proxy at the Annual Meeting and entitled to vote on the matter. Greenlight has indicated its intention to vote in favor of each of the nominees.

Recommendation

The board of directors recommends that stockholders vote FOR each of the nominees for director. If not otherwise specified, proxies will be voted FOR each of the nominees for director.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Greenlight Capital, L.L.C. and its affiliates

E. Nelson Heumann is the chairman of our board of directors and retired from Greenlight in February 2011. Greenlight beneficially owns approximately 64.3% of our common stock as of the record date. As a result, Greenlight has sufficient voting power without the vote of any other stockholders to determine what matters will be submitted for approval by our stockholders, to elect all of our board of directors and, among other things, to determine whether a change in control of our Company occurs. Greenlight has been involved in our financings and refinancings, has purchased our debt and equity securities and was involved in our equity recapitalization.

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Procedures for Review of Transactions with Related Persons

Any proposed transaction with a related person is subject to review, negotiation and action by a committee consisting entirely of independent and disinterested directors, which committee is appointed by the board of directors at the time of any proposed transaction. The committee’s purpose and authority are set forth in resolutions appointing the committee and generally include the authority to retain such consultants, advisers and attorneys as it deems advisable in order to perform its duties.

PROPOSAL 2

APPROVAL OF THE

EQUITY PLAN FOR NON-EMPLOYEE DIRECTORS, AS AMENDED AND RESTATED

We are asking our stockholders to approve the Einstein Noah Restaurant Group, Inc. Equity Plan for Non-Employee Directors, as amended and restated (the Director Plan). Prior to this amendment and restatement, the Director Plan was named the Stock Option Plan for (Non-Employee) Independent Directors, as amended and restated. On February 23, 2011, our board of directors approved the Director Plan, subject to the approval of our stockholders at the Annual Meeting. The Director Plan includes the following material changes:

Background

The plan was initially approved by our stockholders at our 2004 Annual Meeting. Subsequently, in 2005, 2007 and 2009 our stockholders approved changes to the plan to increase the number of shares authorized for issuance from 200,000 shares to 500,000 shares and to make other changes.

Prior to this amendment and restatement, the plan provided for the automatic grant to each of our independent directors, effective each January 1, of an option to purchase 10,000 shares of our common stock, subject to adjustment for commencement of service mid-year. In January 2011, we granted an option to each of our four independent directors to purchase 10,000 shares of our common stock. The Director Plan provides greater flexibility in that it permits the grant of restricted stock awards and restricted stock unit awards, in addition to nonqualified stock options. The Director Plan also eliminates the automatic grant of an option to purchase 10,000 shares, and instead provides for discretionary awards. The board of directors believes that this greater flexibility in the type and amount of awards will help it attract and retain qualified board members. The Director Plan will only be effective if Proposal 2 is approved by our stockholders at the Annual Meeting. If Proposal 2 is not approved, the plan, prior to this amendment and restatement will continue according to its terms before the amendment and restatement.

Vote Required

The affirmative vote of a majority of the votes cast on this proposal is required to approve Proposal 2. Greenlight has indicated its intention to vote in favor of Proposal 2.

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Recommendation

The board of directors recommends that stockholders vote FOR approval of Proposal 2. If not otherwise specified, proxies will be voted FOR Proposal 2.

Summary of the Director Plan

The following is a summary of the material terms of the Director Plan. This summary is not complete and is subject to and qualified in its entirety by the actual terms of the Director Plan, attached as Annex A.

Purposes. The primary purposes of the Director Plan are to provide our non-employee directors with an added incentive to continue in service with the Company and to have a more direct interest in the future success of its operations.

Awards. The Director Plan permits the grant of awards of nonqualified stock options, restricted stock and restricted stock units. Only non-employee directors qualify for awards under the Director Plan. A non-employee director is an individual who is a member of the board or directors and is not an employee of the Company. As of January 1, 2011, we had five non-employee directors who would be eligible to receive awards under the Director Plan.

Administration. Our board of directors administers and interprets the Director Plan.

Number of Shares. A total of 500,000 shares are authorized for issuance under the Director Plan. Any shares subject to awards that are forfeited or that expire or are terminated for any reason become available for use under the Director Plan. Any shares used to pay the option price, or tax withholding obligations are not available again for the grant of awards.

Stock Options. The Director Plan permits the grant of nonqualified stock options. The board of directors, in its sole discretion, determines the number of shares and other terms and conditions of an option subject to the terms of the Director Plan. The terms and conditions are set forth in an award agreement. The option price cannot be less than the fair market value of the Company’s common stock on the date of grant. Except as otherwise provided in an award agreement, each option shall expire five years from the date of grant, unless terminated sooner.

Except as otherwise provided in an award agreement, each option becomes exercisable six months after the date of grant. The option holder may exercise the option by providing written notice to the Company and paying the exercise price: (A) cash; (B) certified, cashier’s, or other check acceptable to the Company, payable to the order of the Company; (C) delivery to the Company of certificates representing the number of shares of Stock then owned by the Holder, the Fair Market Value of which (determined as of the date the notice of exercise is delivered to the Company) equals the Fair Market Value of the Stock to be purchased pursuant to the Option, properly endorsed for transfer to the Company; or (D) by a cashless (broker-assisted) exercise.

Restricted Stock/Restricted Stock Units. The Director Plan permits the grant of restricted stock and restricted stock units. The board of directors, in its sole discretion, determines the type of award, the number of shares subject to the award and the other terms and conditions of awards of restricted stock and restricted stock units subject to the terms of the Director Plan. The terms and conditions are set forth in an award agreement.

A grant of restricted stock units represents a promise to deliver a corresponding number of shares of common stock of the Company based upon the completion of service or such other terms and conditions as specified in the applicable award agreement. The value of one restricted stock unit corresponds to one share of common stock of the Company and vests as determined in the award agreement. Unless otherwise provided in the award agreement, restricted stock units will be settled and paid in shares of common stock of the Company on the date the restricted stock units vest and become nonforfeitable or at such later date as specified in the award agreement or such date as specified in a deferral agreement.

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Dividends and Dividend Equivalents. Unless provided otherwise in the award agreement, dividends (or dividend equivalents) will be paid on shares of restricted stock (restricted stock units) at the same time and in the same manner as dividends are paid to individuals who hold shares of stock as of the dividend record date.

Adjustments. The Director Plan provides for adjustment to the number of shares authorized for issuance under the plan and the number of shares subject to outstanding stock options, restricted stock and restricted stock units in the event of stock splits, stock dividends, recapitalizations and other dilutive changes in our common stock. The board of directors also has discretion to make equitable adjustments in the event of any other changes in our outstanding common stock, provided, that any adjustment is consistent with the requirements of Section 409A.

Non-Transferability. Stock options, restricted stock and restricted stock units granted under the Director Plan are non-transferable, except by will or pursuant to the laws of descent and distribution and may be exercised during the lifetime of the holder only by the holder (or, in the event of incapacity, his or her guardian or legal representative).

Effect of Termination of Service. Unless provided otherwise in the award agreement, upon termination of service, an outstanding stock option will terminate prior to the end of its five-year term in three circumstances. If the option holder is removed from the board for cause, as determined by the board in its sole discretion, the outstanding option becomes void for all purposes upon the removal, regardless of the option term. If the option holder dies while a director, the outstanding option will terminate upon the first to occur of 12 months following the date of death or the end of the option term. If the option holder terminates service as a director of the Company for any other reason, the outstanding option will terminate upon the first to occur of 12 months following the date the option holder is no longer a director or the end of the option term.

Unless provided otherwise in the award agreement, if a holder of restricted stock or restricted stock units ceases to be a non-employee director during the vesting period for any reason other than death, then any non-vested shares of restricted stock or non-vested restricted stock units are forfeited and void. If the holder of restricted stock and restricted stock units dies during the vesting period while serving as a non-employee director, then the shares of restricted stock vest and become nonforfeitable and restricted stock units vest and are settled.

Corporate Reorganization; Change of Control.

Adjustment of Awards. Upon the occurrence of a “corporate transaction,” the board may take any one or more of the following actions with respect to outstanding awards:

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The board need not take the same action with respect to all outstanding awards.

A “corporate transaction” under the Director Plan generally includes the following events:

A change of control means the occurrence of one or more of the following:

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Amendment and Termination. The board may amend, modify, suspend or terminate the Director Plan. No amendment can impair any stock option, restricted stock award or restricted stock units previously granted or deprive any holder of any common stock acquired without the holder’s consent. The Company will obtain stockholder approval of amendments to the extent required by Rule 16b-3 under the Exchange Act, or by listing requirements of any stock exchange on which the Company’s securities are listed. The Director Plan does not have a fixed term, it will terminate whenever the board adopts a resolution to that effect.

Federal Income Tax Consequences

The following summary generally describes the principal federal (but not state and local) income tax consequences of awards granted pursuant to the Director Plan. It is general in nature and is not intended to cover all tax consequences that may apply to a particular recipient or to us. The provisions of the Code and the regulations thereunder relating to these matters are complicated and their impact in any one case may depend upon the particular circumstances.

When an award is granted, there are no income tax consequences for the holder or us. When a nonqualified stock option is exercised or restricted stock or restricted stock units vest, in general, the holder recognizes ordinary income equal to the excess of the fair market value of the common stock on the date of exercise over the exercise price if for a stock option or the fair market value on the day of vesting for restricted stock and restricted stock units. For award holders, we are entitled to a deduction equal to the ordinary income recognized by the holder for our taxable year that ends with or within the taxable year in which the holder recognized the ordinary income.

Section 409A imposes time and form of payment requirements for “nonqualified deferred compensation,” including certain awards. If a nonqualified deferred compensation arrangement subject to Section 409A fails to satisfy, or is not operated in accordance with, the requirements of Section 409A, the service provider may be required to accelerate the recognition of income and be subject to an additional 20% tax, plus interest. The awards issuable under the plan are intended to be designed to comply with Section 409A.

New Plan Benefits

The benefits to be received in the future under the Director Plan are not determinable as they are dependent on the number of non-employee directors serving on the board at any given time and the discretionary grants awarded by the board of directors from time to time. Our named executive officers, other executive officers and other employees are not eligible to participate in the Director Plan and will not receive any benefits under the Director Plan. Options that have been granted under the Director Plan during 2010 are set forth in the “Director Compensation” table below. The closing price of a share of our common stock on the NASDAQ Stock Market on March 15, 2011 was $15.26 per share.

PROPOSAL 3

APPROVAL OF THE

2011 OMNIBUS INCENTIVE PLAN

We are asking our stockholders to approve the Einstein Noah Restaurant Group, Inc. 2011 Omnibus Incentive Plan (the Incentive Plan). The Incentive Plan replaces our 2004 Executive Employee Incentive Plan (the 2004 Plan). If the Incentive Plan is approved by our stockholders, the 2004 Plan will be suspended, and no additional awards will be made under the 2004 Plan. On February 23, 2011, our board of directors adopted the Incentive Plan, subject to the approval of our stockholders at the Annual Meeting. A copy of the Incentive Plan is attached as Annex B.

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Purpose of the Incentive Plan

The purpose of the Incentive Plan is to foster and promote the long-term financial success of the Company and materially increase shareholder value by (a) motivating superior performance by means of performance-related incentives; (b) encouraging and providing for the acquisition of an ownership interest in the Company by employees; and (c) enabling the Company to attract and retain qualified and competent persons to serve as members of our management team.

Background

Subject to approval by our stockholders, the Incentive Plan will replace our 2004 Plan. Effective as of March 15, 2011, 51,172 shares remained available for issuance under the 2004 Plan. Our board of directors has reserved 1,000,000 shares of common stock for issuance under the Incentive Plan.

Our board of directors believes it is in our best interests to approve the Incentive Plan and recommends that our stockholders approve the Incentive Plan. The principal features of the Incentive Plan are summarized below.

Vote Required

The affirmative vote of a majority of the votes cast on this proposal is required to approve Proposal 3. Greenlight has indicated its intention to vote in favor of Proposal 3.

Recommendation

The board of directors recommends that stockholders vote FOR the approval of Proposal 3. If not otherwise specified, proxies will be voted FOR Proposal 3.

Summary of the Incentive Plan

The following is a summary of the material terms of the Incentive Plan. This summary is not complete and is subject to and qualified in its entirety by the actual terms of the Incentive Plan, attached as Annex B.

Awards; Eligibility. The Incentive Plan permits the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. All of our employees and third party service providers are eligible to receive awards under the Incentive Plan.

Duration. The Incentive Plan will terminate 10 years from its effective date, unless terminated sooner. After the plan is terminated, no awards may be granted but awards previously granted will remain outstanding in accordance with their terms.

Administration. The Incentive Plan is administered by the compensation committee of the board of directors or a subcommittee thereof or any other committee designated by the board of directors. The committee has full and exclusive discretionary power and authority to take such actions as it deems necessary and advisable with respect to the administration of the Incentive Plan including, but not limited to:

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Shares Subject to the Plan. Subject to adjustment, the total number of shares available for awards under the plan is 1,000,000 shares. Any shares related to an award that terminates by expiration, forfeiture, cancellation or otherwise without the issuance of shares, are settled in cash in lieu of shares, or are exchanged with the committee’s permission, prior to the issuance of shares, shall be available again for grant under the plan. Any shares tendered to pay the option price or to satisfy tax withholding obligations associated with an award, shall become available again for grant under the plan. Any shares that were subject to an stock appreciation right, or SAR, granted under the plan that were not issued upon the exercise of such SAR, shall become available again for grant under the plan. Notwithstanding the foregoing, no shares that become available again for awards granted under the plan shall be available for grants of incentive stock options.

Annual Award Limits. Subject to adjustment, the maximum number of shares for which options or SARs may be granted to any participant in any calendar year shall be 300,000 shares and the maximum number of shares that may be paid to any participant in any calendar year in the form of restricted stock, restricted stock units, performance shares or other stock based awards, in each case that are performance-based compensation, shall be 300,000 shares determined as of the date of payout. The maximum aggregate amount that may be paid under an award of performance units, cash-based awards or any other award that is payable in cash, in each case that are performance-based compensation, shall be $5,000,000.

Stock Options. The Incentive Plan provides for the grant of incentive and non-qualified stock options. The committee shall determine the award of options in its sole discretion from time to time for grants to participants. The committee in its sole discretion will determine the terms and provisions applicable to the award of options which will be set forth in an Award Agreement and will describe the award as either a nonqualified stock option or incentive stock option. Such terms and provisions will also include, among other provisions, the determination of price which must be at least equal to 100% of the fair market value of a share as of the option’s grant date (110% of fair market value in the case of an incentive option granted to a holder of 10% or more of our common stock) and the determination of option term which shall not be longer than ten years from the date of grant (five years in the case of an incentive option granted to a holder of 10% or more of our common stock). The grant of an incentive option shall also limit vesting each year with respect to no more than $100,000 in value of common stock based upon fair market value of the common stock on the date of grant of the incentive option. Options granted to any participant during a calendar shall not exceed 300,000 shares of common stock.

An option may be exercised by delivery of a notice of exercise to the Company or by complying with the procedures authorized by the committee and payment of the exercise price:

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Stock Appreciation Rights. The Incentive Plan provides for the grant of stock appreciation rights (SARs) to a participant from time to time in such number, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. The award agreement shall include, but not limited to, the grant price which must be at least equal to 100% of the fair market value of a shares as of the grant date, the term of a SAR which shall not be later than the tenth anniversary date of its grant, (except for grants to participants outside the United States in which case the term may be greater than ten years) and the restrictions and conditions of exercise which need not be the same for each grant or each participant.

A SAR may be exercised by delivery of a notice of exercise to the Company or by complying with the procedures authorized by the committee. Payment shall be in cash, shares or a combination thereof as provided for under the applicable award agreement. Settlement of SARs shall be in an amount equal to the product of:

Restricted Stock. The Incentive Plan provides for the grant of restricted stock to a participant from time to time in such number, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. The award agreement shall include, but not limited to, a requirement for payment of a purchase price for each share of restricted stock; a restriction based upon the achievement of specific performance goals; time-based restrictions and time-based restrictions on vesting following attainment of performance goals; restrictions under applicable laws and requirements under any stock exchange or market on which the shares are listed or traded. The committee may determine where the certificates are retained until conditions or restrictions have been satisfied or passed. After all conditions and restrictions have been satisfied or lapsed (including satisfaction of any applicable tax withholding obligations) the shares covered by each restricted stock grant shall become freely transferable by the participant and may bear a restrictive legend. The participant will have full voting rights with respect to those shares during the period of restriction unless otherwise set forth in the award agreement.

Restricted Stock Units. The Incentive Plan provides for the grant of restricted stock units to a participant from time to time in such number, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. A grant of restricted stock units shall not represent the grant of shares of common stock of the Company but shall represent a promise to deliver a corresponding number of shares of common stock of the Company based upon the completion of service or such other terms and conditions as specified in the applicable award agreement. The award agreement may include, but not limited to, a requirement for payment of a purchase price for each restricted stock unit; a restriction based upon the achievement of specific performance goals; time-based restrictions and time-based restrictions on vesting following attainment of performance goals; restrictions under applicable laws and requirements under any stock exchange or market on which the shares are listed or traded. A participant shall have no voting rights with respect to any grant of restricted stock units. Restricted stock units will be settled upon the date such restricted stock units vest. Settlement may be made in shares, cash or a combination as specified in the award agreement.

Performance Shares. The Incentive Plan provides for the grant of performance shares to a participant from time to time in such number, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. Each performance shares shall have an initial value equal to the fair market value of a share on the grant date and the committee shall set performance goals that will determine the number of performance shares that will be paid to a participant. Settlement may be made in cash or shares or a combination as specified in the award agreement.

Performance Units. The Incentive Plan provides for the grant of performance units to a participant from time to time in such number, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. Each performance unit shall have an initial notional value equal to a dollar amount as determined by the committee and the committee shall set performance goals that will determine the

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number of performance units that will be settled and paid to a participant. Earned performance units will be settled upon the close of the performance period in the form of shares, cash or a combination as specified in the award agreement.

Other Stock-Based and Cash-Based Awards. The Incentive Plan provides for the grant of other stock-based and cash-based awards, in a form not otherwise described above, to a participant from time to time in such numbers or amounts, and upon such terms as determined by the committee in its sole discretion and shall be evidenced by an award agreement. Each stock-based award shall be expressed in terms of shares or units based on shares and each cash-based award shall specify a payment amount or payment range as determined by the committee. Payment, if any, shall be made in accordance with the terms of the award agreement, in cash, shares or a combination as determined by the committee in its sole discretion.

Transferability of Awards and Shares. Awards granted under the Incentive Plan are non-transferable, except by will or pursuant to the laws of descent and distribution, or subject to consent of the committee, pursuant to a domestic relations order entered into by a court of competent jurisdiction, and no award shall be subject to attachment, execution or levy of any kind. Options are exercisable solely by the participant during a participant’s lifetime. The committee may establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amount payable or shares deliverable in the event of, or following the participant’s death may be provided.

The committee may in its discretion determine that any or all awards shall be transferable, without compensation to the transferor, to and exercisable by such transferees; and subject to such terms and conditions as the committee may deem appropriate provided however, no award may be transferred for value without shareholder approval. The committee may also impose restrictions on any shares acquired by a participant under the Incentive Plan is it may deem advisable, including minimum holding period requirements, restrictions under applicable federal securities, blue sky or state securities laws or under stock exchange or market requirements upon which such shares are then listed or traded.

Compliance with Code Section 162(m). The provisions of the Incentive Plan are intended to ensure that all options and SARs granted hereunder to any participant who is or may be a covered employee at the time of exercise of such option or SAR grant qualify for exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(c) and that such options and SARs shall therefore be considered performance-based compensation and the Incentive Plan shall be interpreted and operated consistent with that intention. The committee may designate any award (other than an option or SAR) as performance-based compensation upon grant, in each case based upon a determination that (i) the participant is or may be a covered employee with respect to such award, and (ii) the committee wishes such award to qualify for exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(c). The committee shall have the sole authority to specify which awards are to be granted in compliance with Section 162(m) and treated as performance-based compensation. Below are the materials terms of the performance goals under the plan for awards intended to qualify as performance-based compensation:

Eligible Employees. Performance-based awards may be granted to executive officers of the Company and any other employee of the Company or its affiliates who is or may be a covered employee as defined in Section 162(m).

Performance Measures. One or more of the following performance measures may be used for performance-based awards:

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Performance measures may (i) relate to the performance of the Company or any subsidiary as a whole or any business unit or division or any combination, (ii) be compared to the performance of comparator companies, or published or special index, (iii) be based on change in the performance measure over a specified period or be cumulative, (iv) relate to or be compared to one or more performance measures, or (v) any combination.

Maximum Amount of Compensation. For the maximum number of shares or amount payable with respect to a performance-based award see Annual Award Limits above.

Effect of Termination of Services. Each Award Agreement evidencing a grant shall provide for the extent to which a participant shall vest in or forfeit such award following the participant’s termination of employment or termination as a third-party service provider and, with respect to an award in the form of an option or SAR, the extent to which a participant shall have the right to exercise the option or SAR following the participant’s termination of employment or termination as a third-party service provider. These provisions shall be determined in the sole discretion of the committee and included in each award agreement entered into with each participant.

Dividend Equivalents. In general, the committee may grant dividend equivalents and the dividend equivalents will be paid in cash or additional shares or awards as determined by the committee.

Change of Control. Unless otherwise determined by the committee and set forth in the applicable Award Agreement, upon the occurrence of a change of control:

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A change of control means the occurrence of one or more of the following:

Amendment and Termination. The Incentive Plan will terminate ten years from the effective date. However, the board of directors may amend or terminate the plan and any outstanding award at any time. An outstanding award may not be amended without prior shareholder approval to: (1) reduce the option price of an outstanding option or reduce the grant price of an outstanding SAR; (2) cancel an outstanding option or SAR in exchange for other options or SARs with an option or grant price less than the originally granted option or SAR; or (3) cancel an outstanding option or SAR with option or grant price less than the fair market value of a share on the date of cancellation in exchange of cash or another award. Notwithstanding the foregoing, no amendment of the plan shall be made without shareholder approval if shareholder approval is required pursuant to applicable stock exchange rules, state corporate laws, applicable U.S. federal laws or other applicable laws.

Adjustments. The Incentive Plan provides for adjustment to the terms and conditions of the awards in recognition of unusual or nonrecurring events affecting the company or the financial statements of the company or changes in applicable laws, regulations, or accounting principles whenever the committee determines such adjustments appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Incentive Plan. No termination or amendment of this Plan or an award agreement shall adversely affect in any material way any award previously granted under this Incentive Plan without the written consent of the participant holding such award. The committee may deem it necessary or advisable to amend the Incentive Plan or an award agreement for the purpose of conforming the Incentive Plan or an award agreement to any law relating to plans of this or similar nature and to the administrative regulations and rulings promulgated thereunder. A participant accepting an award under the Incentive Plan agrees to any amendment to the Plan and any award without further consideration or action.

Tax Withholding. Under the Incentive Plan, the company shall have the power and the right to deduct or withhold, or require a participant to remit to the company, the minimum statutory amount to satisfy applicable

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federal, state and local tax withholding requirements, domestic or foreign, with respect to any taxable event arising as a result of the Incentive Plan but in no event shall such deduction or withholding or remittance exceed the minimum statutory withholding requirements.

Under the Incentive Plan, with respect to withholding required upon the exercise of options or SARs, upon the lapse of restrictions on restricted stock, upon the settlement of restricted stock units, or upon the achievement of performance goals related to performance shares, or any other taxable event arising as a result of an award granted hereunder (collectively and individually referred to as a “share payment”), a participant may elect, subject to the approval of the committee, to satisfy the withholding requirement, in whole or in part, by having the company withhold from a share payment the number of shares having a fair market value on the date the withholding is to be determined equal to the minimum statutory withholding requirement but in no event shall such withholding exceed the minimum statutory withholding requirement. All such elections shall be irrevocable, made in writing, and signed by the participant, and shall be subject to any restrictions or limitations that the committee, in its sole discretion, deems appropriate.

Federal Income Tax Consequences

The following is intended only as a brief summary of the material U.S. federal income tax consequences of the Incentive Plan. The tax consequences to a participant will generally depend upon the type of award issued to the participant. In general, if a participant recognizes ordinary income in connection with the grant, vesting or exercise of an award, we will be entitled to a corresponding deduction equal to the amount of the income recognized by the participant. This summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local or foreign tax laws.

Options and Stock Appreciation Rights. In general, a participant does not have taxable income upon the grant of an option or a stock appreciation right. The participant will recognize ordinary income upon exercise of a nonqualified stock option equal to the excess of the fair market value of shares acquired on exercise over the aggregate option price for the shares. Upon exercising a stock appreciation right, the participant will recognize ordinary income equal to the cash or fair market value of the shares received. A participant will not recognize ordinary income upon exercise of an incentive stock option, or ISO, except that the alternative minimum tax may apply. If a participant disposes of shares acquired upon exercise of an ISO before the end of the applicable holding periods, the participant will recognize ordinary income. Otherwise, a sale of shares acquired by exercise of an option or a stock appreciation right generally will result in short-term or long-term capital gain or loss measured by the difference between the sale price and the participant’s tax basis in the shares. We normally can claim a tax deduction equal to the amount recognized as ordinary income by a participant in connection with an option or stock appreciation right, but no tax deduction relating to a participant’s capital gains. We will not be entitled to any tax deduction with respect to an ISO if the participant holds the shares for the applicable ISO holding periods before selling or transferring the shares.

Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards. If an award is subject to a restriction on transferability and a substantial risk of forfeiture (for example, restricted stock), the participant generally must recognize ordinary income equal to the fair market value of the transferred amounts at the earliest time either the transferability restriction or risk of forfeiture lapses. If an award has no restriction on transferability or is not subject to a substantial risk of forfeiture, the participant generally must recognize ordinary income equal to the cash or the fair market value of shares received. We can ordinarily claim a tax deduction in an amount equal to the ordinary income recognized by the participant, except as discussed below regarding Section 162(m) of the Code. A participant may irrevocably elect to accelerate the taxable income to the time of grant of restricted stock rather than upon lapse of restrictions on transferability or the risk of forfeiture (Section 83(b) election).

Section 409A. Section 409A of the Code imposes election, payment and funding requirements on “nonqualified deferred compensation” plans. If a nonqualified deferred compensation arrangement subject to Section 409A of the Code fails to meet, or is not operated in accordance with, the requirements of Section 409A,

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then compensation deferred under the arrangement may become immediately taxable and subject to a 20% additional tax. Certain awards that may be issued under the plan may constitute a “deferral of compensation” subject to the requirements of Section 409A of the Code.

Section 162(m). Compensation that qualifies as “performance-based” compensation is excluded from the $1 million deduction limitation of Section 162(m). Under the Incentive Plan, options and stock appreciation rights granted with an exercise price at least equal to 100% of the fair market value of the underlying shares on the date of grant are intended to qualify as “performance-based” compensation. In addition, grants of restricted stock, restricted stock units, performance shares and performance units that require satisfaction of performance-based requirements in order to become vested and non-forfeitable are intended to satisfy the requirements of Section 162(m) if the measure of performance for vesting or payment of the award is approved by our stockholders and the other requirements of Section 162(m) are satisfied. A number of requirements must be met in order for particular compensation to qualify, and we cannot assure you that compensation under the Incentive Plan will be fully deductible by us under all circumstances.

New Plan Benefits

The awards that will be granted under the Incentive Plan in the future to eligible employees and third party service providers, as determined by the committee from time to time, are not determinable because the committee may choose to grant awards or may choose to decline to grant awards in accordance with the committee’s existing policies and the terms of the Incentive Plan. The closing price of a share of our common stock on the NASDAQ Stock Market on March 15, 2011 was $15.26 per share.

The following table sets forth awards of restricted stock units that were granted under the Incentive Plan on February 22, 2011, subject to stockholder approval of the Incentive Plan.

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PROPOSAL 4

ADVISORY VOTE ON COMPENSATION

OF THE COMPANY’S EXECUTIVE OFFICERS

As a result of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), our stockholders are being asked to vote or approve on an advisory (nonbinding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules.

As described under the heading “Compensation Discussion and Analysis”, our executive compensation programs are designed to attract and retain high caliber executives to carry out our strategic objectives and to motivate them to enhance stockholder value. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value. We urge you to read the “Compensation Discussion and Analysis” section of this proxy statement for additional details on our executive compensation, including our compensation philosophy and objectives and the 2010 compensation of our named executive officers.

As required by the Dodd-Frank Act, under this proposal commonly known as “say-on-pay,” our stockholders are provided the opportunity to express their views on our named executive officers’ overall compensation, as described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the adoption of the following resolution:

BE IT RESOLVED by the stockholders of Einstein Noah Restaurant Group, Inc., (the “Company”) that the stockholders approve the compensation of the Company’s named executive officers as disclosed in the proxy statement pursuant to the Securities and Exchange Commission’s disclosure rules.

The say-on pay vote is advisory and is nonbinding on the Company, the compensation committee and our board of directors. However, our board of directors and compensation committee value the opinions of our stockholders and the outcome of the vote will be given due consideration by the board of directors and compensation committee in their discretion.

Vote Required

The affirmative vote of the holders of a majority in voting power of the shares present in person or by proxy at the Annual Meeting and entitled to vote on the matter is required to approve Proposal 4. This proposal is non-binding. Greenlight has indicated its intention to vote in favor of Proposal 4.

Recommendation

The board of directors recommend that stockholders vote FOR Proposal No. 4. If not otherwise specified, proxies will be voted FOR Proposal No. 4.

PROPOSAL 5

ADVISORY VOTE ON THE FREQUENCY OF HOLDING

AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

As part of the “say-on-pay” rules enacted under the Dodd-Frank Act, our stockholders may indicate by an advisory (nonbinding) vote the frequency in which they will have an advisory vote on the compensation paid to our named executive officers. The choices available under the say-on-pay rules are every one, two or three years.

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The Company believes that say-on-pay votes should be conducted every three years. Please mark your proxy card to indicate your preference on this Proposal.

Even though this vote is nonbinding, the results will be given due consideration by the Company in its discretion.

Vote Required

The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency of the advisory vote on executive compensation that has been selected by stockholders. This proposal is non-binding. Greenlight has indicated its intention to vote for the option of every three years as the frequency with which to hold an advisory vote on executive compensation on Proposal 5.

Recommendation

The board of directors recommends that stockholders vote for the option of every three years as the frequency with which stockholders are provided an advisory vote on executive compensation. If not otherwise specified, proxies will be voted for the option of every three years.

PROPOSAL 6

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

A resolution will be presented at the Annual Meeting to ratify the appointment by the board of directors of the firm of Grant Thornton LLP, an independent registered public accounting firm, as independent auditors to audit our financial statements for the year ending January 3, 2012. Inclusion of this proposal in our proxy statement to ratify the appointment of our independent auditors for year ending January 3, 2012 is not required, but is being submitted as a matter of good corporate practice.

Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they wish to do so, and will be available to respond to appropriate questions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Fees Paid to Independent Auditors

For the fiscal years ended December 28, 2010 and December 29, 2009, Grant Thornton LLP, our independent auditor, billed the approximate fees set forth below:

Audit Fees

Aggregate fees billed by Grant Thornton LLP in connection with the audit of our consolidated financial statements as of and for the year ended December 28, 2010 and their reviews of the unaudited condensed consolidated interim financial statements during the year ended December 28, 2010 were approximately $429,157⁽¹⁾. Aggregate fees billed by Grant Thornton LLP in connection with the audit of the consolidated financial statements as of and for the year ended December 29, 2009 and its reviews of the unaudited condensed consolidated interim financial statements during the year ended December 29, 2009 were approximately $445,153.

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Audit-Related Fees

Audit-related fees billed by Grant Thornton LLP in fiscal years ended December 28, 2010 and December 29, 2009 were approximately $18,605 and $18,777, respectively, relating to the annual 401(k) audit.

Tax Fees

The aggregate fees billed by Grant Thornton LLP for the years ended December 28, 2010 and December 29, 2009 were $187,173 and $37,881, respectively, for a fixed asset capitalization review study and a sales and use taxability study.

All Other Fees

There were no other fees billed by Grant Thornton LLP during the years ended December 28, 2010 and December 29, 2009.

Pre-Approval Policies and Procedures

Our audit committee has established procedures for pre-approval of audit and non-audit services as set forth in the audit committee charter. The audit committee pre-approves all services performed by Grant Thornton LLP and discloses such fees under the headings “Audit-Related Fees,” “Tax Fees” and “All Other Fees” above. The audit committee considers whether the provision of the services disclosed under the headings “Audit-Related Fees,” “Tax Fees” and “All Other Fees” is compatible with maintaining Grant Thornton LLP’s independence.

Vote Required

The affirmative vote of the holders of a majority in voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon is required to approve Proposal 6. Greenlight has indicated its intention to vote in favor of Proposal 6.

Recommendation

The board of directors recommends that stockholders vote FOR Proposal 6. If not otherwise specified, proxies will be voted FOR Proposal 6.

Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this proxy statement, in whole or in part, the following Audit Committee Report and Compensation Committee Report shall not be deemed to be “Soliciting Material,” are not deemed “filed” with the SEC and shall not be incorporated by reference into any filings under the Securities Act or Exchange Act whether made before or after the date of this proxy statement and irrespective of any general incorporation language in such filings.

AUDIT COMMITTEE REPORT

The audit committee of the board of directors consists of three non-employee independent directors, Michael W. Arthur, Chairman, Frank C. Meyer and S. Garrett Stonehouse, Jr. The audit committee is a standing committee of the board of directors and operates under a written charter initially approved by the board of directors in January 2004, which is reviewed annually and which was most recently reviewed and approved by the committee in February 2011.

Management is responsible for our system of internal controls and the financial reporting process. The independent accountants are responsible for performing an independent audit of our consolidated financial

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statements in accordance with auditing standards generally accepted in the United States of America and to issue a report thereon. The audit committee is responsible for monitoring (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, and (3) the independence and performance of our auditors.

The audit committee has reviewed with our management and the independent accountants the audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 28, 2010, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements. Management represented to the audit committee that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The audit committee discussed with the independent accountants matters required to be discussed by Statement of Auditing Standards No. 61, as amended, Communication With Audit Committees.

Our independent accountants also provided to the audit committee the written disclosure required by applicable requirements of the Public Company Accounting Oversight Board regarding independent accountant’s communications with the audit committee concerning independence. The audit committee discussed with the independent accountants that firm’s independence. The audit committee considered the non-audit services provided by the independent accountants and subsequently concluded that such services were compatible with maintaining the accountants’ independence.

Based on the audit committee’s discussion with management and the independent accountants, and the audit committee’s review of the representation of management and the report of the independent accountants to the audit committee, the audit committee recommended that the board of directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2010 filed with the SEC.

AUDIT COMMITTEE

Michael W. Arthur, Chairman

Frank C. Meyer

S. Garrett Stonehouse, Jr.

COMPENSATION COMMITTEE REPORT

The compensation committee has revised and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

COMPENSATION COMMITTEE

S. Garrett Stonehouse, Jr., Chairman

Michael W. Arthur

Thomas J. Mueller

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COMPENSATION DISCUSSION & ANALYSIS

In this Compensation Discussion and Analysis, we discuss our compensation objectives, our compensation decisions and the rationale behind those decisions in connection with 2010 compensation of our executive officers. Our named executive officers, or NEOs, include:

Mr. Hilario became our CFO in May 2010 and Mr. Dutkiewicz resigned from the Company effective April 9, 2010.

Executive Summary

How was our company performance for fiscal 2010?

During 2010, we invested in promotions and marketing initiatives in order to attract new customers and encourage existing customers to try new products. In addition, we continued modest growth, opening 6 new restaurants while upgrading 17 restaurants to keep our restaurants current and opening 14 new franchise stores and 35 license stores. We also focused on expanding store level margins at our Company-owned restaurants by reducing costs given the difficult economic environment. The chart below summarizes some key Company financial and stock results for fiscal 2010 compared to fiscal 2009.

How does our executive compensation tie to company performance?

Our compensation philosophy reflects our business strategy by continuing to focus on earnings before interest, taxes, depreciation and amortization (EBITDA). In order to accomplish our goals, the committee determined that it was appropriate to incent and motivate our NEOs to achieve our corporate objectives by continuing to use EBITDA and individual performance evaluations for our annual performance bonus plan. For additional information about our annual performance bonus awards see “Elements of Executive Compensation” below.

Objectives of our Executive Compensation Program

What are the objectives of our compensation program?

The objectives of our compensation program are to attract and retain high caliber executives to carry out our strategic objectives and to motivate them to enhance stockholder value. The compensation committee evaluates our business and compensation objectives on a regular basis, most recently reviewing the business objectives in November 2010. Our compensation strategy is necessarily tied to our stage of development and growth as a business.

The committee strives to balance the goal of providing competitive compensation consistent with our financial resources, while motivating our NEOs to achieve business objectives for increased stockholder value. The committee further reviews the total level of compensation to determine that our levels of pay are competitive relative to the Company’s performance and restaurant industry peers. As a result, the specific direction, emphasis

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and components of our executive compensation program continue to evolve together with our business strategy and performance expectations. For example, target and threshold EBITDA goals, our primary financial measure, have been reviewed and revised from year-to-year to reflect our growth and development plans. The committee will continue to evaluate our compensation philosophy and make modifications designed to balance financial rewards and incentives in order to drive our business.

Who designs our compensation program and makes compensation decisions?

The compensation committee is responsible for designing and administering our executive compensation programs and making decisions regarding compensation of our executive officers. In 2010, our compensation decisions with respect to salaries were made in the first quarter of the calendar year. Our compensation planning process neither begins nor ends with any particular committee meeting. Business and succession planning, evaluation of management performance and consideration of the business environment are year-round processes.

How are compensation decisions made?

The compensation committee periodically reviews data about the compensation levels of executives in the restaurant industry in order to determine whether our compensation packages are competitive. In connection with the recruitment of our CCO, CLO and CFO during 2009 and 2010, the committee performed a review of our NEO base salaries compared to other executives in these positions at similarly-sized restaurant companies using information from a variety of resources, including public information about certain companies and surveys. See “Peer Group—Companies and Surveys” below for additional information regarding the component companies reviewed for each NEO position and the component companies included in the surveys. In addition, our CEO provides executive compensation recommendations to the committee based on NEO job descriptions and performance.

Although the committee has the authority, it did not engage outside compensation consultants to provide compensation information for the committee during consideration of 2010 NEO compensation. The committee did engage an outside compensation consultant, Meridian Compensation Partners LLC, in the second half of 2010 to provide compensation information to the committee for consideration of future NEO compensation.

What is the impact of an individual NEO’s performance on compensation?

The compensation committee or its representative meets periodically with the CEO and other NEOs to evaluate the NEO’s respective performance according to the essential job duties described in the NEO’s job description. These meetings include a performance evaluation as well as an opportunity to review the job description for accuracy and to discuss any modifications to the job description for the coming year. Each job description outlines the essential functions of the position and are specific to the tasks each NEO is directly responsible for achieving. The performance evaluation meeting focuses the executive on operational and service objectives in addition to financial objectives. Individual performance affects both the base salary and the individual performance component of the bonus of each NEO.

Elements of Executive Compensation

What are the elements of our executive compensation program?

The material elements of our executive compensation program are: base salary, annual performance bonus (cash), and equity awards (primarily stock options). The program is designed to motivate our NEOs to enhance stockholder value by rewarding them for their performance and contributions toward achievement of short-term and long-term Company goals.

The 2010 compensation program was designed to reward attainment of goals that have a direct impact on our business results, in particular our financial results. The program also considers our overall financial position. Positive and ongoing improvements in our financial results have been rewarded through both the annual

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performance bonus and equity award elements of our compensation program. Base salary and annual performance bonuses are designed to reward current performance while equity awards provide a long-term incentive and align our NEOs’ and stockholders’ interests.

We utilize the annual performance bonus plan to motivate our NEOs to achieve specific business and financial goals based on our annual business plan. In 2010, the financial component of the annual performance bonus plan was tied to EBITDA and further adjusted up (or down) for the following items (Adjusted EBITDA):

For 2010, Adjusted EBITDA was an important measure in our compensation program because it aligned executive compensation with stockholder interests, is a quantitative measure of operating performance and has a direct correlation to meeting our obligations to our lenders.

Base Salary

We pay base salary to our NEOs to provide current compensation for their services. The amount of base salary is designed to be competitive with salaries for similar positions in the restaurant retail and hospitality industries. We regularly review competitor and market data in the restaurant, retail and hospitality industries to determine the reasonableness of our compensation within the financial constraints of our performance. We use revenues and geography to further refine this analysis. As described above, for each of the NEO positions, we used survey data based upon our industry and size, and public information about companies that we consider competitors. Based in part upon this information, in 2010 we made modest adjustments averaging 2.3% in base salaries for our CEO, COO and CCO. Our CLO, Ms. Parish, and our CFO, Mr. Hilario, were hired in January 2010 and May 2010, respectively. Ms. Parish received an adjustment of 7.5% to base salary in August 2010. Mr. Hilario did not receive any increase in base salary.

Annual Performance Bonus

We provide an annual performance bonus opportunity, payable in cash, to each NEO as a short-term incentive. The purpose of the annual performance bonus is to drive Company-based initiatives and financial results and to directly tie a substantial portion of executive compensation to achievement of those financial results. Each executive was eligible for an annual performance bonus based on Adjusted EBITDA performance in 2010.

The committee adopted the 2010 Bonus Plan in February 2010. Under the plan, 85% of the bonus is based solely on Adjusted EBITDA results (Company Performance Portion) and 15% on individual performance (Individual Performance Portion). To be eligible for the Company Performance Portion or the Individual Performance Portion of the bonus, the Company must achieve a minimum threshold level of Adjusted EBITDA. Once the threshold level is met, increasing percentages of bonuses are earned based upon the degree to which

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actual Adjusted EBITDA exceeds the threshold level. The Adjusted EBITDA threshold level and scale for 2010 represented growth goals for the Company and were set to challenge NEOs to achieve those results. Once the Adjusted EBITDA threshold is met, 85% of the bonus (the Company Performance Portion) is earned. If performance far exceeds the anticipated goal, additional bonuses may be paid out at the discretion of the board of directors upon recommendation of the committee.

In February 2011, the committee evaluated the Company’s performance against the specific financial targets set at the beginning of 2010 to determine whether any participant was eligible for a bonus. For 2010, the threshold was $42.3 million Adjusted EBITDA, with no payments for performance below this amount. As Adjusted EBITDA results increased from the threshold to the target of $46.5 million and to the maximum cap of $48.6 million, the amounts in the bonus pool increased in increments. Based on Adjusted EBITDA of approximately $45.3 million for 2010, the bonus pool level was 71% of the highest target level attained. Adjusted EBITDA of approximately $45.3 million includes the calculated bonus pool.

The committee then reviews the individual performance of each NEO compared to the job description, key initiatives, goals and objectives of each NEO. Individual performance is also evaluated in light of financial, operational and customer experience elements that most accurately reflect the NEO’s role and responsibilities, with recommendations from our CEO. Based on the committee’s evaluation, up to 100% of the Individual Performance Portion is awarded.

The amount of total annual performance bonus paid to our NEOs for 2010 is reported in our Summary Compensation Table under two separate columns, the Company Performance Portion is reported in the Non-Equity Incentive Plan Compensation column and the Individual Performance Portion is reported in the Bonus column.

In February 2011, the committee adopted the 2011 Bonus Plan. Under the 2011 plan, the committee designated Adjusted EBITDA, system-wide sales and same store sales, with possible adjustment of significant non-recurring items approved by the directors, as the performance measures for the Company Performance Portion of which 100% of the bonus is based solely on the financial component of the bonus plan. An additional discretionary bonus based on individual performance may be awarded with a capped maximum at an additional 50% of target for any NEO. The 2011 plan incorporates increased target levels for Adjusted EBITDA and sales to incent improved Company performance.

Equity Awards

Equity-based incentives are the long-term component of our executive officer compensation program. We believe that equity awards align the financial interests of our executives with those of our stockholders for periods greater than the single-year focus of the annual performance bonus plan. Equity incentives also encourage retention of employees through multi-year vesting schedules. Historically, we have granted equity awards to our NEOs in the form of stock options. On January 9, 2009, we also granted restricted stock to our CEO, Mr. O’Neill, in connection with his commencement of employment. During 2010, we granted stock appreciation rights to a broad-based group of our employees, excluding our NEOs.

Stock Options. We grant stock options under our Executive Employee Incentive Plan. Stock options reward the recipient for the increase in our stock price during the holding period but are also a form of at-risk compensation because the potential value of each option can fall to zero if the price of our stock is lower than the exercise price when the options expire. To determine the number of options granted to each NEO, the committee reviews levels of responsibility, experience, internal pay equity, retention concerns, total compensation and number of options available under the Executive Employee Incentive Plan. We grant stock options with an exercise price equal to the closing price of our common stock on the date of grant, and the options generally

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expire ten years after the date of grant. Commencing with options granted to our CEO at the time of his employment in December 2008 and continuing in 2010, options vest in three equal installments on the first, second and third anniversaries of the grant date. In February 2010, we granted a total of 190,000 options to our NEOs. In June 2010, we granted 60,000 options to Mr. Hilario at the time of his commencement of employment. On occasion, the compensation committee may also grant options with vesting based on specific events, performance or timing in order to provide an incentive to achieve a specific goal or result.

Restricted Stock. As an inducement to accept employment as our CEO, the committee granted Mr. O’Neill 63,776 shares of restricted stock, valued at $375,000 effective January 9, 2009, the date of grant. One-third of these restricted shares vest on each of January 9, 2010, January 9, 2011 and January 9, 2012, provided he remains employed by the Company.

Our NEOs’ total compensation may vary significantly from year-to-year based on Company and individual performance. Further, the value of equity awards made to our senior executives will vary in value based on our stock price performance.

On February 22, 2011, our board of directors adopted the Einstein Noah Restaurant Group, Inc. 2011 Omnibus Incentive Plan (“2011 Omnibus Incentive Plan”) which is being submitted to our shareholders for approval at our annual meeting. The 2011 Omnibus Incentive Plan will replace the Executive Employee Incentive Plan. One of the purposes of the 2011 Omnibus Incentive Plan is to provide more flexibility in the type of awards, such as restricted stock and restricted stock units that may be granted by the compensation committee to eligible employees. See “Proposal 3” for additional information.

Other Compensation Decisions

What benefits and perquisites do our NEOs receive?

Our NEOs participate in our health and welfare benefit programs, such as medical, dental and vision care coverage, disability insurance and life insurance that are generally available to our employees. They are also eligible for paid time off, which is earned in increments throughout the year. Upon termination, each NEO is entitled to payment of accrued benefits earned prior to his or her termination.

Our COO and CCO are also reimbursed for travel, lodging, food, transportation and other incidental expenses incurred in connection with commuting from their respective homes in California and Kentucky to our corporate offices in Lakewood, Colorado.

What other plans may our NEOs participate in?

Our NEOs may participate in our non-qualified deferred compensation plan. Under federal tax rules, the participation of our NEOs and certain other management employees in our 401(k) plan is limited. The purpose of the non-qualified plan is to provide a similar means of saving for retirement for affected individuals. Eligible employees, including the CEO, COO, CCO, CFO and CLO, may elect to defer the payment of up to 80% of their base salary and bonus under this plan.

Do we have employment agreements or agreements for payments upon termination of employment?

We do not currently utilize employment agreements, other than offers of employment. As part of Mr. O’Neill’s employment offer, the Company agreed to pay him one year’s severance if he is terminated without cause and, upon a change of control, to remove the restrictions on his restricted stock. Under the offer of employment to Mr. Hilario, the Company agreed to pay him severance in an amount equal to six months’ salary if terminated without cause prior to his relocation permanently to Colorado and an amount equal to one year’s salary once he has permanently relocated to Colorado if terminated for any reason other than cause. We do not currently have any change of control agreement, termination or severance plan or similar agreement with our COO, CCO or CLO.

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Under the Executive Employee Incentive Plan upon a change in control as defined in the plan, all outstanding options become fully vested and exercisable. Also under the Executive Employee Incentive Plan, upon a merger, reorganization or sale of the Company, the committee may (i) provide that any or all options are exercisable in full; (ii) provide for the substitution of any or all options by a successor or purchaser company; or (iii) make any other provision for outstanding options as the committee deems appropriate. After the termination of service of an employee, director or consultant, (other than termination for cause) he or she may exercise his or her vested options for the period of time stated in the option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, the option will generally remain exercisable for three months following the termination of service, unless the committee provides otherwise. However, in no event may an option be exercised later than the expiration of its term.

On February 23, 2011, our board of directors approved and adopted the 2011 Omnibus incentive Plan, subject to the approval of our stockholders at the Annual Meeting. For more information, please see Proposal 3.

Do we have a policy regarding stock ownership?

We do not have stock ownership guidelines for our NEOs; however, the committee considers the number of options (and other equity awards) previously granted to our NEOs and other key employees in determining whether to grant additional options and the amount of options.

What is the impact of regulatory requirements?

We are subject to various regulatory and disclosure requirements under tax, accounting, and securities laws and regulations. However, we do not believe that the effect of these rules has a substantial impact on our compensation decisions or philosophy. Regulatory requirements have a limited impact on our compensation plan and program components, as we are focused primarily on the competitive landscape and compensation practices of other restaurant companies. Nevertheless, our stockholders have approved our Executive Employee Incentive Plan and material amendments to the plan so that we may make performance-based awards under the plan that are designed to satisfy the performance-based exception to the deduction limit under Section 162(m) of the Internal Revenue Code, provided the other requirements for performance-based compensation are satisfied.

Conclusion

The three primary elements of compensation that we provide are intended to achieve a combination of our corporate objectives and to provide competitive and reasonable executive compensation. Tying the annual performance bonus to Adjusted EBITDA and including other performance factors in 2011, focuses our NEOs on financial measures of success that are important to our stockholders. The time-vesting component of long-term incentives encourages continued service. We believe our NEOs are reasonably compensated in a manner that is consistent with our interests and the interests of our stockholders. Our NEOs have shown dedication to our success and we believe this has been achieved, in part, through our compensation philosophy and decisions.

Peer Group—Companies and Surveys

For each NEO, the surveys and companies referred to were:

Chain Restaurant Compensation Association (CRCA) Survey

The Chain Restaurant Compensation Association is a member based group whose survey this year represented 90 organizations including individual restaurant concepts and Restaurant Groups, a company that may cover several concepts. In 2009, the survey participants were split as follows: 34% Dinner House concepts, 15% Family Dining, 8% Quick Casual, 26% Quick Service and 17% Restaurant Group. Comparisons were made with regards to base compensation and short/long term incentive compensation. The Quick Casual Restaurant Segment and the data for all restaurants with revenues from $100 million to $2 billion are considered the key benchmark data from this survey.

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2009 CRCA Survey Participants:

AFC Enterprises, Benihana, Bo Jangle’s Restaurants, Bob Evans Farms, Boddie-Noell Enterprises, Boston Market, The Braid Group, Brinker International, Buca, Inc., Buffalo Wild Wings, Inc., Buffet Partners, Buffets, Burger King, Caribou Coffee Company, Carlson Restaurants Worldwide, CBC Restaurant Corp, CBRL Group, CEC Entertainment, Checkers Drive-In Restaurants, The Cheesecake Factory, Chipotle Mexican Grill, CKE Restaurants, Claim Jumper Cosi Inc., Darden Restaurants, Dave & Buster’s, Denny’s Dine Equity, Dominos Pizza, Donato’s Pizzeria, Duke and King Acquisition, Dunkin’ Brands, Eat’n Park Hospitality Group, Einstein Noah Restaurant Group, Inc., El Pollo Loco, Famous Dave’s Of America Inc., Fired Up, Friendly Ice Cream, Frisch’s Restaurants, Golden Corral, Hard Rock Café, Hooter’s of America, Ilitch Holdings, In-N-Out Burger, International Dairy Queen, International Meal Company Holdings, International Coffee and Tea, Jack in the Box, The Jacmar Companies, Jamba, Inc., Joe’s Crab Shack Holdings, Krispy Kreme Holdings, The Krystal Company, LaRosa’s, Legal Sea Foods, Logan’s Roadhouse, Mazzio’s Corporation, McDonald’s, Morton’s Restaurant Group, NPC International O’Charley’s, P.F. Chang’s China Bistro, Panda Restaurant Group, Panera Bread Company, Papa Gino’s, Papa John’s International, Patina Restaurant Group, Perkins Restaurant and Bakery, Potbelly Sandwich Works, Raising Cane’s Restaurants, Real Mex Restaurants, Red Robin Gourmet Burgers, Inc., Restaurants Unlimited, Rock Bottom Restaurants, Rubio’s Restaurants, Ruby Tuesday, Ruth’s Chris Steak House, Inc., Sonic Restaurants, Specialty’s Café, Starbucks, Taco John’s International, Texas Roadhouse, Thomas & King, Universal Parks and Resorts, Uno Restaurant Holding, Walt Disney, Wendy’s /Arby’s Group, Whataburger, White Castle System, and YUM! Brands.

Salary.com CompAnalyst Executive

CompAnalyst Executive is a subscription software tool provided by Salary.com which provides data from proxy statements for public companies. This is used to compare base salaries, incentive plans and equity compensation for the top executive positions within the company.

Salary.com CompAnalyst Job Analyzer

CompAnalyst Job Analyzer is a subscription software tool provided by Salary.com which provides direct and indirect compensation data compiled from thousands of companies. The benchmark data is selected for each position by the user, usually the Services and/or Restaurant Industry with revenues from $100 million to $2 billion. This is used to compare base salaries and incentive plan compensation for all positions, including the top executive group.

COMPENSATION OF EXECUTIVE OFFICERS

The following table shows the amount of compensation we paid to our Principal Executive Officer (PEO), each individual who served as our Principal Financial Officer (PFO) and each of our other executive officers during the past fiscal year (NEOs). The amounts shown include the cash and non-cash compensation awarded to, earned by and paid to each NEO.

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2010 SUMMARY COMPENSATION TABLE

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2010 GRANTS OF PLAN BASED AWARDS

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Employment and Other Arrangements

Jeffrey J. O’Neill. Effective December 3, 2008, in connection with his employment as President and Chief Executive Officer, we offered Mr. O’Neill an annual salary of $460,000 and granted options to purchase 100,000 shares of common stock, vesting in annual installments over three years. We also agreed to grant him shares of restricted stock valued at $375,000 in January 2009. The restrictions on these shares lapse in equal installments over three years. He is eligible for additional compensation of up to 100 percent of his annual salary based upon company performance and individual performance. In addition, we agreed to grant him options to purchase a minimum of 25,000 shares of common stock annually in 2010, 2011 and 2012 and to pay him one year’s salary if he is terminated without cause. We also agreed to pay certain relocation expenses.

Rhonda J. Parish. Effective January 20, 2010, in connection with her employment as Chief Legal Officer, we offered Ms. Parish an annual salary of $265,000 and granted options to purchase 60,000 shares of common stock, vesting in annual installments over three years. She is eligible for additional compensation of up to 75 percent of her annual salary based upon company performance and individual performance. We also agreed to a one-time payment of $80,000 for relocation expenses as well as certain other additional relocation expenses considered separate from the one time payment.

Emanuel P.N. Hilario. Effective May 25, 2010, in connection with him employment as Chief Financial Officer, we offered Mr. Hilario an annual salary of $285,000 and granted option to purchase 60,000 shares of common stock, vesting in annual installments over three years. He is eligible for additional compensation of up to 75 percent of his annual salary based upon company performance and individual performance. Until permanent relocation to the corporate headquarters area in Lakewood, Colorado, the Company will provide Mr. Hilario six months severance in the event of termination from the Company for any reason other than cause and twelve months severance in the event of termination of his employment from the Company for any reason other than cause after permanent relocation to the corporate headquarters area in Lakewood, Colorado. We also agreed to a one-time payment of $50,000 for relocation expenses as well as certain other additional relocation expenses considered separate from the one-time payment.

We have no other employment or similar contracts for our NEOs as of the date of this proxy statement.

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OUTSTANDING EQUITY AWARDS AT 2010 FISCAL YEAR-END

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OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2010

2010 NONQUALIFIED DEFERRED COMPENSATION

Deferred Compensation Plan

Under our Deferred Compensation Plan, eligible employees may defer up to 80% of their base salary and bonus each year. Participant elections to defer are made annually prior to the beginning of the calendar year. The participant becomes a general unsecured creditor of the Company with respect to amounts deferred. The plan committee, with the advice of its investment advisor, establishes available investments and participants choose investments to be used for crediting earnings. The investment choices are the same as those offered in our 401(k) plan and the appreciation, if any, in the account balance of participants is due solely to contributions by participants and the underlying performance of those investment funds selected by the participants. The participants can make changes in the allocations of their deferred compensation among those funds in generally the same manner and on generally the same terms as under our 401(k) plan. Amounts deferred to the plan are notionally “invested” among the various investment funds selected by the participants. A participant’s amounts are not actually invested in the investment funds but the return on the participant’s account is determined as if the amounts were invested in those funds. The Company does not contribute to the Deferred Compensation Plan on behalf of employees or match the deferral made by participants. Participants may elect up to five specified payment dates for distributions, which are established as separate accounts and may also establish a “separation

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from service” account. Each year, participants may allocate contributions for the next year to one or more of the specified payment date accounts or the separation from service account. Amounts in a specified payment date account are distributed in a lump sum and distributions from the separation from service accounts may be distributed in a lump sum or in annual installments over, but not exceeding, a five-year period, subject to a six-month delay, if required under Section 409A. Participants must elect lump sum distributions or installments prior to the date they allocate contributions. The plan is administered by the third party administrator who provides recordkeeping and third party administration for the Company’s 401(k) plan.

Payments Upon Termination or Change of Control

Upon a change of control of the Company, the Executive Employee Incentive Plan provides that all outstanding options for all participants, including our NEOs, become fully vested and fully exercisable. The plan further provides that, upon a merger, reorganization, or sale of the Company, the compensation committee may (i) provide that any or all options are exercisable in full; (ii) provide for the substitution of any or all options by a successor or purchaser company; or (iii) make any other provision for outstanding options as the compensation committee deems appropriate. After termination of service, other than termination for cause, an employee or consultant may exercise his or her options for the period as determined by the committee, but if no period is specified, generally, this means that if termination is due to death or disability, the option will remain exercisable for 12 months. In other cases, the option generally remains exercisable for three months following termination of service. In no event may an option be exercised later than the expiration of its term. If a change of control had occurred at our fiscal 2010 year end, our NEOs would have received the following values upon acceleration of all their respective outstanding options based on the Company’s closing share price on fiscal 2010 year end of $13.75: Jeffrey J. O’Neill—$1,019,206; James P. O’Reilly—$305,331; Daniel J. Dominguez—$206,418; Emanuel P.N. Hilario—$103,800; and Rhonda J. Parish—$129,600. Under Mr. O’Neill’s January 9, 2009 Stock Award Agreement, restrictions on his restricted shares lapse upon a change of control with a value determined as of fiscal 2010 year end of $889,606. In addition, under the terms of his employment, Messrs. O’Neill and Hilario are entitled to one year’s salary ($475,000 and $285,000 respectively as of fiscal 2010 year end) upon termination of employment without cause.

2010 DIRECTOR COMPENSATION

Director Compensation

For fiscal year 2010, each of our non-employee independent directors received a $15,000 annual retainer, plus $2,000 for each board meeting and $1,000 for each committee meeting attended. In the second half of 2010, the compensation committee engaged an outside compensation consultant, Meridian Compensation Partners LLC, to provide compensation information for consideration of future board of directors’ compensation.

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In addition, on January 1 of each year, each independent director receives a grant of options to purchase 10,000 shares of common stock which vest six months after the date of grant and, unless earlier terminated or exercised, expire five years after the grant date. Any director elected or appointed during the year receives a pro rata grant of options based on his date of election or appointment. All directors are reimbursed for out-of-pocket expenses incurred by them in connection with attendance at board meetings and committee meetings.

Until February 2011, Mr. Heumann was an employee of Greenlight, which owns 64.3% of our common stock as of the record date, and he therefore was not considered an independent director. He was not paid for his service as a director but we reimburse his expenses.

There were no other arrangements pursuant to which any director was compensated during the fiscal year ended December 28, 2010.

BENEFITS UNDER EQUITY COMPENSATION PLANS AS OF DECEMBER 28, 2010

The following table summarizes equity compensation plan information as of December 28, 2010: