UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under § 240.14a-12 |
GEN Restaurant Group, Inc.
(name of registrant as specified in its charter)
(name of person(s) filing proxy statement, if other than registrant)
Payment of Filing Fee (Check all boxes that apply):
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No fee required. |
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Fee paid previously with preliminary materials. |
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
11480 South Street, Suite 205
Cerritos, CA 90703
NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS
Thursday, June 20, 2024
10:00 a.m. Pacific Time
Online at www.proxydocs.com/GENK
GEN Restaurant Group, Inc. (the “Company”, “we” or “us”) is holding its 2024 annual meeting of stockholders virtually by live webcast at 10:00 a.m., Pacific Time, on Thursday, June 20, 2024, for the following purposes:
The Board recommends that you vote “FOR” the election of the director nominees, and “FOR” the ratification, on an advisory basis, of the appointment of Marcum, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2024.
Stockholders of record at the close of business on April 24, 2024 are entitled to notice of and to vote prior to the date of the meeting.
We have elected to use the notice and access rules adopted by the Securities and Exchange Commission (“SEC”) to provide our stockholders access to our proxy materials and 2023 Annual Report to Stockholders by notifying them of the availability of our proxy materials and 2023 Annual Report to Stockholders via the Internet. The notice and access model gives the Company a fast, efficient and lower-cost way to furnish stockholders with their proxy materials and reduces our impact on the environment. As a result, on May 10, 2024, we are mailing to our stockholders an “Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Thursday, June 20, 2024” (“Notice”) with instructions on how to access our proxy materials and the 2023 Annual Report to Stockholders via the Internet and how to vote online. On the date of mailing of the Notice, all stockholders may access our proxy materials on a website referred to, and at the URL address included in, the Notice and in our proxy statement. Our proxy materials are available free of charge.
Stockholders of record as of April 24, 2024 will be able to participate in our virtual annual meeting by visiting www.proxydocs.com/GENK . To participate in our virtual annual meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. Our virtual annual meeting will begin promptly at 10:00 a.m., Pacific Time, on Thursday, June 20, 2024. Online check-in will begin at 9:45 a.m., Pacific Time, on Thursday, June 20, 2024, and you should allow ample time for the online check-in procedures. Appropriate questions may be submitted at any time during the meeting, and they will be addressed at the conclusion of the Company’s prepared remarks.
Our Proxy Statement and Annual Report are available on the Company’s website at www.genkoreanbbq.com under: Investor - Relations .
By Order of the Board of Directors,
Thomas V. Croal, Chief Financial Officer Secretary
April 29, 2024
GEN Restaurant Group, Inc.
PROXY STATEMENT
For the Annual Meeting of
Stockholders To Be Held on June 20, 2024
TABLE OF CONTENTS
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GEN Restaurant Group, Inc.
PROXY STATEMENT
For the 2024 Annual Meeting of Stockholders
Thursday, June 20, 2024
INT RODUCTION
This proxy statement is being furnished to our stockholders by the Board of Directors (the “Board”) of GEN Restaurant Group, Inc., in connection with the solicitation of proxies by our Board for use at our 2024 annual meeting of stockholders to be held virtually by live webcast at www.proxydocs.com/GENK on Thursday, June 20, 2024 at 10:00 a.m., Pacific Time, and all adjournments or postponements thereof (the “Annual Meeting”) for the purposes set forth in the attached Notice of 2024 Annual Meeting of Stockholders.
A proxy, in the provided form, which is properly executed, duly returned to the Company and not revoked, will be voted in accordance with the instructions contained therein. The shares represented by executed but unmarked proxies will be voted as follows:
This proxy statement and the accompanying form of proxy are first being sent or made available to stockholders of record as of April 24, 2024 (the “Record Date”) on or about May 10, 2024. In addition to the use of the mail, proxies may be solicited by directors, officers, or employees of the Company in person, by electronic mail, by telephone or by other means. The cost of the proxy solicitations will be paid by the Company.
References in this proxy statement to the “Company,” “GEN, Inc.,” “we,” “our” and “us,” are references to GEN Restaurant Group, Inc.
It is important that your shares are represented at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, please sign and date the enclosed proxy card and return it to us. If you own your shares through a broker, bank or other nominee, please return your voting instruction form to your broker, bank or nominee, or use the electronic voting means described below to vote your shares.
VOTING AND OTH ER INFORMATION
Who may vote? You may vote up to the day of the Annual Meeting if you were the holder of record of our Class A Common Stock or Class B Common Stock (collectively, “Common Stock”) at the close of business on the Record Date. You are entitled to (i) one vote on each proposal presented at the Annual Meeting for each share of Class A Common Stock you owned on the Record Date and (ii) ten votes on each such proposal for each share of Class B Common Stock you owned on the Record Date. If you held Common Stock on the Record Date in “street name” through a bank, broker, or other nominee, you must obtain a legal proxy, executed in your favor, from the institution that held your Common Stock as of the close of business on the Record Date, to be entitled to vote those shares of Common Stock. As of the close of business on the Record Date, there were 4,511,958 shares of Class A Common Stock and 27,886,912 shares of Class B Common Stock outstanding.
Why did I receive a Notice Regarding the Availability of Proxy Materials instead of printed copies of these materials in the mail? In accordance with rules promulgated by the SEC, the Company has elected to furnish its proxy materials to stockholders as of the Record Date electronically via the Internet at www.proxydocs.com/GENK. On May 10, 2024, the Company will begin mailing to stockholders as of the Record Date a notice containing general information about the Annual Meeting, the address of the website on which this proxy
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statement and the Company’s 2024 Annual Report, excluding exhibits, are available for review, printing and downloading, and instructions on how to submit proxy votes. If you received that notice, you will not receive a printed copy of our proxy materials unless you request them by following the instructions for requesting such materials contained in the notice.
What am I voting on ? You are voting on:
In case any nominee named herein for election as a director is unable to serve when the election occurs, proxies in the accompanying form may be voted for a substitute as determined by our Board. The Company expects all nominees to be able to serve as a director if elected and knows of no matters to be brought before the Annual Meeting other than those referred to in the accompanying Notice of 2024 Annual Meeting and this proxy statement. If, however, any other matters come before the Annual Meeting, proxies in the accompanying form will be voted thereon in accordance with the judgment of the designated proxies.
What vote is required to approve the various proposals?
Proposal 1. A plurality of the votes of the shares present in person or represented by proxy at the Annual Meeting will be required to elect our directors. This means that the individuals receiving the largest number of votes will be elected as directors, up to the maximum number of directors to be elected at the Annual Meeting. Any shares that are not voted on this matter at the Annual Meeting, whether by abstention, broker non-vote or otherwise, will have no effect on the election of directors at the Annual Meeting.
Proposal 2. The ratification of Marcum, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2024 will be approved, on an advisory basis, if the votes cast in favor of the proposal exceed those cast against the proposal. Abstentions and broker non-votes will not affect the voting results for this proposal.
Why a virtual meeting? We are excited to utilize the latest technology to provide expanded access, improved communication and cost savings for our stockholders. Hosting a virtual meeting will enable increased stockholder attendance and participation, since our stockholders can participate from any location around the world. You will be able to attend the Annual Meeting online and submit your appropriate questions during the Annual Meeting by visiting www.proxydocs.com/GENK , however, you will not be able to vote electronically at our Annual Meeting. Appropriate questions may be submitted at any time during the meeting and they will be addressed at the conclusion of the Company’s prepared remarks. Therefore, you must submit your proxy or otherwise vote your shares prior to our Annual Meeting in order for your vote to be properly cast.
What is householding? The rules of the SEC permit companies to provide a single copy of an annual report, proxy statement or notice of internet availability of proxy materials to households in which more than one stockholder resides. As a result, any stockholders who share an address and who have been previously notified that their broker, bank or other intermediary will be householding their proxy materials, will receive only one copy of our proxy statement and 2023 Annual Report to Stockholders and notice of internet availability of proxy materials, unless one or more have affirmatively objected to the householding notice.
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Stockholders sharing an address who received only one set of these materials may request a separate copy, which will be promptly sent at no cost, by contacting our Corporate Secretary orally or in writing at the address below. Stockholders sharing an address who received multiple copies of these materials may request householding by contacting the Corporate Secretary as follows:
GEN Restaurant Group, Inc.
11480 South Street, Suite 205
Cerritos, CA 90703
(562) 356-9929
For future annual meetings, a stockholder may request separate annual reports, proxy statements, or notices of internet availability of proxy materials, as applicable, or may request the householding of such materials, by contacting the Company’s Transfer Agent at the following address:
ComputerShare
150 Royal Street
Canton, MA 02021
(910) 922-5248
What is the quorum requirement for holding the Annual Meeting? The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding voting power of our Common Stock as of the Record Date will constitute a quorum. Abstentions and broker non-votes will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum.
Can I revoke my proxy? Yes, a stockholder of record may revoke his or her proxy at any time prior to the voting thereof by giving written notice of such revocation to the Company in care of the Corporate Secretary at GEN Restaurant Group, Inc., 11480 South Street, Suite 205, Cerritos, CA 90703 or, by executing and duly and timely delivering a subsequent proxy to the same address shown immediately above. For Common Stock you hold beneficially in “street name,” you may change your vote by submitting new voting instructions to your broker, bank or other nominee or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your Common Stock, by executing and properly delivering a timely subsequent proxy to the address set forth in such proxy. If you are a stockholder of record as of the Record Date, you may vote whether or not a proxy has been previously given, but your presence (without further action) at the Annual Meeting will not constitute revocation of a previously submitted proxy.
How can I access the proxy materials on the internet? You can access this proxy statement and our 2023 Annual Report from the Company’s website at www.genkoreanbbq.com or at the www.proxydocs.com/GENK. No information contained on the Company’s website is part of or incorporated into this proxy statement.
How may I obtain a paper copy of the proxy materials? Additional copies of our 2023 Annual Report to Stockholders, excluding exhibits, and this proxy statement may be obtained, without charge, from the Company by calling (562) 356-9929, or by writing to the Company’s Corporate Secretary, Thomas V. Croal, at the address above.
What is the effect of a “broker non-vote” on the proposals to be voted on at the Annual Meeting? Common Stock held by a broker, bank or other nominee that does not have authority, either express or discretionary, to vote on a particular matter at the Annual Meeting is a broker non-vote. A broker non-vote is counted as present for purposes of determining the presence of a quorum at the Annual Meeting. All proposals, other than the ratification of the appointment of our independent accountants, are non-routine matters and are not matters on which a broker may vote without your instructions. Therefore, if your Common Stock is not registered in your name and you do not provide instructions to your broker, bank or other nominee with respect to any proposal other than the ratification of the appointment of independent accountants, a broker non-vote as to your Common Stock will result. The ratification of the appointment of the independent accountant is a routine item. As a result, brokers who do not receive instructions from you as to how to vote on that matter generally may vote on that matter in their discretion.
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How do I vote? Most stockholders have a choice of voting prior to the Annual Meeting by proxy over the Internet, by telephone or by submitting a traditional proxy card. You may not vote your shares electronically at the Annual Meeting. Refer to your proxy or voting instruction card to see which options are available to you and how to use them.
The Internet and telephone voting procedures are designed to authenticate your identity and to confirm that your instructions have been properly recorded.
What if I do not specify a choice for a matter when returning a signed proxy? If your proxy form is signed and returned, your Common Stock represented thereby will be voted in accordance with your directions on the proxy form. In the absence of your direction as to any proposal, your shares will be voted FOR the election of the director nominees, and FOR ratification of the appointment of Marcum LLP as the Company’s independent accountant for the fiscal year ending December 31, 2024.
All stockholders are cordially invited to attend our virtual Annual Meeting.
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PROPOS AL 1 - ELECTION OF DIRECTORS
Two individuals have been nominated by our Board for re-election as Class I directors for three-year terms through the 2027 Annual Meeting, and until their successors are duly elected and qualified. Both of the nominees are currently serving as directors of the Company.
Director N ominees
The following are the Board’s nominees for Class I directors:
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the timing of future exchanges—for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable or amortizable assets of GEN LLC at the time of each purchase of units from the members of GEN LLC in each future exchange; |
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the price of shares of our Class A common stock at the time of the purchase or exchange—the tax basis increase in the assets of GEN LLC is directly related to the price of shares of our Class A common stock at the time of the purchase or exchange; |
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the extent to which such purchases or exchanges are taxable—if the purchase of units from the members of GEN LLC in connection with any future exchange is not taxable for any reason, increased tax deductions will not be available; |
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the amount, timing and character of GEN Inc.’s income—we expect that the Tax Receivable Agreement will require GEN Inc. to pay 85% of the net cash tax savings as and when deemed realized. If GEN Inc. does not have taxable income during a taxable year, GEN Inc. generally will not be required (absent a change in control or other circumstances requiring an early termination payment) to make payments under the Tax Receivable Agreement for that taxable year because no benefit will have been realized. However, any tax benefits that do not result in net cash tax savings in a given tax year may generate tax attributes that may be used to generate net cash tax savings in previous or future taxable years. The use of any such tax attributes will generate net cash tax savings that will result in payments under the Tax Receivable Agreement; and |
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U.S. federal, state and local tax rates in effect at the time that we realize the relevant tax benefits. |
In addition, the amount of each member’s tax basis in its GEN LLC units at the time of the purchase or exchange, the depreciation and amortization periods that apply to the increases in tax basis, the timing and amount of any earlier payments that GEN Inc. may have made under the Tax Receivable Agreement and the portion of GEN Inc.’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis are also relevant factors.
GEN Inc. has the right to terminate the Tax Receivable Agreement, in whole or in part, at any time. The Tax Receivable Agreement provides that payments under the TRA may be accelerated under the following scenarios: (i) GEN Inc. exercises its right to early termination of the Tax Receivable Agreement in whole (that is, with respect to all benefits due to all beneficiaries under the Tax Receivable Agreement) or in part (that is, with respect to some benefits due to all beneficiaries under the Tax Receivable Agreement), (ii) GEN Inc. experiences certain changes in control, (iii) the Tax Receivable Agreement is rejected in certain bankruptcy proceedings, (iv) GEN Inc. fails (subject to certain exceptions) to make a payment under the Tax Receivable Agreement or (v) GEN Inc. materially breaches its obligations under the Tax Receivable Agreement, in each of (iii), (iv) and (v), if such failure is not cured within 90 days. If payments under the TRA are accelerated as a result of one of the foregoing scenarios, GEN Inc. will be obligated to make an early termination payment to the beneficiaries under the Tax Receivable Agreement equal to the present value of all payments that would be required to be paid by GEN Inc. under the Tax Receivable Agreement. The amount of such payments will be determined on the basis of certain assumptions in the Tax Receivable Agreement. The amount of the early termination payment is determined by discounting the present value of all payments that would be required to be paid by GEN Inc. under the Tax Receivable Agreement at a rate equal to the lesser of (a) 6.5% and (b) the SOFR plus 400 basis points. For example, if a change of control were to occur on March 31, 2023, GEN Inc. estimates the liability associated with the early termination payment resulting from the change of control would be approximately $56.6 million. This estimated payment assumes (i) the change of control occurred on March 31, 2023; (ii) a price of $12.00 per share (iii) a constant combined federal and state corporate tax rate of 26.6%; and (iv) no material changes in tax law. Actual results may differ from assumptions for various reasons, including the timing of the change of control, the trading price of GEN Inc.’s shares of Class A common stock at the time of the change of control, and the tax rates then in effect.
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The payments that we will be required to make under the Tax Receivable Agreement are expected to be substantial. If all of the members of GEN LLC other than us were to exchange their GEN LLC units, we would recognize a deferred tax asset of approximately $117.2 million and a liability of approximately $99.6 million, assuming (i) that the members other than us redeemed or exchanged all of their GEN LLC units immediately after the completion of this offering at the initial public offering price of $12.00 per share of Class A common stock, (ii) no material changes in relevant tax law, (iii) a constant combined effective income tax rate of 26.6% and (iv) that we have sufficient taxable income in each year to realize on a current basis the increased depreciation, amortization and other tax benefits that are the subject of the Tax Receivable Agreement. The actual future payments to the members of GEN LLC will vary based on the factors discussed above, and estimating the amount of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors and future events.
Decisions made in the course of running our business, such as with respect to mergers and other forms of business combinations that constitute changes in control, may influence the timing and amount of payments we make under the Tax Receivable Agreement in a manner that does not correspond to our use of the corresponding tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative effect on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
Payments are generally due under the Tax Receivable Agreement within a specified period of time following the filing of GEN Inc.’s tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of SOFR plus 300 basis points from the due date (without extensions) of such tax return. Late payments generally accrue interest at a rate of SOFR plus 500 basis points. Because of our structure, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of GEN LLC to make distributions to us. The ability of GEN LLC to make such distributions will be subject to, among other things, restrictions in the agreements governing our debt. If we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine. Although we are not aware of any material issue that would cause the IRS to challenge a tax basis increase, GEN Inc. will not, in the event of a successful challenge, be reimbursed for any payments previously made under the Tax Receivable Agreement (although GEN Inc. would reduce future amounts otherwise payable to a holder of rights under the Tax Receivable Agreement to the extent such holder has received excess payments). No assurance can be given that the IRS will agree with our tax reporting positions, including the allocation of value among our assets. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement significantly in excess of the benefit that GEN Inc. actually realizes in respect of the increases in tax basis (and utilization of certain other tax benefits) resulting from (i) GEN Inc.’s acquisition of GEN LLC units from other members of GEN LLC in future exchanges and (ii) any payments GEN Inc. makes under the Tax Receivable Agreement. GEN Inc. may not be able to recoup those payments, which could adversely affect GEN Inc.’s financial condition and liquidity.
The obligation to make payments under the Tax Receivable Agreement generally will be senior to any similar obligation under any tax receivable agreement that may be entered into in the future. No holder of rights under the Tax Receivable Agreement (including the right to receive payments) may transfer its rights to another person without the written consent of GEN Inc., except in certain situations as described in the GEN LLC Agreement.
GEN LLC Agreement
In connection with the Reorganization, the members of GEN LLC amended and restated the GEN LLC Agreement. In its capacity as the managing member, GEN Inc. controls all of GEN LLC’s business and affairs. GEN Inc. holds all of the Class A units of GEN LLC. Holders of Class A units and Class B units will generally be entitled to one vote per unit with respect to all matters as to which members are entitled to vote under the GEN LLC Agreement. Class A units and Class B units will have the same economic rights per unit.
Any time GEN Inc. issues a share of Class A common stock for cash, the net proceeds received by GEN Inc. will be promptly used to acquire a Class A unit unless used to settle an exchange of a Class B unit for cash. Any time
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GEN Inc. issues a share of Class A common stock upon an exchange of a Class B unit or settles such an exchange for cash, as described below, GEN Inc. will contribute the exchanged unit to GEN LLC and GEN LLC will issue to GEN Inc. a Class A unit. If GEN Inc. issues other classes or series of equity securities (other than pursuant to our incentive compensation plans), GEN LLC will issue to GEN Inc. an equal amount of equity securities of GEN LLC with designations, preferences and other rights and terms that are substantially the same as GEN Inc.’s newly issued equity securities. If at any time GEN Inc. issues a share of its Class A common stock pursuant to the 2023 Plan, GEN Inc. will contribute to GEN LLC all of the proceeds it receives (if any) and GEN LLC will issue to GEN Inc. an equal number of its Class A units, having the same restrictions, if any, as are attached to the shares of Class A common stock issued under the plan. If GEN Inc. repurchases, redeems or retires any shares of Class A common stock (or equity securities of other classes or series), GEN LLC will, immediately prior to such repurchase, redemption or retirement, repurchase, redeem or retire an equal number of Class A units (or its equity securities of the corresponding classes or series) held by
GEN Inc., upon the same terms and for the same consideration, as the shares of GEN Inc.’s Class A common stock (or equity securities of such other classes or series) are repurchased, redeemed or retired. In addition, membership units of GEN LLC, as well as our common stock, will be subject to equivalent stock splits, dividends, reclassifications and other subdivisions. In the event GEN Inc. acquires Class A units without issuing a corresponding number of shares of Class A common stock, it will make appropriate adjustments to the exchange ratio of Class B units to Class A common stock.
GEN Inc. will have the right to determine when and if distributions will be made to holders of units and the amount of any such distributions, other than with respect to tax distributions as described below. If a distribution is authorized, except as described below, such distribution will be made to the holders of Class A units and Class B units on a pro rata basis in accordance with the number of units held by such holder.
The holders of units, including GEN Inc., will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of GEN LLC. Net profits and net losses of GEN LLC will generally be allocated to holders of units (including GEN Inc.) on a pro rata basis in accordance with the number of units held by such holder; however, under applicable tax rules, GEN LLC will be required to allocate net taxable income disproportionately to its members in certain circumstances. The GEN LLC Agreement will provide for quarterly cash distributions, which we refer to as “tax distributions,” to the holders of the units in a manner to approximate an amount to enable each member to pay applicable taxes on taxable income allocable to such member. If the amount of tax distributions to be made exceeds the amount of funds available for distribution, GEN Inc. shall receive a tax distribution calculated using the corporate tax rate, before the other members receive any distribution and the balance, if any, of funds available for distribution shall be distributed first to the other members in accordance with the GEN LLC Agreement. GEN LLC will also make non-pro rata payments to GEN Inc. to reimburse it for reasonable corporate and other overhead expenses (which payments from GEN LLC will not be treated as distributions under the GEN LLC Agreement). Notwithstanding the foregoing, no distribution will be made pursuant to the GEN LLC Agreement to any unitholder if such distribution would violate applicable law or result in GEN LLC or any of its subsidiaries being in default under any material agreement.
The GEN LLC Agreement provides that it may generally be amended, supplemented, waived or modified by GEN Inc. in its sole discretion without the approval of any other holder of units, except in the case of amendments or actions that would modify the limited liability of a member or increase the obligation of a member to make capital contributions, adversely affect the right of a member to receive distributions, convert GEN LLC into a corporation or cause GEN LLC to be treated as a corporation for tax purposes.
The GEN LLC Agreement entitles certain members (and certain permitted transferees thereof) to exchange their Class B units together with an equal number of shares of Class B common stock, for shares of Class A common stock on a one-for-one basis or, at our election, for cash, or a combination of cash and Class A common stock. The exchange ratio is subject to appropriate adjustment by GEN Inc. in the event Class A units are issued to GEN Inc. without issuance of a corresponding number of shares of Class A common stock or in the event of certain reclassifications, reorganizations, recapitalizations or similar transactions.
The GEN LLC Agreement permits the Class B unitholders to exercise their exchange rights subject to certain reasonable timing procedures and other conditions. The GEN LLC Agreement provides that an owner will not have
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the right to exchange Class B units if we determine that such exchange would be prohibited by law or regulation or would violate other agreements with the Company, GEN LLC or any of their subsidiaries or violate any written policies of GEN Inc. to which GEN LLC unitholder is subject. We intend to impose additional restrictions on exchanges that we determine to be necessary or advisable so that GEN LLC is not treated as a “publicly traded partnership” for U.S. federal income tax purposes.
The GEN LLC Agreement also provides for mandatory exchanges under certain circumstances, including at the option of GEN Inc., if the number of units outstanding (other than those held by GEN Inc.) is less than a minimum percentage and in the discretion of GEN Inc., with the consent of holders of at least 50% of the outstanding Class B units.
Any beneficial holder exchanging Class B units must ensure that the applicable corresponding number of shares of Class B common stock are delivered to us for retirement as a condition of exercising its right to exchange Class B units for shares of our Class A common stock, or, at our election, for cash, or a combination of cash and Class A common stock.
Registration Rights Agreement
In connection with our initial public offering, we entered into a Registration Rights Agreement. This agreement provides holders of our Class B common stock with certain registration rights whereby, at any time following the first anniversary of the consummation of our initial public offering, they will have the right to require us to register under the Securities Act of 1933, as amended, the shares of Class A common stock issuable upon exchange of Class B units, subject to certain limitations set forth in the Registration Rights Agreement. The Registration Rights Agreement also provides for piggyback registration rights for the holders party thereto, subject to certain conditions and exceptions.
Transactions Prior to our Initial Public Offering
Ignite Consulting
On September 29, 2014, we entered into a consulting agreement with Ignite, or the Consulting Agreement, 100% owned by Mr. Kim, which provided for annual fees of up to 25% of gross revenue in exchange for various consulting services. Such consulting fees were only paid to the extent we and our related entities had adequate resources. During the year ended December 31, 2023, $2.3 million was expensed and paid pursuant to the Consulting Agreement. In connection with the initial public offering, we terminated the Consulting Agreement.
Pacific Global Distribution ( " PGD ” )
We purchased approximately $2.8 million for the year ending December 31, 2023, of food and supplies from Pacific Global Distribution, or PGD, which is 100% owned by Jae Chang, our Co-Chief Executive Officer, and Mr. Chang's direct family. Outstanding obligations for supply purchases from PGD of approximately $137,000 are included in accounts payable as of December 31, 2023. We currently obtain the grills used in our restaurants from PGD.
Wise Universal, Inc.
We purchased approximately $12.4 million of food from Wise Universal, an affiliate 60% owned by Mr. Chang for the year ending December 31, 2023. Wise Universal is a provider of the meats used in our restaurants.
Administrative Services Agreement
We provide administrative services to less than ten restaurants owned by David Kim that are unrelated to us.
Limitations on Liability and Executive Officer and Director Indemnification Agreements
Our directors and officers will not be personally liable for our debts, obligations or liabilities, whether that liability or obligation arises in contract, tort or otherwise, solely by reason of being a director or an officer of us. In
15
addition, our amended and restated bylaws require us to indemnify our executive officers and directors to the fullest extent permitted by law, subject to limited exceptions. We have entered into indemnification agreements with each of our executive officers and directors that provide, in general, that we will indemnify them to the fullest extent permitted by law in connection with their service to us or on our behalf.
Review and Approval of Related Person Transactions
We have implemented a written policy pursuant to which the audit committee will review and approve transactions with our directors, director nominees, officers and holders of more than 5% of our voting securities and their affiliates. Prior to approving any transaction with a related party, the audit committee will consider the material facts as to the related party’s relationship with us or interest in the transaction. Related person transactions will not be approved unless the audit committee has approved of the transaction. We did not have a formal review and approval policy for related person transactions at the time of any transaction described in “ Certain Relationships and Related Party Transactions .”
Comm ittees of the Board
Our board committees include an audit committee, a compensation and human capital committee and a nominating and governance committee. The independent Chairman of the Board serves as a de facto non-paid member of all three committees. During 2023, the following number of meetings were held:
|
|
|
Number of
|
||||||||||||||||||||||||
|
Board of Directors |
|
3 |
||||||||||||||||||||||||
|
Audit Committee |
|
3 |
||||||||||||||||||||||||
|
Compensation and Human Capital Committee |
|
— |
||||||||||||||||||||||||
|
Nominating and Governance Committee |
|
— |
||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Audit Fees (1) |
|
$ |
340,656 |
|
|
|
283,250 |
|
|
Audit-Related Fees (2) |
|
|
124,682 |
|
|
|
74,160 |
|
|
Tax Fees |
|
|
— |
|
|
|
— |
|
|
All Other Fees |
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
465,338 |
|
|
$ |
357,410 |
|
(1) Audit fees include fees for the annual audit and quarterly reviews. Audit fees for the years 2023 and 2022 were $217,056 and $185,400, respectively. Quarterly review fees for the years 2023 and 2022 were $123,600 and $97,850, respectively.
(2) Audit-Related fees includes fees consisting of professional services performed by Marcum LLP in connection with reviews of our registration statements and comfort letters.
The Company did not incur any fees related to tax compliance from Marcum LLP during 2023 or 2022.
The Audit Committee has adopted a policy for approving all permitted audit, audit-related, tax and non-audit services to be provided by Marcum LLP in advance of the commencement of such services, except for those considered to be de minimis by law for non-audit services. Information regarding services performed by the independent registered public accounting firm under this de minimis exception is presented to the Audit Committee for information purposes at each of its meetings. There is no blanket pre-approval provision within this policy.
The Audit Committee, at each of its regularly scheduled meetings, and on an interim basis as required, reviews all engagements of Marcum LLP for audit and all other services. Prior to the Audit Committee’s consideration for approval, management provides the Audit Committee with a description of the reason for, and nature of, the services to be provided along with an estimate of the time required and approximate cost. Following such review, each proposed service is approved, modified or denied, as appropriate. The Audit Committee maintains a record of all such approvals in its files for future reference. The Audit Committee approved all services provided by Marcum LLP during the past two years prior to their undertaking.
Representatives of Marcum LLP are expected to attend the Annual Meeting and will be available to respond to appropriate questions and may make a statement if they so desire.
E XECUTIVE COMPENSATION
Informa tion About Our Executive Officers
Our named executive officers, or NEOs, for the year ended December 31, 2023 are:
David Kim, our Co-Chief Executive Officer;
Jae Chang, our Co-Chief Executive Officer and
Thomas V. Croal, our Chief Financial Officer.
21
2023 Summ ary Compensation Table
The table below sets forth the annual compensation earned by or granted to the NEOs during the year ended December 31, 2022 and 2023.
|
Name and Principal Position |
|
Year |
|
Salary |
|
|
Bonus |
|
|
Option
|
|
|
Stock
|
|
|
All Other
|
|
|
Total |
|
||||||
|
David Kim,
|
|
2023 |
|
$ |
289,000 |
|
|
$ |
38,750 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,375 |
|
|
$ |
332,125 |
|
|
|
|
2022 |
|
$ |
289,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
289,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Jae Chang,
|
|
2023 |
|
$ |
— |
|
|
$ |
20,000 |
|
|
$ |
— |
|
|
$ |
500,004 |
|
|
$ |
— |
|
|
$ |
520,004 |
|
|
|
|
2022 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
- |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Thomas V. Croal
|
|
2023 |
|
$ |
350,000 |
|
|
$ |
352,000 |
|
|
$ |
— |
|
|
$ |
1,090,908 |
|
|
$ |
10,142 |
|
|
$ |
1,803,050 |
|
|
|
|
2022 |
|
$ |
350,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
350,000 |
|
|
|
|
Amount and
|
|
|
Total
|
|
|||||||||
|
Name and Address of Beneficial Owner |
|
Class A
|
|
% of All
|
|
|
Class B
|
|
|
% |
|
||||
|
Named Executive Officers, Directors, and
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Jae Chang (2) |
|
|
46,064 |
|
|
1.02 |
% |
|
|
9,315,163 |
|
|
|
31.1 |
% |
|
David Kim (3) |
|
|
130,093 |
|
|
2.88 |
% |
|
|
10,140,345 |
|
|
|
33.8 |
% |
|
Thomas Croal (7) |
|
|
91,909 |
|
|
2.04 |
% |
|
|
— |
|
|
* |
|
|
|
Michael Cowan |
|
|
4,167 |
|
* |
|
|
|
— |
|
|
* |
|
||
|
Jonathan Gregory |
|
|
4,167 |
|
* |
|
|
|
— |
|
|
* |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
All executive officers, directors and
|
|
|
276,400 |
|
|
6.13 |
% |
|
|
19,455,508 |
|
|
|
64.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Other 5% Beneficial Owners: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Don Wook Kim (4) |
|
|
— |
|
|
— |
|
|
|
3,380,115 |
|
|
|
11.3 |
% |
|
Lauren Wang (5) |
|
|
— |
|
|
— |
|
|
|
1,690,058 |
|
|
|
5.6 |
% |
|
Jose Manzanarez (6) |
|
|
— |
|
|
— |
|
|
|
1,690,058 |
|
|
|
5.6 |
% |
|
Ju Han (1) |
|
|
— |
|
|
— |
|
|
|
9,250,695 |
|
|
|
28.1 |
% |
|
Wasatch Advisors, LP
|
|
|
657,738 |
|
|
14.58 |
% |
|
|
— |
|
|
* |
|
|
|
FMR, LLC
|
|
|
428,217 |
|
|
9.49 |
% |
|
|
— |
|
|
* |
|
|
|
Praetorian PR, LLC
|
|
|
380,000 |
|
|
8.42 |
% |
|
|
— |
|
|
* |
|
|
|
Gratia Capital, LLC
|
|
|
337,431 |
|
|
7.48 |
% |
|
|
— |
|
|
* |
|
|
|
Woodson Capital Master Fund, LP
|
|
|
300,000 |
|
|
6.65 |
% |
|
|
— |
|
|
* |
|
|
|
Portolan Capital Management, LLC
|
|
|
275,618 |
|
|
6.11 |
% |
|
|
— |
|
|
* |
|
|
