Hot Topic (HOTT)

Bonus

Annual incentive bonuses are intended to reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each executive officer should be contingent upon our performance and officer contribution to that performance. Accordingly, our executive officers, including our Chief Executive Officer, participate in an annual executive incentive bonus plan, referred to as the Executive Bonus Plan, which provides for cash bonus targets based upon the achievement of certain specified financial goals for the fiscal year. The Board, upon recommendation of the Compensation Committee, annually establishes targeted levels of financial performance for the ensuing fiscal year in conjunction with our annual financial plan. The performance targets range from a minimum (or threshold) level to a maximum level, with a target level in between. Upon the achievement of various increasing levels of financial performance above the minimum level, varying amounts are

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awardable; however the Compensation Committee may choose to recommend increasing bonuses provided for under the Executive Bonus Plan above the original bonus targets, or to recommend awarding less than the target bonuses, or no bonuses. The Board of Directors, upon receiving the Compensation Committee’s recommendations, makes awards as warranted. The various goals attributable to particular executive officers are varied to align the officer’s duties with the appropriate metrics that best reflect the officer’s impact on Hot Topic and our performance and are collectively designed to be “stretch goals,” intended to be challenging but achievable (i.e., viewed by Hot Topic as the target level being achievable less than 50% of the time). The minimum levels for fiscal 2004 and 2005 annual incentive bonuses were not met, and the target levels for fiscal 2006 and 2007 annual incentive bonuses for the Torrid division were met and exceeded (at a level below the maximum level), however the minimum levels for fiscal 2006 and 2007 annual incentive bonuses for the Hot Topic division were not met. The minimum level for fiscal 2008 annual incentive bonuses for Hot Topic, Inc. was met and exceeded (at a level below the target level) and for the Hot Topic division, the target level was met and exceeded (at a level below the maximum level). The minimum level for fiscal 2008 annual incentive bonuses for the Torrid division was not met.

The following table details the general nature of the fiscal 2008 and 2009 annual incentive bonus performance targets attributable to our named executive officers:

Cash bonuses earned under the Executive Bonus Plan are paid each year upon completion of our annual audit of the results of operations for the previous fiscal year by our independent auditors. The table below shows cash bonuses paid to our named executive officers for fiscal 2008:

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Ms. McLaughlin’s and Messrs. Cook’s, McGinty’s and Kirkpatrick’s bonuses were a combination of bonuses awarded based on the parameters established by the Board in March 2008 with respect to the financial performance of Hot Topic, Inc., or in the case of Mr. Kirkpatrick, our Hot Topic and ShockHound divisions, in fiscal 2008 and additional discretionary bonuses awarded in recognition of their contributions to the company. Mr. Daniel’s bonus was a discretionary bonus, awarded in recognition of his contribution to the company.

Bonus

Annual incentive bonuses are intended to reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each executive officer should be contingent upon our performance and officer contribution to that performance. Accordingly, our executive officers, including our Chief Executive Officer, participate in an annual executive incentive bonus plan, referred to as the Executive Bonus Plan, which provides for cash bonus targets based upon the achievement of certain specified financial goals for the fiscal year. The Board, upon recommendation of the Compensation Committee, annually establishes targeted levels of financial performance for the ensuing fiscal year in conjunction with our annual financial plan. The performance targets range from a minimum (or threshold) level to a maximum level, with a target level in between. Upon the achievement of various increasing levels of financial performance above the minimum level, varying amounts are awardable; however the Compensation Committee may choose to recommend increasing bonuses provided for under the Executive Bonus Plan above the original bonus targets, or to recommend awarding less than the target bonuses, or no bonuses. The Board of Directors, upon receiving the Compensation Committee’s recommendations, makes awards as warranted. The various goals attributable to particular executive officers are varied to align the officer’s duties with the appropriate metrics that best reflect the officer’s impact on Hot Topic and our performance and are collectively designed to be “stretch goals,” intended to be challenging but achievable (i.e., viewed by Hot Topic as the target level being achievable less than 50% of the time). The minimum levels for fiscal 2004 and 2005 annual incentive bonuses were not met, and the target levels for fiscal

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2006 and 2007 annual incentive bonuses for the Torrid division were met and exceeded (at a level below the maximum level). The minimum levels for fiscal 2006 and 2007 annual incentive bonuses for the Hot Topic division were not met.

The following table details the general nature of the fiscal 2007 and 2008 annual incentive bonus performance targets attributable to our named executive officers:

Cash bonuses earned under the Executive Bonus Plan are paid each year upon completion of our annual audit of the results of operations for the previous fiscal year by our independent auditors. The table below shows cash bonuses paid to our named executive officers for fiscal 2007:

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Mr. Daniel’s bonus was awarded based on parameters established by our Board of Directors in March 2007 with respect to the financial performance of our Torrid division in fiscal 2007. Mr. Cook’s and Mr. McGinty’s bonuses were discretionary bonuses, awarded in recognition of their respective contributions to the company.

Bonus

Annual incentive bonuses are intended to reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each executive officer should be contingent upon our performance and officer contribution to that performance. Accordingly, our executive officers, including our Chief Executive Officer, participate in an annual executive incentive bonus plan, referred to as the Executive Bonus Plan, which provides for cash bonus targets based upon the achievement of certain specified financial goals for the fiscal year. The Compensation Committee annually establishes targeted profitability levels for the ensuing fiscal year in conjunction with our annual financial plan. Upon the achievement of various increasing levels of profitability above the minimum target level, varying amounts are awardable; however the Compensation Committee may choose to increase bonuses provided for under the Executive Bonus Plan above the original bonus targets, or to recommend awarding less than the target bonuses, or no bonuses. The Board of Directors, upon receiving the Compensation Committee’s recommendations, makes awards as warranted. The various goals attributable to particular executive officers are varied to align the officer’s duties with the appropriate metrics that best reflect the officer’s impact on Hot Topic and our performance and are collectively designed to be “stretch goals,” intended to be challenging but attainable.

Cash bonuses earned under the Executive Bonus Plan are paid each year upon completion of our annual audit of the results of operations for the previous fiscal year by our independent auditors.

Among our executive officers, Christopher Daniel, our President, Torrid, is eligible for a bonus based on financial performance of our Torrid division, while Maria Comfort, our Chief Merchandising Officer, Hot Topic, is eligible for a bonus based on financial performance of our Hot Topic division. Objectives for the remaining executive officers are based on financial performance of both divisions, such that the majority of their potential bonus is based on Hot Topic performance, and the remainder on Torrid performance.

In fiscal 2006, bonuses were not awarded for fiscal 2005 under the Executive Bonus Plan because the targeted profitability levels were not reached. In fiscal 2007, certain of our executive officers and named executive officers received bonuses for fiscal 2006, because targets with respect to our Torrid division were exceeded. The table below shows cash bonuses paid to our named executive officers for fiscal 2006:

Bonus

Annual incentive bonuses are intended to reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each executive officer should be contingent upon our performance, as well

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as the individual contribution of each officer. Accordingly, our executive officers, including our Chief Executive Officer, participate in an annual executive incentive bonus plan, referred to as the Executive Bonus Plan, which provides for cash bonuses based upon the achievement of certain specified financial goals for us for the fiscal year. The Board of Directors, upon receiving the Compensation Committee’s recommendations, makes awards. The Compensation Committee annually establishes targeted profitability levels for the ensuing fiscal year in conjunction with our annual financial plan. Upon the achievement of various increasing levels of profitability above the minimum target level, the Compensation Committee may choose to increase bonuses accrued to the Executive Bonus Plan; similarly, the Compensation Committee may choose to award less than target bonus, or no bonus, in the event applicable financial goals are not reached. The purpose of the Executive Bonus Plan is to reward and reinforce executive management’s commitment to achieve levels of profitability and return consistent with increasing shareholder value.

Cash bonuses earned under the Executive Bonus Plan are paid each year upon completion of our annual audit of the results of operations for the previous fiscal year by our independent auditors. In fiscal 2005, bonuses were not awarded for fiscal 2004 under the Executive Bonus Plan because the targeted profitability levels were not reached; though certain members of the executive officer and officer group received bonuses pursuant to individualized arrangements. In fiscal 2006, bonuses were not awarded for fiscal 2005 under the Executive Bonus Plan, because the targeted profitability levels were not reached; though we did make certain payments in excess of base salary to two executive officers who joined us in fiscal 2005 pursuant to individualized arrangements.

Bonus

Annual incentive bonuses are intended to reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each executive officer should be contingent upon our performance, as well as the individual contribution of each officer. Accordingly, our executive officers, including our Chief Executive Officer, participate in an annual executive incentive bonus plan, referred to as the Executive Bonus Plan, which provides for cash bonuses based upon the achievement of certain specified financial goals for us for the fiscal year. The Board of Directors, upon receiving the Compensation Committee’s recommendations, makes awards. The Compensation Committee annually establishes targeted profitability levels for the ensuing fiscal year in conjunction with our annual financial plan. Upon the achievement of various increasing levels of profitability above the minimum target level, the Compensation Committee may choose to increase bonuses accrued to the Executive Bonus Plan; similarly, the Compensation Committee may choose to award less than target bonus, or no bonus, in the event applicable financial goals are not reached. The purpose of the Executive Bonus Plan is to reward and reinforce executive management’s commitment to achieve levels of profitability and return consistent with increasing shareholder value.

Cash bonuses earned under the Executive Bonus Plan are paid each year upon completion of our annual audit of the results of operations for the previous fiscal year by our independent auditors. In fiscal 2004, executive officers received bonuses for fiscal 2003 under the Executive Bonus Plan in excess of the originally targeted amounts due to company performance that was superior to applicable target financial goals. In fiscal 2005, bonuses were not awarded for fiscal 2004 under the Executive Bonus Plan, though certain members of the executive officer and officer group received bonuses pursuant to individualized arrangements.

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