A proxy submitted by a stockholder may indicate that the shares represented by the proxy are not being voted (stockholder withholding) with respect to the election of directors (stockholder withholding). Stockholder withholding will count for purposes of determining the presence of a particular matter.quorum, but it will not be treated as a vote cast. Accordingly, stockholder withholding will have no effect on the election of the Class III directors or the advisory vote to elect the Advisory Nominees. Similarly, abstentions will count for purposes of determining the presence of a quorum, but they will not be treated as votes cast, and, therefore, will have no effect on the advisory vote to elect the Advisory Nominees, the ratification of the appointment of Ernst & Young LLP, or the advisory vote to approve the compensation provided to our named executive officers. In addition, while a broker may not be permittedhas discretion to vote onuninstructed shares held in street name on “routine” matters, under stock market rules, a particular matterbroker lacks discretion to vote shares held in street name on “non-routine” matters in the absence of instructions from the beneficial owner of the stock (broker(called a broker non-vote). The shares subject toProposal 4 is a proxy thatroutine matter, but Proposal 1, Proposal 2, Proposal 3, and Proposal 5 are not being voted on a particular matter because of either stockholder withholding or brokernon-routine matters. Broker non-votes will count for purposes of determining the presence of a quorum, but will not be treated as votes cast on Proposals 1, 2, 3 and therefore,5. Accordingly, broker non-votes will have no effect on the election of the Class III directors, or the ratificationadvisory vote to elect the Advisory Nominees, and the advisory vote to approve compensation provided to our named executive officers. Because approval of Proposal 3 requires the appointmentvote of Ernst & Young LLP. Broker non-votes, if any,at least two-thirds of our outstanding stock, a broker non-vote will have the effect of a vote against the proposal to amend our Restated Certificate of Incorporation to reduce the authorized number of common shares.
•vote by mail — if you request or receive a paper proxy card and voting instructions by mail, simply complete, sign and date the proxy card and return it as soon as possible before the meeting in the envelope provided.provided; or
•vote in-person at the meeting — we will provide a ballot to stockholders who attend the meeting and wish to vote in-person.
Votes submitted through the Internet, by mail, or by telephone must be received by 11:59 p.m., Eastern Time, on May 30, 2016.June 6, 2023. Submitting your proxy, whether through the Internet, by telephone, or by mail if you request or receivedreceive a paper proxy card, will not affect your right to vote in person should you decide to attend the meeting. Annual Meeting.
If you are not the stockholder of record, please refer to the voting instructions provided by your brokerage firm, bank or other nominee to direct it how to vote your shares.
For Proposal 1 and Proposal 2, you may either vote “FOR” alleach of the nominees to the Board of Directors, or you may withhold your vote from any nominee you specify. For Proposal 23, Proposal 4 and Proposal 3,5, you may vote “FOR” or “AGAINST” or “ABSTAIN” from voting. Your vote is important. Whether or not you plan to attend the meeting,Annual Meeting in-person, we urge you to vote in advance of the meeting through the Internet, by proxymail or by phone to ensure that your vote is counted.
shares are represented at the meeting.
All proxies will be voted in accordance with the instructions specified on the proxy card. If you sign a physical proxy card and return it without instructions as to how your shares should be voted on a particular proposal at the meeting,Annual Meeting, your shares will be voted in accordance with the recommendations of our Board of Directors stated above.
in the above table. The proxies also confer discretionary authority upon the person named therein with respect to any amendments, variations or other matters which may properly come before the Annual Meeting. As of the date hereof, the Company knows of no such amendments, variations or other matters to come before the Annual Meeting. However, if any such amendment, variation or other matter properly comes before the Annual Meeting, a proxy, when properly completed and delivered and not revoked, will confer discretionary authority upon the person named therein to vote on such other business in accordance with his or her best judgment, subject to any limitations imposed by applicable law or the rules of any applicable securities exchange.
If you received a Notice of Internet Availability, please follow the instructions included on the notice on how to access your proxy card and vote through the Internet or by telephone. If you do not vote and you hold your shares in street name, and your broker does not have discretionary power to vote your shares, your shares may constitute “broker non-votes” (as described above) and will not be counted in determining the number of shares necessary for approval of the proposals. However, shares that constitute broker non-votes will be counted for the purpose of establishing a quorum for the meeting.
If you receive more than one proxy card or Notice of Internet Availability, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on the Notice of Internet Availability on how to access each proxy card and vote each proxy card through the Internet. If you requested or received paper proxy materials by mail, please complete, sign and return each proxy card to ensure that all of your shares are voted.card.
Expenses of Soliciting Proxies
The expenses of soliciting proxies will be paid by Trupanion. Following the original distribution and mailing of the solicitation materials, we or our agents may solicit proxies by mail, email, telephone, facsimile,or by other similar means, or in person.in-person. Our directors, officers and other employees, without additional compensation, may solicit proxies for us personally or in writing, by mail, email, telephone, email or otherwise.by other similar means. Following the original distribution and mailing of the solicitation materials, we will request brokers, custodians,brokerage firms, banks and other nominees and otherwho are record holders to forward copies of those materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, we, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials and/or vote through the Internet, by phone or by mail, you are responsible for any Internet access, telephone or data usage or postage charges you may incur.
Revocability of Proxies
A stockholder of record who has given a proxy may revoke it at any time before the closing of the polls by the inspector of elections at the meetingAnnual Meeting by:
•delivering to the Corporate Secretary a written notice stating that the proxy is revoked;
•signing and delivering a proxy bearing a later date;
•voting again through the Internet;Internet or by telephone (by June 6, 2023, 11:59 p.m. Eastern Time); or
•attending and voting at the meeting (although attendanceAnnual Meeting (attendance at the meeting will not, by itself, revoke a proxy).
Please note, however, that if your shares are held of record by a brokerage firm, bank or other nominee and you wish to revoke a proxy, you must contact that firm to revoke or change any prior voting instructions.
Electronic Access to the Proxy Materials
The Notice of Internet Availability will provide you with instructions regarding how to:
•view our proxy materials for the meeting through the Internet;
•instruct us to mail paper copies of our future proxy materials to you; and
•instruct us to send our future proxy materials to you electronically by email.
Choosing
To help us achieve our environmental goals, consider choosing to receive your future proxy materials by email, which will reduce the impact of our annual meetings of stockholders on the environment and lower the costs of printing and distributing our proxy materials. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the meeting. The preliminary voting results will be announced at the meeting and posted on ourthe investor relations section of our website at https://investors.trupanion.com. The final results will be tallied by the inspector of elections and filed with the SEC in a current report on Form 8-K within four business days of the meeting.Annual Meeting.
Implications
Proposal No. 1: Election of beingClass III Directors
As of the date of this Proxy Statement, our Board of Directors consists of nine directors. Our Certificate of Incorporation currently divides the Board of Directors into three classes, and there are currently two directors in each of Class I and Class II and three directors in Class III. Directors in each class serve for three years, with the terms of office of the respective classes expiring in successive years. Mr. Daniel "Dan" Levitan, Dr. Murray Low, and Mr. Howard Rubin, each an “emerging growth company.”incumbent Class III director, will stand for election at this Annual Meeting.
We are an “emerging growth company”Our nominating and corporate governance committee nominated Messrs. Levitan and Rubin and Dr. Low for election as Class III directors at the 2023 Annual Meeting, and at the recommendation of our nominating and corporate governance committee, our Board of Directors proposes that Messrs. Levitan and Rubin and Dr. Low each be elected as a Class III director for a three-year term expiring at the 2026 annual meeting and until his successor is usedduly elected and qualified or until his earlier resignation or removal. Each Class III director has agreed to resign in the Jumpstart Our Business Startups Actevent stockholders approve Proposal 3 to declassify our Board of 2012Directors.
Under our Bylaws, each director is elected by a plurality of the votes cast at the Annual Meeting. This means that the three individuals nominated for election to the Board of Directors at the Annual Meeting receiving the highest number of “FOR” votes will be elected. You may either vote “FOR” one, two, or three of the nominees or you may “WITHHOLD” your vote with respect to one, two, or three nominees. Shares represented by proxies will be voted “FOR” the election of each of the Class III nominees, unless the proxy is marked to withhold authority to so vote. You may not cumulate votes in the election of directors. If any nominee for any reason is unable to serve, the proxies may be voted for such substitute nominees as the proxy holders, who are officers of our Company, might determine. Each nominee has consented to being named in this proxy statement and to serve if elected, provided, in order to accomplish the declassification of our Board of Directors, each nominee has agreed to resign in the event Proposal 3 is approved. Proxies may not be voted for more than three directors.
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OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF EACH OF THE NOMINATED CLASS III DIRECTORS. |
Proposal No. 2: Advisory and Non-Binding Vote to Approve the Class I and Class II Directors
As described in this proxy statement, we are recommending that our stockholders vote to approve Proposal 3 – a proposal to amend and restate our Certificate of Incorporation to declassify our Board of Directors such that each director will serve a one-year term and be subject to election at each Annual Meeting rather than every three years. In connection with the declassification, and as such,a demonstration of our commitment to annual director elections, we are asking our stockholders to cast an advisory vote on the Advisory Nominees, which directors have agreed to resign and will be re-appointed to fill vacancies on our Board of Directors created by their resignations only if they receive a number of advisory votes that would be sufficient to elect them had they been subject to election at the Annual Meeting.
At the recommendation of our nominating and corporate governance committee, our Board of Directors proposes that Jacqueline "Jackie" Davidson, Elizabeth "Betsy" McLaughlin and Zay Satchu, each an incumbent Class I director, and Paulette Dodson and Darryl Rawlings, each an incumbent Class II director, be, on an advisory basis, elected to comply with certain reduced public company reporting requirements. These reduced reporting requirements include reduced disclosure about the company’s executive compensation arrangementsBoard of Directors. Michael Doak, an incumbent Class II director, has notified us that he is resigning upon completion of the Annual Meeting, and no non-bindingas a result he is not standing for election as an Advisory Nominee.
Each of our Advisory Nominees has agreed to resign and will not be re-appointed to fill vacancies on our Board of Directors unless they receive a number of advisory votes that would be sufficient to elect them had they been subject to election at the Annual Meeting. Accordingly, any director who does not receive a plurality of the votes cast at the Annual Meeting will not be reappointed as a director. For directors who do receive the highest number of "FOR" votes, however, we expect that the remaining directors will appoint them to fill vacancies on executive compensation. Weour Board of Directors.
Although this is an advisory and nonbinding vote, we are otherwise conducting it in a manner similar to the election of directors. Accordingly, you may either vote “FOR” the directors subject to this Proposal 2 or you may “WITHHOLD” your vote with respect to the directors subject to this Proposal 2. Shares represented by proxies will remainbe voted “FOR” the election of each of the directors subject to this Proposal 2, unless the proxy is marked to withhold authority to so vote. You may not cumulate votes in the election of directors. If any director subject to this Proposal 2 for any reason is unable to serve, the proxies may be voted for such substitute individuals as the proxy holders, who are officers of our Company, might determine. Each director subject to this Proposal 2 has consented to being named in this proxy statement and to serve if approved by our stockholders, provided, in order to accomplish the declassification of our Board of Directors, each director has agreed to resign in the event Proposal 3 is approved.
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OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF EACH OF THE CLASS I AND CLASS II DIRECTORS RUNNING FOR ELECTION. |
Our Board of Directors
Board of Directors Snapshot
Our Board of Directors and their respective ages and class designation as of April 10, 2023 are as follows:
| | | | | | | | |
| Name | Age | Class Designation |
| Jacqueline "Jackie" Davidson | 62 | Class I Director |
| Elizabeth "Betsy" McLaughlin | 62 | Class I Director |
| Zay Satchu | 34 | Class I Director |
| Michael Doak | 47 | Class II Director |
| Paulette Dodson | 59 | Class II Director |
| Darryl Rawlings | 53 | Class II Director |
| Daniel "Dan" Levitan | 65 | Class III Director |
| Murray Low | 70 | Class III Director |
| Howard Rubin | 70 | Class III Director |
Information regarding our director nominees (see Proposal 1) and Advisory Nominees (see Proposal 2), including information they have furnished as to their principal occupations, certain other directorships they hold, or have held, and their ages as of April 10, 2023, is set forth below. There are no familial relationships among our directors and officers. No director nominee or Advisory Nominee has an emerging growth company untilarrangement or understanding with another person under which he or she was or is to be selected as a director or nominee.
Our Class III Director Nominees
Our Class I and Class II Directors
Non-Employee Director Compensation
Non-Employee Director Compensation Program
In February 2018, our Board of Directors approved a non-employee director compensation program, which has been amended from time to time, most recently in 2023. The program in effect for calendar year 2022 provided for a phased-in increase to non-employee director compensation in calendar years 2022 and 2023. For calendar year 2022, each of our non-employee directors received an annual retainer in the earlieramount of (1)$112,500 and the lastchairs of each of the Board of Directors, audit committee, compensation committee and nominating and corporate governance committee received an additional annual retainer in the amount of $15,000, $15,000, $10,000 and $10,000, respectively. For calendar year 2023, these amounts will increase such that each of our non-employee directors will receive an annual retainer in the amount of $150,000 and the lead independent director and chairs of each of the audit committee, compensation committee and nominating and corporate governance committee will receive an additional annual retainer in the amount of $50,000. Annual awards will be pro-rated for any person who becomes a non-employee director, lead independent director, and/or chair after annual awards are granted for that year.
Under our non-employee director compensation program, each director receives his or her retainer in the form of either restricted stock units (RSUs) or non-qualified stock options, as our Board of Directors determines each year. However, each director may elect to receive 50% of his or her retainer in cash and 50% in equity (either RSUs or non-qualified stock options, as our Board of Directors determines each year), provided that a director who holds at least the minimum amount of equity required under our stock ownership guidelines (without regard to the five-year transition relief) may elect to receive 100% in cash. If our Board of Directors determines that the equity compensation will be paid in the form of RSUs, the number of shares of Common Stock underlying the RSUs will be based on our then-most recent determination of the intrinsic value of a share of Common Stock. If our Board of Directors determines that the equity compensation will be paid in the form of non-qualified stock options, the number of shares of Common Stock underlying the options will be determined by dividing the cash compensation by our then-most recent determination of the intrinsic value of a share of Common Stock then the quotient of this calculation is multiplied by a fraction, the numerator of which is the closing price of our Common Stock as reported by the NASDAQ stock market on the first day of the fiscalopen trading window in which the grant will be made and the denominator is the value of the Common Stock calculated using the Black-Scholes valuation method as of the same date. For calendar year (a)2022, the Board of Directors determined that equity would be in the form of RSUs.
For calendar year 2022, no non-employee director elected to receive any portion of their retainer in cash and all non-employee director compensation was in the form of RSUs, with the number of RSUs granted determined by dividing the retainer amount by our then-most current calculation of intrinsic value of a share of our Common Stock.
Equity awards under our non-employee director compensation program are typically granted in the first open trading window of the calendar year and vest in four quarterly installments on March 31st, June 30th, September 30th, and December 31st, subject to the continued service of the non-employee director through the vesting date. Annual awards that are unvested at the time of resignation or termination of a non-employee director are forfeited. Similarly, no cash compensation will be paid following the fifth anniversaryeffective date of a director’s resignation or other termination from our Board of Directors. The resignations described in Proposals 1, 2 and 3 in connection with our efforts to declassify our Board of Directors will only be deemed to be resignations for corporate law purposes and will not be deemed to be resignations for any other purpose, including vesting provisions under our equity incentive plan and related award agreements.
Additional Compensation for Non-Employee Directors
From time to time, our Board of Directors may also award additional compensation to directors when it determines doing so is in our best interests and those of our stockholders, such as for unexpected or additional service contributions.
The Company also provides reimbursement for reasonable travel, accommodation and out-of-pocket expenses of directors to attend Board meetings and participate in other corporate functions.
2022 Non-Employee Director Compensation Table
The following table presents the total compensation for each person who served as a non-employee member of our Board of Directors during the year ended December 31, 2022. Other than as set forth in the table, during the year ended December 31, 2022, we did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our Board of Directors, with the exception of reimbursement of travel expenses as described above. Mr. Rawlings, our Chief Executive Officer, received no compensation for his service as a director during the year ended December 31, 2022. The compensation provided to Mr. Rawlings is discussed in the section entitled “Executive Compensation”.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Fees Earned or Paid in Cash (1) | Stock Awards
(2) | | All Other Compensation | Total | |
| Jackie Davidson | $ | — | | | $ | 125,930 | | | $ | — | | | $ | 125,930 | | |
| Michael Doak (3) | $ | — | | | $ | 121,001 | | | $ | — | | | $ | 121,001 | | |
| Eric Johnson (4) | $ | — | | | $ | 111,141 | | | $ | — | | | $ | 111,141 | | |
| Dan Levitan | $ | — | | | $ | 111,141 | | | $ | — | | | $ | 111,141 | | |
| Murray Low (5) | $ | — | | | $ | 135,789 | | | $ | — | | | $ | 135,789 | | |
| Howard Rubin | $ | — | | | $ | 111,141 | | | $ | — | | | $ | 111,141 | | |
| Zay Satchu | $ | — | | | $ | 111,141 | | | $ | — | | | $ | 111,141 | | |
(1)Under our non-employee director compensation program, each director receives his or her retainer in the form of either RSUs or non-qualified stock options, as our Board of Directors determines each year. However, each director may elect to receive 50% of his or her retainer in cash and 50% in equity (either RSUs or non-qualified stock options, as our Board of Directors determines each year). In 2022, all directors elected to receive equity only, which was in the form of RSUs.
(2)For 2022, our Board of Directors determined that equity granted pursuant to the non-employee director compensation program would be in the form of RSUs. The amounts in this column represent the aggregate grant date fair value of the RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our directors. See Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of the assumptions we apply in calculating these amounts.
(3)As of December 31, 2022, Mr. Doak held options to purchase 29,920 shares of Common Stock under certain option awards granted pursuant to our 2014 Equity Incentive Plan. Mr. Doak has notified us that he is resigning effective upon completion of the Annual Meeting.
(4)Mr. Johnson resigned as a member of our Board of Directors effective as of January 1, 2023.
(5)As of December 31, 2022, Dr. Low held options to purchase 37,592 shares of Common Stock under certain option awards granted pursuant to our 2014 Equity Incentive Plan.
Proposal No. 3: Approval of Amendment and Restatement of Certificate of Incorporation to Declassify the Board of Directors
After careful consideration, our Board of Directors recommends that our stockholders approve the amendment and restatement of our Certificate of Incorporation to declassify our Board of Directors and provide that all directors elected at or after our 2024 annual meeting of stockholders be elected on an annual basis. The text of the amendment, marked to show the proposed deletions and insertions, is attached as Annex A to this proxy statement (the Declassification Amendment).
Since our initial public offering on July 17,in 2014, (b) in which we have totalhad our classified board structure. In deciding to approve the Declassification Amendment and to recommend that our stockholders vote to adopt the proposed Declassification Amendment, our Board of Directors considered the benefits of retaining a classified board structure, such as providing continuity and stability, encouraging directors to take a long-term perspective and enhancing the independence of non-management directors by providing them with a longer term of office. However, our Board of Directors recognizes that our classified board structure does not enable stockholders to express a view on each director’s performance by means of an annual gross revenuevote and therefore may be perceived as reducing directors’ accountability to stockholders. Our Board of at least $1.0 billion, or (c)Directors has carefully considered input from our stockholders, weighed the advantages and disadvantages of the current classified board structure, and determined that it is advisable and in which we are deemed to be a large accelerated filer, which means the market valuebest interest of our common stockcompany and our stockholders to adopt the Declassification Amendment to effect the declassification of our Board of Directors.
Currently, Article VI of our Certificate of Incorporation provides that is heldour Board of Directors shall be classified into three classes with each class holding office for a three-year term. If our stockholders approve the Declassification Amendment, each director would be elected to an annual term beginning at our 2024 annual meeting of stockholders. Vacancies that may occur during the year may be filled by non-affiliates exceeds $700 million asvote of a majority of the prior June 30th,remaining members of our Board of Directors, and (2)each director so appointed shall serve for a term which will expire at the datenext annual meeting of stockholders. The Declassification Amendment also eliminates the requirement in our Certificate of Incorporation that directors be removed for cause, because Delaware law only allows such provisions at companies with staggered boards. The Declassification Amendment will become effective upon the filing of the amended and restated Certificate of Incorporation with the Delaware Secretary of State.
Under Delaware law, the Declassification Amendment will not operate to remove a director or shorten the term of a director. If the Declassification Amendment is approved, and once the amended and restated Certificate of Incorporation is filed with the Delaware Secretary of State, each Advisory Nominee will resign and, assuming they have received the advisory vote contemplated by Proposal 2, will be immediately re-appointed as directors for a term that expires at our 2024 annual meeting. Immediately after such directors are re-appointed to our Board of Directors, our Class III directors will resign and immediately be re-appointed as directors for a term that expires at our 2024 annual meeting. Following these resignations and re-appointments, no directors will remain classified and all directors will be subject to annual elections starting at our 2024 annual meeting.
If the Declassification Amendment is not approved, our Board of Directors will not declassify, and none of the resignations and re-appointments described above will occur.
If the Declassification Amendment is approved, our Board of Directors would also make conforming changes to our Bylaws as necessary or appropriate to declassify our Board of Directors. If our stockholders do not approve the Declassification Amendment, our Board of Directors will remain classified and such conforming changes to the Bylaws will be abandoned.
This description of the Declassification Amendment is only a summary of these amendments and is qualified in its entirety by reference to the actual text of Article VI as set forth on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
Annex A to this proxy statement.
CORPORATE GOVERNANCE STANDARDS AND DIRECTOR INDEPENDENCE | | |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 3 |
Corporate Governance
We are strongly committed to good corporate governance practices. These practices provide an important framework within which our Board of Directors and management pursue our strategic objectives for the benefit of our stockholders.
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that set forth expectations for directors, director independence standards, the board committee structure and functions and other policies for the governance of the company.our Company. Our Corporate Governance Guidelines are available without charge on the investor relations section of our website at www.trupanion.com.
https://investors.trupanion.com. Information contained on, or that can be accessed through, our website is not incorporated by reference, and you should not consider information on our website to be part of, this proxy statement.
Board Composition and Leadership Structure
TheUnder our Corporate Governance Guidelines, our Board of Directors is free to choose its chairperson in any way that it deems best for us. Our Board of Directors, in consultation with our nominating and corporate governance committee, periodically considers its leadership structure and may change the structure as it deems appropriate. Since January 2023, the positions of Chief Executive Officer and ChairmanChairperson of our Board of Directors arehave been held by two different individuals (Mr. Rawlings and Dr. Low, respectively). This structure allows our Chief Executive Officer to focus on our day-to-day business while our Chairman leads our Board of Directors in its fundamental role of providing advice to and independent oversight of management.Mr. Rawlings. Our Board of Directors believes such separation is appropriate, as it enhances the accountability of thethat having our Chief Executive Officer to the Board of Directors and strengthens the independenceas chairperson of the Board of Directors fromwill facilitate our Board of Directors’ decision-making process because Mr. Rawlings has first-hand knowledge of our operations and the major opportunities and challenges facing us. This also enables Mr. Rawlings to act as the key link between our Board of Directors and other members of management.
To assure effective independent oversight, our Corporate Governance Guidelines provide that when the positions of Chairperson of our Board of Directors and Chief Executive Officer are held by the same person, our independent directors may designate a Lead Independent Director. Our former chairperson of the Board, Dr. Low, is currently serving as our Lead Independent Director. Mr. Rawlings' appointment to Chairperson of our Board is in connection with succession planning for our Chief Executive Officer. Our current intent is for Mr. Rawlings to serve as our Chief Executive Officer and also as Chairperson of the Board of Directors until 2025, after which time he will no longer serve as Chief Executive Officer and will only serve as Chairperson of the Board. Mr. Rawlings has indicated a willingness to serve as Chairperson of the Board until 2035, assuming our stockholders re-elect him to our Board of Directors.
Board’s Role in Risk Oversight
Our Board of Directors believes that open communication between management and the Board of Directors is essential for effective risk management and oversight. OurIn addition to receiving daily Company performance reports, our Board of Directors meets with our Chief Executive Officer and other members of the senior management team at least quarterly at Board of DirectorDirectors meetings, where, among other topics, they discuss strategy and risks in the context of reports from the management team and evaluate the risks inherent in our business and significant transactions. While our Board of Directors is ultimately responsible for risk oversight, our Board committees assist the Board of Directors in fulfilling its oversight responsibilities in certain areas of risk. TheAmong other things, the audit committee assists our Board of Directors in fulfilling its oversight responsibilities with respect to risk management in the areas of internal control over financial reporting and disclosure controls and procedures. The compensation committee assists our Board of Directors in assessing risks created by the incentives inherent in ourwhether Trupanion’s executive compensation policies.programs and policies encourage undue or excessive risk-taking. The nominating and corporate governance Committeecommittee assists our Board of Directors in fulfilling its oversight responsibilities with respect to the management of risk associated with Board membership and corporate governance.
Director Independence
Our common stockCommon Stock is listed on the New York Stock Exchange, or the NYSE.NASDAQ Global Market. Under the rules of the NYSE,NASDAQ Stock Market, independent directors must comprise a majority of a listed company’s Boardboard of Directors.directors. In addition, the rules of the NYSENASDAQ Stock Market require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the rules of the NYSE,NASDAQ Stock Market, a director will only qualify as an “independent director” if, in the opinion of that company’s Boardboard of Directors,directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Audit committee members must also satisfy the heightened independence criteria set forth in Rule 10A-3 under the Securities Exchange Act.Act of 1934, as amended. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the Boardboard of Directorsdirectors or any other committee of our Board of Directorsboard committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries. We have determined that we satisfy theCompensation committee members are also subject to heightened independence standards similar to those applicable to audit committee independence requirements of Rule 10A-3.
members.
Our Board of Directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromisewould interfere with his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors determined that Ms. Davidson, Mr. Doak, Ms. Dodson, Mr. Levitan, Dr. Low, Messrs. Cohen, Doak, Levitan, LindsleyMs. McLaughlin, Mr. Rubin and Novotny and Ms. Ferracone,Dr. Satchu, representing seveneight of our nine directors, are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE.NASDAQ Stock Market. Our Board of Directors did not conclude that Mr. Rawlings was independent because he is our Chief Executive Officer. Mr. Rubin was an executive officer of ours nine years ago. He also formerly provided certain consulting services to us and our Board of Directors determined that these services no longer affect Mr. Rubin's independence. In making these determinations, our Board of Directors reviewed and discussed information provided by the directors and us with regard tothe Company regarding each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and theother transactions involving them describedthem.
Role of Lead Independent Director
Dr. Low, in his role as our Lead Independent Director, works to ensure that “all voices are heard” within the section entitled “Transactionsboardroom, proactively spends considerable time with Related Parties, Foundersour Chief Executive Officer and Control Persons.”President to understand our vision and strategy, and helps focus our Board of Directors on areas aligned with our vision and strategy. In addition to acting as the chairperson of the independent director sessions, the Lead Independent Director also assists our Board of Directors in assuring effective corporate governance.
In cases in which the Chairperson of our Board of Directors and Chief Executive Officer are the same person, the Chairperson of our Board of Directors, with the Lead Independent Director, may schedule and set the agenda for meetings of our Board of Directors, and the Chairperson of our Board of Directors or, if the Chairperson of our Board of Directors is not present, the Lead Independent Director, may chair such meetings. In addition, the Lead Independent Director may preside over executive sessions of independent directors, serve as a liaison between the Chairperson of our Board of Directors and the independent directors, coordinate information sent to our Board of Directors, approve meeting schedules to ensure sufficient time to cover all agenda items, consult with stockholders on an annual basis and perform such other functions and responsibilities as requested by our Board of Directors from time to time.
Committees of Our Board of Directors
Our Board of Directors has established an audit committee, a compensation committee and a nominating and corporate governance committee.committee, each of which has a charter. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignations or until otherwise determined by the Board of Directors. Copies of the charters for each committee are available without charge on the investor relations section of our website at www.trupanion.com.https://investors.trupanion.com/governance/Committee-Charters-Governance-Documents/default.aspx. As of April 10, 2023, the Company's committee composition is as follows:
Audit Committee. OurCommittee
In 2022, our audit committee iswas comprised of Messrs. Cohen,Ms. Davidson, Mr. Doak Lindsley and Novotny. Mr. Novotny isRubin, with Ms. Davidson serving as the chair of our audit committee. The composition of our audit committee meets the independence and other composition requirements for independence under the current NYSEapplicable NASDAQ Stock Market and SEC rules and regulations. Eacheach member of our audit committee is financially literate. In addition, our Board of Directors has determined that each member of our audit committee is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act of 1933, as amended. This designation does not impose on him any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our Board of Directors.Act. Our audit committee’s principal functions are to assist our Board of Directors in its oversight of:
•our accounting and financial reporting processes, including our financial statement audits and the integrity of our financial statements;
•our compliance with legal and regulatory requirements;
•the qualifications, independence and performance of our independent auditors; and
•the preparation of the audit committee report to be included in our annual meeting proxy statement.statements.
Compensation Committee. OurCommittee
In 2022, our compensation committee iswas comprised of Messrs. LevitanMs. Davidson, Dr. Low, Dr. Satchu, and Lindsley, Ms. Ferracone andMr. Rubin, with Dr. Low. Ms. Ferracone is theLow serving as chair of our compensation committee. Former director Eric Johnson also served on the compensation committee until his resignation from our Board of Directors on January 1, 2023. The composition of our compensation committee meets the requirements for independence under the current NYSEapplicable NASDAQ Stock Market and SEC rules and regulations. Each member of this committee is also an outside director, within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.rules. Our compensation committee’s principal functions are to assist our Board of Directors with respect to compensation matters, including:
•evaluating, recommending, approving and reviewing executive officer and director compensation arrangements, plans, policies and programs;
•administering our cash-based and equity-based compensation plans; and
•making recommendations to our Board of Directors regarding any other Board of Director responsibilities relating to executive compensation.compensation; and
•preparing the compensation committee report to be included in our annual meeting proxy statements.
Nominating and Corporate Governance Committee. OurCommittee
In 2022, our nominating and corporate governance committee iswas comprised of Messrs.Mr. Doak, and Levitan, Ms. FerraconeDr. Low, and Dr. Low. Dr. Low isSatchu, with Mr. Doak serving as the chair of our nominating and corporate governance committee. Former director Eric Johnson also served on the nominating and corporate governance committee until his resignation from our Board of Directors in January 2023. Each nominating and corporate governance committee member is independent under the applicable NASDAQ Stock Market rules and SEC rules. Our nominating and corporate governance committee’s principal functions include, among other things:
include:
•identifying, considering and recommending candidates for membership on our Board of Directors;
•developing and recommending our corporate governance guidelines and policies;
•overseeing the process of evaluating the performance of our Board of Directors; and
•advising our Board of Directors on other corporate governance matters.
Corporate Governance and Ethics Principles
A primary goal of our Board of Directors is to build long-term value for our stockholders. Our Board of Directors has adopted and follows corporate governance practices that it and our senior management believe are sound and, promote this purpose, and represent best practices, including the establishment of the following:
•Code of Conduct and Ethics that sets forth our ethical principles and applies to all of our directors, officers and employees, including our Chief Executive Officer and Chief Financial Officer;
•Corporate Governance Guidelines that set forth our corporate governance principles;
•Insider Trading Policy and Pledging Guidelines for Directors and Officers that prohibit insider trading, limit pledging activities and prohibit engaging in any form of hedging transactions (derivatives, equity swaps, and so forth) in the Company's stock; and
•charters for our audit, compensation and nominating and corporate governance committees.committees that require independent oversight of key functions.
The full text of eachour Code of these policies,Conduct and Ethics, Corporate Guidelines, and committee charters and guidelines is posted on theour investor relations section of our website at investors.trupanion.com.https://investors.trupanion.com/governance/Committee-Charters--Governance-Documents/default.aspx. We intend to disclose any future amendments or waivers to provisionsour Code of Conduct and Ethics that applies to our code of business conduct and ethicsexecutive officers on our website or in public filings. We also have a number of internal policies, procedures, and systems, including policies relating to insider trading, andpledging, related-party transactions, clawback of incentive compensation and a confidential, anonymous system for employees and others to report concerns about fraud, accounting matters, violations of our policies and other matters.
Information contained on, or that can be accessed through, our website is not incorporated by reference, and you should not consider information on our website to be part of, this proxy statement.
Compensation Committee Interlocks and Insider Participation
The current members of our compensation committee are Messrs. Levitanduring the last concluded fiscal year were Mr. Johnson, who resigned in January 2023, along with Ms. Davidson, Dr. Low, Dr. Satchu, and Lindsley, Ms. Ferracone and Dr. Low. NoMr. Rubin. With the exception of Mr. Rubin, no member of the compensation committee washas served as an officer or employee of ours or any of our subsidiaries duringand no member of our compensation committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K. Mr. Rubin currently serves as a director for American Pet Insurance Company, ZPIC Insurance Company, GPIC Insurance Company, and QPIC Insurance Company, each a wholly-owned subsidiary of the fiscal year ended December 31, 2015. In addition, noneCompany. None of our executive officers currently serves or has served on the Board of Directors or compensation committee of any entity whose executive officers included any of our directors.
Board and Committee Meetings, Attendance, and AttendanceExecutive Sessions
The Board of Directors and its committees meet regularly throughout the year and also hold special meetings and act by written consent from time to time. During 2015, 2022:
•the Board of Directors held five meetings including telephonic meetings, and acted by written consent five times;
•the audit committee held nine meetings, including telephonic meetings, five meetings;
•the compensation committee held thirteen meetings, including telephonicfour meetings and acted by written consent three times; and
•the nominating and corporate governance committee held six meetings, including telephonicfour meetings.
During 2015, none2022, with the exception of the directorsformer director Eric Johnson, no director attended fewer than 75% of the aggregate of the total number of meetings held by theour Board of Directors during his or her tenure andDirectors. Mr. Johnson attended three of the totalfive meetings held by our Board of Directors. No director attended fewer than 75% of the number of meetings held by all committees of theour Board of Directors on which such director served, in each case during his or her tenure. The independent members of the time the director served on our Board of Directors also meet separately without management directors at least once per year to discuss such matters as the independent directors consider appropriate.
Directors.
Typically, in conjunction with the regularly scheduled meetings of our Board of Directors, the board, the independent directors meet in executive sessions with our Chief Executive Officer outside the presence of management. The Chairmanother members of management and, separately, our non-employee directors meet outside the presence of the Chief Executive Officer. In 2022, our then-current Chairperson of our Board of Directors, Dr. Low, presidespresided over such executive sessions.
Board Attendance at Annual Stockholders’ Meeting
We invite and encourage each member of our Board of Directors to attend our annual meetings of stockholders. Westockholders though we do not have a formal policy regarding attendance of annual meetings by the members of our Board of Directors. We may consider in the future whether our companyCompany should adopt a more formal policy regarding director attendance at our annual meetings. All but oneSix of our eight then-current directors attended the 2015our 2022 Annual Meeting of Stockholders.
Role of Stockholder Engagement
Our Board of Directors believes it is important to regularly engage with our stockholders. In the past several years, we have proactively reached out to many of our largest stockholders to solicit their feedback on our executive compensation, corporate governance and disclosure practices in order to gain a better understanding of the practices they most value. In response to a common stockholder request, this year we are proposing that our stockholders approve the declassification of our Board of Directors. Our stockholder engagement team has consisted of certain independent directors and members of our investor relations and legal team. Stockholders have also regularly met with members of our senior management team to discuss our strategy and review our operational performance.
Communication with Directors
Stockholders and interested parties who wish to communicate with our Board of Directors, non-managementnon-employee members of our Board of Directors as a group, a committee of the Board of Directors or a specific member of our Board of Directors (including our Chairman)Chairperson and Lead Independent Director) may do so by letters addressed to the attention of our Corporate Secretary, Trupanion, Inc., 907 NW Ballard Way,6100 4th Avenue South, Suite 400, Seattle, WA 98107.
Washington 98108.
All communications are reviewed by theour Corporate Secretary and provided to the members of the Board of Directors unless such communications are unsolicited items, sales materials and/or other routine items, andor items unrelated to the duties and responsibilities of theour Board of Directors.
Considerations in Evaluating Director Nominees
TheOur nominating and corporate governance committee is responsible for identifying, evaluating and recommending candidatesnominees to theour Board of Directors for Board membership.Directors. A variety of methods are used to identify and evaluate director nominees, with the goal of maintaining and further developing a diverse, experienced and highly qualified Board.Board of Directors. Candidates may come to our attention through current members of our Board of Directors, professional search firms, stockholders or other persons.
TheOur nominating and corporate governance committee will recommend to the Board of Directors for selection all nominees to be proposed by the Board of Directors for election by the stockholders, including approval or recommendation of a slate of director nominees to be proposed by the Board of Directors for election at each annual meeting of stockholders, and will recommend all director nominees to be appointed by the Board of Directors to fill interim director vacancies.
Our Board of Directors encourages selection of directors who will contribute to theour Company’s overall corporate goals. The nominating and corporate governance committee may from time to time review and recommend to the Board of Directors the desired qualifications, expertise and characteristics of directors, including such factors as business experience, diversity and personal skillsprofessional experience in management, technology, finance, marketing, financial reporting and other areas that are expected to contribute to an effective Board of Directors. Exceptional candidates who do not meet all of these criteria may still be considered. In evaluating potential candidates for the Board of Directors, the nominating and corporate governance committee considers these factors in the light of the specific needs of the Board of Directors at that time.
In addition, under our Corporate Governance Guidelines, a director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board of Directors and committees on which such director sits and to review material distributed to the director. Thus, the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee is a member, as well as his or her other professional responsibilities, will be considered. Also underUnder our Corporate Governance Guidelines, there are no limits on the number of three-year terms that may be served by a director. However, in connection with evaluating recommendations for nomination for reelection, the nominating and corporate governance committee considers director tenure. We value diversity on a company-wide basis but have not adopted a specific policy regarding Boardboard diversity.
Stockholder Recommendations for Nominations to the Board of Directors
TheOur nominating and corporate governance committee will consider properly submitted stockholder recommendations for candidates for our Board of Directors who meet the minimum qualifications as described above. TheOur nominating and corporate governance committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. A stockholder of record can nominate a candidate for election to theour Board of Directors by complying with the procedures in Article I, Section 1.11 of our Bylaws. Any eligible stockholder who wishes to submit a nomination should review the requirements in theour Bylaws on nominations by stockholders. Any nomination should be sent in writing to our Corporate Secretary, Trupanion, Inc., 907 NW Ballard Way,6100 4th Avenue South, Suite 400, Seattle, WA 98107.Washington 98108. Submissions must include the full name of the proposed nominee, complete biographical information, a description of the proposed nominee’s qualifications as a director, other information specified in our Bylaws, and a representation that the nominating stockholder is a beneficial or record holder of our stock and has been a holder for at least one year. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. These candidates are evaluated at meetings of the nominating and corporate governance committee, and may be considered at any point during the year. If any materials are provided by a stockholder in connection with the recommendation of a director candidate, such materials are forwarded to the nominating and corporate governance committee.
All proposals of stockholders that are intended to be presented by such stockholder at an annual meeting of Stockholdersstockholders must be in writing and notice must be delivered to the Corporate Secretary at our principal executive offices not later than the close of business on the 75th day, nor earlier than the close of business on the 105th day, prior to the first anniversary of the preceding year’s annual meeting. Stockholders are also advised to review our Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations.
PROPOSAL NO. 1
ELECTION OF CLASS II DIRECTORS
Our Board of Directors is divided into three classes. Each class serves for three years, with the terms of office of the respective classes expiring in successive years. Directors and director nominees in Class II will stand for election at this meeting. The terms of office of directors in Class III and Class I do not expire until the annual meetings of stockholders to be held in 2017 and 2018, respectively. Our nominating and corporate governance committee nominated Messrs. Cohen, Doak, and Rawlings, all incumbent Class II directors, for election as Class II directors at the 2016 annual meeting. At the recommendation of our nominating and corporate governance committee, our Board of Directors proposes that each of the three Class II nominees be elected as a Class II director for a three-year term expiring at the 2019 Annual Meeting of Stockholders and until such director’s successor is duly elected and qualified or until such director’s earlier resignation or removal.
Each director will be elected by a plurality of the votes present in person or represented by proxy at the meeting and entitled to vote on the election of directors. This means that the three individuals nominated for election to the Board of Directors at the meeting receiving the highest number of “FOR” votes will be elected. You may either vote “FOR” one, two or all nominees or “WITHHOLD” your vote with respect to one, two or all nominees. Shares represented by proxies will be voted “FOR” the election of each of the three Class II nominees, unless the proxy is marked to withhold authority to so vote. You may not cumulate votes in the election of directors. If any nominee for any reason is unable to serve the proxies may be voted for such substitute nominee as the proxy holders, who are officers of our company, might determine. Each nominee has consented to being named in this proxy statement and to serve if elected. Proxies may not be voted for more than three directors.
Nominees to the Board of Directors
The nominees, and their ages, occupations and length of board service are provided in the table below. Additional biographical descriptions of each nominee are set forth in the text below the table. These descriptions include the primary individual experience, qualifications, qualities and skills of each of our nominees that led to the conclusion that each director should serve as a member of our Board of Directors at this time.
|
| | | | | | |
Name of Director/Nominee | | Age | | Principal Occupation | | Director Since |
Chad Cohen (1)
| | 41 | | Chief Financial Officer, Adaptive Biotechnologies Corporation | | December 2015 |
Michael Doak (1) (2)
| | 40 | | President, RenaissanceRe Ventures U.S. LLC; and
Senior Vice President, RenaissanceRe Ventures Ltd.
| | February 2014 |
Darryl Rawlings | | 46 | | President and Chief Executive Officer, Trupanion, Inc. | | January 2000 |
| |
(1)
| Member of the audit committee |
| |
(2)
| Member of the nominating and corporate governance committee |
Chad Cohen has served as a member of our Board of Directors since December 2015. Since August 2015, Mr. Cohen has served as the Chief Financial Officer of Adaptive Biotechnologies Corporation, an immunosequencing company. Prior to that, Mr. Cohen served as the Chief Financial Officer of Zillow Group, Inc., an online real estate marketplace company, from March 2011 to August 2015.Mr. Cohen also served as Vice President of Finance at Zillow from September 2010 to March 2011 and as the Controller at Zillow from June 2006 to September 2010. Mr. Cohen previously worked for Ticketmaster Entertainment, Ernst & Young and Novellus Systems. Mr. Cohen has served on the Board of Directors of several private companies, including his current company. Mr. Cohen holds a B.S. from Boston University and is a Certified Public Accountant in the State of California (inactive). Mr. Cohen was chosen to serve on our Board of Directors based on his deep financial knowledge and significant public company CFO experience.
Michael Doak has served as a member of our Board of Directors since February 2014. Mr. Doak has served in various leadership roles at entities affiliated with RenaissanceRe Holdings Ltd., a global provider of reinsurance and insurance services, since June 2010, most recently as President of RenaissanceRe Ventures U.S. LLC and Senior Vice President of RenaissanceRe Ventures Ltd and formerly, as a Director of DaVinci Reinsurance Ltd. Prior to that, he served as an investment banker in the Financial Institutions Group at Morgan Stanley & Co. LLC, an investment bank, from September 2005 to May 2010. Mr. Doak holds a J.D. from the University of Pennsylvania Law School and a B.A. from the University of Virginia. Mr. Doak was chosen to serve on our Board of Directors based on his experience advising insurance and high-growth companies and his financial and investment expertise.
Darryl Rawlings is our founder and has served as our Chief Executive Officer and President and as a member of our Board of Directors since January 2000. Previously, Mr. Rawlings was a founder of the Canadian Cigar Company. Mr. Rawlings holds a Diploma of Marketing Management from the British Columbia Institute of Technology. Mr. Rawlings was chosen to serve on our Board of Directors based on his experience founding high-growth companies and his experience and familiarity with our business as its Chief Executive Officer since inception.
Continuing Directors
The directors who are serving for terms that end following the meeting, and their ages, occupations and length of board service are provided in the table below. Additional biographical descriptions of each such director are set forth in the text below the table. These descriptions include the primary individual experience, qualifications, qualities and skills of each of our nominees that led to the conclusion that each director should serve as a member of our Board of Directors at this time.
|
| | | | | | |
Name of Director | | Age | | Principal Occupation | | Director Since |
Class I Directors: | | | | | | |
Robin Ferracone (1) (2)
| | 62 | | Founder and Chief Executive Officer, Farient Advisors LLC | | December 2014 |
H. Hays Lindsley (1) (3)
| | 57 | | Member of Investment Team, Petrus Asset Management Company | | February 2013 |
Glenn Novotny (3)
| | 69 | | Founder and Owner, Glennhawk Vineyards and Emerald Pet Products | | February 2013 |
Class III Directors: | | | | | | |
Dan Levitan (1) (2)
| | 58 | | Managing Member, Maveron LLC | | April 2007 |
Murray Low (1) (2)
| | 63 | | Professor, Columbia Business School | | April 2006 |
Howard Rubin | | 63 | | Consultant, Trupanion, Inc. | | March 2010 |
Proposal No. 4: Ratification of Independent Registered Public Accounting Firm
| |
(1)
| Member of the compensation committee |
| |
(2)
| Member of the nominating and corporate governance committee |
| |
(3)
| Member of the audit committee |
Robin Ferracone has served as a member of our Board of Directors since December 2014. Since April 2007, Ms. Ferracone has served as the Chief Executive Officer of Farient Advisors, a performance advisory and strategic compensation firm. Previously, she was at Marsh & McLennan Companies, Inc., a global professional services firm in the areas of risk, strategy and human capital. Ms. Ferracone is also on the Board of Directors of a private company and is the trustee of several mutual funds. Ms. Ferracone holds an M.B.A. from Harvard Business School and a B.A. from Duke University. Ms. Ferracone was chosen to serve on our Board of Directors due to her extensive expertise in corporate governance and executive compensation strategy.
H. Hays Lindsley has served as a member of our Board of Directors since February 2013. Mr. Lindsley currently oversees private investments at Petrus Asset Management Company, an investment firm, where he has served in various roles relating to private investments since 1994. Mr. Lindsley has also served as Chairman and Chief Executive Officer of Higginbotham Bartlett of New Mexico, a lumber company, since September 2009. Previously, Mr. Lindsley served in various roles at Hillwood Development Company, LLC, a real estate development company, and was a tax lawyer at Jenkens & Gilchrist, LLP. Mr. Lindsley holds a J.D. and an M.B.A. from the University of Texas at Austin and a B.S. from Vanderbilt University. Mr. Lindsley was chosen to serve on our Board of Directors based on his extensive experience in business investments, finance and operations.
Glenn Novotny has served as a member of our Board of Directors since February 2013. Mr. Novotny is the founder and owner of Glennhawk Vineyards, a vineyard and winery, and Emerald Pet Products, an online wholesale distributer of treats for pets. Mr. Novotny also serves as the Managing Director of Glennmont, LLC and GMMR, LLC, both of which are real estate development organizations. Mr. Novotny was formerly the Operating Partner at Telegraph Hill Partners, a private equity firm investing in life science and healthcare companies, from 2008 to 2015. Prior to that, Mr. Novotny held key management positions, including, Chief Executive Officer and board member of Central Garden & Pet Company, a lawn and garden and pet supplies company, from 1990 to 2007. Mr. Novotny served in a number of operating, strategic planning, sales and executive management roles with Weyerhaeuser Company from 1970 to 1990. Mr. Novotny also serves on the Board of Directors of several private companies. Mr. Novotny completed the Executive Management Program at the Harvard Business School Program and holds a B.A. from Chadron State College. Mr. Novotny was chosen to serve on our Board of Directors based upon his significant experience in operations of high-growth companies, his knowledge of and experience in the pet industry, and his extensive experience serving on various boards of directors.
Dan Levitan has served as a member of our Board of Directors since April 2007. In 1998, Mr. Levitan co-founded Maveron LLC, a venture capital firm that invests in consumer companies. From 1983 to 1997, Mr. Levitan was employed by Wertheim Schroder & Co., an investment banking firm acquired by Salomon Smith Barney Inc. in 2000, most recently serving as a managing director. Mr. Levitan also currently serves on the boards of directors of Potbelly Corp., a national quick-service restaurant chain, and numerous private companies and non-profit organizations. In addition, Mr. Levitan is also on the advisory board of the Arthur Rock Center for Entrepreneurship at Harvard Business School and the board of trustees of Seattle Children’s Hospital Foundation. Mr. Levitan holds an M.B.A. from Harvard Business School and a B.A. from Duke University. Mr. Levitan was chosen to serve on our Board of Directors due to his extensive experience with a wide range of consumer companies and the venture capital industry and his operational and financial expertise.
Murray Low is currently the Chairman of our Board of Directors and has served as a member of our Board of Directors since April 2006. In addition, Dr. Low served as our Secretary and Treasurer from April 2006 to June 2006. Dr. Low has been a professor at Columbia Business School since 1990 and was the Founding Director of the Eugene M. Lang Center for Entrepreneurship at Columbia Business School from July 2000 to September 2013. Since July 2015, Dr. Low has been the Professor of Executive Education at Columbia Business School. From September 2013 to July 2015, Dr. Low was the Director of Entrepreneurship Education at Columbia Business School. Since 1997, Dr. Low has also served as President of Low & Associates. Dr. Low holds a Ph.D. from the University of Pennsylvania, and an M.B.A. and a B.A. from Simon Fraser University. Dr. Low was chosen to serve on our Board of Directors due to his expertise in the areas of entrepreneurship and strategic management and his deep knowledge of our business.
Howard Rubin has served as a member of our Board of Directors since March 2010. Mr. Rubin currently serves on the Dean’s Advisory Board for the College of Veterinary Medicine at Western University of Health Sciences, the Chief Executive Officer Advisory Committee of the Western Veterinary Conference and the American Veterinary Medical Association Insurance Trust Governance Task Force. Mr. Rubin previously served as our Chief Operating Officer from March 2010 to May 2014, and as our Secretary from July 2012 to August 2013. Mr. Rubin founded and served as Chief Executive Officer at BrightHeart Veterinary Centers, a company operating specialty and emergency veterinary hospitals, from November 2007 to October 2009 and as the Chief Executive Officer of the National Commission on Veterinary Economic Issues, a non-profit association supporting the animal health and veterinary industry, from January 2001 to October 2007. Previously, he served as the Chief Executive Officer of Cardiopet, Inc. and as a Divisional Vice President of IDEXX Laboratories, Inc. Mr. Rubin also founded the Veterinary Referral Centre, a comprehensive, multi-specialty veterinary hospital. Mr. Rubin holds an M.B.A. from Washington University in St. Louis’ Olin Business School and a B.A. from Ohio Wesleyan University. Mr. Rubin was chosen to serve on our Board of Directors based on his extensive experience in the veterinary care and animal health industries.
There are no familial relationships among our directors and officers.
Non-Employee Director Compensation
The following table presents the total compensation for each person who served as a non-employee member of our Board of Directors in the year ended December 31, 2015. Other than as set forth in the table, in the year ended December 31, 2015, we did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our Board of Directors, with the exception of reimbursement of expenses related to attendance at quarterly Board meetings. Mr. Rawlings, our Chief Executive Officer, received no compensation for his service as a director in the year ended December 31, 2015. The compensation provided to Mr. Rawlings is discussed in the section entitled “Executive Compensation.”
|
| | | | | | | | | | | | | | |
Name (1) | Option Awards ($)(2) | | | All Other Compensation ($) | | | Total |
Dr. Peter R. Beaumont (3) | $ | 50,000 |
| | | $ | 108,000 |
| | | $ | 158,000 |
| |
| Robin Ferracone | $ | 80,000 (4) |
| | | $ | — |
| | | $ | 80,000 |
| |
| Howard Rubin | $ | — |
| | | $ | 304,500 (5) |
| | | $ | 304,500 |
| |
| |
(1)
| Chad Cohen, Michael Doak, Dan Levitan, H. Hays Lindsley, Murray Low and Glenn Novotny also served as non-employee members of our Board of Directors in 2015. None of these directors were paid any compensation during 2015, nor did they hold any outstanding options to purchase shares of our common stock as of December 31, 2015, except for Dr. Low, who held options to purchase 8,750 shares of common stock at an exercise price of $4.05 per share, and Mr. Novotny, who held options to purchase 50,000 shares of common stock at an exercise price of $1.04 per share. |
| |
(2)
| The amounts reported in this column represent the aggregate grant date fair value of the stock options granted to our directors during the year ended December 31, 2015, as computed in accordance with Accounting Standards Codification Topic 718. The assumptions used in calculating the aggregate grant date fair value of the stock options reported in this column are set forth in Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. The amounts reported in this column reflect the accounting cost for these stock options, and do not correspond to the actual economic value that may be received by our directors from the stock options. |
| |
(3)
| Dr. Beaumont resigned as a director in December 2015. Amounts represent compensation paid to Dr. Beaumont for consulting services, which compensation consisted of $108,000 in cash and stock options to purchase 15,441 shares of common stock at an exercise price of $7.44 per share. As of December 31, 2015, Dr. Beaumont held outstanding options to purchase 56,303 shares of common stock at an exercise price of $1.04 per share and 15,441 shares of common stock at an exercise price of $7.44 per share. |
| |
(4)
| In February 2015, in connection with her December 2014 appointment to the Board of Directors, Ms. Ferracone was granted an option to purchase 23,360 shares of common stock at an exercise of $7.73 per share. All of such stock options remained outstanding as of December 31, 2015. |
| |
(5)
| Amount represents compensation paid to Mr. Rubin for certain services unrelated to his service as a director, including attending animal health industry events on our behalf. |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF EACH OF THE THREE NOMINATED CLASS II DIRECTORS.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has selected Ernst & Young LLP as our principal independent registered public accounting firm to perform the audit of our consolidated financial statements for the fiscal year ending December 31, 2016.2023. Ernst & Young LLP audited our financial statements for the fiscal yearsyear ended December 31, 20152022 and 2014.has been our independent registered public accounting firm since 2012. We expect that representatives of Ernst & Young LLP will be present atjoin the annual meeting,Annual Meeting in-person or via webcast, will be able to make a statement if they so desire, and will be available to respond to appropriate questions.
At the Annual Meeting, the stockholders are being asked to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2023. Our audit committee is submitting the selection of Ernst & Young LLP to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. If this proposal does not receive the affirmative approval of a majority of the votes cast on the proposal, the audit committee would reconsider the appointment. Notwithstanding its selection and even if our stockholders ratify the selection, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the audit committee believes that such a change would be in our best interests and the intereststhose of our stockholders.
| | |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 4 |
The following table presents fees for professional audit services for the fiscal years ended December 31, 2015 and 2014, by Ernst & Young LLP.
Principal Accountant Fees and Services
The following table presents fees for professional services for the fiscal years ended December 31, 2022 and 2021, for Ernst & Young LLP. |
| | | | | | | | | |
| | | Fiscal Year 2015 | | | Fiscal Year 2014 |
Audit fees (1) | $ | 431,500 |
| | | $ | 1,373,000 |
| |
Audit related fees (2) | | — |
| | | | — |
| |
Tax fees (3) | | 25,500 |
| | | | — |
| |
All other fees (4) | | 1,995 |
| | | | 2,000 |
| |
| Total fees | $ | 458,995 |
| | | $ | 1,375,000 |
| |
| | | | | | | | |
| Fiscal Year 2022 | Fiscal Year 2021 |
| Audit fees (1) | $ | 1,193,320 | | $ | 905,000 | |
| All other fees (2) | $ | 5,200 | | $ | 2,710 | |
| Total fees | $ | 1,198,520 | | $ | 907,710 | |
| |
(1)
| Audit fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements, the review of our quarterly consolidated financial statements, and audit services that are normally provided by independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits. The audit fees also include fees for professional services provided in connection with our initial public offering, incurred during the fiscal year ended December 31, 2014, including comfort letters, consents and review of documents filed with the SEC. |
| |
(2)
| Audit-related feesinclude fees billed for assurance and related services reasonably related to the performance of the audit.
|
| |
(3)
| Tax feesinclude fees for tax compliance and advice.
|
| |
(4)
| All other fees consist of fees for access to online accounting and tax research software. |
(1)Audit fees consist of fees for professional services provided in connection with the audits of our annual consolidated financial statements and our internal control over financial reporting, the reviews of our quarterly consolidated financial statements, and audit services that are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits.
(2)All other fees consist of fees for access to online accounting and tax research software and examination fees for the Department of Insurance for one of our subsidiaries.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our audit committee generally pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. Our audit committee may also pre-approve particular services on a case-by-case basis. All of the services relating to the fees described in the table above were pre-approved by our audit committee.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 2
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 TO 100,000,000
The Board of Directors has unanimously approved, subject to stockholder approval, a proposal to amend our Restated Certificate of Incorporation to reduce the number of our authorized shares of common stock from 200,000,000 to 100,000,000. No other changes will be made to the other provisions of our Restated Certificate of Incorporation.
Current Structure
As of April 1, 2016, we had 200,000,000 authorized shares of common stock, of which 28,577,926 shares were issued and outstanding, and 10,000,000 authorized shares of preferred stock, of which no shares were issued and outstanding. Of the remaining 171,422,074 authorized shares of common stock, 620,979 shares are held as treasury shares, 8,926,325 shares are either subject to outstanding awards or reserved for future issuance under our 2014 Equity Incentive Plan, 869,999 shares are subject to outstanding warrants to purchase shares of common stock and 2,574,690 shares are reserved for issuance under our 2014 Employee Stock Purchase Plan, resulting in an aggregate of 159,051,060 shares of our authorized common stock remaining available for future issuance.
PurposeReport of the Amendment and RestatementAudit Committee
Our Board’s primary reason for approving an amendment to our Restated Certificate of Incorporation and reduce our authorized capital stock is to reduce the amount of our annual franchise tax in the State of Delaware, while still maintaining a sufficient number of authorized shares to permit us to act promptly with respect to future financings, acquisitions, additional issuances and for other corporate purposes. Each year, we are required to make franchise tax payments to the State of Delaware in an amount determined, in part, by the total number of shares of stock we are authorized to issue. Therefore, the amount of this tax will be decreased if we reduce the number of authorized shares of our common stock (unless before and after such reduction, we are subject to the maximum tax amount). While the exact amount of such cost savings will depend on a number of factors, and could change year to year, we estimate the amount of tax savings to be approximately $85,000 in 2017 based on the current Delaware law.
Effects of the Amendment and Restatement
If the proposed amendment to our Restated Certificate of Incorporation is approved, the number of our authorized shares of common stock will be reduced from 200,000,000 to 100,000,000. The number of our authorized shares of preferred stock will remain unchanged, with an authorized amount of 10,000,000 shares of preferred stock. The amendment will not change the par value of the shares of our common stock, affect the number of shares of our common stock that are outstanding, or affect the legal rights or privileges of holders of existing shares of common stock. The reduction will not have any effect on any outstanding equity incentive awards to purchase our common stock.
The proposed decrease in the number of authorized shares of common stock could have adverse effects on us. Our Board will have less flexibility to issue shares of common stock without stockholder approval, including in connection with a potential merger or acquisition, stock dividend or follow on offering. In the event that our Board determines that it would be in our best interest to issue a number of shares of common stock or preferred stock in excess of the number of then-authorized but unissued and unreserved shares, we would be required to seek the approval of our stockholders to increase the number of shares of authorized common stock, as applicable, which may increase our expenses. If we are not able to obtain the approval of our stockholders for such an increase in a timely fashion, we may be unable to take advantage of opportunities that might otherwise be advantageous to us and our stockholders. However, our Board has determined that these potential risks are outweighed by the anticipated benefits of reducing our Delaware franchise tax obligations.
This description of the effects of the proposed amendment to our Restated Certificate of Incorporation is a summary and is qualified by the full text of the proposed Certificate of Amendment to our Restated Certificate of Incorporation, which is attached to this Proxy Statement as Appendix A, with additions indicated by underlined text and deletions indicated by strikethrough text.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 3
REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of the audit committee is not considered to be “soliciting material,”material”, “filed” or incorporated by reference in any past or future filing by us under the Securities Exchange Act of 1934 or the Securities Act of 1933 unless and only to the extent that we specifically incorporate it by reference.
The audit committee of the Board of Directors of Trupanion, Inc. (the "Company") has reviewed and discussed with ourthe Company's management and Ernst & Young LLP ourthe Company's audited consolidated financial statements as of and for the year ended December 31, 2015.2022. The audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, Communications with Audit Committees.
and the Securities and Exchange Commission.
The audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB Rule No. 3526 regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with Ernst & Young LLP its independence.
Based on the review and discussions referred to above, the audit committee recommended to ourthe Board of Directors that the audited consolidated financial statements as of and for the year ended December 31, 2015 be included in ourthe Company's annual report on Form 10-K for the year ended December 31, 20152022 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
Glenn Novotny, Chair
Chad Cohen
Michael Doak
H. Hays Lindsley
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 1, 2016, by:
each stockholder known by us to be the beneficial owner of more than 5% of our common stock;
each of our directors or director nominees;
each of our named executive officers; and
all of our directors and executive officers as a group.
Percentage ownership of our common stock is based on 28,577,926 shares of our common stock outstanding on April 1, 2016. We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed all shares of common stock subject to options, restricted stock units (RSUs) or other convertible securities held by that person or entity that are currently exercisable or releasable or that will become exercisable or releasable within 60 days of April 1, 2016 to be outstanding and to be beneficially owned by the person or entity holding the option for the purpose of computing the percentage ownership of that person or entity but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person or entity.
Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Trupanion, Inc., 907 NW Ballard Way, Seattle, Washington 98107.
|
| | | | | |
| Name of Beneficial Owner | | Number of Shares
Beneficially Owned | | Percentage |
| | | | | |
| 5% or greater stockholders: | | | | |
Entities affiliated with Maveron (1) | | 6,553,586 |
| | 22.9% |
Entities affiliated with Highland Consumer Fund (2) | | 3,096,427 |
| | 10.8% |
RenaissanceRe Ventures Ltd. (3) | | 2,755,000 |
| | 9.6% |
Capital World Investors (4) | | 2,257,500 |
| | 7.9% |
Wasatch Advisors, Inc. (5) | | 1,941,984 |
| | 6.8% |
| Directors and Named Executive Officers: | | | | |
Darryl Rawlings (6) | | 2,448,366 |
| | 8.3% |
Michael Banks (7) | | 274,923 |
| | * |
Timothy Graff (8) | | 76,801 |
| | * |
Chad Cohen (9) | | 5,120 |
| | * |
Michael Doak (10) | | 5,120 |
| | * |
Robin Ferracone (11) | | 57,269 |
| | * |
Dan Levitan (1) (12) | | 6,558,706 |
| | 23.0% |
H. Hays Lindsley (13) | | 71,790 |
| | * |
Murray Low (14) | | 260,683 |
| | * |
Glenn Novotny (15) | | 128,976 |
| | * |
Howard Rubin (16) | | 790,639 |
| | 2.7% |
| | | | | |
All officers and directors as a group (13 persons) (17) | | 10,790,758 |
| | 37.4% |
* Represents beneficial ownership of less than 1% of our outstanding shares of common stock.
| | |
(1)
| Based solely on the Schedule 13G filed by Maveron Equity Partners III, L.P. (Maveron Equity) on February 12, 2016. Consists of (i) 5,556,046 shares held by Maveron Equity, (ii) 235,731 shares held by Maveron III Entrepreneurs’ Fund, L.P. (Maveron Entrepreneurs) and (iii) 761,809 shares held by MEP Associates III, L.P. (together with Maveron Equity and Maveron Entrepreneurs, the Maveron Entities). Maveron General Partner III LLC (Maveron LLC) is the general partner of each of the Maveron Entities. Dan Levitan, a member of our Board of Directors, Clayton Lewis, Peter McCormick and Jason Stoffer are the managing members of Maveron LLC and, as such, share voting and dispositive power over the shares heldSubmitted by the Maveron Entities. The principal business address of each of the Maveron Entities is 411 First Avenue South, Suite 600, Seattle, Washington 98104. |
| Audit Committee |
(2)
| Based on the Schedule 13G filed by Highland Consumer GP GP LLC (HC LLC) on February 16, 2016. Consists of (i) 2,438,064 shares and 48,176 shares underlying warrants to purchase common stock that are exercisable within 60 days of April 1, 2016 are held by Highland Consumer Fund I Limited Partnership (Highland Consumer I), (ii) 520,175 shares and 10,278 shares underlying warrants to purchase common stock that are exercisable within 60 days of April 1, 2016 are held by Highland Consumer Fund 1-B Limited Partnership (Highland Consumer 1B) and (iii) 78,189 shares and 1,545 shares underlying warrants to purchase common stock that are exercisable within 60 days of April 1, 2016 are held by Highland Consumer Entrepreneurs’ Fund I, Limited Partnership (together with Highland Consumer I and Highland Consumer 1B, the Highland Entities). Highland Consumer GP Limited Partnership (HC LP) is the general partner of each of the Highland Entities. HC LLC is the general partner of HC LP.Peter Cornetta, Daniel Nova and Thomas Stemberg are the managers of HC LLC. Each of HC LP and HC LLC, as the general partner of the general partner of the Highland Entities, respectively, is deemed to have beneficial ownership of the shares held by the Highland Entities. Voting and investment decisions of HC LLC are made by the managers of HC LLC. The principal business address for the Highland Consumer Entities is One Broadway, 16th Floor, Cambridge, Massachusetts 02142.
|
| Jacqueline Davidson, Chair |
(3)
| Based solely on the Schedule 13G filed by RenaissanceRe Ventures Ltd. (Ventures) on February 5, 2016. Consists of 2,755,000 shares. Ventures is a wholly owned subsidiary of Renaissance Other Investments Holdings II Ltd. (Holdings), which in turn is a wholly owned subsidiary of RenaissanceRe Holdings Ltd. (RenaissanceRe). By virtue of these relationships, RenaissanceRe and Holdings may be deemed to have voting and dispositive power over the shares held by Ventures. The principal business address of RenaissanceRe is Renaissance House, 12 Crow Lane, Pembroke HM19, Bermuda. |
| Michael Doak |
(4)
| Based solely on the Schedule 13G filed by Capital World Investors on February 16, 2016. Consists of 2,257,500 shares over which Capital World Investors has sole voting and dispositive power. Capital World Investors is a division of Capital Research and Management Company. The principal business address of Capital World Investors is 333 South Hope Street, Los Angeles, California 90071.Howard Rubin |
| |
(5)
| Based solely on the Schedule 13G filed by Wasatch Advisors, Inc. on February 16, 2016. Consists of 1,941,984 shares over which Wasatch Advisors, Inc. has sole voting and dispositive power. The principal business address of Wasatch Advisors, Inc. is 505 Wakara Way, Salt Lake City, Utah 84108. |
| |
(6)
| Consists of (i) 1,594,095 shares held by Mr. Rawlings, of which 467,508 are shares of unvested restricted stock subject to
Executive Officers
The following sets forth information regarding our right of repurchase and (ii) 854,271 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016. Mr. Rawlings holdings exclude 120,481 shares held by Rawlings GST Trust dated March 1, 2012, of which Murray Low, a member of our Board of Directors, is the trustee and the Rawlings GST Exempt Trust FBO and Rawlings GST Non-Exempt Trust FBO are the beneficiaries, of which Mr. Rawlings’ children are beneficiaries. |
| |
(7)
| Consists of (i) 6,175 shares held by Mr. Banks and (ii) 268,748 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016. |
| |
(8)
| Consists of (i) 33,053 shares held by Mr. Graff and (ii) 43,748 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016. |
| |
(9)
| Consists of 5,120 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Cohen. |
| |
(10)
| Consists of 5,120 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Doak. |
| |
(11)
| Consists of (i) 28,106 shares held by Robin A. Ferracone TTEE of the Robin A. Ferracone Living Trust dtd 6/3/2002 and (ii) 29,163 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Ms. Ferracone. |
| |
(12)
| Consists of 5,120 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Levitan. |
| |
(13)
| Consists of (i) 66,670 shares held by Lindsley Partners, L.P. (Lindsley Partners) and (ii) 5,120 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Lindsley. The HHL09 Trust is the sole member of Zoida LLC, which is the general partner of Lindsley Partners. H. Hays Lindsley, a member of our Board of Directors, is the sole trustee of the HHL09 Trust and, as such, holds sole voting and investment power over the shares. |
| |
(14)
| Consists of (i) 178,630 shares and 14,553 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Low and (ii) 67,500 shares held by Murray R. Low ROTH IRA #90GK49015. |
| |
(15)
| Consists of (i) 5,000 shares and 56,144 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Novotny, (ii) 3,004 shares held by Glenn and Linda Novotny 1996 Living Trust, of which Mr. and Mrs. Novotny are beneficiaries and (iii) 64,828 shares held by Linda K. Novotny Irrevocable Trust dated December 27, 2012, of which Scott Kerr is trustee and Christina Kerr, Teresa Novotny-Micheal, Angela Ovalle and Glenn Novotny are beneficiaries. |
| |
(16)
| Consists of 790,639 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by Mr. Rubin. |
| |
(17)
| Consists of (i) 8,601,347 shares held by our directors and executive officers as a group and (ii) 2,189,411 shares underlying options to purchase common stock that are exercisable within 60 days of April 1, 2016 held by our directors and executive officers as a group. |
EXECUTIVE OFFICERS
Our executive officers, andincluding their respective ages and positions as of April 21, 2016, are as follows:
|
| | | | |
NAME | | AGE | | POSITION |
Executive Officers |
Darryl Rawlings | | 47 | | Chief Executive Officer, President and Director |
Michael Banks | | 56 | | Chief Financial Officer |
Tim Graff | | 54 | | President of American Pet Insurance Company |
Ian Moffat | | 40 | | Chief Operating Officer |
Margaret Tooth | | 37 | | Chief Marketing Officer |
Darrylthe record date. Biographical information pertaining to Mr. Rawlings, who is our founderboth an executive officer and has served as our Chief Executive Officer and President and as a memberdirector of ourthe Company, can be found in the Section titled "Our Board of Directors since January 2000. Previously, Mr. Rawlings was a founder of the Canadian Cigar Company. Mr. Rawlings holds a Diploma of Marketing Management from the British Columbia Institute of Technology. Mr. Rawlings was chosen to serve on our Board of Directors based on his experience founding high-growth companies and his experience and familiarity with our business as its Chief Executive Officer since inception.
Michael Banks has served as our Chief Financial Officer since June 2012. Previously, Mr. Banks served as the Chief Financial Officer at Penn Millers Holding Corporation, a provider of property casualty insurance, from August 2002 to May 2012. Prior to that, Mr. Banks served as the Vice President, Treasurer and Comptroller at Atlantic Mutual Insurance Company, Inc. and as the Vice President and Assistant Controller at AMBAC Indemnity Corporation. Mr. Banks holds a B.S. from the University of Delaware.
Tim Graff has served as the President of American Pet Insurance Company (APIC), our insurance company subsidiary, since October 2012. Previously, Mr. Graff served as Senior Vice President at QBE North America, a division of the QBE Insurance Group Ltd., an insurance company, from March 2011 to May 2012. Prior to that, Mr. Graff served in various leadership roles, including most recently as Senior Vice President, at U.S. subsidiaries of RenaissanceRe Holdings Ltd., a global catastrophe reinsurer, from December 2003 to March 2011.
Ian Moffat has served as our Chief Operating Officer since November 2015. Prior his current appointment, Mr. Moffat served as our Senior Vice President and Vice President of Operations, from October 2012 to November 2015. Previously, Mr. Moffat served as the Head of Operations and in various other roles at Allianz Insurance plc, from June 1997 to August 2012.
Margaret Tooth has served as our Chief Marketing Officer since November 2015. Prior to her current appointment, Ms. Tooth served as Head of Marketing, from June 2014 to November 2015, and as our Vice President of Digital Marketing, from October 2013 to June 2014. Previously, Ms. Tooth held various positions at Allianz Insurance plc, including Acting Head of Marketing, in 2011, and as the E-commerce and Brand Manager, from 2009 to 2013. Prior to that, Ms. Tooth has also held senior marketing roles within business to business and direct to consumer brand functions in the United Kingdom.
- Our executive officers are appointed by, and serve at the discretion of, our Board of Directors.Director Nominees." There are no family relationships among any of our directors or executive officers.
| | | | | | | | |
| Name | Age | Title |
| Darryl Rawlings | 53 | Chief Executive Officer, Director, and Chairperson of the Board of Directors |
| Andrew "Drew" Wolff | 52 | Chief Financial Officer |
| Margaret "Margi" Tooth | 44 | President |
| Brenna McGibney | 54 | Chief Administrative Officer |
| Emily Dreyer | 35 | Senior Vice President, Channels |
| Dr. Steve Weinrauch | 48 | Executive Vice President, North America and Veterinary Strategy |
| Simon Wheeler | 62 | Executive Vice President, Trupanion International |
| John Gallagher | 36 | Executive Vice President, Global Support Services |
| Melissa "MJ" Hewitt | 41 | General Manager |
| Kalpesh Raval | 47 | General Manager |
| Jason Wasdin | 47 | General Manager |
| Travis Worra | 30 | General Manager |
EXECUTIVE COMPENSATION
Our Executive Officers
Proposal No. 5: Advisory and Non-Binding Vote to Approve the Compensation Provided to the Company’s Named Executive Officersfor 2022
Say-On-Pay
We are asking our stockholders to vote, on an advisory, non-binding basis, to approve a resolution on the compensation of the Company’s named executive officers, as reported in this proxy statement pursuant to Item 402 of Regulation S-K (commonly referred to as a "say-on-pay" vote). As described in the “Compensation Discussion and Analysis” section of this proxy statement, our compensation philosophy drives our compensation programs, which are designed to align the interests of our executive officers with those of our stockholders, our corporate objectives, our desired behaviors and company culture, as well as to attract, motivate, and retain key employees who are critical to the success of our Company. Under these programs, our executive officers, including our named executive officers, are motivated to achieve specific strategic objectives that are expected to increase stockholder value. Please read the “Compensation Discussion and Analysis” section of this proxy statement and the “Executive Compensation Tables” and narrative discussion for additional details about our compensation programs, including information about the 2022 compensation for our named executive officers.
| | |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 5 |
Say-On-Pay Resolution
At the Annual Meeting, stockholders are being asked to approve the compensation of our named executive officers as described in this proxy statement by voting in favor of the resolution set forth below. This vote is not needed to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the SEC's executive compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED."
Even though this say-on-pay vote is advisory, and therefore will not be binding on us, we value the opinions of our stockholders. Accordingly, to the extent there is a significant vote against the compensation for our named executive officers, we will consider our stockholders’ concerns and the compensation committee will evaluate what actions may be necessary or appropriate to address those concerns. Stockholders who vote against the resolution are encouraged to contact the Board of Directors to explain their concerns in writing to:
Trupanion, Inc.
6100 4th Avenue South, Suite 400
Seattle, Washington 98108
Attn: Corporate Secretary
Unless the Board of Directors modifies its policy regarding the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will be held at the 2024 Annual Meeting of Stockholders.
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) explains our executive compensation philosophy and programs, the decisions our compensation committee made under those programs, and their rationale in making those decisions. While this CD&A focuses on the compensation of our named executive officers, it also discusses our compensation philosophy and programs more broadly in the organization. This broader discussion provides a lens into our values and culture and how we believe they are in the long-term best interests of our stockholders.
Part 1. Organization of this CD&A
1.1 CD&A Sections
We have organized this CD&A into the following six sections:
| | | | | |
| Key Sections | Core Topics |
| Part 1. Organization of this CD&A | 1.1 CD&A Sections |
| Part 2. Executive Summary | 2.1 Named Executive Officers 2.2 Business Overview and Performance 2.3 Compensation Highlights - Compensation Philosophy - Consideration of "Say-on-Pay" Vote - Compensation Programs - Compensation Mix - Alignment with Stockholders |
| Part 3. Our Culture | 3.1 Who We Are |
| Part 4. Governance of Executive Compensation | 4.1 Role of the Compensation Committee
4.2 Role of Management
4.3 Role of Consultant
4.4 Peer Group
|
| Part 5. Components of Executive Compensation | 5.1 Key Elements of Compensation 5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for 2022 Performance Year ‐ Base Salary ‐ Short-Term Incentive Awards ‐ Long-Term Incentive Awards ◦ Equity Allocations in 2023 for the 2022 Performance Year ◦ 2021 Long-Term Incentive Awards Reflected in 2022 Summary Compensation Table - Other Compensation and General Benefits
|
| Part 6. Other Compensation Policies and Practices | 6.1 Employment Agreements
6.2 Severance and Change-in-Control Protection
6.3 Share Ownership
6.4 Risk Assessment
6.5 Clawbacks
6.6 Pledging & Hedging
6.7 Discussion on Key Performance Metrics |
Part 2. Executive Summary
2.1 Named Executive Officers
For 2022, our named executive officers were:
| | | | | |
| Name | Title (1) |
| Darryl Rawlings | Chief Executive Officer, Chairperson of the Board and Director |
| Drew Wolff | Chief Financial Officer (2) |
| Margi Tooth | President (3) |
| Tricia Plouf | Former Executive Vice President of Pricing (4) |
| Emily Dreyer | Senior Vice President of Channel Growth |
(1)Reflects current titles as of April 10, 2023.
(2)In March 2023, Mr. Wolff notified Trupanion of his intent to resign effective June 1, 2023.
(3)In February 2022, Ms. Tooth's title changed from Co-President to President.
(4)In February 2022, Ms. Plouf's title changed to Chief Operating Officer and in June 2022, Ms. Plouf's title changed to Executive Vice President of Pricing. As of March 2023, Ms. Plouf ceased to provide services to Trupanion.
2.2 Business Overview and Performance
Trupanion's mission is to help loving, responsible pet owners budget and care for their pets. We offer medical insurance for cats and dogs to help pet owners solve the problem of budgeting for unexpected veterinary expenses should their pet become sick or injured. As of December 31, 2022, we insured over 1,537,000 pets in North America.
Our revenue for the calendar year 2022 was $905.2 million, an increase of 29% year-over-year, primarily comprised of subscription fees for our Trupanion-branded medical insurance and policies written on behalf of third parties. Growth of our intrinsic value is the primary internal measure we use to evaluate corporate and named executive officer long-term performance. For performance year 2021, we calculated the growth of intrinsic value based on a year-over-year annual growth calculation. We believe this approach best reflects performance of the Company and the team in a given year. In 2022, for the evaluation of team compensation, we calculated an estimated increase in intrinsic value per share of 12.3% (as discussed in more detail below). Most of Trupanion's intrinsic value is derived from our direct-to-consumer, monthly subscription business.
In prior years, we set corporate and individual goals on a quarterly basis. Beginning in 2021, we moved from quarterly goals to monthly goals in an effort to allow us to refocus our efforts quickly in response to changing business needs. The corporate objectives include the enrollment of young pets at an acquisition cost within our targeted internal rate of return, the deployment and utilization of our patented software, improved member experience and retention, and achieving certain adjusted operating income metrics. These objectives drove our evaluation of the 2022 Company performance.
In 2022, for purposes of evaluating Company and team compensation, we estimate that intrinsic value per share grew by 12.3%. Key performance metrics from 2022 include:
•Gross new subscription pets of 258,299 and an average monthly retention rate of 98.69%, resulting in net new subscription pets of 137,621 (or 9% year-over-year growth);
•Adjusted operating income of $89.3 million (or 14% year-over-year growth); and
•Anticipated internal rate of return of new subscription pets of 30%
For further detail on the calculation of our key performance metrics, see the section of this CD&A titled “6.7 Discussion on Key Performance Metrics”.
2.3 Compensation Highlights
Compensation Philosophy
The primary objective of Trupanion’s compensation program is to align team member incentives with long-term stockholder interests. To accomplish this, we:
•Strive to compensate team members based on value contributed;
•Share increases in Company value among stockholders, leadership and employees in a sensible way;
•Link equity award grants to growth in our calculated intrinsic value per share;
•Link performance metrics and goals to the Company’s business strategy;
•Recognize team and individual contributions through pay-for-performance incentive awards;
•Encourage equity ownership by emphasizing equity in the overall executive compensation mix, facilitating equity ownership by all employees, and requiring equity ownership by executives and directors;
•Provide a pay package that will attract, reward, focus, and retain critical talent;
•Ensure that our incentive plans do not encourage undue risk-taking nor behavior that is contrary to the intent of our incentive plans by utilizing time-based vesting for equity awards; and
•Communicate openly with employees about how their compensation mix is structured, the rationale behind this structure, and the decisions around their individual pay.
Consideration of "Say-on-Pay" Vote
We held a non-binding advisory "say-on-pay" vote at our 2022 Annual Meeting of Stockholders. Approximately 98.9% of the shares that voted for or against the 2022 say-on-pay proposal (excluding abstentions and broker non-votes) were cast in favor of our say-on-pay proposal. Our compensation committee considered the result of this advisory vote to be an endorsement of our compensation program, policies, practices, and philosophy for our named executive officers. Our compensation committee will continue to consider the outcome of our say-on-pay votes and our stockholder views when making compensation decisions for our named executive officers, including the outcome of Proposal 5 (advisory and non-binding vote to approve the compensation provided to the Company's named executive officers for 2022) at the 2023 Annual Meeting of Stockholders, as we currently hold say-on-pay votes annually.
Compensation Programs
To support our philosophy, the compensation committee strives to deliver total compensation that is commensurate primarily with overall Company performance and to be reasonable compared to the market and among executives internally. To encourage a long-term focus, the compensation committee emphasizes long-term equity compensation over salaries and bonuses for executives, as illustrated below.
Throughout the remainder of this CD&A, we discuss both 2022 performance year compensation, as well as 2022 calendar year compensation found in the Summary Compensation Table to give a full view of our 2022 compensation practices for our named executive officers.
The progress we made against our objectives is outlined above in the section of this CD&A titled “2.2 Business Overview and Performance”. For performance year 2022, we calculated a year-over-year annual growth in intrinsic value of 12.3% per share for purposes of evaluating performance. The increase in our intrinsic value is a primary driver for determining how we allocated long-term incentive awards, as set forth in more detail in the section of this CD&A titled "5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for the 2022 Performance Year". As described below, the growth in intrinsic value for performance year 2022 resulted in an aggregate equity pool of 150,624 shares. After deductions for new hire grants, spot bonus grants, promotional grants and non-employee director grants already made in performance year 2022, there were no shares remaining in the pool and no additional shares were granted in 2023 for the 2022 performance year.
Compensation Mix
The mix of our executive pay structure emphasizes performance-based pay (pursuant to our short-term and long-term incentive awards) over fixed salary, equity over cash, and long-term awards over short-term awards. This pay structure is designed to motivate our executives to achieve our long-term goals and deliver sustained increases in stockholder value without undue risk-taking.
We evaluate compensation on a "performance year," rather than a "calendar year" basis. This means, for 2022 for example, we analyzed our total direct compensation mix by adding together the actual salary earned in 2022, plus the bonus earned for 2022 performance, but paid in 2023, plus the long-term incentive award earned for 2022 performance, but granted in 2023. We do not target a specific compensation mix; rather, we monitor executive compensation mix to ensure that our compensation mix objectives of emphasizing long-term performance-based compensation, are being met. The following pay mix charts reflect the mix of 2022 performance year compensation for the CEO and other named executive officers:
(1)This chart reflects the full amount earned for Mr. Rawlings’ short-term incentive award (cash bonus) amount for performance year 2022, in which he earned $21,534. Mr. Rawlings waived receipt of his full cash bonus amount for performance year 2022.
(2)Long-Term Incentive Awards were not issued to employees for performance year 2022.
(3)This chart reflects the full amount earned for other NEOs’ short-term incentive award (cash bonus) amounts for performance year 2022, in which Ms. Dreyer, Ms. Plouf, Ms. Tooth, and Mr. Wolff each earned $41,868, $39,630, $21,534, and $60,444, respectively. Ms. Plouf and Mr. Wolff each waived receipt of their earned cash bonus amounts in the first half of 2022, resulting in Ms. Plouf receiving $20,330 and Mr. Wolff receiving $22,964 for performance year 2022. Ms. Tooth waived receipt of her full cash bonus amount for performance year 2022. Ms. Plouf ceased to provide services to Trupanion in March 2023. Long-Term Incentive Awards were not issued to employees for performance year 2022.
Alignment with Stockholders
The Company’s Board of Directors and its compensation committee are committed to strong corporate governance and to a pay-for-performance philosophy tied to stockholder interests. The table below summarizes the key elements of our programs relative to this philosophy.
| | |
| Compensation Committee’s Factors Supporting the Pay-For-Performance Philosophy: |
| ▪ Deliver the significant majority of our executive compensation through long-term incentives |
| ▪ Require year-over-year annual growth calculation of intrinsic value per share of at least 10% prior to granting performance-based long-term equity incentive awards |
| ▪ Apply a four-year vesting schedule to our employee equity grants to support long-term decision-making |
| ▪ Link our short-term incentive awards to measures and goals that drive value and derive from our corporate strategy |
| ▪ Require equity ownership by our named executive officers to align pay with stockholder interests |
| ▪ Use a balanced set of measures to support top and bottom line interests and the efficient deployment of capital |
| ▪ Require achievement of demanding performance goals as a condition of our named executive officers earning target short-term incentive awards |
| | |
| Compensation Committee’s Factors Supporting Strong Corporate Governance: |
| ▪ Do not enter into individual employment agreements that provide a defined period of employment unless required by law |
| ▪ Maintain a reasonable severance and change in control policy, no more generous than what is provided to all employees |
| ▪ Hold executive sessions at least once a quarter |
| ▪ Evaluate our incentive program each year to ensure that it does not encourage excessive risk-taking |
| ▪ Maintain a compensation committee comprised of only independent board members |
| ▪ Oversee and administer all executive compensation and equity programs |
| ▪ Maintain stock ownership guidelines for our directors and require at least 50% of director compensation to be paid in equity until the director complies with such guidelines |
| ▪ Maintain a clawback policy to recover incentive compensation in the case of a restatement or actions causing reputational damage |
| ▪ Frequently conduct stockholder outreach to capture stockholder views on a variety of corporate practices, including on executive compensation |
| ▪ Engage an independent executive pay consultant who reports solely to the compensation committee |
| ▪ Prohibit tax gross-ups |
| ▪ Prohibit executive and director hedging activities |
| ▪ Do not provide any perquisites to our executives |
Part 3. Our Culture
3.1 Who We Are
We are all about helping pets, which is why we choose to work at Trupanion. Our mission is to help loving, responsible pet owners budget and care for their pets. Our mission is what connects us regardless of our different backgrounds, and our shared passion drives everything we do. This includes our aspiration for greatness, our welcoming of change and innovation, our wish to have fun, and our trust in each other. We value diversity and each person's individuality. We believe that we can achieve great things together when we are caring, collaborative, courageous, curious, honest, inclusive, and nimble - we call this our Trupanion Team DNA.
We are especially proud of our track record of promoting from within and the opportunities we have created for team members to grow. In 2022, 155 team members advanced their careers by moving into new roles internally.
Part 4. Governance of Executive Compensation
4.1 Role of the Compensation Committee
The compensation committee is responsible for administering our executive compensation program, among other responsibilities, as provided for in its charter. The compensation committee meets at least four times a year. The compensation committee oversees the following items:
•Compensation philosophy and strategies to confirm that they are aligned with our corporate objectives, stockholder interests, desired behaviors and Company culture;
•Alignment of executive pay to performance, including salary, bonuses and equity grants for our Chief Executive Officer and named executive officers;
•Compensation elements and mix;
•Peer group and surveys used to gather market data;
•Design of named executive officers' short-term incentive awards and long-term incentive awards;
•Our calculation of our intrinsic value per share growth, its calibration to aggregate equity pool size for long-term incentive grants, and the allocation of that equity pool to our named executive officers by individual and other employees in aggregate;
•Dilution, equity allocation, use of equity vehicles, equity plan features, and equity authorizations;
•Pay for new executive hires, promotions, and terminations;
•Pay policies, such as severance, change in control severance, ownership guidelines, and clawbacks;
•Broader interests pertaining to Company culture, the perception of our compensation mix, team member fulfillment and feedback, and other related items;
•Director compensation;
•Participation in and results of our stockholder engagement processes;
•Regulatory and governance developments; and
•CD&A disclosure for our annual proxy, and other disclosures related to compensation, as needed.
With respect to the compensation of our Chief Executive Officer, his direct report, and our other executive officers, the compensation committee reviews and approves salary adjustments; short-term incentive awards; equity awards; aggregate compensation; levels of individual performance; and form of equity awards. As noted in more detail below in section 5.2, the compensation committee determines compensation of our Chief Executive Officer in compensation committee meetings during an executive session without the Chief Executive Officer present. The compensation committee considers the Chief Executive Officer recommendations, but makes independent decisions on determining the compensation of all executive officers.
4.2 Role of Management
The compensation committee works closely with management to gather and analyze data to assist it with compensation decisions. In addition, the Chief Executive Officer reviews the performance of the executive officers (and others) and provides recommendations regarding their compensation to the compensation committee for its consideration.
Additionally, the Chief Executive Officer and the Chief Administrative Officer annually help the compensation committee, and then the broader Board of Directors, review succession planning, given its critical importance to the Company’s success.
4.3 Role of Consultant
In 2022, the compensation committee again engaged Meridian Compensation Partners, LLC (Meridian) as its independent compensation consultant. During the year, Meridian advised the compensation committee on various executive pay issues, as solely directed by the compensation committee. Meridian reports directly to the compensation committee of the Board of Directors.
Pursuant to SEC rules, the compensation committee has assessed the independence of Meridian and concluded Meridian is independent and does not have any conflict of interest with the Company, its directors or its executive officers.
4.4 Peer Group
The compensation committee's practice has been to identify a comparator group of companies to assist in evaluating the competitiveness of its compensation levels, policies, programs, and dilution. In addition, the compensation committee consults survey data from time to time for a broad evaluation of the market pay levels for executive positions. Market data does not determine or dictate pay levels. We use this information primarily as a reference point for evaluating our executive compensation levels relative to our performance.
Because the Company has few direct public competitors in the pet insurance industry, the compensation committee screens for companies that share certain business characteristics with Trupanion, including:
•Traded on major U.S. securities exchanges
•U.S. based
•Categorized in one of the following industries:
◦Animal Health
◦Diversified Consumer Services
◦Life and Health Insurance
◦Internet Service and Infrastructure
◦Healthcare Providers and Services
•Revenue under $2.5 billion
•3-year compound annual revenue growth of mid-teens or higher
•Certain business model characteristics, including:
◦Recurring revenue model (subscription-based company);
◦Business-to-consumer focus; and
◦Strategically-relevant companies with a pet focus.
Based on these criteria the compensation committee identified ten primary peer companies and five reference peer companies for informing compensation decisions. The compensation committee considered information gathered from the peer groups below and the broader market when evaluating the Company's compensation programs.
These companies included:
| | | | | | | | | | | | | | |
| Primary Peer Group Used | | Reference Peer Group |
| | | | |
| Company | Industry | | Company | Industry |
| Alarm.com Holding, Inc. | Consumer Software Services | | Central Garden & Pet Company | Animal Health |
| ANGI Inc. | Consumer Services | | Chewy, Inc. | Online Retail for Animal Products |
| Freshpet, Inc. | Animal Health | | Heska Corporation | Animal Health |
| Frontdoor, Inc. | Consumer Services | | IDEXX Laboratories, Inc. | Animal Health Care Equipment |
| HealthEquity, Inc. | Healthcare Services | | Zillow Group, Inc. | Consumer Real Estate Services |
| Lemonade, Inc. | Property and Casualty Insurance | | | |
| Medifast, Inc. | Consumer Health Products | | | |
| PetIQ, Inc. | Health Care Provider and Services | | | |
| Petmed Express, Inc. | Animal Health | | | |
| Teladoc Health | Health Care Services | | | |
Part 5. Components of Executive Compensation
5.1 Key Elements of Compensation
Summary of All Key Compensation Elements. The table below describes our pay components and the purpose of each:
| | | | | | | | | | | |
| Element | Form | Description | Purpose |
| Base Salary | Cash | Fixed cash compensation determined by value of contribution and desired pay mix of each position, and informed by market data. | Provide baseline level of fixed compensation. |
| Short-Term Incentive Awards | Cash or equity, at the election of the participant | Variable compensation based on achievement of corporate and individual monthly performance goals that include strategic and financial goals. In 2022, for all named executive officers (other than Ms. Dreyer), awards were scored monthly and paid in the first quarter of 2023, subject to the compensation committee’s approval. | Focus named executive officers on the achievement of individual monthly strategic and financial goals and reinforce value connection by role. |
| | All participants in the plan may elect to take their cash awards in the form of equity with a 20% premium to cash amount based on a volume-weighted average market price and subject to a 2-year lock-up. | Enhance ownership mindset of the team with the option to forgo cash for equity. |
| | For 2022, short-term incentive awards to our Chief Executive Officer, President, and Chief Operating Officer were based solely on Company performance goals, whereas short-term incentive awards to other named executive officers are based on a 50/50 mix of Company and individual performance goals. | |
| Long-Term Incentive Awards | RSUs or Stock Options (determined annually) | Aggregate amount of long-term incentive awards to be granted is based on the calculation of the growth of our intrinsic value per share - the higher the growth of our intrinsic value per share, the larger the amount of equity we make available for grant in aggregate to all employees and directors. | Promote stock ownership. |
| | Generally, stock options and restricted stock units vest over four years, subject to the holders’ continued service with the Company, with standard vesting for stock options vesting as to 1/4th on the one year anniversary and then 1/48th monthly thereafter, and restricted stock units vesting as to 1/4th on the one year anniversary and then 1/16th quarterly thereafter, subject to the recipient being a service provider through each vesting date for the equity award). | Align executives directly with stockholder interests. |
| | Reward the long-term growth of intrinsic value. |
| | | Enhance long-term perspective and support retention of named executive officers. |
| Other Compensation | 401(k) Plan | Broad based retirement plan sponsored by Trupanion and offered to all employees. | Support long term financial planning. |
| General Benefits | Healthcare, Life and Disability Insurance, Daycare, Pet-related Benefits, Public Transit Pass, and Sabbatical | All employees have the opportunity to receive paid healthcare, including life and disability insurance for themselves. Employees in North America receive coverage for their pet on a Trupanion policy. Employees located at our Seattle headquarters receive paid daycare for infants through pre-K (subject to space availability), professional dog walker services for all furry office mates and a prepaid public transit pass. Every 5 years, employees receive a 5-week paid sabbatical. | Overall competitive benefits package that is offered to employees to foster a fulfilling, enjoyable, and productive work environment. |
5.2 Detailed Description of Each Element of Compensation and Determination of
Compensation for the 2022 Performance Year
A detailed description of each pay program and our pay analysis and rationale for performance year 2022 are described below:
Base Salary: The compensation committee considers executive salary levels annually, but does not automatically adjust salaries on an annual or other scheduled basis. Rather, salaries are increased as appropriate, based on changes in an executive's role, an executive's impact, or the market.
| | | | | | | | | | | | | | |
| Name | Title (1) | 2022
Base Salary | 2021
Base Salary | Percent Increase |
| Darryl Rawlings | Chief Executive Officer, Director, and Chairperson of the Board | $300,000 | $300,000 | —% |
| Drew Wolff | Chief Financial Officer | $300,000 | $300,000 | —% |
| Margi Tooth | President | $300,000 | $300,000 | —% |
| Tricia Plouf (2) | Former Executive Vice President of Pricing | $300,000 | $300,000 | —% |
| Emily Dreyer | Senior Vice President of Channel Growth | $220,000 | $200,000 | 10% |
(1) Reflects current titles as of the date of this Proxy Statement.
(2) Ms. Plouf ceased to provide services to Trupanion in March 2023.
Short-Term Incentive Awards: We offer short-term incentive awards to our named executive officers and other employees. The intent of the short-term incentive awards is to reward each individual’s contribution based on the achievement of the Company’s corporate objectives and individual goals. For 2022, each of our named executive officers, other than Ms. Dreyer, were eligible to receive an annual bonus based on achievement of certain diversity, equity, inclusion, and belonging goals (DEIB Goals). Between two and four percent of a named executive officer’s base salary that would otherwise be payable based on achievement of corporate and individual objectives was reallocated to the DEIB Goals.
Previously, the corporate objectives and individual goals were established at the beginning of each quarter and scored at the end of each quarter. Starting in 2021, the Company moved to a monthly cadence, by which corporate objectives and individual goals were established at the beginning of each month and scored at the end of each month.
The measures for the individual goals for our named executive officers (other than Ms. Dreyer, who became a named executive officer in 2022, Ms. Tooth, and Mr. Rawlings) were determined by such officer's managers in consultation with our President and Chief Executive Officer and subject to oversight by our compensation committee. Individual goals typically tie to specific Company initiatives that vary based on the role of the named executive officer but are generally aligned to indicators of growth in our calculation of intrinsic value, such as the number of active hospitals and number of enrolled pets. As described below, and with exception to Ms. Plouf (who ceased to provide services to Trupanion in March 2023), short-term incentive awards for Mr. Rawlings and Ms. Tooth were based exclusively on achievement of our monthly corporate objectives and these officers did not have individual goals.
The monthly achievement scores for corporate objectives were reviewed by the compensation committee quarterly, the monthly individual achievement scores for named executive officers (other than Ms. Dreyer, who became a named executive officer in 2022) were approved annually, and the DEIB Goals were scored and approved annually. These short-term incentive awards were paid annually to our named executive officers (other than Ms. Dreyer) in the following fiscal year, whereas short-term incentive awards for other employees (including Ms. Dreyer) were paid monthly. Short-term incentive awards for our Chief Executive Officer, President, and, until June 2022, our Chief Operating Officer were based exclusively on achievement of our monthly corporate objectives and short-term incentive awards for our other named executive officers were weighted 50% to corporate objectives and 50% to individual objectives.
The mechanism for determining the annual short-term incentive payouts for our named executive officers for performance year 2022 is shown below:
(1)From January to May 2022, Ms. Plouf's short-term incentive awards were determined exclusively based on achievement of corporate goals. From June 2022 to December 2022, Ms. Plouf's short-term incentive awards were weighted 50% to corporate objectives and 50% to individual objectives. Ms. Plouf ceased to provide services to Trupanion in March 2023.
(1)Ms. Dreyer's short-term incentive award did not include DEIB Goals.
Once the weighted achievement scores and annual incentive payout amounts for named executive officers are determined, they are reviewed and approved by the compensation committee.
All team members, including named executive officers, can elect to accept each short-term incentive award in cash or equity. Team members who elect equity instead of cash receive a 20% premium to the cash value, based on a volume- weighted average market price, and subject to a two-year holding restriction.
The Chief Executive Officer recommended the short-term incentive percentage scores below to the compensation committee for consideration. Following this process, the compensation committee approved the percentage payout against the target for each named executive officer. Both corporate and individual goals were intentionally set with a high degree of difficulty and are not designed to be indicative of overall performance.
Target awards and actual awards by individual are shown below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Corporate & Individual Goals | DEIB Goal | | | | | |
| Name | 2022 Base Salary | Bonus Target as a Percentage of Salary | | Bonus Target Percentage Allocation (Corporate/ Individual) | | DEIB Bonus Target as a Percentage of Salary | DEIB Bonus Target Percentage Allocation | Aggregate Bonus Target Amount (Corporate & Individual plus DEIB) | | Earned Aggregate Bonus Amount (Corporate & Individual plus DEIB) | Bonus Amount Paid | |
| Darryl Rawlings | $ | 300,000 | | 18 | % | | 100/0 | | 2 | % | 100 | $ | 60,000 | | | $ | 21,534 | | $ | — | | (1) |
| Drew Wolff | $ | 300,000 | | 36 | % | | 50/50 | | 4 | % | 100 | $ | 120,000 | | | $ | 60,444 | | $ | 22,964 | | (2) |
| Margi Tooth | $ | 300,000 | | 18 | % | | 100/0 | | 2 | % | 100 | $ | 60,000 | | | $ | 21,534 | | $ | — | | (1) |
| Tricia Plouf | $ | 300,000 | | 36 | % | (3) | 50/50 | (4) | 4 | % | 100 | $ | 97,500 | | (5) | $ | 39,630 | | $ | 20,330 | | (2) |
| Emily Dreyer | $ | 220,000 | | 40 | % | | 50/50 | | — | % | 100 | $ | 88,000 | | | $ | 41,868 | | $ | 41,868 | | |
(1)Mr. Rawlings and Ms. Tooth each waived their earned short-term incentive award amounts for performance year 2022 and did not receive any short-term incentive award for performance year 2022.
(2)Ms. Plouf and Mr. Wolff each waived their earned short-term incentive award amounts for the period between January and June of the 2022 performance year. Ms. Plouf ceased to provide services to Trupanion in March 2023.
(3)Effective as of June 2022, in connection with her title change from Chief Operating Officer to Executive Vice President of Pricing, Ms. Plouf’s bonus target as a percentage of her salary increased from 20% to 40%.
(4)Effective as of June 2022, in connection with her role change from Chief Operating Officer to Executive Vice President, Pricing, Ms. Plouf’s short-term incentive award weighting was revised from being based 100% on corporate objectives to 50% based on corporate objectives and 50% based on individual objectives.
(5)Reflects blended target bonus amount for 2022 given the modifications described in footnotes 3 and 4.
The aggregate bonus target amount is further broken down by total opportunity below.
| | | | | | | | | | | | | | |
| | Weighting |
| Total Opportunity (Aggregate Short-Term Incentive Award Bonus Target Amount) | Corporate | Individual | DEIB |
| CEO & President | $60,000 | 90% | —% | 10% |
| CFO | $120,000 | 45% | 45% | 10% |
| EVP (1) | $97,500 | 58% | 32% | 10% |
| SVP | $88,000 | 50% | 50% | —% |
(1)Reflects blended target bonus amount for 2022 given the modifications described in footnotes 3 and 4 above.
Included among the factors the compensation committee evaluated when determining our named executive officer's individual performance (for those named executive officers who are evaluated based on personal objectives in addition to corporate objectives) were:
| | | | | |
| Executive | 2022 Individual Performance |
| Drew Wolff | Achievement of financial margin targets, including adjusted operating income and internal rate of return. |
| Tricia Plouf | Achievement of adjusted operating margin and operational service level targets, including work to refine pricing strategy and modeling capabilities. |
| Emily Dreyer | Achievement of lead volume targets based on channel optimization. Improve reporting capabilities, including operationalizing leads by channel reporting. |
Included among the factors the compensation committee evaluated when determining our named executive officer's achievement of DEIB Goals (for those named executive officers who were eligible to receive a bonus based on DEIB Goals) were:
| | | | | |
| Executive | 2022 DEIB Goals |
| Darryl Rawlings | 36% of US-based new hires in 2022 are diverse. |
| Drew Wolff | 36% of US-based new hires in 2022 that report to Mr. Wolff are diverse. |
| Margi Tooth | 36% of US-based new hires in 2022 are diverse. |
| Tricia Plouf | 36% of US-based new hires in 2022 that report to Ms. Plouf are diverse. |
The compensation committee determined that each of Mr. Rawlings, Ms. Tooth, and Ms. Plouf achieved their 2022 DEIB Goals. As noted above, Mr. Rawlings and Ms. Tooth each waived their earned short-term incentive award amounts for performance year 2022 and did not receive any short-term incentive award for performance year 2022.
Beginning in 2023, short-term incentive awards will be paid annually to our Chief Executive Officer, President , and Chief Financial Officer in the following fiscal year. Short-term incentive awards for all other executive officers will be paid monthly, subject to oversight from our compensation committee.
Long-Term Incentive Awards: We grant long-term incentive awards under our 2014 Equity Incentive Plan (2014 Plan). Our long-term incentive awards deliver equity-based awards to executives and other employees who contribute to the long-term success of the Company. We determine the aggregate amount of long-term incentive awards to be granted based on our estimates of the growth of our intrinsic value per share. The higher the growth of our intrinsic value per share, the larger the amount of equity we make available for grant in aggregate to all employees and non-employee directors.
For performance awards granted to our named executive officers in 2023 for performance year 2022, the compensation committee, in consultation with management, evaluated the growth of our intrinsic value per share on a year-over-year basis in the same manner used for the prior performance year.
As in prior years, our compensation decisions are filtered through our model using inputs that are grounded by historical performance and analysis approved by the Board of Directors. As such, our intrinsic value growth per share in connection with compensation decisions is intended to be consistent with the following principles:
•Give credit for proven performance, generally based on historical three-year average trends, as well as the year-over-year growth rate of resulting intrinsic value per share changes, rather than performance we hope to achieve in the future.
•Incorporate controllable factors, like advertising spending, but not give credit for or penalize participants for certain other factors that a participant is less likely to be able to influence, like changes in interest rates and foreign exchange rates, without compensation committee approval.
•Allow for period-over-period comparisons not susceptible to manipulation by management. We generally base our inputs on the most recent three-year actual performance trend and prefer to avoid changing inputs such as the weighted average cost of capital when making compensation decisions.
•Subject the calculation, including assumptions, to the scrutiny of the compensation committee, which may adjust the calculation and/or our awards if it determines that the equity pool and/or resulting grants are inappropriate or inconsistent with the long-term interests of stockholders.
Ultimately, the compensation committee of the Board of Directors retains the discretion to modify the model by which we calculate intrinsic value per share, as it deems appropriate.
We provide no long-term incentive awards to named executive officers if we calculate such intrinsic value per share growth as 10% or lower. For each increment of our calculation of intrinsic value per share growth above 10%, the percentage of the incremental value is allocated between all employees and stockholders according to the following schedule:
| | | | | | | | |
| Estimated Increase to Our Calculation of Intrinsic Value Per Share | % of Value Creation Going to Employees (Assume RSUs) | % of Value Creation Going to Stockholders (Assume RSUs) |
| 1 - 10% | 0.0% | 1 - 10% |
| 11% | 0.3% | 10.7% |
| 20% | 1.0% | 19.0% |
| 30% | 2.5% | 27.5% |
| 35% | 3.0% | 32.0% |
| 40% | 3.5% | 36.5% |
| 45% | 4.0% | 41.0% |
| 50% | 4.5% | 45.5% |
| 60% | 5.5% | 54.5% |
| 70% | 6.5% | 63.5% |
(Progression between identified points is not linear due to the degree of difficulty in achieving greater increases to our calculation of intrinsic value per share. In the event our calculation of intrinsic value per share shows growth in excess of 70%, our compensation committee will determine the amount of equity we make available to grant in aggregate to all employees and non-employee directors.)
The award of long-term incentive grants is contingent upon our intrinsic value per share growth being higher than 10%. Once we have determined the aggregate number of shares available for long-term incentive awards, we first deduct a number of shares (determined based on our calculation of intrinsic value per share) for available cash used during the performance year and then deduct shares that have already been granted for new hires, spot bonus grants, grants made in connection with promotions, and non-employee director grants. The compensation committee then allocates the number of long-term incentive awards to individuals in the company. All employees are eligible for long-term incentive grants, including named executive officers, based on their contributions during the year to the calculated intrinsic value per share growth results. In doing so, the compensation committee takes the Chief Executive Officer's recommendations into account.
Annually, the compensation committee determines whether shares or the equivalent value of such shares will be granted in the form of restricted stock units or stock options. The selection of equity type granted is based on a number of considerations, including the Company’s stock price, retention needs, and other factors deemed relevant by the compensation committee.
All long-term incentive awards granted to employees, including our named executive officers, vest over four years. All stock options granted expire ten years from the date of grant.
Below is a depiction of how we reward intrinsic value per share growth using long-term incentive awards:
Equity Allocations in 2023 for the 2022 Performance Year: For the 2022 performance year, we estimated that the year-over-year annual growth of our intrinsic value per share was 12.3%. After adjusting for foreign exchange and available cash used during the performance year, this resulted in an aggregate equity pool of 150,624 shares. From the pool of 150,624 shares available, deductions were made for new hire grants, spot bonus grants, promotional grants and non-employee director grants already made in performance year 2022. After deductions, there were no shares remaining in the pool and no additional shares were granted in 2023 for the 2022 performance year.
The table below provides an overview of performance year 2022 compensation for all named executive officers.
| | | | | | | | | | | | | | | | | | | | |
| Name | 2022 Base Salary | | Short-Term Incentive Award Payout (Cash Received in 2023 for 2022 Performance Year)
(1) | | Long-Term Incentive Award Issuance
(RSU Value Received in 2023 for 2022 Performance Year) (2) | Total Performance Compensation |
| Darryl Rawlings | $ | 300,000 | | | $ | — | | (3) | $ | — | | $ | 300,000 | |
| Drew Wolff | $ | 300,000 | | | $ | 22,964 | | (4) | $ | — | | $ | 322,964 | |
| Margi Tooth | $ | 300,000 | | | $ | — | | (3) | $ | — | | $ | 300,000 | |
| Tricia Plouf | $ | 300,000 | | | $ | 20,330 | | (4) | $ | — | | $ | 320,330 | |
| Emily Dreyer | $ | 220,000 | | | $ | 41,868 | | (5) | $ | — | | $ | 261,868 | |
(1)For the 2022 performance year, we issued short-term incentive awards to the named executive officers (other than Ms. Dreyer) in February 2023.
(2)As described above, long-term incentive awards were not issued to Company employees in 2023 for the 2022 performance year.
(3)Mr. Rawlings and Ms. Tooth each waived their earned short-term incentive award amounts for performance year 2022.
(4)Ms. Plouf and Mr. Wolff each waived their earned short-term incentive award amounts for January through June for the 2022 performance year. Ms. Plouf ceased to provide services to Trupanion in March 2023.
(5)Prior to Ms. Dreyer becoming a named executive officer, she received monthly bonus payments in 2022.
Mr. Rawlings received $300,000 in total compensation from the Company for performance year 2022. Mr. Rawlings' compensation was less than would have been warranted by the Company's performance for the applicable period and Mr. Rawlings' very significant contribution to that performance as Chief Executive Officer; however, due to Mr. Rawlings' beneficial ownership in the Company (approximately 3.5%), and his desire to encourage a team orientation among senior executives, the compensation committee determined, in consultation with Mr. Rawlings, that his performance compensation for performance year 2022 was appropriate.
2021 Long-Term Incentive Awards Reflected in 2022 Summary Compensation Table: The long-term incentive awards earned in 2021 and granted to our named executive officers in 2022 are listed on the Summary Compensation Table (see the section titled “Executive Compensation Tables - Summary Compensation Table”). For the 2021 performance year, the compensation committee estimated that the two-year compound annual growth rate of our intrinsic value per share was 41.4%. This performance resulted in an aggregate equity pool of 630,952 shares. From the pool of 630,952 shares available, deductions were made for new hire grants, spot bonus grants, promotional grants, and non-employee director grants already made in performance year 2021, and the remaining 472,814 shares were then granted in the form of restricted stock units in 2022 for the 2021 performance year to certain employees, including named executive officers. These restricted stock units will vest over four years.
To determine the specific amounts granted to each named executive officer in 2022, our Chief Executive Officer, considering team member input, determined the value each individual contributed toward our growth in intrinsic value per share. In making this determination, our Chief Executive Officer also reviewed how each named executive officer demonstrated leadership to achieve those results and the officer's ability to impact future growth of the Company. The compensation committee considered these recommendations and assessed potential long-term incentive awards against each named executive officer's base pay and bonus levels. Our Chief Executive Officer was not present for the decisions relating to his own long-term equity incentive awards. Following this process, the compensation committee approved the following grants to named executive officers in February 2022 based on 2021 performance:
| | | | | | | | |
| Name | Long-Term Incentive Awards (Number of RSUs Received in 2022 for 2021 Performance Year) | RSU Value (1) |
| Darryl Rawlings | 15,132 | | $ | 1,356,281 | |
| Drew Wolff | 13,219 | | $ | 1,184,819 | |
| Margi Tooth | 52,250 | | $ | 4,683,168 | |
| Tricia Plouf | 52,250 | | $ | 4,683,168 | |
| Emily Dreyer | 23,707 | | $ | 2,124,858 | |
(1)The amounts in this column represent aggregate grant date fair value of the RSUs granted in 2022 for 2021 performance, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of the assumptions we apply in calculating these amounts.
Other Compensation, General Benefits and Perquisites:We provide all employees the opportunity to receive paid healthcare for themselves. We also provide medical coverage for one pet on a Trupanion subscription for employees in North America. At our Seattle headquarters, we provide paid on-site daycare for one child (infants through Pre-K) and professional dog walkers for all furry office mates. After every five years of service, employees receive a five-week paid sabbatical. We also provide a Company-wide broad based retirement 401(k) plan for our U.S. employees. We do not provide any perquisites to our executives. We continue to assess opportunities to enhance benefit offerings to our employees at all locations.
Part 6. Other Compensation Policies and Practices
6.1 Employment Agreements
No named executive officers have employment agreements.
6.2 Severance and Change-in-Control Protection
Our Employee Severance and Change in Control Plan (the Plan) provides certain severance benefits to eligible employees. The Plan is intended to standardize the severance paid to current and future employees. We believe the Plan creates an equitable framework for situations when an employee leaves us involuntarily that applies equally to all team members regardless of title.
Severance Policy:
Under the Plan, if an employee, including any named executive officer, is terminated without cause (defined to include willful or gross neglect of job duties, material breach of a fiduciary duty or Company policy, willful failure to comply with instructions from the Board or such person’s supervisor, engagement in dishonest or illegal or gross misconduct, and conviction of a felony), then they are entitled to the following benefits:
•a payment equal to the employee’s salary for a minimum of two weeks with an additional two weeks for each completed year of employment, up to a maximum of 26 weeks;
•for each full calendar quarter prior to the date of termination, any bonuses earned by the employee but unpaid as of the date of such termination; and
•a payment equal to one month of the medical insurance premium for the team member.
In order to receive these benefits, the employee must sign a separation agreement containing a full and unconditional release of claims.
Change in Control Policy:
If an employee, including any named executive officer, is terminated without cause in the three-month period before the occurrence of a Change in Control (the definition of "Change in Control" is set forth in footnote 5 to the "Termination of Employment and Change of Control Payments Table" below) or during the period of time beginning on the first occurrence of a Change in Control and lasting through the one-year anniversary of the occurrence of the Change in Control, then, in lieu of the severance payments set forth above, we will provide the employee with the following benefits:
•six months of salary;
•for each full calendar quarter prior to the date of such termination, any bonuses earned by the employee but unpaid as of the date of such termination; and
•immediate vesting of all unvested equity awards.
In order to receive these benefits, the employee must sign a separation agreement containing a full and unconditional release of claims. If any total payment determined by this policy would result in an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (Code)), then we would reduce the payment to produce a payment value that would maximize the “net after-tax amount” payable to the employee.
6.3 Share Ownership
We believe stock ownership aligns the interests of the named executive officers and Board of Directors with those of our stockholders.
Our named executive officers and Board of Directors are held to the following requirements:
| | | | | |
| Position | Required Ownership |
| Board Director | 3X annual compensation value (excluding chair compensation) |
| Chief Executive Officer | 5X annual base compensation |
| Executive Officer | 3X annual base compensation |
These ownership guidelines must be met within five years of becoming a board member or executive officer of the Company, including promotion into an executive role.
The minimum ownership may be satisfied by ownership of: (i) shares of our common stock, including shares purchased in the open market or through a company purchase plan or otherwise owned by the individual as a result of vesting of restricted stock units or performance-based stock units or exercise of options; (ii) vested restricted stock units and performance-based stock units; (iii) all deferred restricted stock units; (iv) vested restricted stock awards, (v) vested and exercisable “in-the-money” stock options (on a net exercise basis and net of taxes set at a 50% tax rate for purposes of calculating share ownership); and (vi) any other shares of our common stock owned by the executive or non-employee director. Shares or equity awards that are vested but are not settled pursuant to a pre-arranged deferral program will count toward the ownership requirement.
As of December 31, 2022 all of our named executive officers and directors who have been in their role for at least five years were in compliance with these ownership guidelines.
6.4 Risk Assessment
Our compensation committee assessed the risk profile of our executive pay program and determined that it does not encourage undue risk-taking by executives. Key considerations are the weighting of compensation mix towards long-term growth in our intrinsic value, that the short-term incentive award measurement categories are set monthly and are designed to encourage focus on our key initiatives, the long-term incentive awards are subject to an objective measurement (i.e., our calculation of intrinsic value per share) that assesses our long-term sustainable growth and health, and all of the long-term incentive awards carry four-year vesting, which encourages executives to make decisions that are in the best long-term interests of the business.
Further, we require executives to hold meaningful levels of Company stock which results in stockholder alignment and a long-term focus. We also maintain a clawback policy, as more fully described below.
6.5 Clawbacks
Our clawback policy allows us to recover incentive compensation that was inappropriately delivered due to an accounting restatement or team member misconduct. Incentive compensation is all variable compensation, which includes any bonus compensation, equity-based awards, or other incentive plans.
6.6 Pledging & Hedging
Our Insider Trading Policy prohibits employees from engaging in any form of hedging transactions (derivatives, equity swaps, and so forth) in our stock.
Our Insider Trading Policy requires preapproval by our Compliance Officer for any transaction in our shares, which would include sales in connection with pledges. Our Insider Trading Policy and our Pledging Guidelines for Directors and Officers generally discourage pledging transactions and encourage pre-approval of pledging transactions by the Nominating and Governance Committee. In addition, management regularly updates the Nominating and Governance Committee regarding outstanding pledges and considers, among other things, the number of shares pledged and the percentage of the pledgor's total Trupanion securities these shares represent. With this oversight, we allow limited pledging transactions because we acknowledge that personal circumstances may warrant entrance into such arrangements instead of selling Company shares.
6.7 Discussion on Key Performance Metrics
We use certain non-GAAP financial metrics when determining compensation.
Adjusted operating income is a non-GAAP financial measure that adjusts operating income (loss) to remove the effect of acquisition cost, development expenses, one-time business combination transaction costs and gain (loss) from investment in joint ventures. Non-cash items, such as stock-based compensation expense and depreciation and amortization, are also excluded. Adjusted operating margin is adjusted operating income as a percentage of revenue. Management uses adjusted operating income and the margin on adjusted operating income to understand the effects of scale in its non-acquisition cost and development expenses and to plan future advertising expenditures, which are designed to acquire new pets. Management uses this measure as a principal way of understanding the operating performance of its business exclusive of acquisition cost and new product exploration and development initiatives. Management believes disclosure of this metric provides investors with the same data that we employ in assessing its overall operations and that disclosure of this measure may provide useful information regarding the efficiency of our utilization of revenues, return on advertising dollars in the form of new subscribers and future use of available cash to support the continued growth of our business. The following is a reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
| | | | | |
| Year Ended December 31, 2022 |
| Revenue | $ | 905,179 | |
| Cost of paying veterinary invoices | 645,683 | |
| Variable expenses | 131,025 | |
| Fixed expenses | 39,216 | |
| Adjusted operating income | 89,255 | |
| Acquisition cost | 80,384 | |
| Development expenses | 7,789 | |
| Stock-based compensation expense | 32,537 | |
| Depreciation and amortization | 10,921 | |
| Business combination transaction costs | 372 | |
| Loss from investment in joint venture | (253) | |
| Operating loss | $ | (43,001) | |
As a percentage of revenue:
| | | | | |
| Year Ended December 31, 2022 |
| Revenue | 100.0 | % |
| Cost of paying veterinary invoices | 71.3 | % |
| Variable expenses | 14.5 | % |
| Fixed expenses | 4.3 | % |
| Adjusted operating income | 9.9 | % |
| Acquisition cost | 8.9 | % |
| Development expenses | 0.9 | % |
| Stock-based compensation expense | 3.6 | % |
| Depreciation and amortization | 1.2 | % |
| Business combination transaction costs | — | % |
| Loss from investment in joint venture | — | % |
| Operating loss | (4.8) | % |
Our internal rate of return is calculated assuming the new subscription pets we enroll during the period will behave like an average subscription pet. Specifically, our 2022 calculation assumes an estimated profit per pet per month of $8.40 for 76.3 months (calculated as the quotient obtained by dividing one by the churn rate, which equals one minus the average monthly retention rate of 98.69%).
The following tables include our calculation of the monthly per pet unit economics for our subscription business for the trailing twelve months ended December 31, 2022, as well as the estimated internal rate of return for a single average pet.
Subscription business monthly per pet unit economics1:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2022 | | | | | | | | |
| Monthly average revenue per pet | $ | 63.82 | | | | | | | | | |
| Cost of paying veterinary invoices | $ | 46.38 | | | | | | | | | |
| Variable expenses | $ | 6.27 | | | | | | | | | |
| Fixed expenses | $ | 2.77 | | | | | | | | | |
| Estimated profit per pet per month | $ | 8.40 | | Multiplied by 76.3 months = $641 (Lifetime value of a pet, including fixed expenses) |
1Calculated on a trailing twelve month basis. Excluding managing general agent activity. | | | | |
| | | | | | | | | |
| Estimated IRR calculation for the year ended December 31, 2022: |
| Year | — | 1 | 2 | 3 | 4 | 5 | 6 | | |
Months2 | 6.0 | 12.0 | 12.0 | 12.0 | 12.0 | 12.0 | 10.3 | 76.3 | |
| Estimated Profit per Pet per Month | $8 | $8 | $8 | $8 | $8 | $8 | $8 | | |
| Estimated Profit per Pet | $50 | $101 | $101 | $101 | $101 | $101 | $86 | $641 | |
Capital Charge3 | $(4) | $(8) | $(8) | $(8) | $(8) | $(8) | $(7) | | |
| PAC | $(289) | | | | | | | IRR | |
| $(243) | $93 | $93 | $93 | $93 | $93 | $80 | 30% | |
| | | | | | | | | |
2This represents the average subscriber life in months, for the period presented, which is calculated as the quotient obtained by dividing one by one minus the average monthly retention rate. |
|
3We include a capital charge in this calculation to estimate cost of capital on reserves which must be set aside to meet regulatory capital requirements. These reserves are included on our balance sheet. |
Compensation Committee Report
The compensation committee of the Board of Directors of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management of the Company. Based on such review and discussion, the compensation committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement for the Company’s 2023 Annual Meeting of Stockholders and in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into, any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates such information by reference in such filing.
| | |
| Submitted by the Compensation Committee |
| Howard Rubin, Chair |
| Jacqueline Davidson |
| Murray Low |
| Zay Satchu |
Executive Compensation Tables
The following tables and accompanying narrative disclosure set forth information about the compensation provided to our Chief Executive Officer, Chief Financial Officer, and President of American Pet Insurance Companynamed executive officers during the fiscal year ended December 31, 2015. We refer to these individuals in this section as our “named executive officers.”years specified below.
Summary Compensation Table
The following table provides information regarding all long-term incentive equity compensation awarded to, earned by or paid to our named executive officers forduring the 2022, 2021 and 2020 fiscal years, and all services rendered in all capacities to us during 2015short-term incentive compensation and 2014.
|
| | | | | | |
| Name and principal position | Year | Salary | Option Awards (1) | Stock Awards (1) | Non-equity incentive plan compensation | Total |
| | | ($) | ($) | ($) | ($) | ($) |
| | | | | | | |
| Darryl Rawlings | 2015 | 300,000 | — | — | 252,825 | 552,825 |
| Chief Executive Officer | 2014 | 300,000 | — | — | 182,550 | 482,550 |
| | | | | | | |
| Michael Banks | 2015 | 275,000 | 90,048 | — | 112,212 | 477,260 |
| Chief Financial Officer | 2014 | 275,000 | — | — | 84,627 | 359,627 |
| | | | | | | |
| Timothy Graff | 2015 | 240,000 | 112,560 | — | 66,516 | 419,076 |
| President of American Pet Insurance Company | 2014 | 72,355(2) | 556,000 | 17,315(3) | — | 645,670 |
| |
(1)
| The amounts reported in this column represent the aggregate grant date fair value of the stock options and restricted stock granted to our named executive officers during the years ended December 31, 2015 and 2014, as computed in accordance with Accounting Standards Codification Topic 718. The assumptions used in calculating the aggregate grant date fair value of the stock options and restricted stock reported in this column are set forth in Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. The amounts reported in this column reflect the accounting cost for these stock options and restricted stock, and do not correspond to the actual economic value that may be receivedsalary earned by our named executive officers from the stock options and restricted stock. |
| |
(2)
| Mr. Graff's full-time employment commenced on August 1, 2014. |
| |
(3)
| Mr. Graff was granted 2,385 shares of fully-vested restricted stock under the 2014 Plan in lieu of a cash bonus for 2014. |
2015 Non-Equity Incentive Plan Awards
Annual bonuses for our named executive officers during the 2022, 2021 and 2020 fiscal years.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position | Year | | Salary | | Stock Awards
(1) | | Non-Equity Incentive Plan Compensation
(2) | | Total |
| Darryl Rawlings | 2022 | | $ | 300,000 | | | $ | 1,356,281 | | | $ | — | | (3) | $ | 1,656,281 | |
| Chief Executive Officer | 2021 | | $ | 300,000 | | | $ | 4,623,067 | | | $ | 39,355 | | | $ | 4,962,422 | |
| 2020 | | $ | 300,000 | | | $ | 822,367 | | | $ | 38,400 | | | $ | 1,160,767 | |
| Drew Wolff | 2022 | | $ | 300,000 | | | $ | 1,184,819 | | (4) | $ | 22,964 | | (5) | $ | 1,507,783 | |
| Chief Financial Officer | 2021 | | $ | 181,818 | | (6) | $ | 1,578,224 | | | $ | 44,240 | | (4) | $ | 1,804,282 | |
| 2020 | (7) | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Margi Tooth | 2022 | | $ | 300,000 | | | $ | 4,683,168 | | (8) | $ | — | | (3) | $ | 4,983,168 | |
| President | 2021 | | $ | 300,000 | | | $ | 4,941,857 | | | $ | 39,355 | | (8) | $ | 5,281,212 | |
| 2020 | | $ | 300,000 | | | $ | 851,155 | | | $ | 48,473 | | | $ | 1,199,628 | |
| Tricia Plouf | 2022 | | $ | 300,000 | | | $ | 4,683,168 | | | $ | 20,330 | | (5) | $ | 5,003,498 | |
| Chief Operating Officer | 2021 | | $ | 300,000 | | | $ | 4,887,460 | | | $ | 39,355 | | | $ | 5,226,815 | |
| 2020 | | $ | 300,000 | | | $ | 851,155 | | | $ | 40,688 | | | $ | 1,191,843 | |
| Emily Dreyer | 2022 | | $ | 220,000 | | | $ | 2,124,858 | | | $ | 41,868 | | | $ | 2,386,726 | |
| Senior Vice President, | 2021 | (9) | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Channels | 2020 | (9) | $ | — | | | $ | — | | | $ | — | | | $ | — | |
(1)The amounts represent aggregate grant date fair value of the RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of the assumptions we apply in calculating these amounts.
(2)For additional information regarding the non-equity incentive plan compensation, please refer to the CD&A, under the section titled "5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for the 2022 Performance Year". This column includes amounts earned for the prior fiscal year but paid the following fiscal year.
(3)For the 2022 performance year, Mr. Rawlings and Ms. Tooth each waived receipt of their earned short-term incentive awards (cash bonuses), in the amounts of $21,534 and $21,534, respectively.
(4)With the exception of named executive officers, the Company issued short-term incentive awards (cash bonuses) to its team members on a monthly basis. In lieu of taking their full cash bonus amount, team members may elect to convert all or a portion of their cash bonus into Company equity, in the form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. Prior to Mr. Wolff's appointment to Chief Financial Officer and becoming a named executive officer, Mr. Wolff received monthly bonuses, in the aggregate amount of $19,065. Of that amount, Mr. Wolff elected to convert $11,370 of his cash bonus into RSUs, receiving the remaining $7,695 in cash. Such RSUs were based ongranted in November 2021, in the achievementamount of quarterly corporate performance objectives, which in 2015 included measures related to business and financial growth, employee and member experience, brand, investor relations and efficiency. The annual bonus awarded to Messrs. Banks and Graff were also based on individual performance objectives.145 shares with an aggregate grant date fair value of $12,413. In February 2016, based on2022, Mr. Wolff's 2021 cash bonus as Chief Financial Officer was approved in the achievementamount of these quarterly corporate$25,175. Mr. Wolff elected to convert 100% of his cash bonus into RSUs. Such RSUs were granted in February 2022 in the amount of 262 shares with an aggregate grant date fair value of $15,049. To avoid double counting, the aggregate grant date fair value of RSUs granted pursuant to electing to convert their cash bonus into RSUs is excluded from the column in this table titled "Stock Awards".
(5)For the first half of the 2022 performance year (January 2022 through June 2022), Mr. Wolff and individual objectives, our Chief Executive Officer, except with respect to his own compensation, and our compensation committee determined that approximately 84.28%, 81.61% and 69.29% of Messrs. Rawlings’, Banks’ and Graff’s target bonuses, respectively, should be awarded. For 2015, Messrs. Rawlings, Banks and Graff had target bonuses at 100% achievement equal to 100%, 50% and 40%Ms. Plouf each waived receipt of their annual base salaries. Accordingly, Messrs. Rawlings, Banks and Graff were awarded the annual bonuses reflectedearned short-term incentive awards (cash bonuses), in the amounts of $37,480 and $19,300, respectively. Ms. Plouf ceased to provide services to Trupanion in March 2023.
(6)Mr. Wolff's annual salary is $300,000. Mr. Wolff became an employee on May 24, 2021 and was appointed to serve as Trupanion's Chief Financial Officer on September 24, 2021. Mr. Wolff's pro-rated salary for 2021 was $181,818.
(7)Mr. Wolff became a named executive officer for the first time in 2021.
(8)For the 2021 performance year, the Company issued short-term incentive awards (cash bonuses) to its named executive officers in February 2022. Ms. Tooth’s 2021 cash bonus was approved in the amount of $39,355. In lieu of taking their full cash bonus amount, team members may elect to convert all or a portion of their cash bonus into Company equity, in the form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. In
February 2022, Ms. Tooth elected to convert 100% of her cash bonus into RSUs. Such RSUs were granted in February 2022, in the amount of 409 shares with an aggregate grant date fair value of $23,493. In this table, above.the original cash bonus of $39,355 is reported under the column titled "Non-Equity Incentive Plan Compensation". To avoid double counting, the aggregate grant date fair value of RSUs granted pursuant to electing to convert their cash bonus into RSUs is excluded from the column in this table titled "Stock Awards".
(9)Ms. Dreyer became a named executive officer for the first time in 2023.
2015 Equity
Grants of Plan-Based Awards
EquityThe following table sets forth information regarding the short-term incentive awards areearned by our named executive officers during fiscal year 2022, the long-term incentive awards earned in fiscal year 2021 and granted to our named executive officers atin fiscal year 2022, and additional awards as described in footnotes (5), (6), and (7) below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan (1) | | | |
| Name | Award Type | Approval Date | Grant Date | Threshold | Target | Maximum | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards
(2) | |
| Darryl Rawlings | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | $ | — | | | | |
| RSU (4) | 2/22/2022 | 2/28/2022 | | | | 15,132 | | $ | 1,356,281 | | |
| Drew Wolff | Annual short-term incentive award (3) | | | $ | — | | $ | 120,000 | | $ | — | | | | |
| RSU (4) | 2/22/2022 | 2/28/2022 | | | | 13,219 | | $ | 1,184,819 | | |
| RSU (5) | 2/22/2022 | 2/28/2022 | | | | 262 | | $ | 15,049 | | (7) |
| Margi Tooth | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | $ | — | | | | |
| RSU (4) | 2/22/2022 | 2/28/2022 | | | | 52,250 | | $ | 4,683,168 | | |
| RSU (6) | 2/22/2022 | 2/28/2022 | | | | 409 | | $ | 23,493 | | (7) |
| Tricia Plouf | Annual short-term incentive award (3) | | | $ | — | | $ | 97,500 | | $ | — | | | | |
| RSU (4) | 2/22/2022 | 2/28/2022 | | | | 52,250 | | $ | 4,683,168 | | |
| Emily Dreyer | Annual short-term incentive award (3) | | | $ | — | | $ | 88,000 | | $ | — | | | | |
| RSU (4) | 2/22/2022 | 2/28/2022 | | | | 23,707 | | $ | 2,124,858 | | |
(1)The amounts in these columns represent the discretionthreshold, target and maximum amounts of cash that might have become payable to each named executive officer as a short-term incentive award. Trupanion employees (including named executive officers) may elect to take their short-term awards in the form of equity with a 20% premium to cash on value but subject to a 2-year lock-up.
(2)The amounts represent the aggregate grant date fair value of the restricted stock units, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our compensation committee. In 2015,officers. See Note 12 to our Boardconsolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of Directorsthe assumptions we apply in calculating these amounts.
(3)These rows represent possible payouts pursuant to the annual short-term incentive awards. Trupanion employees (including named executive officers) may elect to take their short-term awards in the form of equity with a 20% premium to cash on value but subject to a 2-year lock-up.
(4)Reflects the long-term incentive awards received in the form of restricted stock units, which vests as to 1/4th on the approximate one year anniversary of the date of grant and compensation committee determined notthen 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date.
(5)Mr. Wolff elected to receive a portion of his short-term incentive award in the form of RSUs. Such RSUs were fully vested on the grant anydate but subject to a 2-year lock-up.
(6)Ms. Tooth elected to receive the full amount of her short-term incentive award in the form of RSUs. Such RSUs were fully vested on the grant date but subject to a 2-year lock-up.
(7)These amounts reflect a 20% premium to the employees who elect to take their short-term incentive award in the form of equity awardspursuant to Mr. Rawlings due to his prior equity grants, which continued to vest throughout 2015. In July 2015, our compensation committee granted Messrs. Banks and Graff stock options to acquire 19,200 and 24,000 shares of our common stock, respectively, in connection with the continuation of their employment with us.policy regarding short-term incentive awards.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding stock options and restricted stock units held by our named executive officers as of December 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | Stock Awards |
| Name | Grant Date | | Number of Securities Underlying Options
Total Grant | Number of Securities Underlying Unexercised Options
Exercisable | Number of Securities Underlying Unexercised Options
Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested
(1) |
| Darryl Rawlings | 2/28/2022 | (2) | | | | | | 15,132 | | $ | 719,224 | |
| 2/22/2021 | (3) | | | | | | 24,640 | | $ | 1,171,139 | |
| 4/3/2020 | (4) | | | | | | 10,490 | | $ | 498,590 | |
| 2/22/2019 | (5) | | | | | | 1,505 | | $ | 71,533 | |
| 5/4/2017 | (6) | 23,448 | | 23,448 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 8/8/2016 | (7) | 50,000 | | 2,000 | | — | | $ | 14.95 | | 8/8/2026 | | |
| Drew Wolff | 2/28/2022 | (2) | | | | | | 13,219 | | $ | 628,299 | |
| 11/12/2021 | (8) | | | | | | 5,283 | | $ | 251,101 | |
| 8/16/2021 | (9) | | | | | | 4,843 | | $ | 230,188 | |
| Margi Tooth | 2/28/2022 | (2) | | | | | | 52,250 | | $ | 2,483,443 | |
| 2/22/2021 | (3) | | | | | | 26,341 | | $ | 1,251,988 | |
| 4/3/2020 | (4) | | | | | | 10,857 | | $ | 516,033 | |
| 2/22/2019 | (5) | | | | | | 2,377 | | $ | 112,979 | |
| 5/4/2017 | (6) | 23,448 | | 23,448 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 12/21/2015 | (10) | 40,000 | | 40,000 | | — | | $ | 8.93 | | 12/21/2025 | | |
| 7/24/2015 | (11) | 19,200 | | 200 | | — | | $ | 7.78 | | 7/24/2025 | | |
| 11/7/2014 | (12) | 10,000 | | 7,500 | | — | | $ | 6.54 | | 11/7/2024 | | |
| Tricia Plouf | 2/28/2022 | (2) | | | | | | 52,250 | | $ | 2,483,443 | |
| 2/22/2021 | (3) | | | | | | 26,051 | | $ | 1,238,204 | |
| 4/3/2020 | (4) | | | | | | 10,857 | | $ | 516,033 | |
| 2/22/2019 | (5) | | | | | | 1,783 | | $ | 84,746 | |
| 5/4/2017 | (6) | 46,895 | | 46,895 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 5/6/2016 | (13) | 50,000 | | 44,049 | | — | | $ | 14.40 | | 5/6/2026 | | |
| 7/24/2015 | (11) | 10,255 | | 7,999 | | — | | $ | 7.78 | | 7/24/2025 | | |
| Emily Dreyer | 2/28/2022 | (2) | | | | | | 23,707 | | $ | 1,126,794 | |
| 2/22/2021 | (3) | | | | | | 204 | | $ | 9,696 | |
| 2/22/2021 | (3) | | | | | | 7,199 | | $ | 342,168 | |
| 4/3/2020 | (4) | | | | | | 518 | | $ | 24,621 | |
| 2/22/2019 | (5) | | | | | | 204 | | $ | 9,696 | |
| 5/4/2017 | (6) | 4,250 | | 4,250 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 10/7/2016 | (14) | 5,000 | | 5,000 | | — | | $ | 16.04 | | 9/19/2026 | | |
| 7/22/2016 | (15) | 1,450 | | 700 | | — | | $ | 15.46 | | 5/4/2027 | | |
| 7/24/2015 | (11) | 2,484 | | 704 | | — | | $ | 7.78 | | 9/19/2026 | | |
(1)Value is calculated by multiplying the number of restricted stock units or restricted stock awards that have not vested by the closing market price of our stock ($47.53) as of the close of trading on December 30, 2022 (the last trading day of the fiscal year).
(2)Restricted stock units vested as to 1/4th of the shares on February 25, 2023 and 1/16th vests each quarter thereafter.
(3)Restricted stock units vested as to 1/4th of the shares on February 25, 2022 and 1/16th vests each quarter thereafter.
(4)Restricted stock units vested as to 1/4th of the shares on February 25, 2021 and 1/16th vests each quarter thereafter.
(5)Restricted stock units vested as to 1/4th of the shares on February 25, 2020 and 1/16th vests each quarter thereafter.
(6)Stock option vested as to 1/4th of the shares underlying this option on May 4, 2018 and 1/48th vests monthly thereafter.
(7)Stock option vested as to 1/4th of the shares underlying this option on August 8, 2017 and 1/48th vests monthly thereafter.
(8)Restricted stock units will vest as to 1/4th of the shares on November 25, 2022 and 1/16th vests each quarter thereafter.
(9)Restricted stock units will vest as to 1/4th of the shares on August 25, 2022 and 1/16th vests each quarter thereafter.
(10)Stock option vested as to 1/4th of the shares underlying this option on January 7, 2017 and 1/48th vests monthly thereafter.
(11)Stock option vested as to 1/4th of the shares underlying this option on July 24, 2016 and 1/48th vests monthly thereafter.
(12)Stock option vested as to 1/4th of the shares underlying this option on September 1, 2015 and 1/48th vests monthly thereafter.
(13)Stock option vested as to 1/4th of the shares underlying this option on May 6, 2017 and 1/48th vests monthly thereafter.
(14)Stock option vested as to 1/4th of the shares underlying this option on July 22, 2017 and 1/48th vests monthly thereafter.
(15)Stock option vested as to 1/4th of the shares underlying this option on July 24, 2016 and 1/48th vests monthly thereafter.
Option Exercises and Stock Vested Table
The following table presents, for each ofprovides information regarding stock options exercised, restricted stock and restricted stock units vested which were held by our named executive officers information regarding outstandingduring fiscal 2022.
| | | | | | | | | | | | | | | | | |
| | Option Awards | Stock Awards |
| Name | Grant Date | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting |
| Darryl Rawlings | 2/22/2021 | | | 19,164 | | $ | 1,503,941 | |
| 4/3/2020 | | | 8,391 | | $ | 594,624 | |
| 2/22/2019 | | | 6,020 | | $ | 426,592 | |
| 2/20/2018 | | | 1,220 | | $ | 108,129 | |
| 5/4/2017 | 20,000 | | $ | 608,560 | | | |
| 8/8/2016 | 48,000 | | $ | 2,497,080 | | | |
| Drew Wolff | 2/28/2022 | | | 262 | | $ | 23,483 | |
| 11/12/2021 | | | 1,761 | | $ | 95,323 | |
| 8/16/2021 | | | 2,201 | | $ | 160,277 | |
| Margi Tooth | 2/28/2022 | | | 409 | | $ | 36,659 | |
| 2/22/2021 | | | 20,487 | | $ | 1,607,766 | |
| 4/3/2020 | | | 8,685 | | $ | 615,459 | |
| 2/22/2019 | | | 9,505 | | $ | 673,566 | |
| 2/20/2018 | | | 1,220 | | $ | 108,129 | |
| Tricia Plouf | 2/22/2021 | | | 20,261 | | $ | 1,590,045 | |
| 4/3/2020 | | | 8,685 | | $ | 615,459 | |
| 2/22/2019 | | | 7,128 | | $ | 505,108 | |
| 2/20/2018 | | | 1,220 | | $ | 108,129 | |
| Emily Dreyer | 2/22/2021 | | | 5,758 | | $ | 451,892 | |
| 4/3/2020 | | | 414 | | $ | 29,361 | |
| 2/22/2019 | | | 814 | | $ | 57,706 | |
| 11/19/2018 | | | 100 | | $ | 7,086 | |
| 2/20/2018 | | | 313 | | $ | 27,741 | |
Termination of Employment and Change of Control Payments Table
The following discussion and table summarize the compensation that would have been payable to each named executive officer under the various scenarios assuming the triggering event occurred at the close of business on December 31, 2022 using a price per share of our common stock equal to the closing market price on the NASDAQ Stock Market as of that date. The payments summarized in the following table are governed by the various agreements and arrangements described in "Part 6. Other Compensation Policies and Practices" of the CD&A above.
No special payments are due if any of the named executive officers terminates his employment voluntarily or is terminated for cause. For all terminations, a terminated employee receives accrued and unpaid salary and the balance in his or her 401(k) Plan account. We do not accrue vacation pay for the named executive officers or other senior officers. On the same basis as we provide benefits to all of our employees, the named executive officers have life insurance and disability benefits.
The actual amounts to be paid to and the value of stock options, restricted stock, and other equityrestricted stock units held by a named executive officer upon any termination of employment can be determined only at the time of such termination, and depend on the facts and circumstances then applicable.
| | | | | | | | | | | | | | | | | |
| Name and Termination Event | | Severance Payment
(1)(2) | Accelerated Restricted Stock Awards and Restricted Stock Units
(3) | Continued Benefit Plan Coverage
(4) | Total |
| Darryl Rawlings | | | | | |
| Termination without Cause | | $ | 171,534 | | $ | — | | $ | 1,016 | | $ | 172,550 | |
| After Change of Control, Termination without Cause | (5) | $ | 171,534 | | $ | 2,460,486 | | $ | — | | $ | 2,632,020 | |
| Drew Wolff | | | | | |
| Termination without Cause | | $ | 83,520 | | $ | — | | $ | 1,016 | | $ | 84,536 | |
| After Change of Control, Termination without Cause | (5) | $ | 210,444 | | $ | 1,109,588 | | $ | — | | $ | 1,320,032 | |
| Margi Tooth | | | | | |
| Termination without Cause | | $ | 136,919 | | $ | — | | $ | 1,016 | | $ | 137,935 | |
| After Change of Control, Termination without Cause | (5) | $ | 171,534 | | $ | 4,364,442 | | $ | — | | $ | 4,535,976 | |
| Tricia Plouf (6) | | | | | |
| Termination without Cause | | $ | 166,553 | | $ | — | | $ | 835 | | $ | 167,388 | |
| After Change of Control, Termination without Cause | (5) | $ | 189,630 | | $ | 4,322,426 | | $ | — | | $ | 4,512,056 | |
| Emily Dreyer | | | | | |
| Termination without Cause | | $ | 126,483 | | $ | — | | $ | 1,016 | | $ | 127,499 | |
| After Change of Control, Termination without Cause | (5) | $ | 151,867 | | $ | 1,512,975 | | $ | — | | $ | 1,664,842 | |
(1)Under our Employee Severance and Change in Control Plan (our Severance Plan), in the event the executive is terminated without cause and not in connection with a change in control, the executive is entitled to a lump sum payment equal to the executive's salary for a minimum of two weeks with an additional two weeks for each completed year of employment up to a maximum of 26 weeks, plus his or her earned but unpaid bonuses. Under our Severance Plan, in the event the executive is terminated without cause within three months prior or 12 months following a change of control, the executive is entitled to a payment equal to six months of the greater of (i) the executive's salary and (ii) the executive's base salary in effect when the change in control first occurred plus, for each full calendar quarter prior to the date of termination, any bonuses earned by the executive but unpaid as of the date of termination.
(2)The amounts shown in this column are the salary and bonus cash severance amounts due under our Severance Plan for a termination without cause and are based on 2022 short-term incentive awards.
(3)All unvested restricted stock awards heldand restricted stock units vest in full if the named executive officer is terminated without cause three months prior to or 12 months following a change in control. The amounts shown in this column reflect the value of the named executive officer’s unvested restricted stock awards and/or restricted stock units with vesting accelerated in full as of December 31, 2015.
|
| | | | | | | | | | | | | | | | | | | | | | |
| NAME | | GRANT DATE (1) | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
EXERCISABLE
(#) | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
UNEXERCISABLE
(#) | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER OF
SHARES OR
UNITS OF
STOCK
THAT
HAVE NOT
VESTED
(#) | | MARKET
VALUE OF
SHARES OR
UNITS OF
STOCK
THAT
HAVE NOT
VESTED
($)(2) |
| Darryl Rawlings | | 12/4/2008 | (3) | 544,592 |
| | — |
| | $ | 0.90 |
| | 12/4/2018 |
| | — |
| | — |
|
| | 9/23/2011 | (4) | 309,679 |
| | — |
| | $ | 1.04 |
| | 9/23/2021 |
| | — |
| | — |
|
| | | 8/2/2013 | (5) | — |
| | — |
| | — |
| | — |
| | 467,508 |
| | $ | 4,562,878 |
|
| Michael Banks | | 6/21/2012 | (6) | 175,000 |
| | 25,000 |
| | $ | 4.05 |
| | 6/21/2022 |
| | — |
| | — |
|
| | 8/2/2013 | (7) | 62,500 |
| | 37,500 |
| | $ | 4.77 |
| | 8/2/2023 |
| | — |
| | — |
|
| | | 7/24/2015 | (8) | — |
| | 19,200 |
| | $ | 7.78 |
| | 7/24/2025 |
| | — |
| | — |
|
| Timothy Graff | | 8/1/2014 | (9) | 33,333 |
| | 66,667 |
| | $ | 9.90 |
| | 8/1/2024 |
| | — |
| | — |
|
| | 7/24/2015 | (10) | — |
| | 24,000 |
| | $ | 7.78 |
| | 7/24/2025 |
| | — |
| | — |
|
| |
(1)
| All of the outstanding equity awards were granted under our 2007 Equity Compensation Plan except for the award granted to Mr. Graff on August 1, 2014 and the awards granted in 2015, which were granted under our 2014 Equity Incentive Plan. |
| |
(2)
| Calculated based on the closing stock price reported on the New York Stock Exchange on December 31, 2015 of $9.76 per share. |
| |
(3)
| Twenty-five percent of the shares underlying this option vested on April 25, 2008 and approximately 2% vested monthly thereafter. |
| |
(4)
| Twenty-five percent of the shares underlying this option vested on September 23, 2012 and approximately 2% vested monthly thereafter. |
| |
(5)
| Of the 701,262 restricted shares, 116,877 vested on August 2, 2014 and approximately 17% vests on each annual anniversary of that date thereafter. |
| |
(6)
| Twenty-five percent of the shares underlying this option vested on June 13, 2013 and approximately 2% vests monthly thereafter. |
| |
(7)
| Twenty-five percent of the shares underlying this option vested on June 28, 2014 and approximately 2% vests monthly thereafter. |
| |
(8)
| Twenty-five percent of the shares underlying this option vests on July 24, 2016 and approximately 2% vests monthly thereafter. |
| |
(9)
| Twenty-five percent of the shares underlying this option vested on August 1, 2015 and approximately 2% vests monthly thereafter. |
| |
(10)
| Twenty-five percent of the shares underlying this option vests on July 24, 2016 and approximately 2% vests monthly thereafter. |
Employment, Severance and Change2022. The value of Control Agreements
Darryl Rawlings
the unvested restricted stock awards and/or restricted stock units held by each named executive officer was calculated based upon the aggregate market value of such shares. We entered into an employment agreement with Mr. Rawlings, our Chief Executive Officer, on June 30, 2006,used a price of $47.53 per share to determine market value, which was amendedthe closing market price of our common stock as reported by the NASDAQ Stock Market on December 30, 2022, the last trading day of the year.
(4)The amounts shown in this column reflect the one-month cost of group medical, dental and restated on April 20, 2007. Pursuant to the amended and restated employment agreement, Mr. Rawlings is entitled to an initial base salary and annual bonusvision insurance benefits based on the achievementmonthly cost for the applicable coverage level.
(5)A change of objectives determined by our compensation committee. If we terminate Mr. Rawlings’ employment without “cause,” hecontrol is entitled to receive continued paymentdefined as the occurrence of his base salary for a period equal to the lesser of six months or through the endany of the currentfollowing events: (a) any "Person" (as such term is used in Sections 13(d) and 14(d) of his employment agreement,the Exchange Act) becomes the "beneficial owner" (as defined in addition to standard entitlements such as earned but unpaid wages, including any bonus he is otherwise entitled to, reimbursement for unpaid expenses incurred and paymentRule 13d-3 of other vested benefits.
If, onthe Exchange Act), directly or within nine monthsindirectly, of a “changesecurities of control,” we or our successor in interest terminate Mr. Rawlings’ employment without “cause” or Mr. Rawlings voluntarily resigns for “good reason,” he is entitled to receive accelerated vestingTrupanion representing more than 50% of 100% of his then-unvested interests in all of our equity securities.
Under Mr. Rawlings’ amended and restated employment agreement, “cause” means his (i) conviction of an offence that is related to his employment; (ii) commission of a fraudulent, illegal or dishonest act in respect of us or any of our affiliates or subsidiaries; (iii) willful misconduct or gross negligence that reasonably could be expected to be injurious (in our reasonable discretion) to our business, operations or reputation or to any of our affiliates or subsidiaries (monetarily or otherwise); (iv) violation of our policies or procedures in effect from time to time;the total voting power represented by Trupanion's then-outstanding voting securities; provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than 50% of the extent that such violation is subject to cure, Mr. Rawlings shall have an opportunity to cure such violation within ten days following written noticetotal voting power of such violation; (v) afterthe securities of Trupanion will not be considered a written warning and a 10-day opportunity to cure non-performance, failure to perform his duties as assigned to him from time to time; or (vi) other material breachChange in Control; (b) the consummation of his amended and restated employment agreement.
Under Mr. Rawlings’ restricted stock agreement, “change of control” means (i) our dissolution or liquidation; (ii) the sale or exclusive licensedisposition by Trupanion of all or substantially all of our assets to a person that is not an affiliate; (iii) a merger, reorganization or consolidation in which each outstanding shareTrupanion's assets; (c) the consummation of our capital stock is converted into or exchanged for a different kind of security of the successor entity and the holders of our outstanding voting power immediately prior to such conversion or exchange do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such conversion or exchange; or (iv) the sale of all or substantially all of our outstanding capital stock to a person that is not an affiliate.
Under Mr. Rawlings’ restricted stock agreement, “good reason” means failure to pay any amounts owed to Mr. Rawlings within ten days of written demand therefor.
Michael Banks
We entered into an employment agreement with Mr. Banks, our Chief Financial Officer, on June 13, 2012. Pursuant to the employment agreement, Mr. Banks is entitled to an initial base salary and annual bonus based on the achievement of objectives determined by our compensation committee. If we terminate Mr. Banks’ employment without “cause,” he is entitled to receive a severance payment equivalent to two months of his base salary, in addition to standard entitlements, such as earned but unpaid wages, including any bonus he is otherwise entitled to, reimbursement for unpaid expenses incurred and payment of other vested benefits.
If, on or within 12 months of a “change of control,” we or our successor in interest terminate Mr. Banks’ employment without cause, he is entitled to receive a severance payment equivalent to one year of his then-current base salary.
Under Mr. Banks’ employment agreement, “cause” means (i) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Mr. Banks with respect to his obligations or otherwise relating to our business; (ii) any acts or conduct by Mr. Banks that are materially adverse to our interests; (iii) Mr. Banks’ material breach of his employment agreement; (iv) Mr. Banks’ breach of our confidential information, inventions, nonsolicitation and noncompetition agreement; (v) Mr. Banks’ conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise negatively impacts his ability to effectively perform his duties under his employment agreement; (vi) Mr. Banks’ willful neglect of duties as determined in the sole and exclusive discretion of our Board of Directors; (vii) Mr. Banks’ inability to perform the essential functions of his position, with or without reasonable accommodation, due to a mental or physical disability; (viii) Mr. Banks’ death; or (ix) Mr. Banks’ failure to relocate his primary residence to Seattle, Washington within three months of the effective date of his employment agreement.
Under Mr. Banks’ employment agreement, “change of control” means (i) any person, other than a trustee or other fiduciary holding our securities under one of our employee benefit plans, becoming the beneficial owner, directly or indirectly, of our securities representing more than 50% of (A) our outstanding shares of common stock or (B) the combined voting power of our then-outstanding securities; (ii) the sale or disposition of all or substantially all of our assets (or any transaction having similar effect); (iii) us becoming party to a merger or consolidation that resultsof Trupanion with any other corporation, other than a merger or consolidation which would result in the holdersvoting securities of our voting securitiesTrupanion outstanding immediately prior to such merger or consolidation failing to continuethereto continuing to represent (either( either by remaining outstanding or by being converted into voting securities of the surviving entity) more thanentity or its parent) at least 50% of the combinedtotal voting power of ourrepresented by the voting securities of Trupanion or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a "corporate transaction" under Section 424(a) of the Internal Revenue Code wherein the stockholders of Trupanion give up all of their equity interest in Trupanion (except for the acquisition, sale or (iv)transfer of all or substantially all of the outstanding shares of Trupanion); or (e) a change in the effective control of Trupanion that occurs on the date that a majority of members of the Board is replaced during any 12 month period by member of the Board whose appointment or election is not endorsed by as majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of Trupanion, the acquisition of additional control of Trupanion by the same Person will not be considered a Change in Control. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with Trupanion.
(6)As of March 2023, Ms. Plouf ceased to provide services to Trupanion.
Narrative Discussion to Termination of Employment and Change of Control Payment Table:
Please see the above discussion regarding our dissolutionSeverance Policy and Change of Control Policy under the CD&A in the section titled "6.2 Severance and Change-in-Control Protection". In addition, our equity incentive plans generally provide that upon termination of employment, other than for Cause, death, or liquidation.permanent and total disability, outstanding stock options cease vesting and the optionee has three months to exercise the option or, if earlier, until the option expires. If the optionee is terminated for Cause, as defined in the applicable equity incentive plan, the participant has no right to exercise such option on or after the effective date of such termination.
Under our equity incentive plans, if a change in control occurs and the outstanding equity is not substituted or assumed by the successor entity, then such equity would vest in full and each participant would have the opportunity to exercise his or her equity in full, including any portion not then vested. We believe that acceleration of vesting of options, restricted stock awards, and restricted stock units is appropriate when the stock option, restricted stock award, or restricted stock unit are not continued or assumed by the successor company, as the recipient has not received the full contemplated benefit of the equity award due to circumstances beyond the recipient’s control.
Timothy GraffOur option agreements generally provide that if the holder’s employment is terminated due to death or disability, no additional vesting shall occur and the participant has 12 months to exercise the option or, if earlier, until the option expires.
Our restricted stock unit agreements generally provide that upon a termination of service for any reason, all unvested restricted stock units will be forfeited and all rights of participation in such restricted stock units will immediately terminate.
Pay Ratio
For fiscal year 2022:
•the annual total compensation, calculated as described below, of our Chief Executive Officer, Darryl Rawlings, was $1,712,517; and
•the estimated median of the annual total compensation of all employees of our Company, other than Darryl Rawlings, calculated as described below was $93,133.
Based on this information, for 2022 the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual compensation of all employees was 18:1.
To determine the median employee as of December 31, 2022, we used the total base earnings, bonuses earned, and the grant date fair value of equity granted in 2022 for all employees, full-time and part–time who were employed as of December 31, 2022 and excluded independent contractors, as they are not employees. We also excluded approximately 14 employees located in Germany and Switzerland who became employees in connection with our acquisition of Smart Paws GmbH in August 2022 and approximately 14 employees located in the Czech Republic and Belgium who became employees in connection with our acquisition of Royal Blue s.r.o. in November 2022. Finally, we also excluded eleven employees hired in December 2022 who had not received compensation before December 31, 2022.
The 2021 annual bonus (for certain executives) and the 2021 fourth quarter bonus for eligible employees were included as they were paid out in 2022. We did not include the 2022 annual bonus (for certain executives) nor the December 2022 bonus for eligible employees, as these were paid out in 2023.
For employees hired throughout the year, we annualized earnings based on amounts paid during the portion of 2022 in which they were employed.
With the factors noted above, we identified the median role.
We entered into an offer letter agreement withthen used the total compensation set forth in the summary compensation table for Mr. Graff, PresidentRawlings, added to it the amounts we pay on behalf of American Pet Insurance Company,Mr. Rawlings pursuant to benefits programs that are available on July 6, 2014,a non-discriminatory basis to all our employees, including health, life and disability insurance premiums, child care at our headquarters, and enrollment of employee pets in our Trupanion medical insurance policy (Non-discriminatory Benefits) and compared that amount to the total compensation paid in 2022 for the identified role, which also included the Non-discriminatory Benefits paid out for the identified role. For the identified role and Mr. Rawlings, we included the applicable 2021 bonus which was amendedpaid in 2022 but did not include the December 2022 bonus which was paid in 2023. This determined the ratio set forth above.
In identifying the median employee under SEC rules, companies are permitted to use reasonable estimates, assumptions, and methodologies based on March 5, 2015. their own facts and circumstances. As a result, the disclosure regarding the compensation of our median employee may not be directly comparable to similar disclosure by other reporting companies.
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our Chief Executive Officer and to our other named executive officers and certain company financial performance metrics. Compensation actually paid, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning our compensation philosophy and how we align executive compensation with our performance, please refer to the Compensation Discussion and Analysis section of this proxy statement.
Pay Versus Performance Table
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based On: | | |
Year
(1) | Summary Compensation Total For CEO | Compensation Actually Paid to CEO
(2) | Average Summary Compensation Total for Other NEOs | Average Compensation Actually Paid to Other NEOs
(2) | Cumulative TSR | Peer Group Cumulative TSR
(3) | Net Income | Company Selected Measure - Adjusted Operating Income
(4) |
| 2022 | $ | 1,656,281 | | $ | (4,037,132) | | $ | 3,470,294 | | $ | (1,316,756) | | $ | 129.30 | | $ | 105.70 | | $ | (44,672,000) | | $ | 89,255,000 | |
| 2021 | $ | 4,962,422 | | $ | 5,890,091 | | $ | 3,953,082 | | $ | 4,603,908 | | $ | 359.17 | | $ | 175.96 | | $ | (35,530,000) | | $ | 78,454,000 | |
| 2020 | $ | 1,160,767 | | $ | 6,273,363 | | $ | 1,249,292 | | $ | 6,331,959 | | $ | 325.65 | | $ | 138.58 | | $ | (5,840,000) | | $ | 57,107,000 | |
(1)The offer letter hasCEO and other NEOs for the indicated years were as follows: (i) for 2022, our CEO was Darryl Rawlings, and our other NEOs were Drew Wolff, Margi Tooth, Tricia Plouf, and Emily Dreyer, (ii) for 2021, our CEO was Mr. Rawlings, and our other NEOs were Mr. Wolff, Ms. Tooth, Ms. Plouf, and Mr. Gavin Friedman, and (iii) for 2020, our CEO was Mr. Rawlings, Ms. Plouf, Ms. Tooth, Mr. Friedman, and Mr. Asher Bearman.
(2)Amounts reported in this column are based on total compensation reported for our CEO and other NEOs in the Summary Compensation Table for the indicated fiscal years and adjusted as shown in the table below. Fair value of equity awards was computed in accordance with our methodology used for financial reporting purposes.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | Executive(s) | Summary Compensation Table Total
($) | Subtract Stock Awards
($) | Add Year-End Equity Value ($) (i) | Change in Value of Prior Equity Awards
($) | Add Change in Value of Vested Equity Awards
($) | Subtract Value of Equity Awards that Failed to Meet Vesting Conditions
($) | Compensation Actually Paid ($) |
| 2022 | CEO | 1,656,281 | | (1,356,281) | | 719,224 | | (3,095,658) | | (1,960,698) | | — | | (4,037,132) | |
| Other NEOs | 3,470,294 | | (3,169,003) | | 1,680,494 | | (2,038,922) | | (1,259,619) | | — | | (1,316,756) | |
| 2021 | CEO | 4,962,422 | | (4,623,067) | | 5,788,691 | | 340,352 | | (578,307) | | — | | 5,890,091 | |
| Other NEOs | 3,953,082 | | (3,635,556) | | 4,529,917 | | 376,093 | | (619,628) | | — | | 4,603,908 | |
| 2020 | CEO | 1,160,767 | | (822,367) | | 4,018,186 | | 1,719,513 | | 197,264 | | — | | 6,273,363 | |
| Other NEOs | 1,249,292 | | (907,511) | | 4,434,208 | | 1,821,721 | | (265,751) | | — | | 6,331,959 | |
i.With the exception of named executive officers, the Company issued short-term incentive awards (cash bonuses) to its team members on a monthly basis. In lieu of taking their full cash bonus amount, team members may elect to convert all or a portion of their cash bonus into equity, in the form of RSUs, with a 20% premium to cash on value, fully vested on grant date and subject to a two year lock-up. To avoid double counting, the average grant date fair value of RSUs granted pursuant to certain named executive officers electing to convert their cash bonus into RSUs is excluded from the column in this table for each covered fiscal year. For covered years 2022, 2021, and 2020, an average vest date fair value of $25,888, $12,413 and $27,167, respectively, was excluded in this calculation.
(3)The Company used the NASDAQ-100 Tech Peer Group Cumulative TSR for each covered fiscal year.
(4)In accordance with SEC rules, we are required to include in the Pay versus Performance table the "most important" financial measure (as determined by us) used to link compensation actually paid to our Chief Executive Officer and to our other named executive officers to our performance for the most recently completed fiscal year. We determined Adjusted Operating Income, which is a measure included in our incentive program, meets this requirement and therefore, we have included this performance measure in the Pay versus Performance table.
Description of the Relationship Between Compensation Actually Paid to Our Named Executive Officers and Company Performance
The charts below describe the relationship between compensation actually paid to our Chief Executive Officer and to our other named executives officers (as calculated above) and our financial and stock performance for the indicated years. In addition, the first table below compares our cumulative TSR and peer group cumulative TSR for the indicated years.
The Company's Most Important Financial Performance Measures
The items listed below represent the most important financial metrics used to link the compensation actually paid to our Chief Executive Officer and other named executive officers to company performance for the 2022 fiscal year. Please refer to the CD&A sections titled “5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for the 2022 Performance Year” and “6.7 Discussion on Key Performance Metrics” for a description of the metrics below.
| | | | | |
| Short-term Incentive Awards | •Adjusted Operating Income |
| •Adjusted Operating Margin |
| Long-term Incentive Awards | •Growth of Intrinsic Value per Share |
Equity Compensation Plan Information
The following table presents information as of December 31, 2022 with respect to compensation plans under which shares of our common stock may be issued.
| | | | | | | | | | | | | | | | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |
| Equity compensation plans approved by security holders | 1,742,202 | $ | 13.5268 | | (1) | 1,241,046 | (2) |
| Equity compensation plans not approved by security holders | — | | — | | | — | | |
| Total | 1,742,202 | — | | | 1,241,046 | |
(1)The weighted average exercise price relates solely to outstanding stock option shares since shares of restricted stock units have no specific term and constitutes an at-will employment arrangement. The offer letterexercise price.
(2)Includes 1,241,046 shares of common stock that remain available for issuance under our 2014 Plan. Additionally, our 2014 Plan provides for an initial base salaryautomatic increases in the number of shares available for issuance under it on January 1 of each of the calendar years during the term of the 2014 Plan by the lesser of 4% of the number of shares of common stock issued and annual bonus basedoutstanding on each December 31 immediately prior to the achievementdate of objectivesincrease or the number determined by our compensation committee.Board of Directors. The offer letter does not provide for any change-of-control or severance payments.
Employee Benefits and Incentive PlansBoard of Directors approved the automatic increase in 2022.
2007 Equity Compensation Plan
Our Board of Directors and stockholders adopted our 2007 Equity Compensation Plan (2007 Plan) in December 2008. The 2007 Plan providesprovided for the grant of both incentive stock options, which qualify for favorable tax treatment to their recipients under Section 422 of the Internal Revenue Code, of 1986, as amended (Code), and nonstatutory stock options, as well as for the issuance of shares of restricted stock and stock bonuses and the award of restricted stock units. We may grant incentive stock options only to our employees. We may grant nonstatutory stock options, restricted stock, stock bonuses and restricted stock units to our employees, directors and consultants. The exercise price of each stock option must be at least equal to the fair market value of our common stock on the date of grant. The exercise price of incentive stock options granted to stockholders who, at the time of grant, own stock representing more than 10% of the voting power of all classes of our stock, must be at least equal to 110% of the fair market value of our common stock on the date of grant. The maximum permitted term of options granted under our 2007 Plan is ten years, except that the maximum permitted term of incentive stock options granted to stockholders who, at the time of grant, ownowned stock representing more than 10% of the voting power of all classes of our stock, is five years. In the event of our merger or consolidation, the 2007 Plan provides that, unless the applicable award agreement provides otherwise, if awards are not assumed or substituted in connection with the merger or consolidation, then the vesting and exercisability of such awards will accelerate in full, followed by termination of any unexercised awards.
We ceased issuing awards under the 2007 Plan upon the implementation of our 2014 Equity Incentive Plan (2014 Plan).Plan. As a result, the 2007 Plan terminated and we will notno longer grant any additional options under the 2007 Plan, and the 2007 Plan terminated. ThePlan. However, outstanding options and restricted stockawards granted under the 2007 Plan however, remain outstanding, subjectwill continue to be governed by the terms of the 2007 Plan and stock option and restricted stock agreements, until such outstanding options are exercised or shares of restricted stock are vested or until the awards terminate or expire by their terms.Plan. Options and restricted stock granted under the 2007 Plan have similar terms to those described abovebelow with respect to such awards to be granted under our 2014 Plan.
2014 Equity Incentive Plan
Our Board of Directors and stockholders adopted our 2014 Plan in June 2014, it became effective July 17, 2014 and serves as the successor to our 2007 Plan. We initially reserved 2,000,000 shares of our common stock to be issued under our 2014 Plan. TheUnder the 2014 Plan, the number of shares reserved for issuance under our 2014 Plan increasedis and will continue to automatically increase on January 1 2016 and will increase automatically for each of the calendar years 20172016 through 2024, by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31 of such year. Ouryear; provided, however, that our Board of Directors or compensation committee may however, reduce the
amount of the increase in any particular year. Between 2017 and 2021, our Board of Directors declined the automatic increase that would have occurred on January 1 of each year, but did approve the increase in 2022. In addition to the foregoing, the following shares are available for grant and issuance under our 2014 Plan:
•shares subject to options or stock appreciation rights (SARs) granted under our 2014 Plan that ceased to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2014 Plan that were subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2014 Plan that otherwise terminated without shares being issued;
•shares surrendered, canceled, or exchanged for cash or the same type of award or a different award (or combination thereof);
•shares reserved but not issued or subject to outstanding awards under our 2007 Plan on July 17, 2014;
•shares issuable upon the exercise of options or subject to other awards under our 2007 Plan prior to July 17, 2014 that ceased to be subject to such options or other awards by forfeiture or otherwise after July 17, 2014;
•shares issued under our 2007 Plan that were forfeited or repurchased by us after July 17, 2014; and
•shares subject to awards under our 2007 Plan that were used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Our 2014 Plan authorizes the award of stock options, restricted stock awards (RSAs), SARs, restricted stock units (RSUs),RSUs, performance awards and stock bonuses. No person will be eligible to receive more than 1,000,000 shares in any calendar year under our 2014 Plan other than a new employee, who will be eligible to receive no more than 2,000,000 shares under the 2014 Plan in the calendar year in which the employee commences employment. Additionally, no participant may be granted in a calendar year a performance cash award having a maximum value in excess of $5.0 million under our 2014 Plan. Such limitations arewere designed to help ensure that any deductions to which we would otherwise be entitled with respect to such awards will not be subjectcompensation was eligible for exceptions to the $1.0 million limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code.
Our 2014 Plan permitsThe Tax Cuts and Jobs Act of 2017, effective January 1, 2018 (2017 Tax Act), removed the grantperformance-based compensation exception to Section 162(m) of performance-based stock and cashthe Code, except as to outstanding awards that may qualify as performance-based compensation that is not subject toare grandfathered. The 2017 Tax Act also extended the $1.0 million limitationSection 162(m) limit on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code. To help ensure that the compensation attributable to performance-based awards will so qualify, our compensation committee can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of specified pre-established performance goals during a designated performance period.Chief Financial Officer beginning in 2018.
Our 2014 Plan is administered by our compensation committee, all of the members of which are outside directors as defined under applicable federal tax laws, or by our Board of Directors acting in place of our compensation committee. Our compensation committee has the authority to construe and interpret our 2014 Plan, grant awards and make all other determinations necessary or advisable for the administration of our 2014 Plan.
Our 2014 Plan provides for the grant of awards to our employees, directors, consultants, independent contractors and advisors, provided the employees, directors, consultants, independent contractors and advisors are natural persons that render services not in connection with the offer and sale of securities in a capital-raising transaction. The exercise price of stock options must be at least equal to the fair market value of our common stock on the date of grant.
In general, options granted to employees under our 2014 Plan vest over a four-year period.period, with 1/4th of the total shares issuable on exercise of the options vesting on the one year anniversary of the vesting commencement date and 1/48th of the total shares issuable on exercise of the options vesting each month thereafter, subject to the employee’s continued service to us. Options may vest based on time or achievement of performance conditions. Our compensation committee may provide for options to be exercised only as they vest or to be immediately exercisable with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. The maximum term of options granted under our 2014 Plan is ten years, except that the maximum permitted term of incentive stock options granted to stockholders who, at the time of grant, own stock representing more than 10% of the voting power of all classes of our stock, is five years.
An RSA is an offer by us to sell shares of our common stock subject to restrictions, which may vest based on time or achievement of performance conditions. The price (if any) of an RSA willwould be determined by the compensation committee. Unless otherwise determined by the compensation committee at the time of award, vesting willwould cease on the date the participant no longer provides services to us and unvested shares will be forfeited to or repurchased by us.
SARs provide for a payment, or payments, in cash or shares of our common stock, to the holder based on the difference between the fair market value of our common stock on the date of exercise and the stated exercise price, up to a maximum amount of cash or number of shares. SARs may vest based on time or the achievement of performance conditions.
RSUs represent the right to receive shares of our common stock at a specified date in the future, subject to forfeiture of that right because of termination of employment or failure to achieve the performance conditions. If an RSU has not been forfeited, then on the date specified in the RSU agreement, we willwould deliver to the holder of the RSU whole shares of our common stock (which may be subject to additional restrictions), cash or a combination of our common stock and cash.
In general, RSUs granted to employees under our 2014 Plan vest over a four-year period, with 1/4th of the award settling on the one year anniversary of the vesting commencement date and the remainder settling in equal quarterly installments.
Performance shares are performance awards that cover a number of shares of our common stock that may be settled upon achievement of the pre-established performance conditions in cash or by issuing the underlying shares. These awards are subject to forfeiture prior to settlement because of termination of employment or failure to achieve the performance conditions.
Stock bonuses may be granted as additional compensation for service or performance and, therefore, may not be issued in exchange for cash.
Subject to the terms of our 2014 Plan, the administrator has the authority to re-price any outstanding option or SAR, cancel and re-grant any outstanding option or SAR in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a re-pricing under generally accepted accounting principles, with the consent of any adversely affected participant.
In the event there is a specified type of change in our capital structure without receipt of consideration, such as a stock split, appropriate adjustments will be made to the number of shares reserved under our 2014 Plan, the maximum number of shares that can be granted in a calendar year, and the number of shares and exercise price, if applicable, of all outstanding awards under our 2014 Plan.
Awards granted under our 2014 Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as determined by our compensation committee. Unless otherwise permitted by our compensation committee, stock options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal representative. Options granted under our 2014 Plan generally may be exercised for a period of three months after the termination of the optionee’s service to us, for a period of 12 months in the case of death or disability, or such shorter or longer period as our compensation committee may provide. Options generally terminate immediately upon termination of employment for cause.
If we are party to a merger or consolidation, outstanding awards, including any vesting provisions, may be assumed, substituted or replaced by the successor company. Outstanding awards that are not assumed, substituted or replaced willshould accelerate in full and expire upon the merger or consolidation.
Our 2014 Plan will terminate ten years from the date our Board of Directors approved the plan, or July 16, 2024, unless it is terminated earlier by our Board of Directors. Our Board of Directors may amend or terminate our 2014 Plan at any time. If our Board of Directors amends our 2014 Plan, it does not need to ask for stockholder approval of the amendment unless required by applicable law.
Security Ownership of Certain Beneficial Owners and Management
2014 Employee Stock Purchase Plan
Our Board of Directors adopted a 2014 Employee Stock Purchase Plan (2014 ESPP) in order to enable eligible employees to purchase shares of our common stock at a discount. The 2014 ESPP is not currently in use. If and when we elect to implement the 2014 ESPP, purchases would be accomplished through participation in discrete offering periods. Our 2014 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code. We initially reserved 2,000,000 shares of our common stock for issuance under our 2014 ESPP. The number of shares reserved for issuance under our 2014 ESPP increased automatically on January 1, 2016 and will increase automatically on January 1 of each of the first nine calendar years following the first offering date by the number of shares equaltable sets forth certain information with respect to the greater of 1% of the total outstanding sharesbeneficial ownership of our common stock as of April 10, 2023, by:
•each stockholder known by us to be the immediately preceding December 31beneficial owner of such year (rounded to the nearest whole share). Our Board of Directors or compensation committee may, however, reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of our 2014 ESPP will not exceed 20,000,000 sharesmore than 5% of our common stock.stock;
•each of our directors or director nominees;
Our compensation committee administers•each of our 2014 ESPP. Ifnamed executive officers; and when we elect to implement the 2014 ESPP,
•all of our U.S. employees generally would be eligible to participate in our 2014 ESPP if they are employed by us for more than 20 hours per weekdirectors and more than five months in a calendar year. Employees who are 5% stockholders, or would become 5% stockholdersexecutive officers as a resultgroup.
Percentage ownership of their participation in our 2014 ESPP, are ineligible to participate in our 2014 ESPP. We may impose additional restrictions on eligibility. We will also have the right to amend or terminate our 2014 ESPP at any time. Our 2014 ESPP will terminate on the 10th anniversary of the last day of the first purchase period, unless earlier terminated by our Board of Directors or compensation committee.
When the initial purchase period commences, our employees who meet the eligibility requirements for participation in that purchase period will automatically be granted a nontransferable option to purchase shares in that purchase period. For subsequent purchase periods, new participants will be required to enroll in a timely manner. Once an employeecommon stock is enrolled, participation will be automatic in subsequent purchase periods. An employee’s participation automatically ends upon termination of employment for any reason.
401(k) Plan
We sponsor a retirement plan intended to qualify for favorable tax treatment under Section 401(k) of the Code. Eligible employees may make pre-tax contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit on pre-tax contributions under the Code. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Pre-tax contributions by participants to the plan and the income earned on those contributions are generally not taxable to participants until withdrawn. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2015 with respect to compensation plans under which41,224,954 shares of our common stock mayoutstanding on April 10, 2023. We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed all shares of common stock subject to options or other convertible securities held by that person or entity that are currently exercisable or releasable or that will become exercisable or releasable within 60 days of April 10, 2023 to be issued.outstanding and to be beneficially owned by the person or entity holding the option for the purpose of computing the percentage ownership of that person or entity but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person or entity.
Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Trupanion, Inc., 6100 4th Avenue South, Suite 400, Seattle, Washington 98108.
| | | | | | | | | | | |
| Name of Beneficial Owner | | Number of Shares Beneficially Owned | Percentage |
| 5% or Greater Stockholders: | | | |
| BlackRock, Inc. | (1) | | 5,917,745 | | 14.35% |
| Capital World Investors | (2) | | 4,018,881 | 9.75% |
| The Vanguard Group | (3) | | 3,999,232 | 9.70% |
| The Nine Ten Entities | (4) | | 3,743,517 | | 9.08% |
| Aflac Incorporated | (5) | | 3,636,364 | | 8.82% |
| The Flossbach Entities | (6) | | 2,880,000 | | 6.99% |
| Directors and Named Executive Officers: | | | |
| Darryl Rawlings | (7) | | 1,424,786 | | 3.46% |
| Howard Rubin | (8) | | 228,101 | | * |
| Murray Low | (9) | | 170,370 | | * |
| Tricia Plouf | (10) | | 162,162 | | * |
| Margaret Tooth | (11) | | 136,099 | | * |
| Dan Levitan | (12) | | 95,430 | | * |
| Michael Doak | (13) | | 28,336 | | * |
| Emily Dreyer | (14) | | 28,265 | | * |
| Jacqueline Davidson | (15) | | 11,612 | | * |
| Andrew Wolff | (16) | | 8,310 | | * |
| Eric Johnson | (17) | | 2,691 | | * |
| Zay Satchu | (18) | | 2,102 | | * |
| Paulette Dodson | (19) | | — | | * |
| Betsy McLaughlin | (20) | | — | | * |
| | | |
All Officers and Directors as a Group
(21 persons) | (21) | | 2,415,896 | | 5.81% |
* Represents beneficial ownership of less than 1% of our outstanding shares of common stock.
(1) BlackRock, Inc.: Based solely on the Schedule 13G/A filed by BlackRock, Inc. on February 1, 2023. Consists of 5,835,645 shares over which BlackRock, Inc. has sole voting power and 5,917,745 shares over which BlackRock, Inc. has sole dispositive power. The principal business address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
|
| | | | | | | | | |
Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights(#) | | Weighted-average exercise price of outstanding options, warrants and rights($) | | Number of securities remaining available for future issuance under equity compensation plans (#) |
Equity compensation plans approved by security holders(1) | | 5,746,824 |
| | 3.71(2) |
| | 5,353,070 (3) |
|
| Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
| Total | | 5,746,824 |
| | — |
| | 5,353,070 |
|
| |
(1)
| Excludes purchase rights accruing under our 2014 ESPP and includes 467,508 shares of restricted stock and 4,876 shares of restricted stock units. |
| |
(2)
| The weighted average exercise price relates solely to outstanding stock option shares since shares of restricted stock and restricted stock units have no exercise price. |
| |
(3)
| Includes 2,284,519 shares of common stock that remain available for purchase under the 2014 ESPP and 3,068,551 shares of common stock that remain available for purchase under our 2014 Plan. Additionally, our 2014 Plan provides for automatic increases in the number of shares available for issuance under it on January 1 of each four calendar years during the term of the 2014 Plan by the lesser of 4% of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase or the number determined by our Board of Directors. Similarly, on January 1 of each calendar year, the aggregate number of shares of our common stock reserved for issuance under our 2014 ESPP increases automatically by the number of shares equal to the lesser of 1% of the total number of outstanding shares of our common stock on the immediately preceding December 31 or the number determined by our Board of Directors and may never exceed 20,000,000 shares. |
(3) The Vanguard Group: Based solely on the Schedule 13G/A filed by The Vanguard Group on February 9, 2023. Consists of 64,701 shares over which The Vanguard Group has shared voting power, 3,899,077 shares over which The Vanguard Group has sole dispositive power, and 100,155 shares over which The Vanguard Group has shared dispositive power. The principal business address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS(4) TheNine Ten Entities: Based solely on the Schedule 13G/A jointly filed by Nine Ten Capital Management LLC (NT LLC), Nine Ten Partners LP (NT LP), and Russell Mollen (RM, together with NT LLC and NT LP, The Nine Ten Entities) on February 10, 2023. The Nine Ten Entities reported shared voting and dispositive power over 3,743,517 shares. The principal business address of The Nine Ten Entities is 1603 Orrington Avenue, Suite 1650, Evanston, IL 60201.
(5) Aflac Incorporated: Based solely on the Schedule 13G/A filed by Aflac Incorporated on November 20, 2020 and company records. Consists of 3,636,364 shares over which Aflac Incorporated has sole voting power and sole dispositive power. The principal business address of Aflac Incorporated is 1932 Wynnton Road, Columbus, GA 31999.
(6) The Flossbach Entities: Based solely on the Schedule 13G jointly filed by Flossbach von Storch, AG (FvS AG) and Flossbach von Storch Invest S.A. (FvSI S.A. and together with FvS AG, The Flossbach Entities) on February 10, 2023. The Flossbach Entities reported shared voting and dispositive power over 2,880,000 shares. The principal business address of FvS AG is Ottoplatz 1, 50679 Cologne, Germany. The principal business address of FvSI S.A. is 2, rue Jean Monnet, L-2180, Luxembourg.
(7) Darryl Rawlings: Consists of (i) 576,449 shares held by Mr. Rawlings; (ii) 837,109 shares held by Kuyashii Primary Equities LLC; (iii) 5,448 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023; and (iv) 5,780 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023 held by Mr. Rawlings. Kuyashii Primary Equities LLC is a wholly owned subsidiary of Kuyashii, LLC, of which Mr. Rawlings and his spouse are sole members, and as such, Mr. Rawlings holds sole voting and investment power over these shares. Mr. Rawlings’ holdings exclude an aggregate of 200,000 shares held by Rawlings GST Trust dated March 1, 2012 (GST Trust). Murray Low, a member of our Board of Directors, is the trustee of the GST Trust and Rawlings GST Non-Exempt Trust FBO (Trust Beneficiaries) are the beneficiaries of the GST Trust. Mr. Rawlings’ children are beneficiaries of the Trust Beneficiaries.
(8) Howard Rubin: Consists of 228,101 shares held by Mr. Rubin.
(9) Murray Low: Consists of (i) 11,997 shares held by Dr. Low; (ii) 120,781 shares held by Murray B. Low Revocable Trust U/A 3-9-2018, Murray B. Low, Trustee, of which Dr. Low’s children are beneficiaries; and (iii) 37,592 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023 held by Dr. Low.
(10) Tricia Plouf: Consists of (i) 54,889 shares held by Ms. Plouf of which 34,061 shares are pledged as collateral in a line of credit; (ii) 98,943 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023; and (iii) 8,330 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023 held by Ms. Plouf.
(11) Margaret Tooth: Consists of (i) 56,589 shares held by Ms. Tooth; (ii) 71,148 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023; and (iii) 8,362 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023 held by Ms. Tooth.
(12) Dan Levitan: Consists of (i) 92,430 shares held by Mr. Levitan; and (ii) 3,000 shares held by the Levitan Family Foundation.
(13) Michael Doak: Consists of (i) 1,866 shares held by Mr. Doak; and (ii) 26,470 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023 held by Mr. Doak. Mr. Doak has notified us that he is resigning effective upon completion of the Annual Meeting.
(14) Emily Dreyer: Consists of (i) 15,204 shares held by Ms. Dreyer; (ii) 10,654 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023; and (iii) 2,407 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023 held by Ms. Dreyer.
(15) Jacqueline Davidson: Consists of 11,612 shares held by Ms. Davidson, of which 1,000 are shares held in the name Jacqueline L Davidson & Stewart P Davidson.
(16) Andrew Wolff: Consists of (i) 6,604 shares held by Mr. Wolff; and (ii) 1,706 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023 held by Mr. Wolff.
(17) Eric Johnson: Consists of 2,691 shares held by Mr. Johnson.
(18) Zay Satchu: Consists of 2,102 shares held by Dr. Satchu.
(19) Paulette Dodson: Ms. Dodson joined our Board in April 2023.
(20) Betsy McLaughlin: Ms. McLaughlin joined our Board in April 2023.
(21) All Officers and Directors as a Group: Consists of (i) 2,071,778 shares held by our directors and executive officers as a group; (ii) 310,325 shares underlying options to purchase common stock that are exercisable within 60 days of April 10, 2023 held by our directors and executive officers as a group; and (iii) 33,793 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 10, 2023, held by our directors and executive officers as a group.
Certain Relationships and Related Party Transactions
Other than as disclosed below, from January 1, 20152022 to the present, there have been no transactions, and there are currently no proposed transactions, in which the amount involved exceeds $120,000 to which we or any of our subsidiaries was (or is to be) a party and in which any director, director nominee, executive officer, holder of more than 5% of our capitalcommon stock, or any immediate family member of or person sharing the household with any of these individuals, had (or will have) a direct or indirect material interest, except for payments set forth under “Proposal One”the sections titled “Non-Employee Director Compensation — 2022 Non-Employee Director Compensation Table” and “Executive Compensation” above.“Executive Compensation Tables — Summary Compensation Table”.
Consulting Arrangements
David Rawlings, the father of our Chief Executive Officer, has provided services to us as an independent contractor through his role as one of our Territory Partners. For the year ended December 31, 2015,2022, we paid David Rawlings approximately $292,523$51,562 in fees for his services as a Territory Partner and in substantially the same manner as we compensate other Territory Partners. David Rawlings also sold certain territories to other Territory Partners, including his son David Rawlings, Jr., pursuant to Assignment and Assumption Agreements that require us to continue to pay David Rawlings a portion of the proceeds payable with respect to those territories. For the year ended December 31, 2022, we paid an aggregate amount of approximately $171,312 to David Rawlings on behalf of certain Territory Partners pursuant to the Assignment and Assumption Agreements.
David Rawlings, Jr., the brother of our Chief Executive Officer, has provided services to us as an independent contractor through his role as one of our Territory Partners. For the year ended December 31, 2015,2022, we paid David Rawlings, Jr., approximately $13,288$209,973 in fees for his services as a Territory Partner (excluding amounts paid to his father pursuant to their Assignment and Assumption Agreement) and in substantially the same manner as we compensate other Territory Partners.
Review, Approval or Ratification of Transactions with Related Parties
In May 2014, we entered into a consulting agreement with Howard Rubin, our former Chief Operating Officer and a current member of our Board of Directors. Pursuant to the consulting agreement, Mr. Rubin agreed to provide services to us, which include his attendance on our behalf at animal health industry events. From May 1, 2014 through July 1, 2015, Mr. Rubin was paid a monthly fee of $28,500 for up to 100 aggregate days spent consulting. From July 1, 2015 through July 1, 2017, Mr. Rubin is entitled to receive $5,000 per day spent consulting, but will not be compensated for fewer than 40 days spent consulting during this period. On January 1, 2016, the consulting agreement was amended to provide Mr. Rubin with a monthly fee of $10,000 in the months of January through March and July through December of 2016, during which no fewer than 20 project consulting days must be delivered.
Review, approval or ratification of transactions with related parties
We have adopted a written related-person transactions policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stock, and any members of the immediate family of the foregoing persons, are not permitted to enter into a material related-person transaction with us without the review and approval of our audit committee, or a committee composed solely of independent directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. The policy provides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 will be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee will consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
ADDITIONAL INFORMATION
Additional Information
Stockholder Proposals to be presentedPresented at Next Annual Meeting
Requirements for Stockholder Proposals to be Brought Before an Annual Meeting. Meeting
Our bylawsBylaws provide that for stockholder nominations to our Board of Directors or other proposals to be considered at an annual meeting, the stockholder must give timely notice thereof in writing to the attention of the Corporate Secretary at Trupanion, Inc., 907 NW Ballard Way,6100 4th Avenue South, Suite 400, Seattle, Washington 98107.98108, our principal executive offices.
To be timely for our company’s 2017Company’s 2024 Annual Meeting of Stockholders, a stockholder’s noticeproposal must be delivered to or mailed and received by our Corporate Secretary at our principal executive offices not earlier than the close of business on February 15, 201723, 2024 and not later than the close of business on March 17, 2017.24, 2024. A stockholder’s noticeproposal to the Corporate Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting the information required by applicable law and our bylaws.Bylaws. In no event will the public announcement of an adjournment or a postponement of our annual meeting commence a new time period for the giving of a stockholder’s notice as provided above.
Requirements for Stockholder Proposals to be Considered for Inclusion in our Proxy Materials.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2017 annual meeting2024 Annual Meeting of stockholders must be received by us not later than December 22, 201629, 2023 in order to be considered for inclusion in our proxy materials for that meeting. If the date of our 2024 Annual Meeting of stockholders is changed by more than 30 days from the anniversary date of this year’s Annual Meeting of stockholders, then the deadline to submit a proposal to be considered for inclusion in our proxy statement and form of proxy for our 2024 Annual Meeting of stockholders, shall be a reasonable time before we begin to print and mail proxy materials. If our 2024 Annual Meeting of stockholders is changed by more than 30 days from the one-year anniversary of this Annual Meeting, we will disclose the new deadline for stockholder proposals under Item 5 of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably calculated to inform stockholders.
A stockholder’s notice to the Corporate Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting the information required by applicable law (including Rule 14a-8 of the Exchange Act) and our bylaws.Bylaws.
In addition to satisfying the foregoing requirements, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than our nominees in connection with our 2024 Annual Meeting of Stockholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 8, 2024.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16 of the Exchange Act requires our directors, executive officers and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file. Based solely on our review of the copies of such forms furnished to us and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in 2015, except2022, with respect tothe exception of Darryl Rawlings who filed one late Form 4 filing covering one transaction by Ian Moffat, an executive officerin May 2022 relating to a cash exercise of the Company, and one late Form 4 filing covering one transaction by Peter Beaumont, a former member of our Board of Directors. In addition, amendments were filed to report inadvertent omissions of a transaction on certain, originally filed Section 16(a) forms, which included: 1) an amended Form 4 filing by Robin Ferracone, a member of our Board of Directors, to include one additional transaction, 2) an amended Form 3 filing by Alison Andrew, our former Chief Marketing Officer of the Company, to include one additional transaction, and 3) an amended Form 3 filing by Peter Beaumont, a former member of our Board of Directors, to include one additional transaction.
stock options.
Available Information
We will mail without charge, upon written request, a copy of our annual report on Form 10-K for the year ended December 31, 2015,2022, including the financial statements and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
Trupanion, Inc.
907 NW Ballard Way6100 4th Avenue South, Suite 400
Seattle, Washington 9810798108
Attn: Investor Relations
TheA digital copy of the annual report on Form 10-K is also available at https://investors.trupanion.com.
“Householding” — Stockholders Sharing the Same Address
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.”“householding”. Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our annual report on Form 10-K and proxy materials, including the Notice of Internet Availability, unless the affected stockholder has provided other instructions. This procedure reduces printing costs and postage fees, and helps protect the environment as well.
We expect that a number of brokersbrokerage firms, banks and other nominees with account holders who arebeneficially owning our stockholdersstock will be “householding” our annual report on Form 10-K and proxy materials, including the Notice of Internet Availability. A single Notice of Internet Availability and, if applicable, a single set of our annual report on Form 10-K and other proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from one or more of the affected stockholders. Once you have received notice from your brokerbrokerage firms, banks or other nominees that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by contacting their broker.brokerage firm, bank or other nominee.
Upon written or oral request, we will undertake to promptly deliver a separate copy of the Notice of Internet Availability and, if applicable, annual report on Form 10-K and other proxy materials, including the Notice of Internet Availability, to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice of Internet Availability and, if applicable, annual report on Form 10-K and other proxy materials, you may contact our Head of Investor Relations, teamLaura Bainbridge, by mail at 907 NW Ballard Way,6100 4th Avenue South, Suite 400, Seattle, Washington 98107,98108, Attn: Investor Relations, by phone at (310) 829-5400(206) 607-1929 or by email at investorrelations@trupanion.com.InvestorRelations@trupanion.com.
Any stockholders who share the same address and currently receive multiple copies of our Notice of Internet Availability or annual report on Form 10-K and other proxy materials who wish to receive only one copy in the future can contact their bank, brokerbrokerage firms, banks or other nominees that are the holder of record of our stock to request information about “householding” or our Investor Relations department using the contact information in the preceding paragraph.
OTHER MATTERSOther Matters
Our Board of Directors does not presently intend to bring any other business before the meeting and, so far as is known to the Board of Directors, no matters are to be brought before the meeting except as specified in the notice of the meeting. As to any business that may arise and properly come before the meeting, however, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.
AppendixInformation on Attending the 2023 Annual Meeting of Stockholders
Attending the Annual Meeting In-Person. The Annual Meeting will be held on Wednesday, June 7, 2023 at 9 a.m. (Pacific Time) at the Company's headquarters located at 6100 4th Avenue South, Seattle Washington 98108. The Company endeavors to make our annual meetings a major event that maximizes in-person engagement with stockholders. We encourage those who want to participate in-person to come to our offices. For those stockholders who do not wish to attend in-person, we are planning to allow stockholders to listen to the formal business portions of the Annual Meeting by dialing +1-877-407-0784 (Toll Free) or +1-201-689-8560 (Toll/International), although voting and tabulation of votes will be in-person (so for those attending remotely, please cast your vote online prior to the Annual Meeting). Please visit https://investors.trupanion.com for further details on attending our Annual Meeting. Company presentations will follow the Annual Meeting via webcast. Company presentations and an in‑depth question and answer session with Trupanion’s leadership team will commence after the formal business is conducted and the Annual Meeting adjourns.
Stockholder Admission and Voting In-Person at the Annual Meeting. Please bring a valid photo ID and either your Proxy Card, Voting Instruction FormorNotice of Internet Availability. To facilitate appropriate evidence of your ability to vote, please bring one or more of the forms indicated below, showing that you owned, or are legally authorized to act as proxy for someone who owned shares of our common stock on April 10, 2023.
•If you are a registered stockholder, please bring oneof the following that shows your current name and address: the Proxy Cardor the Notice of Internet Availability for the Annual Meeting.
•If you are a “proxy” for a registered stockholder, then you will need to obtain a valid, written “legal proxy” from the holder of record, naming you, signed by the registered stockholder. The legal proxy should include the name and address of the registered holder of record, as recorded on their Notice of Internet Availability. Please also bring either the Proxy Cardor the Notice of Internet Availability (in the name of the registered stockholder).
•If you are a beneficial stockholder (that is, your shares are held in the name of a brokerage firm, bank or other nominee), then please bring either the Voting Instruction FormorNotice of Internet Availabilityand a written “legal proxy”, naming you, signed by the brokerage firm, bank or other nominee that holds your shares. You should contact your brokerage firm, bank or other nominee to learn how to obtain a legal proxy.
•If you are a “proxy” for a beneficial stockholder, then you will need to obtain a valid, written “legal proxy” from the holder of record, naming you, signed by the beneficial stockholder’s brokerage firm, bank or other nominee. The legal proxy should include the name and address of the beneficial holder of record, as recorded on the Notice of Internet Availability. Please also bring either the Voting Instruction Formor the Notice of Internet Availability. You should contact your brokerage firm, bank or other nominee to learn how to obtain a legal proxy.
Guest Admission. Please join our guest list if you plan to attend in-person. You can RSVP online on the “News & Events – Corporate Events” section of Trupanion’s investor relations website at https://investors.trupanion.com or by contacting Trupanion’s Investor Relations (see “Questions” below for contact information). Please bring a valid photo ID on the day of the Annual Meeting.
Questions. If you have additional questions about attending our Annual Meeting, please contact Trupanion’s Head of Investor Relations, Laura Bainbridge, at (310) 829-5400 or InvestorRelations@trupanion.com.
Annex A
TRUPANION, INC.
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TRUPANION, INC.
ARTICLE I: NAME
The name of the corporation is Trupanion, Inc. (the “CompanyCorporation”), a corporation duly.
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware 19808. The name of the registered agent of the Corporation at that address is Corporation Service Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:Delaware.
1.Article IV, Section 1 of the Company’s current Restated Certificate of Incorporation (the “Current Certificate”) is hereby amended and restated in its entirety to read as follows:ARTICLE IV: AUTHORIZED STOCK
“1.Total Authorized.The total number of shares of all classes of stock that the Corporation has authority to issue is One Hundred and Ten Million (110,000,000) shares, consisting of two classes: One Hundred Million (100,000,000) shares of Common Stock, $0.00001 par value per share (“Common Stock”), and Ten Million (10,000,000) shares of Preferred Stock, $0.00001 par value per share (“Preferred Stock”).”
2. Designation of Additional Series.
2.2.1 The foregoing amendment to the Current Certificate has been duly approved by the Company’s Board of Directors of the Corporation (the “Board”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers, preferences and relative, participating, optional or other rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, unless a vote of any such holders is required pursuant to the terms of any certificate or certificates establishing a series of Preferred Stock.
2.2 Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock or any future class or series of Preferred Stock or Common Stock.
2.3 Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided,however,that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).
ARTICLE V: AMENDMENT OF BYLAWS
The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board shall require the approval of a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however,that in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation), the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation.
ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS
1. Director Powers.The conduct of the affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
2. Number of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.
3. Classified Board.Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall beDeclassified Board. The directors elected or appointed to the Board prior to the effectiveness of this Article VI, Section 3 are divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively, (the "Classified Board"). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time the Classified Board becomes effective. Directors shall be assigned to each class in accordance with Sections 141 and 242a resolution or resolutions adopted by the Board, with the number of directors in each class to be divided as nearly equal as reasonably possible. The initial term of office of the DGCL.
3.Class I directors shall expire at the Corporation's first annual meeting of stockholders following the closing of the Corporation's initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the "Initial Public Offering"), the initial term of office of the Class II directors shall expire at the Corporation's second annual meeting of stockholders following the closing of the Initial Public Offering and the initial term of office of the Class III directors shall expire at the Corporation's third annual meeting of stockholders following the closing of the Initial Public Offering. At each annual meeting of stockholders following the closing of the Initial Public Offering, directors elected to succeed those directors of the class whose terms then expire, with one class elected at each annual meeting of stockholders. Commencing at the 2024 annual meeting of stockholders, all directors of the Corporation elected at an annual meeting of stockholders to succeed those whose term expire at such meeting shall hold office for a term expiring at the next annual meeting of stockholders. The foregoing amendmentBoard will be deemed to Current Certificate has been duly approvedno longer be classified by the Company’searlier of the 2026 annual meeting or until such time that all directors are serving one year terms. Any director’s death, resignation or removal shall result in the elimination of any classification of the seat previously held by such director, and such director’s successorshall be elected for a termof office to expireexpiringat thethird succeedingnextannual meeting of stockholdersafter their election.
4. Term and Removal. Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted in the Corporation’s Bylaws. Subject to the rights of the holders of any series of Preferred Stock, no director directors may be removed exceptfrom office at any time, with or without cause, by the affirmative vote of the holders of a majority of the voting power of the outstanding Common Stock; provided that, any director elected prior to the 2026 annual meeting and not holding a one-year term may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors voting together as a single class. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director.
5. Board Vacancies. Subject to the rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. Any director elected in accordance with Section 242the preceding sentence shall hold office for a term expiring at the next annual meeting of stockholders at which the term of office of the DGCL.class to which the director has been assigned expires or until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation or removal.
6. Vote by Ballot.Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE VII: DIRECTOR LIABILITY
1. Limitation of AmendmentLiability. To the fullest extent permitted by law, no director of the Corporation shall be effective upon filing withpersonally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the Delaware SecretaryGeneral Corporation Law is hereafter amended to authorize the further elimination or limitation of State.the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF,2. Change in Rights.Neither any amendment nor repeal of this Article VII, nor the Company has causedadoption of any provision of this Certificate of AmendmentIncorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS
1. No Action by Written Consent of Stockholders.Subject to the rights of any series of Preferred Stock, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders by written consent.
2. Special Meeting of Stockholders.Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, the President or the Board acting pursuant to a resolution adopted by a majority of the Whole Board.
3. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings.Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be signedbrought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.
ARTICLE IX: CHOICE OF FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law, this Certificate of Incorporation or the Bylaws; (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws; or (e) any action asserting a claim against the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION
If any provision of this Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its duly authorized officerentirety, to the extent necessary, shall be severed from this ___ dayCertificate of _______, 2016Incorporation, and the foregoing facts stated hereincourt will replace such illegal, void or unenforceable provision of this Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Certificate of Incorporation shall be enforceable in accordance with its terms.
The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are true and correct.granted subject to this reservation; provided, however,that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X or Article V, Article VI, Article VII or Article VIII.
TRUPANION, INC.
By: _________________________________
Name:Darryl Rawlings
Title:President and Chief Executive Officer
* * * * * * * * * * *
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