Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On
February 20, 2023, pursuant to the power granted to the Board of Directors (the “Board”) of Hour Loop, Inc. (the “Company”)
in the Company’s Bylaws, the Board increased the size of the Board from five persons to six persons. In addition, on February 20,
2023, the Board appointed Hillary Bui to serve as a member of the Board, to fill the vacancy created by the increase in the size of the
Board. Ms. Bui will serve as a member of the Board until her earlier death, resignation or removal from office.
Ms.
Bui, age 38, has been a certified public accountant (license inactive) since 2007. She was a Senior Associate, Assurance for PricewaterhouseCoopers,
LLP from 2007 to 2011. Ms. Bui has worked for Starbucks Corporation in various capacities since 2015, most recently as Senior Finance
Manager – North America and US Retail FP&A. She holds a Bachelor of Science degree in Accounting from the University of Minnesota.
In
connection with Ms. Bui’s appointment, the Company entered into a Director Agreement with Ms. Bui.
Pursuant
to the Director Agreement, Ms. Bui agreed to act as a Director of the Company and to be available to perform the duties consistent with
such position pursuant to the Certificate and Bylaws of the Company, and any additional codes, guidelines or policies of the Company
that may be effective now or in the future. The Director Agreement continues in effect until the earliest of (a) such time as the Director
resigns or is removed from office and (b) the death of the Director.
The
Director Agreement provides that, during the term of the Director Agreement, in exchange for her services, the Company shall issue to
Ms. Bui a number of shares of common stock having a fair market value of $3,000 as of such date (with any partial quarter being pro-rated).
The
Director Agreement provides that if at the Company’s request Ms. Bui attends any trade shows, events, or meetings which are independent
of the director’s responsibility under the agreement, the Company will pay the director $1,000 in cash per full day for such attendance
or $500 in cash for a half day.
The
Director Agreement provides that, during the applicable term, the Company will reimburse the director for all reasonable out-of-pocket
expenses incurred by them in attending any in-person meetings, provided that the director complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses. Any reimbursements
for allocated expenses (as compared to out-of-pocket expenses of the director in excess of $500) must be approved in advance by the Company.
The
Director Agreement contains customary confidentiality provisions, customary provisions relating to the Company’s ownership of intellectual
property created by the director, customary representations and warranties by the parties and other customary miscellaneous provisions.
Also
on February 20, 2023, the Company entered into (i) Addendum No. 2 to the Executive Employment Agreement with Sam Lai, the Company’s
Chairman of the Board, Chief Executive Officer, Interim Chief Financial Officer and significant stockholder (the “Lai Addendum”);
and (ii) Addendum No. 2 to the Executive Employment Agreement with Sau Kuen Yu, the Company’s Senior Vice President, Director and
significant stockholder (the “Yu Addendum”).
Pursuant
to the terms of the Lai Addendum, the parties agreed that for the Company’s 2023 fiscal year, Mr. Lai’s bonus targets and
payments will be as follows:
If
the Company grows its net profits (excluding taxes) to at least $1,500,000 during the 2023 fiscal year with minimum annual revenue growth
rate of 20%, Mr. Lai will receive a bonus equal to 50% of his base salary.
(ii)
If the Company grows its net profits (excluding taxes) to at least $5,000,000 during the 2023 fiscal year with minimum annual revenue
growth rate of 20%, Mr. Lai will receive a bonus equal to 100% of his base salary.
The
satisfaction of the conditions set forth above will be determined following the end of the 2023 fiscal year, and, for the avoidance of
doubt, only one of the bonus amounts, if at all, will be payable, and the target bonus set forth above is in addition to the guaranteed
bonus set forth in the original agreement.
Pursuant
to the terms of the Yu Addendum, the parties agreed that for the Company’s 2023 fiscal year, Ms. Yu’s bonus targets and payments
will be as follows:
(i)
If the Company acquires at least 100 new vendors during the 2023 fiscal year, Ms. Yu will receive a bonus equal to 50% of her base salary.
(ii)
If the Company acquires at least 135 new vendors during the 2023 fiscal year, Ms. Yu will receive a bonus equal to 100% of her base salary.
The
satisfaction of the conditions set forth above will be determined following the end of the 2023 fiscal year, and, for the avoidance of
doubt, only one of the bonus amounts, if at all, will be payable, and the target bonus set forth above is in addition to the guaranteed
bonus set forth in the original agreement.
Mr.
Lai and Ms. Yu are husband and wife, and together, beneficially own 33,311,576 shares of the Company’s common stock, representing
over 95% of the voting power of the Company’s outstanding common stock, with each of Mr. Lai and Ms. Yu beneficially holding 33,311,576
shares of the Company’s common stock, as each of them is deemed to indirectly beneficially own the other’s 16,655,788 shares.
The
foregoing description of the Director Agreement, the Lai Addendum and the Yu Addendum is qualified in its entirety by reference to the
complete terms and conditions of the Director Agreement, the Lai Addendum and the Yu Addendum, copies of which are filed as Exhibits
10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K, and is incorporated by reference into this Item 5.02.