Summary of terms of 2011 Management Incentive Plan (which plan is not set forth is any formal plan document)

---

 

 

The 2011 management incentive plan (the “Plan”) of Heelys, Inc. (the “Company”) is not formalized in any definitive plan document.  Set forth below is a summary of the material provisions of the Plan, as adopted by the Board of Directors of the Company (the “Board”).  These provisions serve as the criteria for payments of cash bonuses to the Company’s executive officers for service in fiscal 2011.

The Plan assigns a specific target bonus to each participant.  The target bonus for the Company’s Chief Executive Officer is 50% of his base salary, and the target bonus for the Company’s Chief Financial Officer and the Company’s Vice President, International is 30% of their respective base salary.

 

Under the Plan, bonus payout amounts generally will be a percentage of each participant’s respective target bonus, and will vary depending on the Company’s financial performance.  The Plan divides the Company’s financial performance into three levels:  At the “threshold” level, the participant will be eligible for 50% of his target bonus; at the “target” level, the participant would be eligible for 100% of his target bonus; and at the “maximum” level, the participant would be eligible for 250% of his target bonus.  Bonus payout opportunities at each level (i.e., threshold, target, and maximum) are based 25% on the Company’s net sales and 75% on its profit before tax.  The Board may, in its discretion, adjust the payout opportunities at each level to exclude one-time, non-operating items that may occur during fiscal 2011.

 

All bonus payout amounts are subject to prior approval by the Board.  The Board retains discretion to vary the bonus payout amounts up to 20% (higher or lower), based on its subjective assessment of the participant’s performance and contribution to achieving the Company’s financial performance level.

 

The amounts payable under the Plan are not determinable at present. However, if, during fiscal 2011, the Company’s financial performance reaches the threshold level, the maximum bonuses available to our Chief Executive Officer (Thomas C. Hansen), Chief Financial Officer (Craig D. Storey) and Vice President, International (John W. O’Neil) will be $107,500, $30,000 and $26,250 , respectively.  If the Company’s financial performance reaches the target level, the maximum bonuses available to Messrs. Hansen, Storey and O’Neil will be $215,000, $60,000 and $52,500, respectively.  If the Company reaches the maximum level, the maximum bonuses available to Messrs. Hansen, Storey and O’Neil will be $537,500, $150,000 and $131,250, respectively.  All of the foregiong amounts are before the discretionary subjective assessment that the Board may make — which can vary the bonus payment amounts — up to 20% higher or lower.

 

 

---