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.
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.
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.
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.
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.
The Notice of Internet Availability will provide you with instructions regarding how to:
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.
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.
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.
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.
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, Mr. Johnson, Mr. Levitan, Dr. Low, Messrs. Cohen, Doak, Levitan, LindsleyMr. Rubin and Novotny and Ms. Ferracone,Dr. Satchu, representing seven of our nineeight 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 eight 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 described in the section entitled “Transactions with Related Parties, Founders and Control Persons.”them.
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 26, 2022, the Company's committee composition is as follows:
Audit Committee. OurCommittee
In 2021, 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 2021, our compensation committee iswas comprised of Messrs. LevitanMs. Davidson, Mr. Johnson, Dr. Low and Mr. Rubin. Former directors Robin Ferracone and Hays Lindsley also served on the compensation committee from January until June 2021, with Ms. Ferracone serving as compensation committee chair. Ms. Ferracone and Mr. Lindsley did not stand for re-election at the 2021 Annual Stockholder Meeting and Dr. Low. Ms. Ferracone is theLow was appointed as compensation committee chair of our compensation committee.in June 2021. 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 2021, our nominating and corporate governance committee iswas comprised of Messrs.Ms. Davidson, Mr. Doak, and Levitan, Ms. FerraconeMr. Johnson and Dr. Low. Dr. Low, iswith Mr. Doak serving as the chair of our nominating and corporate governance committee. In June 2021, Ms. Davidson stepped down from the nominating and corporate governance committee. 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. Levitan and Lindsley,during the last concluded fiscal year were Ms. Ferracone and Mr. Lindsley, both of whom did not stand for re-election in 2021, along with current members Ms. Davidson, Mr. Johnson, Dr. Low. NoLow and Mr. 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, 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, 2021:
•the Board of Directors held fivefour meetings including telephonic meetings, and acted by written consent six 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 sixfive meetings including telephonic meetings. and acted by written consent once.
During 2015, none of the directors2021, no director attended fewer than 75% of the aggregate of the total number of meetings held by the Board of Directors during his or her tenure and the total number of meetings held by all committees of the 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 the board,Board of Directors, the independent directors meet in executive sessions with our Chief Executive Officer outside the presence of management.other members of management and, separately, our non-employee directors meet outside the presence of the Chief Executive Officer. The Chairman of our Board of Directors, Dr. Low, presides 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 oneEight of our nine then-current directors attended the 2015our 2021 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. 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) 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 the Board of Directors.
Considerations in Evaluating Director Nominees
The nominating and corporate governance committee is responsible for identifying, evaluating and recommending candidatesnominees to the 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.
The 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
The 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. The 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 the 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 the 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. 1Proposal No. 2: Ratification of Independent Registered Public
ELECTION OF CLASS II DIRECTORSAccounting Firm
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 |
| |
(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.”
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| | | | | | | | | | | | | | |
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, 2016.2022. Ernst & Young LLP audited our financial statements for the fiscal yearsyear ended December 31, 20152021 and has been our independent registered public accounting firm since 2014. 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, 2016.2022. 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. 2 |
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, 2021 and 2020, 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 2021 | Fiscal Year 2020 |
| Audit fees (1) | $ | 905,000 | | $ | 872,000 | |
| All other fees (2) | $ | 2,710 | | $ | 13,535 | |
| Total fees | $ | 907,710 | | $ | 885,535 | |
| |
(1)(1)Audit fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements and our internal control over financial reporting, the review of our quarterly consolidated financial statements, incremental audit fees, 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.
| 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. |
(2)All other fees consist of fees for access to online accounting and tax research software, accounting consultation fees, and examination fees for the Department of Insurance for one of the Company's 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 Restatement
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.
Audit Committee
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. 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, 2015.2021. The audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, 1301, Communications with Audit Committees.
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 PCAOB Rule No. 3526 regarding the independent accountant’s independence, and has discussed with Ernst & Young LLP its independence.
Based on the review and discussions referred to above, the audit committee recommended to our Board of Directors that the audited consolidated financial statements as of and for the year ended December 31, 2015 be included in our annual report on Form 10-K for the year ended December 31, 20152021 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 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 and their respective ages and positions as of April 21, 2016,11, 2022 are as follows:
|
| | | | | | | |
NAME Name | Age | AGE | | POSITION |
Executive OfficersTitle (1) |
| Darryl Rawlings | | 47 | 52 | Chief Executive Officer President and Director |
Michael BanksAndrew "Drew" Wolff | | 56 | 51 | Chief Financial Officer (2) |
Tim GraffMargaret "Margi" Tooth | | 54 | 43 | President of American Pet Insurance Company(3) |
Ian MoffatTricia Plouf | | 40 | 43 | Chief Operating Officer (4) |
Margaret ToothGavin Friedman | 54 | 37 | | Chief Marketing OfficerExecutive Vice President, Legal, and Corporate Secretary (5) |
Darryl Rawlings(1) is our founder and has servedReflects current titles 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. date of this Proxy Statement.
(2)Mr. Rawlings holds a Diploma of Marketing Management from the British Columbia Institute of Technology. Mr. RawlingsWolff became an employee on May 24, 2021 and was chosenappointed 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 ourTrupanion's Chief Financial Officer since June 2012. Previously,on September 24, 2021.
(3)On February 10, 2022, Ms. Tooth's title changed from Co-President to President.
(4)Ms. Plouf served as both Co-President and Chief Financial Officer until September 24, 2021 when Mr. BanksWolff became Chief Financial Officer. On February 10, 2022, Ms. Plouf's title changed to Chief Operating Officer.
(5)Mr. Friedman served as the Company's Chief FinancialPeople Officer at Penn Millers Holding Corporation, a provider of property casualty insurance, from August 2002and recently transitioned his responsibilities to May 2012. Prior to that, Mr. Banks served as the Vice President, Treasurerfocus exclusively on legal 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.regulatory matters.
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. There are no family relationships among any of our directors or executive officers. All executive officers are, together with Asher Bearman, "named executive officers" for the fiscal year ended December 31, 2021.
EXECUTIVE COMPENSATION
Proposal No. 3: Advisory and Non-Binding Vote to Approve the Compensation Provided to the Company’s Named Executive Officers for 2021
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 2021 compensation for our named executive officers.
| | |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 3 |
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 2023 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 2021 Performance Year ‐ Base Salary ‐ Short-Term Incentive Awards ‐ Long-Term Incentive Awards ◦ Equity Allocations in 2022 for the 2021 Performance Year ◦ 2020 Long-Term Incentive Awards Reflected in 2021 Summary Compensation Table ‐ Other Equity Awards for 2021 Company Performance Issued in 2022 - 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 2021, our named executive officers were:
| | | | | |
| Name | Title (1) |
| Darryl Rawlings | Chief Executive Officer and Director |
| Drew Wolff | Chief Financial Officer (2) |
| Margi Tooth | President (3) |
| Tricia Plouf | Chief Operating Officer (4) |
| Gavin Friedman | Executive Vice President, Legal, and Corporate Secretary (5) |
| Asher Bearman | Executive Vice President, Corporate Development |
(1)Reflects current titles as of the date of this Proxy Statement.
(2)Mr. Wolff became an employee on May 24, 2021 and was appointed to serve as Trupanion's Chief Financial Officer on September 24, 2021.
(3)On February 10, 2022, Ms. Tooth's title changed from Co-President to President.
(4)Ms. Plouf served as both Co-President and Chief Financial Officer until September 24, 2021 when Mr. Wolff became Chief Financial Officer. On February 10, 2022, Ms. Plouf's title changed to Chief Operating Officer.
(5)Mr. Friedman also served as the Company's Chief People Officer and recently transitioned his responsibilities to refocus exclusively on legal and regulatory matters.
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, 2021, we insured over 1,176,000 pets in North America.
Our revenue for the calendar year 2021 was $699 million, an increase of 39% 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 2020, we calculated the growth of intrinsic value based on a two-year compound annual growth rate and for performance year 2021, we returned to using a year-over-year annual growth calculation. We believe this approach better reflects performance of the Company and the team in a given year while also reducing complexity. In 2021, for the evaluation of team compensation, we calculated an estimated increase in intrinsic value per share of 41.4% (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 as well as improved member experience and retention. These objectives drove our evaluation of the 2021 Company performance.
In 2021, for purposes of evaluating Company and team compensation, we estimate that intrinsic value per share grew by 41.4%. Key performance metrics from 2021 include:
•Gross New Subscription Pet Growth of 223,080 and an Average Monthly Retention rate of 98.74%, resulting in Net New Subscription Pets of 126,376 (or 51% year-over-year growth);
•Adjusted Operating Income of $78.5 million (or 37.4% year-over-year growth); and
•Anticipated Internal Rate of Return of new subscription pets of 36%
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 2021 Annual Meeting of Stockholders. Approximately 99.7% of the shares that voted for or against the 2021 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 3 (advisory and non-binding vote to approve the compensation provided to the Company's named executive officers for 2021) at the 2022 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 2021 performance year compensation, as well as 2021 calendar year compensation found in the Summary Compensation Table to give a full view of our 2021 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 2021, we calculated a year-over-year annual growth in intrinsic value of 41.4% per share for purposes of evaluating performance. In contrast, for performance year 2020, instead of using a year-over-year growth calculation, we used a two-year compound annual growth rate to determine intrinsic value per share growth. 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 2021 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 2021 for example, we analyzed our total direct compensation mix by adding together the actual salary earned in 2021, plus the bonus earned for 2021 performance, but paid in 2022, plus the long-term incentive award earned for 2021 performance, but granted in 2022. 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 2021 performance year compensation for the CEO and other named executive officers:
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 and retention goals |
| ▪ 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 |
| ▪ 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 not take ourselves too seriously, 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 2021, 209 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 and his direct reports, including our other named 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 named 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 Named Executive Officers (and others) and provides recommendations regarding their compensation to the compensation committee for its consideration.
Additionally, the Chief Executive Officer and senior human resources personnel 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 2021, 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 $1 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 2021, for all named executive officers, awards were scored monthly and paid in the first quarter of 2022, 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 and subject to a 2-year lock-up. | Enhance ownership mindset of the team with the option to forgo cash for equity. |
| | Awards to our Chief Executive Officer, President, and Chief Operating Officer are based solely on Company performance goals, whereas 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 2021 Performance Year
A detailed description of each pay program and our pay analysis and rationale for performance year 2021 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) | 2021
Base Salary | 2020
Base Salary | Percent Increase |
| Darryl Rawlings | Chief Executive Officer and Director | $300,000 | $300,000 | —% |
| Drew Wolff | Chief Financial Officer | $300,000 | $300,000 | —% |
| Margi Tooth | President | $300,000 | $300,000 | —% |
| Tricia Plouf | Chief Operating Officer | $300,000 | $300,000 | —% |
| Gavin Friedman | Executive Vice President, Legal, and Corporate Secretary | $300,000 | $300,000 | —% |
| Asher Bearman | Executive Vice President, Corporate Development | $300,000 | $300,000 | —% |
(1) Reflects current titles as of the date of this Proxy Statement.
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. 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 were determined by our Chief Executive Officer in consultation with our executive team 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. The monthly achievement scores for corporate objectives are reviewed by the compensation committee quarterly and the monthly individual achievement scores for named executive officers are approved annually. These short-term incentive awards were paid annually to our named executive officers in the following fiscal year, whereas short-term incentive awards for other employees were paid monthly. Short-term incentive awards for our Chief Executive Officer, President, and Chief Operating Officer are based exclusively on achievement of our monthly corporate objectives and short-term incentive awards for our other named executive officers are weighted 50% to corporate objectives and 50% to individual objectives.
The mechanism for determining the annual incentive payouts for our named executive officers for performance year 2021 is shown below: 
Once the weighted achievement scores and annual incentive payout amounts 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, 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | 2021 Base Salary | | Bonus Target of Salary % | | Bonus Split (Corporate/ Individual) | Target Bonus Amount | | Earned Bonus Amount |
| Darryl Rawlings | $ | 300,000 | | | 20 | % | | 100/0 | $ | 60,000 | | | $ | 39,355 | |
| Drew Wolff | $ | 300,000 | | (1) | 40 | % | | 50/50 | $ | 70,000 | | (2) | $ | 44,240 | |
| Margi Tooth | $ | 300,000 | | | 20 | % | | 100/0 | $ | 60,000 | | | $ | 39,355 | |
| Tricia Plouf | $ | 300,000 | | | 20 | % | | 100/0 | $ | 60,000 | | | $ | 39,355 | |
| Gavin Friedman | $ | 300,000 | | | 20 | % | | 50/50 | $ | 60,000 | | | $ | 43,703 | |
| Asher Bearman | $ | 300,000 | | | 20 | % | | 50/50 | $ | 60,000 | | | $ | 39,159 | |
(1)Mr. Wolff became an employee on May 24, 2021 and was appointed to serve as Trupanion's Chief Financial Officer on September 24, 2021. Prior to this appointment, Mr. Wolff received cash bonus payments for June, July, and August. Mr. Wolff's pro-rated salary for 2021 was $181,818.
(2)Mr. Wolff's Target Bonus Amount was prorated to $70,000 based on a full year Target Bonus Amount of $120,000.
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 | 2021 Performance and Results |
| Drew Wolff | Achievement of financial margin targets. Work to secure long-term source of cash to fund insurance company surplus requirements. |
| Gavin Friedman | Positioning the Company to take advantage of new opportunities, including setting up new underwriting entities, progress towards regulatory and legislative initiatives, development and implementation of talent assessment program, and progress towards diversity, equity and inclusion goals. |
| Asher Bearman | Strategically improving our competitive position for existing future state products. Completion of international discovery and initial phases of key long term business initiatives, each expected to result in increases to intrinsic value. |
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 2022 for performance year 2021, 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 prior to performance year 2020. In comparison, for performance year 2020, the compensation committee, in consultation with management, determined the growth of our intrinsic value per share using a two-year compound annual growth rate. The compensation committee returned to the year-over-year method of determining the growth in intrinsic value per share because the compensation committee believes a year-over-year calculation better reflects the actual changes in intrinsic value per share and rewards team members based on the value created in a given year, while also reducing complexity.
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 2022 for the 2021 Performance Year: For the 2021 performance year, we estimated that the year-over-year annual growth of our intrinsic value per share was 41.4%. After adjusting for foreign exchange and available cash used during the performance year, this 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. Deductions from the pool were also made for the bonus grants issued in 2022, described below under "Other Equity Awards for 2021 Company Performance Issued in 2022". After deductions, 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 for performance year 2021, 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 Granted in 2022 for 2021 Performance) | 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 | |
| Gavin Friedman | 6,181 | | $ | 554,003 | |
| Asher Bearman | 2,881 | | $ | 258,224 | |
(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 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of the assumptions we apply in calculating these amounts.
The compensation committee determined that the long-term equity grants above were reasonable in the context of the growth of our intrinsic value per share and each individual’s contribution to that growth. The table below provides an overview of 2021 performance year compensation for all named executive officers.
| | | | | | | | | | | | | | | | | | | | |
| Name | 2021 Base Salary | | Short-Term Incentive Award Payout (Cash Receivable in 2022 for 2021 Performance)
(1) | | Long-Term Incentive Award Issuance
(RSU Value Received in 2022 for 2021 Performance) (2) | Total Performance Compensation |
| Darryl Rawlings | $ | 300,000 | | | $ | 39,355 | | | $ | 1,356,281 | | $ | 1,695,636 | |
| Drew Wolff | $ | 181,818 | | (3) | $ | 44,240 | | (4) | $ | 1,184,819 | | $ | 1,410,877 | |
| Margi Tooth | $ | 300,000 | | | $ | 39,355 | | (5) | $ | 4,683,168 | | $ | 5,022,523 | |
| Tricia Plouf | $ | 300,000 | | | $ | 39,355 | | | $ | 4,683,168 | | $ | 5,022,523 | |
| Gavin Friedman | $ | 300,000 | | | $ | 43,703 | | | $ | 554,003 | | $ | 897,706 | |
| Asher Bearman | $ | 300,000 | | | $ | 39,159 | | (6) | $ | 258,224 | | $ | 597,383 | |
(1)For the 2021 performance year, the Company issued short-term incentive awards (cash bonuses) to its team members in February 2022. 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.
(2)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 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of the assumptions we apply in calculating these amounts.
(3)Mr. Wolff's prorated salary of $300,000 for 2021 was $181,818.
(4)Prior to Mr. Wolff's appointment to Chief Financial Officer, he received monthly bonus payments in June, July and August 2022, in the respective amounts of $7,695, $5,800 and $5,570. In November 2021, Mr. Wolff elected to convert 100% of his July and August cash bonus into RSUs. Such RSUs were granted in November 2021, in the amount of 145 shares with an aggregate grant date fair value of $12,413. In February 2022, Mr. Wolff elected to convert 100% of his remaining cash bonus ($25,175) 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.
(5)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.
(6)Mr. Bearman elected to convert 50% of his cash bonus into RSUs. Such RSUs were granted in February 2022, in the amount of 203 shares with an aggregate grant date fair value of $11,660.
Mr. Rawlings received $1,695,636 in total compensation from the Company for performance year 2021. 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' substantial ownership in the Company (approximately 3.7%), 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 2021 was appropriate.
2020 Long-Term Incentive Awards Reflected in 2021 Summary Compensation Table: The long-term incentive awards earned in 2020 and granted to our named executive officers in 2021 are listed on the Summary Compensation Table (see the section titled “Executive Compensation Tables - Summary Compensation Table”). For the 2020 performance year, the compensation committee estimated that the two-year compound annual growth rate of our intrinsic value per share was 31.4%. This performance resulted in an aggregate equity pool of 850,608 shares. From the pool of 850,608 shares available, deductions were made for new hire grants, spot bonus grants, promotional grants, non-employee director grants already made in performance year 2020, and for an anticipated issuance of a non-plan common stock donation to a non-profit organization, and the remaining 545,378 shares were then granted in the form of restricted stock units in 2021 for the 2020 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 2021, 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 2021 based on 2020 performance:
| | | | | | | | |
| Name | Long-Term Incentive Awards (Number of RSUs Granted in 2021 for 2020 Performance) | RSU Value (1) |
| Darryl Rawlings | 43,804 | | $ | 4,617,818 | |
| Drew Wolff (2) | — | | $ | — | |
| Margi Tooth | 46,828 | | $ | 4,936,608 | |
| Tricia Plouf | 46,312 | | $ | 4,882,211 | |
| Gavin Friedman | 32,061 | | $ | 3,379,871 | |
| Asher Bearman | 32,061 | | $ | 3,379,871 | |
(1)The amounts in this column represent aggregate grant date fair value of the RSUs granted in 2021 for 2020 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 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of the assumptions we apply in calculating these amounts.
(2)Mr. Wolff became an employee of the Company on May 24, 2021.
Other Equity Awards for 2020 Company Performance Issued in 2021: In February 2021, the compensation committee approved two grants of RSUs to employees in connection with the achievement of certain 2020 performance goals:
•Trutopia Grants. The Company’s 2020 fourth quarter corporate goal was to offset cancellations by increasing member referrals and existing members adding pets (what we call Trutopia). Because the Company achieved certain Trutopia metrics, the compensation committee approved the grant of RSUs to each employee and certain other service providers who were providing services to the Company as of December 31, 2020.Each eligible team member received 15 RSUs that were fully vested upon date of grant.
•2020 Team Grants. In recognition of the Company's performance in 2020, the compensation committee approved the grant of equity awards in the form of RSUs to all employees and certain team members who were providing services to the Company as of December 31, 2020. Each recipient received five RSUs for every full month that they were employed by the Company or its affiliates in 2020 up to a maximum of sixty RSUs. These RSUs were fully vested upon date of grant.
The Trutopia Grants and 2020 Team Grants both have a two-year holding period requirement for employees, during which time the RSUs may not be sold.
The compensation committee approved the following Trutopia Grants and 2020 Team Grants to named executive officers in February 2021:
| | | | | | | | |
| Name | Trutopia Grants (Number of RSUs granted in 2021 for 2020 Company Performance) | 2020 Team Grants (Number of RSUs granted in 2021 for 2020 Company Performance) |
| Darryl Rawlings | 15 | | 60 | |
| Drew Wolff (1) | — | | — | |
| Margi Tooth | 15 | | 60 | |
| Tricia Plouf | 15 | | 60 | |
| Gavin Friedman | 15 | | 60 | |
| Asher Bearman | 15 | | 60 | |
(1)Mr. Wolff did not receive Trutopia Grants nor 2020 Team Grants because he did not become an employee of the Company until 2021.
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
In January 2021, we adopted the Trupanion, Inc. Employee Severance and Change in Control Plan (the Plan), pursuant to which we will provide certain severance benefits to eligible employees of the Company. We adopted the Plan to standardize the severance paid to current and future employees and it supersedes each of the On-Going Severance Policy for CEO and Key Senior Leaders (Severance Policy) and a Change of Control Policy for Select Officers and Key Leaders (Change of Control Policy), which were adopted in 2019. We believe the Plan creates an equitable framework for situations when an employee leaves the Company 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 with the Company, 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 7 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, the Company 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
The Company believes stock ownership aligns the interests of the named executive officers and Board of Directors with those of the Company’s 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 the Company’s 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 the Company’s 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, 2021 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
The 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 the Company's intrinsic value, that the short-term incentive award measurement categories are set monthly and are designed to encourage focus on the Company's key initiatives, the long-term incentive awards are subject to an objective measurement (i.e., our calculation of intrinsic value per share) that assesses the long-term sustainable growth and health of the Company, 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, the Company requires 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 the Company 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 the Company’s 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 the Company employs 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, 2021 |
| Revenue | $ | 698,991 | |
| Cost of paying veterinary invoices | 481,524 | |
| Variable expenses | 105,973 | |
| Fixed expenses | 33,040 | |
| Adjusted operating income | 78,454 | |
| Acquisition cost | 69,487 | |
| Development expenses | 3,719 | |
| Stock-based compensation expense | 28,226 | |
| Depreciation and amortization | 11,965 | |
| Business combination transaction costs | 82 | |
| Loss from investment in joint venture | (171) | |
| Operating loss | $ | (35,196) | |
As a percentage of revenue:
| | | | | |
| Year Ended December 31, 2021 |
| Revenue | 100.0 | % |
| Cost of paying veterinary invoices | 68.9 | % |
| Variable expenses | 15.2 | % |
| Fixed expenses | 4.7 | % |
| Adjusted operating income | 11.2 | % |
| Acquisition cost | 9.9 | % |
| Development expenses | 0.5 | % |
| Stock-based compensation expense | 4.0 | % |
| Depreciation and amortization | 1.7 | % |
| Business combination transaction costs | — | % |
| Loss from investment in joint venture | — | % |
| Operating loss | (5.0) | % |
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 2021 calculation assumes an estimated profit per pet per month of $9.03 for 79.4 months (calculated as the quotient obtained by dividing one by the churn rate, which equals one minus the average monthly retention rate of 98.74%).
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, 2021, as well as the estimated internal rate of return for a single average pet.
Subscription business monthly per pet unit economics1:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2021 | | | | | | | | |
| Monthly average revenue per pet | $ | 63.56 | | | | | | | | | |
| Cost of paying veterinary invoices | $ | 45.27 | | | | | | | | | |
| Variable expenses | $ | 6.25 | | | | | | | | | |
| Fixed expenses | $ | 3.01 | | | | | | | | | |
| Estimated profit per pet per month | $ | 9.03 | | Multiplied by 79.4 months = $717 (Lifetime value of a pet, including fixed expenses) |
1Calculated on a trailing twelve month basis | | | | | | | | |
| | | | | | | | | |
| Estimated IRR calculation for the year ended December 31, 2021: |
| Year | — | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
Months2 | 6.0 | 12.0 | 12.0 | 12.0 | 12.0 | 12.0 | 12.0 | 1.4 | 79.4 |
| Estimated Profit per Pet per Month | $9 | $9 | $9 | $9 | $9 | $9 | $9 | $9 | $72 |
| Estimated Profit per Pet | $54 | $108 | $108 | $108 | $108 | $108 | $108 | $12 | $717 |
Capital Charge3 | $(4) | $(8) | $(8) | $(8) | $(8) | $(8) | $(8) | $(1) | $(50) |
| PAC | $(287) | | | | | | | | IRR |
| $(237) | $101 | $101 | $101 | $101 | $101 | $101 | $11 | 36% |
| | | | | | | | | |
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 2022 Annual Meeting of Stockholders and in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
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 |
| Murray Low, Chair |
| Jacqueline Davidson |
| Eric Johnson |
| Howard Rubin |
| Zay Satchu |
Pay Ratio
For fiscal year 2021:
•the annual total compensation, calculated as described below, of our Chief Executive Officer, Darryl Rawlings, was $4,976,606; and
•the estimated median of the annual total compensation of all employees of our Company, other than Darryl Rawlings, calculated as described below was $93,203.
Based on this information, for 2021 the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual compensation of all employees was 53:1.
To determine the median employee as of December 31, 2021, we used the total base earnings, bonuses paid, and the grant date fair value of equity granted in 2021 for all employees, full-time and part–time who were employed as of December 31, 2021 and excluded independent contractors, as they are not employees.
The 2020 annual bonus (for certain executives) and the 2020 fourth quarter bonus for eligible employees were included as they were paid out in 2021. We did not include the 2021 annual bonus (for certain executives) nor the December 2021 bonus for eligible employees, as these were paid out in 2022.
For employees hired throughout the year, we annualized earnings based on amounts paid during the portion of 2021 in which they were employed.
With the factors noted above, we identified the median role.
We then used the total compensation set forth in the summary compensation table for Mr. Rawlings, added to it the amounts we pay on behalf of Mr. Rawlings pursuant to benefits programs that are available on 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 2021 for the identified role, which also included the Non-discriminatory Benefits paid out for the identified role. For the identified role, we included the 2020 fourth quarter bonus which was paid in 2021 and did not include the December 2021 bonus which was paid in 2022. 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 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.
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 2021, 2020 and 2019 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 2021, 2020 and 2019 fiscal years.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position | Year | | Salary | | Stock Awards
(1) | | Non-Equity Incentive Plan Compensation
(2) | | Total |
| Darryl Rawlings | 2021 | | $ | 300,000 | | | $ | 4,623,067 | | | $ | 39,355 | | | $ | 4,962,422 | |
| Chief Executive Officer | 2020 | | $ | 300,000 | | | $ | 822,367 | | | $ | 38,400 | | | $ | 1,160,767 | |
| 2019 | | $ | 300,000 | | | $ | 720,714 | | | $ | 34,650 | | | $ | 1,055,364 | |
| Drew Wolff | 2021 | | $ | 181,818 | | (3) | $ | 1,578,224 | | | $ | 44,240 | | (4) | $ | 1,804,282 | |
| Chief Financial Officer | 2020 | (5) | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| 2019 | (5) | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Margi Tooth | 2021 | | $ | 300,000 | | | $ | 4,941,857 | | | $ | 39,355 | | (6) | $ | 5,281,212 | |
| President | 2020 | | $ | 300,000 | | | $ | 851,155 | | | $ | 48,473 | | | $ | 1,199,628 | |
| 2019 | | $ | 240,000 | | | $ | 1,137,939 | | | $ | 26,190 | | | $ | 1,404,129 | |
| Tricia Plouf | 2021 | | $ | 300,000 | | | $ | 4,887,460 | | | $ | 39,355 | | | $ | 5,226,815 | |
| Chief Operating Officer | 2020 | | $ | 300,000 | | | $ | 851,155 | | | $ | 40,688 | | | $ | 1,191,843 | |
| 2019 | | $ | 210,000 | | | $ | 853,454 | | | $ | 28,340 | | | $ | 1,091,794 | |
| Gavin Friedman | 2021 | | $ | 300,000 | | | $ | 3,385,120 | | | $ | 43,703 | | | $ | 3,728,823 | |
| Executive Vice President, | 2020 | | $ | 300,000 | | | $ | 1,076,579 | | | $ | 39,285 | | | $ | 1,415,864 | |
| Legal | 2019 | | $ | 193,333 | | | $ | 339,031 | | | $ | 45,249 | | | $ | 577,613 | |
| Asher Bearman | 2021 | | $ | 300,000 | | | $ | 3,385,120 | | | $ | 39,159 | | (7) | $ | 3,724,279 | |
| Executive Vice President, | 2020 | | $ | 300,000 | | | $ | 851,155 | | | $ | 38,681 | | | $ | 1,189,836 | |
| Corporate Development | 2019 | | $ | 240,000 | | | $ | 995,711 | | | $ | 31,515 | | (8) | $ | 1,267,226 | |
(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 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 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 2021 Performance Year". This column includes amounts earned for the prior fiscal year but paid the following fiscal year.
(3)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.
(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.
(5)Mr. Wolff became an employee in 2021.
(6)For the 2021 performance and individual objectives, our Chief Executive Officer, except with respectyear, the Company issued short-term incentive awards (cash bonuses) to his own compensation, and our compensation committee determined that approximately 84.28%, 81.61% and 69.29%its named executive officers in February 2022. Ms. Tooth’s 2021 cash bonus was approved in the amount 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$39,355. In lieu of taking their full cash bonus amount, team members may elect to 100%, 50% and 40%convert all or a portion of their annual base salaries. Accordingly, Messrs. Rawlings, Banks and Graff were awarded the annual bonuses reflectedcash bonus into Company equity, in the table above.form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. In
2015 EquityFebruary 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.
(7)For the 2021 performance year, the Company issued short-term incentive awards (cash bonuses) to its named executive officers in February 2022. Mr. Bearman’s 2021 cash bonus was approved in the amount of $39,159. 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, Mr. Bearman elected to convert 50% of his cash bonus into RSUs, receiving the remaining $19,579 in cash. Such RSUs were granted in February 2022, in the amount of 203 shares with an aggregate grant date fair value of $11,660.
(8)For the 2019 performance year, the Company issued short-term incentive awards (cash bonuses) to named executive officers in February 2020. In February of 2020, Mr. Bearman elected to convert 100% of his cash bonus into RSUs. 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. Mr. Bearman's 2019 cash bonus was approved in the amount of $31,515. Such RSUs were granted in May 2020, in the amount of 1,308 shares with an aggregate grant date fair value of $27,167.
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 2021, the long-term incentive awards earned in fiscal year 2020 and granted to our named executive officers atin fiscal year 2021, and additional awards as described in footnotes (5), (6), (7), (8), (9), (10), and (11) 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) | 2/17/2021 | 2/21/2021 | | | | | 43,804 | | $ | 4,617,818 | | |
| RSU (5) | 2/17/2021 | 2/21/2021 | | | | | 60 | | $ | 4,199 | | |
| RSU (6) | 2/17/2021 | 2/21/2021 | | | | | 15 | | $ | 1,050 | | |
| Drew Wolff | Annual short-term incentive award (3) | | | $ | — | | $ | 70,000 | | (7) | $ | — | | | | |
| RSU (8) | 11/12/2021 | 11/12/2021 | | | | | 145 | | $ | 12,413 | | (9) |
| RSU (10) | 9/24/2021 | 11/12/2021 | | | | | 7,044 | | $ | 915,650 | | |
| RSU (11) | 8/16/2021 | 8/16/2021 | | | | | 7,044 | | $ | 650,161 | | |
| Margi Tooth | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | | $ | — | | | | |
| RSU (4) | 2/17/2021 | 2/21/2021 | | | | | 46,828 | | $ | 4,936,608 | | |
| RSU (5) | 2/17/2021 | 2/21/2021 | | | | | 60 | | $ | 4,199 | | |
| RSU (6) | 2/17/2021 | 2/21/2021 | | | | | 15 | | $ | 1,050 | | |
| Tricia Plouf | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | | $ | — | | | | |
| RSU (4) | 2/17/2021 | 2/21/2021 | | | | | 46,312 | | $ | 4,882,211 | | |
| RSU (5) | 2/17/2021 | 2/21/2021 | | | | | 60 | | $ | 4,199 | | |
| RSU (6) | 2/17/2021 | 2/21/2021 | | | | | 15 | | $ | 1,050 | | |
| Gavin Friedman | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | | $ | — | | | | |
| RSU (4) | 2/17/2021 | 2/21/2021 | | | | | 32,061 | | $ | 3,379,871 | | |
| RSU (5) | 2/17/2021 | 2/21/2021 | | | | | 60 | | $ | 4,199 | | |
| RSU (6) | 2/17/2021 | 2/21/2021 | | | | | 15 | | $ | 1,050 | | |
| Asher Bearman | Annual short-term incentive award (3) | | | $ | — | | $ | 60,000 | | | $ | — | | | | |
| RSU (4) | 2/17/2021 | 2/21/2021 | | | | | 32,061 | | $ | 3,379,871 | | |
| RSU (5) | 2/17/2021 | 2/21/2021 | | | | | 60 | | $ | 4,199 | | |
| RSU (6) | 2/17/2021 | 2/21/2021 | | | | | 15 | | $ | 1,050 | | |
(1)The amounts 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 11 to our Boardconsolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 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. Except as noted in footnote (8), no named executive officer elected to receive equity, and compensation committee determined notthis row reflects information regarding short-term incentive awards received as a cash bonus, paid annually.
(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 any equityand then 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date.
(5)Reflects one-time awards issued 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,Company team members in connection with the continuationCompany's 2020 performance results, received in the form of their employmentrestricted stock units, fully vested on date of grant and subject to a 2-year lock-up.
(6)Reflects one-time awards issued to all Company team members in connection with us.the achieving the Company's Q4 goal in 2020, received in the form of restricted stock units, fully vested on date of grant and subject to a 2-year lock-up.
(7)Mr. Wolff's Target Bonus Amount was prorated to $70,000 based on a full year Target Bonus Amount of $120,000.
(8)Mr. Wolff elected to receive a portion of his short-term incentive award in the form of RSUs. Such RSUs were fully vested on the grant date but subject to a 2-year lock-up.
(9)These amounts reflect a 20% premium to Mr. Wolff's short-term incentive award pursuant to our policy regarding short-term incentive awards.
(10)Reflects promotion award issued in connection with Mr. Wolff's appointment to Chief Financial Officer, received in the form of restricted stock units, which vests as to 1/4th on the one year anniversary and then 1/16th quarterly thereafter, subject to Mr. Wolff being a service provider through each vesting date.
(11)Reflects new employee award received in the form of restricted stock units, which vests as to 1/4th on the one year anniversary and then 1/16th quarterly thereafter, subject to Mr. Wolff being a service provider through each vesting date.
Outstanding Equity Awards at December 31, 2015Fiscal Year-End
The following table presents, for each ofprovides information regarding stock options and restricted stock units held by our named executive officers information regarding outstanding stock options and other equity awards held as of December 31, 2015.
2021.
|
| | | | | | | | | | | | | | | | | | | | | | |
| NAME | | GRANT DATE (1) | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
EXERCISABLE
(#) | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
UNEXERCISABLE
(#) | | OPTION
EXERCISE
PRICE
($) | | 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 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | 2/22/2021 | (2) | | | | | | 43,804 | | $ | 5,783,442 | |
| 4/3/2020 | (3) | | | | | | 18,881 | | $ | 2,492,858 | |
| 2/22/2019 | (4) | | | | | | 7,525 | | $ | 993,526 | |
| 2/20/2018 | (5) | | | | | | 1,220 | | $ | 161,077 | |
| 5/4/2017 | (6) | 23,448 | | 23,448 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 8/8/2016 | (7) | 50,000 | | 50,000 | | — | | $ | 14.95 | | 8/8/2026 | | |
| Drew Wolff | 11/12/2021 | (8) | | | | | | 7,044 | | $ | 930,019 | |
| 8/16/2021 | (9) | | | | | | 7,044 | | $ | 930,019 | |
| Margi Tooth | 2/22/2021 | (2) | | | | | | 46,828 | | $ | 6,182,701 | |
| 4/3/2020 | (3) | | | | | | 19,542 | | $ | 2,580,130 | |
| 2/22/2019 | (4) | | | | | | 11,882 | | $ | 1,568,780 | |
| 2/20/2018 | (5) | | | | | | 1,220 | | $ | 161,077 | |
| 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 | 2/22/2021 | (2) | | | | | | 46,312 | | $ | 6,114,573 | |
| 4/3/2020 | (3) | | | | | | 19,542 | | $ | 2,580,130 | |
| 2/22/2019 | (4) | | | | | | 8,911 | | $ | 1,176,519 | |
| 2/20/2018 | (5) | | | | | | 1,220 | | $ | 161,077 | |
| 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 | | |
| Gavin Friedman | 2/22/2021 | (2) | | | | | | 32,061 | | $ | 4,233,014 | |
| 4/3/2020 | (3) | | | | | | 24,717 | | $ | 3,263,386 | |
| 11/12/2019 | (14) | | | | | | 182 | | $ | 24,029 | |
| 2/22/2019 | (4) | | | | | | 3,420 | | $ | 451,543 | |
| 2/20/2018 | (5) | | | | | | 313 | | $ | 41,325 | |
| 5/4/2017 | (6) | 9,000 | | 9,000 | | — | | $ | 17.97 | | 5/4/2027 | | |
| 9/19/2016 | (15) | 40,000 | | 10,000 | | — | | $ | 16.32 | | 9/19/2026 | | |
| Asher Bearman | 2/22/2021 | (2) | | | | | | 32,061 | | $ | 4,233,014 | |
| 4/3/2020 | (3) | | | | | | 19,542 | | $ | 2,580,130 | |
| 2/22/2019 | (4) | | | | | | 10,397 | | $ | 1,372,716 | |
| 2/20/2018 | (5) | | | | | | 1,220 | | $ | 161,077 | |
| 5/4/2017 | (6) | 35,171 | | 4,397 | | — | | $ | 17.97 | | 5/4/2027 | | |
| |
(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. |
(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 ($132.03) as of the close of trading on December 31, 2021 (the last trading day of the fiscal year).
(2)Restricted stock units vested as to 1/4th of the shares on February 25, 2022 and 1/16th vests each quarter thereafter.
(3)Restricted stock units vested as to 1/4th of the shares on February 25, 2021 and 1/16th vests each quarter thereafter.
(4)Restricted stock units vested as to 1/4th of the shares on February 25, 2020 and 1/16th vests each quarter thereafter.
(5)Restricted stock units vested as to 1/4th of the shares on February 25, 2019 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)Restricted stock units vested as to 1/4th of the shares on November 25, 2020 and 1/16th vests each quarter thereafter.
(15)Stock option vested as to 1/4th of the shares underlying this option on September 12, 2017 and 1/48th vests monthly thereafter.
Option Exercises and Stock Vested Table
The following table provides information regarding stock options exercised, restricted stock and restricted stock units vested which were held by our named executive officers during fiscal 2021.
| | | | | | | | | | | | | | | | | |
| | 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 | | | 75 | | $ | 7,907 | |
| 4/3/2020 | | | 14,685 | | $ | 1,428,969 | |
| 2/22/2019 | | | 6,020 | | $ | 597,470 | |
| 2/20/2018 | | | 4,878 | | $ | 484,119 | |
| 9/23/2011 | 309,679 | | $ | 29,588,005 | | | |
| Drew Wolff | 11/12/2021 | | | 145 | | $ | 18,849 | |
| Margi Tooth | 2/22/2021 | | | 75 | | $ | 7,907 | |
| 4/3/2020 | | | 15,199 | | $ | 1,478,966 | |
| 2/22/2019 | | | 9,505 | | $ | 943,343 | |
| 2/20/2018 | | | 4,878 | | $ | 484,119 | |
| Tricia Plouf | 2/22/2021 | | | 75 | | $ | 7,907 | |
| 4/3/2020 | | | 15,199 | | $ | 1,478,966 | |
| 2/22/2019 | | | 7,129 | | $ | 707,530 | |
| 2/20/2018 | | | 4,878 | | $ | 484,119 | |
| 5/6/2016 | 5,951 | | $ | 435,028 | | | |
| 7/24/2015 | 2,256 | | $ | 162,538 | | | |
| 9/26/2014 | 3,500 | | $ | 335,921 | | | |
| Gavin Friedman | 2/22/2021 | | | 75 | | $ | 7,907 | |
| 4/3/2020 | | | 19,225 | | $ | 1,870,752 | |
| 11/12/2019 | | | 91 | | $ | 9,036 | |
| 2/22/2019 | | | 2,736 | | $ | 271,541 | |
| 2/20/2018 | | | 1,250 | | $ | 124,049 | |
| 9/19/2016 | 20,000 | | $ | 1,987,151 | | | |
| Asher Bearman | 2/22/2021 | | | 75 | | $ | 7,907 | |
| 4/3/2020 | | | 15,199 | | $ | 1,478,966 | |
| 2/22/2019 | | | 8,317 | | $ | 825,437 | |
| 2/20/2018 | | | 4,878 | | $ | 484,119 | |
| 8/2/2013 | 67,162 | | $ | 6,178,232 | | | |
Termination of Employment Severance and Change of Control AgreementsPayments Table
Darryl Rawlings
We entered into an employment agreement with Mr. Rawlings,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, 2021 using a price per share of our Chief Executive Officer, on June 30, 2006, which was amended and restated on April 20, 2007. Pursuantcommon stock equal to the amendedclosing 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 restatedarrangements 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 agreement, Mr. Rawlingsvoluntarily 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 restricted 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 | | $ | 200,893 | | $ | — | | $ | 874 | | $ | 201,767 | |
| After Change of Control, Termination without Cause | (5) | $ | 189,355 | | $ | 9,430,903 | | $ | — | | $ | 9,620,258 | |
| Drew Wolff | | | | | |
| Termination without Cause | | $ | 55,778 | | $ | — | | $ | 874 | | $ | 56,652 | |
| After Change of Control, Termination without Cause | (5) | $ | 194,240 | | $ | 1,860,039 | | $ | — | | $ | 2,054,279 | |
| Margi Tooth | | | | | |
| Termination without Cause | | $ | 143,201 | | $ | — | | $ | 874 | | $ | 144,075 | |
| After Change of Control, Termination without Cause | (5) | $ | 189,355 | | $ | 10,492,688 | | $ | — | | $ | 10,682,043 | |
| Tricia Plouf | | | | | |
| Termination without Cause | | $ | 154,740 | | $ | — | | $ | 713 | | $ | 155,453 | |
| After Change of Control, Termination without Cause | (5) | $ | 189,355 | | $ | 10,032,300 | | $ | — | | $ | 10,221,655 | |
| Gavin Friedman | | | | | |
| Termination without Cause | | $ | 112,933 | | $ | — | | $ | 713 | | $ | 113,646 | |
| After Change of Control, Termination without Cause | (5) | $ | 193,703 | | $ | 8,013,297 | | $ | — | | $ | 8,207,000 | |
| Asher Bearman | | | | | |
| Termination without Cause | | $ | 143,005 | | $ | — | | $ | 394 | | $ | 143,399 | |
| After Change of Control, Termination without Cause | (5) | $ | 189,159 | | $ | 8,346,937 | | $ | — | | $ | 8,536,096 | |
(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 initialadditional 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 annual bonus cash severance amounts due under our Severance Plan for a termination without cause and are based on 2021 short-term incentive awards.
(3)All unvested restricted stock awards and 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, 2021. The value of 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 used a price of $132.03 per share
to determine market value, which was the closing market price of our common stock as reported by the NASDAQ Stock Market on December 31, 2021, the last trading day of the year.
(4)The amounts shown in this column reflect the one-month cost of group medical, dental and vision 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.
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.
Timothy Graff
We entered into an offer letter agreement with Mr. Graff, President of American Pet Insurance Company, on July 6, 2014, which was amended on March 5, 2015. The offer letterpermanent 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 specific termright 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 constitutes an at-willthe 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.
Our option agreements generally provide that if the holder’s employment arrangement. 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.
Equity Compensation Plan Information
The offer letterfollowing table presents information as of December 31, 2021 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 | 1,894,832 | $ | 13.3916 | | (1) | 1,721,350 | (2) |
| Equity compensation plans not approved by security holders | — | | — | | | — | | |
| Total | 1,894,832 | — | | | 1,721,350 | |
(1)The weighted average exercise price relates solely to outstanding stock option shares since shares of restricted stock units have no exercise price.
(2)Includes 1,721,350 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 provideBoard of Directors waived the automatic increase for any change-of-control or severance payments.
Employee Benefits and Incentive Plans2021.
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. Since 2017, our Board of Directors declined the automatic increase that would have occurred on January 1 of each year. 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 11, 2022, 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 which40,712,473 shares of our common stock mayoutstanding on April 11, 2022. 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 11, 2022 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) | | 5,768,753 | | 14.17% |
| Vanguard Group Inc. | (2) | | 3,832,072 | 9.41% |
| Aflac Incorporated | (3) | | 3,636,364 | 8.93% |
| Capital World Investors | (4) | | 2,408,785 | | 5.92% |
| Wellington Management Company LLP | (5) | | 2,344,490 | | 5.76% |
| Directors and Named Executive Officers: | | | |
| Darryl Rawlings | (6) | | 1,494,247 | | 3.66% |
| Howard Rubin | (7) | | 230,425 | | * |
| Murray Low | (8) | | 168,987 | | * |
| Tricia Plouf | (9) | | 135,751 | | * |
| Margaret Tooth | (10) | | 114,651 | | * |
| Asher Bearman | (11) | | 94,137 | | * |
| Dan Levitan | (12) | | 94,131 | | * |
| Michael Doak | (13) | | 31,989 | | * |
| Gavin Friedman | (14) | | 10,714 | | * |
| Jacqueline Davidson | (15) | | 10,312 | | * |
| Eric Johnson | (16) | | 1,761 | | * |
| Zay Satchu | (17) | | 803 | | * |
| Andrew Wolff | (18) | | 679 | | * |
| | | |
| All Officers and Directors as a Group | (19) | | 2,388,587 | | 5.86% |
* 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 January 26, 2021. Consists of 5,027,448 shares over which BlackRock, Inc. has sole voting power and 5,133,036 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 |
|
(3) Aflac Incorporated: Based solely on the Schedule 13G/A filed by Aflac Incorporated on November 20, 2020. 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.
(4) Capital World Investors: Based solely on the Schedule 13G filed by Capital World Investors on February 11, 2022. Consists of 2,408,785 shares over which Capital World Investors has sole voting power and sole dispositive power. The principal business address of Capital World Investors is 333 South Hope Street, 55th Floor, Los Angeles, CA 90071.
(5) Wellington Management Company LLP: Based solely on the Schedule 13G/A filed by Wellington Management Group LLP (WMG LLP), Wellington Group Holdings LLP (WGH LLP), Wellington Investment Advisors Holdings LLP (WIAH LLP) and Wellington Management Company LLP (WMC LLP) on February 4, 2022. Consists of: (i) 2,072,881 shares over which WMG LLP has shared voting power and 2,344,442 shares over which WMG LLP has shared dispositive power; (ii) 2,072,881 shares over which WGH LLP has shared voting power and 2,344,442 shares over which WGH LLP has shared dispositive power; (iii) 2,072,881 shares over which WIAH LLP has shared voting power and 2,344,442 shares over which WIAH LLP has shared dispositive power; and (iv) 1,966,667 shares over which WMC LLP has shared voting power and 2,169,124 shares over which WMC LLP has shared dispositive power. The principal business address of Wellington Management Group LLP is Wellington Management Group LLP, c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.
(6) Darryl Rawlings: Consists of (i) 557,350 shares held by Mr. Rawlings; (ii) 857,109 shares held by Kuyashii Primary Equities LLC; (iii) 73,448 shares underlying options to purchase common stock that are exercisable within 60 days of April 11, 2022; and (iv) 6,340 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022 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.
(7) Howard Rubin: Consists of 230,425 shares held by Mr. Rubin.
(8) Murray Low: Consists of (i) 10,614 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 11, 2022 held by Dr. Low.
(9) Tricia Plouf: Consists of (i) 29,961 shares held by Ms. Plouf of which 11,706 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 11, 2022; and (iii) 6,847 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022 held by Ms. Plouf.
(10) Margaret Tooth: Consists of (i) 36,030 shares held by Ms. Tooth; (ii) 71,148 shares underlying options to purchase common stock that are exercisable within 60 days of April 11, 2022; and (iii) 7,473 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022 held by Ms. Tooth.
(11) Asher Bearman: Consists of (i) 83,487 shares held by Mr. Bearman of which 67,162 shares are pledged as collateral in a line of credit; (ii) 4,397 shares underlying options to purchase common stock that are exercisable within 60 days of April 11, 2022; and (iii) 7,473 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022 held by Mr. Bearman.
(12) Dan Levitan: Consists of (i) 91,131 shares held by Mr. Levitan; and (ii) 3,000 shares held by the Levitan Family Foundation.
(13) Michael Doak: Consists of (i) 669 shares held by Mr. Doak; and (ii) 31,320 shares underlying options to purchase common stock that are exercisable within 60 days of April 11, 2022 held by Mr. Doak.
(14) Gavin Friedman: Consists of (i) 5,258 shares held by Mr. Friedman; and (ii) 5,456 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022 held by Mr. Friedman.
(15) Jacqueline Davidson: Consists of 10,312 shares held by Ms. Davidson, of which 1,000 are shares held in the name Jacqueline L Davidson & Stewart P Davidson.
(16) Eric Johnson: Consists of 1,761 shares held by Mr. Johnson.
(17) Zay Satchu: Consists of 803 shares held by Dr. Satchu.
(18) Andrew Wolff: Consists of 679 shares held by Mr. Wolff.
(19) All Officers and Directors as a Group: Consists of (i) 2,039,370 shares held by our directors and executive officers as a group; (ii) 316,848 shares underlying options to purchase common stock that are exercisable within 60 days of April 11, 2022 held by our directors and executive officers as a group; and (iii) 32,369 shares issuable upon settlement of restricted stock units that will vest within 60 days of April 11, 2022, held by our directors and executive officers as a group.
| |
Certain Relationships and Related Party Transactions
(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. |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than as disclosed below, from January 1, 20152021 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 — 2021 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, 2015,2021, we paid David Rawlings approximately $292,523$41,312 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, 2021, 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, 2015,2021, we paid David Rawlings, Jr., approximately $13,288$176,871 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 2022 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, 2022 and not later than the close of business on March 17, 2017.25, 2022. 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 meeting2022 Annual Meeting of stockholders must be received by us not later than December 22, 201627, 2021 in order to be considered for inclusion in our proxy materials for that meeting. If the date of our 2022 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 2022 Annual Meeting of stockholders, shall be a reasonable time before we begin to print and mail proxy materials. If our 2022 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.
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 2015,2021, except with respect to one late Form 4 filing covering one transaction by Ian Moffat, an executive officerfor: (i) each of the Company,Jacqueline Davidson, Michael Doak, Eric Johnson, Dan Levitan, Murray Low, 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,Howard Rubin (each a member of our Board of Directors,Directors) filed one late Form 4 in April 2021 relating to includevesting of RSUs that occurred in March 2021 and filed one additional transaction, 2) an amendedtimely Form 5 in February 2022 relating to the vesting of RSUs that occurred in December 2021; (ii) Asher Bearman, our EVP of Corporate Development filed one timely Form 5 in February 2022 relating to the vesting of RSUs that occurred in August and November 2021; (iii) Gavin Friedman, our EVP of Legal, and Darryl Rawlings, our Chief Executive Officer, each filed one late Form 4 in January 2022 relating to the vesting of RSUs that occurred in August and November 2021; (iv) Tricia Plouf, our Chief Operating Officer (and former Chief Financial Officer and Co-President), filed one late Form 4 in December 2021 relating to the vesting of RSUs that occurred in November 2021 and one late Form 4 in January 2022 relating to the vesting of RSUs that occurred in August and November 2021; (v) Margaret Tooth, our President (and former Co-President), filed one late Form 4 in December 2021 relating to the vesting of RSUs that occurred in November 2021 and one late Form 4 in February 2022 relating to the vesting of RSUs that occurred in August and November 2021; and (vi) Andrew Wolff, our Chief Financial Officer, filed one late Form 3 filing by Alison Andrew, our former Chief Marketing Officer of thein October 2021 relating to Mr. Wolff's initial 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.holdings.
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, 2015,2021, 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.
Appendix A
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TRUPANION, INC.
Information on Attending the 2022 Annual Meeting of Stockholders
Trupanion, Inc. (the “Attending the Annual Meeting In-Person. The Annual Meeting will be held on Wednesday, June 8, 2022 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 corporation duly organized and existing undermajor 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 General Corporation Lawformal business portions of the StateAnnual Meeting by dialing +1-877-407-0784 (Toll Free) or +1-201-689-8560 (Toll/International), although voting and tabulation of Delaware (the “DGCL”), does hereby certify that:votes will be in-person (so for those attending remotely, please cast your vote online prior to the Annual Meeting). Company presentations will follow the Annual Meeting via webcast. We strongly encourage our stockholders and guests who intend to attend in-person to practice appropriate social distancing, to comply with all applicable stay-at-home or similar orders that may be in effect at the time of the Annual Meeting. Please visit https://investors.trupanion.com for further details on attending our Annual Meeting. 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.
1.Stockholder Admission and Voting In-Person at the Annual Meeting. Article IV, Section 1Please 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 Company’sforms 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 11, 2022.
•If you are a registered stockholder, please bring oneof the following that shows your current Restated Certificatename and address: the Proxy Cardor the Notice of Incorporation (the “Internet Availability Current Certificate”) is hereby amended and restated in its entirety to read as follows:for the Annual Meeting.
“•1.If you are a Total Authorized“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. The total numberPlease also bring either the Proxy Cardor the Notice of sharesInternet Availability (in the name 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”)registered stockholder).”
2.•The foregoing amendment toIf you are a beneficial stockholder (that is, your shares are held in the Current Certificate has been duly approvedname 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 Company’s Boardbrokerage 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 Directors in accordance with Sections 141record, naming you, signed by the beneficial stockholder’s brokerage firm, bank or other nominee. The legal proxy should include the name and 242address of the DGCL.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.
3.Guest Admission. The foregoing amendmentPlease join our guest list if you plan to Current Certificate has been duly approvedattend 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 Company’s stockholders in accordance with Section 242day of the DGCL.
4.This Certificate of Amendment shall be effective upon filing with the Delaware Secretary of State.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed by its duly authorized officer this ___ day of _______, 2016 and the foregoing facts stated herein are true and correct.
TRUPANION, INC.
By: _________________________________ Annual Meeting.
Name:
Darryl Rawlings
Title:Questions. President and Chief Executive OfficerIf you have additional questions about attending our Annual Meeting, please contact Trupanion’s Head of Investor Relations, Laura Bainbridge, at (206) 607-1929 or InvestorRelations@trupanion.com.
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