Table of Contents
As filed with the Securities and Exchange Commission on June 16, 2014
Registration No. 333-            
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Trupanion, Inc.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	7374        	 	83-0480694	
(State or other jurisdiction of
incorporation or organization)	 	(Primary Standard Industrial        
Classification Code Number)        	 	(I.R.S. Employer
Identification Number)	

907 NW Ballard Way
Seattle, WA 98107
(855) 727-9079
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Darryl Rawlings
Chief Executive Officer
Trupanion, Inc.
907 NW Ballard Way
Seattle, WA 98107
(855) 727-9079
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:

Alan Smith
James Evans
Amanda Rose
Fenwick & West LLP
1191 Second Avenue, Floor 10
Seattle, WA 98101
(206) 389-4510	 	Asher Bearman        
General Counsel        
Trupanion, Inc.        
907 NW Ballard Way        
Seattle, WA 98107        
(855) 727-9079        	 	Peter Astiz
Trent Dykes
Andrew Ledbetter
DLA Piper LLP (US)
701 Fifth Avenue, Suite 7000
Seattle, WA 98104
(206) 839-4800	

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.   ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	 	¨	  	Accelerated filer	 	¨	
Non-accelerated filer	 	x   (Do not check if a smaller reporting company)	  	Smaller reporting company	 	¨	

CALCULATION OF REGISTRATION FEE

 	
Title of each class of
securities to be registered	 	Proposed
maximum
aggregate
offering price (1)(2)	 	Amount of
registration fee	
Common stock, $0.00001 par value per share	 	$75,000,000	 	$9,660	

(1)  	Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.	
(2)  	Includes the offering price of the additional shares that the underwriters have the option to purchase.	
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Table of Contents
The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED JUNE 16, 2014
PRELIMINARY PROSPECTUS
             Shares

Common Stock

We are offering              shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. We expect the initial public offering price to be between $         and $         per share. We have applied to list our common stock on the New York Stock Exchange under the symbol “TRUP.”

Investing in our common stock involves a high degree of risk. Please read “ Risk Factors ” beginning on page 13 of this prospectus.
We are an “emerging growth company” as defined in The Jumpstart Our Business Startups Act of 2012, and will be subject to reduced public company reporting requirements.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 	  	PER
SHARE	 	  	TOTAL	 	
Public Offering Price	  	$	            	  	  	$	            	  	
Underwriting Discounts and Commissions (1)	  	$	 	  	  	$	 	  	
Proceeds to Trupanion, Inc. Before Expenses	  	$	 	  	  	$	 	  	

 	(1)	See “Underwriting” for additional information regarding underwriter compensation.	
Delivery of the shares of common stock is expected to be made on or about                     , 2014. We have granted the underwriters an option for a period of 30 days to purchase an additional              shares of our common stock.

 
					
RBC Capital Markets	    	Barclays     	  	Stifel	

Canaccord Genuity	  	Cowen and Company	
Prospectus dated                     , 2014

Table of Contents

Table of Contents

Table of Contents

Table of Contents
 TABLE OF CONTENTS

PROSPECTUS SUMMARY	  	 	1	  	
		
RISK FACTORS	  	 	13	  	
		
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	  	 	44	  	
		
MARKET AND INDUSTRY DATA	  	 	45	  	
		
USE OF PROCEEDS	  	 	46	  	
		
DIVIDEND POLICY	  	 	46	  	
		
CAPITALIZATION	  	 	47	  	
		
DILUTION	  	 	49	  	
		
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA	  	 	51	  	
		
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	  	 	56	  	
		
BUSINESS	  	 	87	  	
		
MANAGEMENT	  	 	105	  	
		
EXECUTIVE COMPENSATION	  	 	113	  	
		
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS	  	 	123	  	
		
PRINCIPAL STOCKHOLDERS	  	 	126	  	
		
DESCRIPTION OF CAPITAL STOCK	  	 	128	  	
		
MATERIAL U.S. FEDERAL TAX CONSEQUENCES FOR NON-U.S. HOLDERS	  	 	134	  	
		
SHARES ELIGIBLE FOR FUTURE SALE	  	 	139	  	
		
UNDERWRITING	  	 	141	  	
		
LEGAL MATTERS	  	 	148	  	
		
EXPERTS	  	 	148	  	
		
WHERE YOU CAN FIND MORE INFORMATION	  	 	148	  	
		
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	  	 	F-1	  	

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor any of the underwriters have authorized anyone to provide you with information that is different. We are offering to sell shares of our common stock, and seeking offers to buy shares of our common stock, only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
Until and including                     , 2014, 25 days after the date of this prospectus, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
For investors outside of the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

Table of Contents
 PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the section entitled “Risk Factors” and the consolidated financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless otherwise stated or the context otherwise indicates, references to “Trupanion,” “we,” “us,” “our” and similar references refer to Trupanion, Inc. and its subsidiaries taken as a whole.
Our Company
We are a direct-to-consumer monthly subscription service providing a medical insurance plan for cats and dogs throughout the United States, Canada and Puerto Rico. Our data-driven, vertically-integrated approach enables us to provide pet owners with what we believe is the highest value medical plan for their pets, priced specifically for each pet’s unique characteristics. Our growing and loyal member base provides us with highly predictable and recurring revenue. We operate our business with a focus on maximizing the lifetime value of each pet while sustaining a favorable ratio of lifetime value relative to acquisition cost.
Our target market is large and underpenetrated. We have pioneered a unique solution that sits at the center of the pet medical ecosystem, meeting the needs of pets, pet owners and veterinarians, and we believe we are uniquely positioned to disrupt the pet medical insurance market and drive increased market penetration. The number of pets enrolled in our medical plan has increased every quarter for the last ten years. More recently, our total enrolled pets grew from 31,207 on January 1, 2010 to 181,634 on March 31, 2014, which represents a compound annual growth rate of 51.4%.
We generate revenue primarily from subscription fees for our medical plan. Our medical plan automatically renews on a monthly basis, and members pay the subscription fee at the beginning of each subscription period. Our vertically integrated infrastructure eliminates significant frictional costs that constrain many of our competitors, which allows us to provide superior value to our members. For example, while many traditional providers spend approximately $0.45 to $0.64 per dollar of premium on claims, we spent $0.67, $0.68, $0.70 and $0.70 per subscription dollar in 2011, 2012, 2013 and the first quarter of 2014, respectively. Since 2010, at least 88% of our subscription business revenue every quarter has come from existing members who had active subscriptions at the beginning of the quarter. Due to our focus on providing a superior value proposition and member experience, our members are very loyal, as evidenced by our 98.5% average monthly retention rate over 2011, 2012 and 2013. This loyalty is also reflected in our retention of annual cohorts of members, both on an average monthly and cumulative basis. For example, the pets that we enrolled in our medical plan in 2010 had average monthly retention rates of 98.15%, 98.85% and 99.07% at the end of 2011, 2012 and 2013, respectively, which resulted in a cumulative impact of 56% of the original cohort pets remaining enrolled at December 31, 2013. For more information regarding average monthly retention, including an explanation of how we calculate that metric, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.”
We generate leads through both third-party referrals and online member acquisition channels, which we then convert into members through our website and contact center. Our website, Trupanion.com, is critical to converting leads from all of our member acquisition channels, with over 85% of our new members in the three months ended March 31, 2014 visiting our website prior to or during the enrollment process. Veterinary practices represent our largest referral source. While these referrals accounted for a majority of our enrollments in 2013 and the first quarter of 2014, we do not pay commissions to or otherwise compensate veterinarians for their referrals. We engage a national referral network of independent contractors who are paid fees based on activity in their regions, which we refer to as our Territory Partners. Our Territory Partners are dedicated to cultivating direct veterinary relationships and building awareness of the benefits that our medical plan offers veterinarians

1

Table of Contents
and their clients. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about, and potentially enroll in, our medical plan. Our online member acquisition channels serve as important resources for pet owner education and drive new member leads and conversion. We also receive a significant number of new leads from existing members adding pets and referring their friends and family members.
As a result of the predictable nature of our subscription business, our business model yields attractive per unit economics. Pets that enrolled in the first quarter of 2014 cost us an average of $111 to acquire and have an implied lifetime value of $610. This represents a 5.5x ratio of lifetime value of a pet divided by average pet acquisition cost. We continually refine our sales and marketing strategies to optimize this ratio. For more information about our key financial metrics, including related risks and assumptions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.”
We enrolled our first pet in Canada in 2000 and our first pet in the United States in 2008. Our revenue increased from $19.1 million for the year ended December 31, 2010 to $83.8 million for the year ended December 31, 2013, representing a compound annual growth rate of 64%. Additionally, our revenue increased from $17.8 million for the three months ended March 31, 2013 to $25.6 million for the three months ended March 31, 2014, representing 44% year-over-year growth. We have achieved sequential revenue growth in every quarter since the first quarter of 2010. We have made and expect to continue to make substantial investments in member acquisition and in expanding our operations to support our expected growth. For the years ended December 31, 2011, 2012 and 2013, we had a net loss of $3.9 million, $6.4 million and $8.2 million, respectively. For the three months ended March 31, 2013 and 2014, we had a net loss of $1.9 million and $4.9 million, respectively. As of March 31, 2014, our accumulated deficit was $40.9 million.
Industry Overview
The role pets play in their owners’ lives is constantly evolving, with each generation allowing pets to play a more prominent role in family life. Over the course of the last two generations, pets have transitioned from the backyard, to the kitchen, and into the bedroom. Innovations in pharmaceutical technologies, including flea and tick medications, have been important factors enabling increased physical proximity and emotional attachment between pet owners and pets. According to a 2012 survey conducted by Harris Interactive, 91% of U.S. pet owners consider their pets to be family members. (1) Additionally, 81% of U.S. pet owners consider their pets as equal members of the family and 58% think of their pets as their children and refer to themselves as their pets’ mom or dad, according to a 2011 survey conducted by Kelton Research LLC. (2) As further evidence of this growing human-animal bond, 77% of cat owners and 66% of dog owners said they let their cats or dogs sleep in their beds, according to a 2012 survey conducted by Harris Interactive. (1) A growing number of pet owners pamper their cats and dogs, and spend significant amounts on relatively expensive products and services for their pets, such as premium organic food and doggy day care. According to the American Pet Products Association (APPA), U.S. consumers are estimated to have spent $55.5 billion on their pets in 2013, which is an increase of approximately 44% from the $38.5 billion spent in 2006. (3)
Despite this increased focus on pet care, pet owners are often surprised by the cost of veterinary care and can be financially unprepared if their beloved pets become injured or ill. The costs of medical treatments for pets have become more onerous over time due to the availability and usage of increasingly advanced veterinary care. Although traditional pet insurance products have been offered for years, many of these products are poorly designed and confusing to pet owners and their veterinarians. Because these products provide limited value to both pet owners and veterinarians, they have low adoption rates. Consequently, pet owners without medical

(1)  	See note 1 in the section entitled “Market and Industry Data.”	
(2)  	See note 2 in the section entitled “Market and Industry Data.”	
(3)  	See note 3 in the section entitled “Market and Industry Data.”	

2

Table of Contents
coverage or with traditional insurance products may be forced to accept sub-standard care for their pets due to financial constraints.
While both pet owners and veterinarians share the common goal of ensuring the best possible care for pets, they face several challenges.
Problems facing pet owners: 
 
 	•	 	Cost of medical care is becoming increasingly burdensome on pet owners	
 
 	•	 	Pet owners are often surprised by and unprepared for the costs of veterinary care	
 
 	•	 	Traditional pet insurance products provide poor value and customer experiences	
Problems facing veterinarians: 
 
 	•	 	Veterinarians are constrained by pet owners’ inability to pay for optimal care	
 
 	•	 	Veterinary practices face challenging business economics	
 
 	•	 	Traditional pet insurance products have created conflicts between veterinarians and pet owners	
Our Market Opportunity
We believe the growing human-animal bond has led to an increasing willingness by pet owners to spend on pet health. According to the APPA, of the $55.5 billion that is estimated to have been spent on pets in 2013, U.S. consumers spent an estimated $14.2 billion on veterinary care, which is an increase of 54% from the $9.2 billion spent in 2006. (4) Veterinary expenditures are rising due to technological advancements in veterinary medicine and increased utilization of care. More sophisticated and costly treatments, such as ultrasound, radiation therapy, MRIs, CT scans, transplants and chemotherapy, are gaining wider acceptance. The cost of diagnostic testing alone can be expensive, in part because pets are unable to communicate their symptoms. For example, even a seemingly minor issue can potentially cost thousands of dollars to diagnose and treat since the pet cannot communicate symptoms.
We believe the addressable market for medical coverage for cats and dogs in North America is the largest in the world. Pet owners in the United States and Canada collectively owned approximately 193 million cats and dogs according to surveys conducted by the APPA in 2013 and the Canadian Animal Health Institute in 2012. (5) By comparison, pet owners in Europe collectively owned approximately 165 million cats and dogs in 2012, according to the European Pet Food Industry Federation. (6) Despite the growing human-animal bond, approximately 1% of pet owners in the United States and Canada had pet medical coverage in 2013, according to a 2013 report from Packaged Facts, a division of Market Research Group, LLC. (7) Many European countries have significantly higher penetration rates of pet medical coverage, which range from 5% in France and Denmark to 25% in the United Kingdom and 40% in Sweden, according to a 2013 study conducted by Munich Re. (8) We believe that these higher penetration rates stem from active collaboration between pet medical coverage providers and veterinary communities to design and deliver high value medical coverage.
Our Solution
To address these challenges, we offer a simple, fair and comprehensive plan that pays 90% of veterinary costs for covered accident and illness claims, has no payout limitations and can be used to cover the costs incurred at any

(4)  	See notes 3 and 4 in the section entitled “Market and Industry Data.”	
(5)  	See notes 5 and 6 in the section entitled “Market and Industry Data.”	
(6)  	See note 7 in the section entitled “Market and Industry Data.”	
(7)  	See note 8 in the section entitled “Market and Industry Data.”	
(8)  	See note 9 in the section entitled “Market and Industry Data.”	

3

Table of Contents
veterinary practice, emergency care center or specialty hospital. Generally, the only costs not covered by our plan are those relating to conditions existing prior to the pet’s enrollment and to routine or preventative care, including examination fees. This differentiated approach aligns the interests of pet owners and veterinarians, which allows them to focus on providing the best care for pets rather than minimizing the cost of treatment.
Benefits to Pet Owners
We believe our solution offers the following key benefits to pet owners:
Predictability of costs and peace of mind. Our members can be confident that their pets will be covered in the event of injury or illness.
Awareness of cost of care. We actively market the value of our plan to veterinarians, enabling them to educate pet owners effectively about the costs of veterinary care and the benefits of our medical plan.
Superior value proposition. We offer a comprehensive medical plan with no limitations for chronic, congenital or hereditary conditions, no payout limits and no mandates to veterinarians on the cost of treatment.
Exceptional member experience. We have designed our claims process to be fair, efficient and transparent. Our goal is to help eliminate the high levels of frustration associated with traditional pet insurance products.
Benefits to Veterinarians
We believe our solution offers the following key benefits to veterinarians:
Freedom to be the most effective advocate for pets. Our plan does not limit how much can be paid for an injury or illness. This provides veterinarians with the freedom to practice veterinary medicine at the highest level and be the most effective advocate for the health of the pets.
More loyal client base. Our members visit veterinarians more frequently, which can generate significantly more annual revenue for veterinarians compared to clients without pet medical coverage. The result is a client base that is more engaged, spends more money on care and has healthier cats and dogs.
Reduces potential conflicts with cost-sensitive pet owners. We enable veterinarians to recommend optimal treatment without having their decisions dictated by the cost of treatment and the financial burden on the pet owner. As a result, veterinarians are able to establish stronger ties with their clients.
Our Strengths
We have the following strengths, which we believe are competitive advantages and not easily replicated:
Compelling value proposition drives a powerful network effect. Our differentiated solution aligns the interests of both pet owners and veterinarians, creating a unique network effect. Our members benefit because their pets receive the best care possible and we pay 90% of the covered costs. Veterinarians benefit because they can recommend the optimal treatment and provide a high standard of care regardless of cost, which improves their business fundamentals. As more pet owners and veterinarians experience the compelling benefits of our medical plan, we believe they act as ambassadors for our brand and drive additional enrollments.
Unique “go-to-market” strategy enables cost-efficient member acquisition. We invest significantly in developing relationships with veterinarians because we believe they are uniquely positioned to introduce our value proposition to pet owners. Since 2003, we have been building a national independent referral network,

4

Table of Contents
comprised of 62 Territory Partners as of March 31, 2014, dedicated to cultivating direct veterinary relationships and building awareness of the benefits that our medical plan offers both veterinarians and their clients. For the three months ended December 31, 2013, we received referrals from over 5,000 veterinary practices.
Vertically integrated approach reduces frictional costs and improves member value. We manage all aspects of our business using a vertically integrated approach that eliminates many of the significant frictional costs and member experience complications that can result from outsourcing key business functions to third-party service providers. We have strategically chosen to share these cost savings with our members in the form of higher claims payout ratios relative to traditional providers, which has enabled us to provide a superior value proposition.
Actionable data insights. Over the past 14 years, we have collected an extensive library of proprietary data that is not commercially available and that we believe is unparalleled in the industry. As of March 31, 2014, we had collected data from over 5,500,000 medical plan months, 750,000 claims, 18,000 veterinary practices, 60,000 postal codes and 440 cat and dog breeds. Using these insights, we are able to accurately price subscriptions to our medical plan, increase our retention rate and optimize lifetime value of a pet.
Powerful technology infrastructure. We have developed proprietary software systems that form the backbone of our technology platform, including our data analytics and pricing engine, claims processing software, customer relationship management system, contact center phone system and website. These solutions were custom built to meet the unique needs of our business and enable us to achieve superior operational execution.
Proven management team. We have a management team of experienced professionals with deep industry knowledge, a strong track record of successful execution and an average of ten years of experience in the veterinary medicine and insurance industries. We believe that our management team is uniquely positioned to lead a company that operates at the intersection of three highly complex fields: veterinary medicine, data analytics and technology.
Our Strategy
Our strategy is focused on attracting and retaining members by providing a best-in-class value and member experience. We are focused on building a successful long-term business by pursuing the following growth strategies:
Increase the number of referring veterinary practices. We intend to increase the number of veterinary practices that are actively introducing our medical plan to their clients by continuing to expand our national independent referral network of Territory Partners and increasing direct marketing to veterinarians.
Increase the number of referrals from active veterinary practices. We intend to continue increasing the number and quality of interactions that we have with veterinarians to accelerate the rate at which active veterinary practices refer us leads.
Increase the number of third-party referrals from members. We are focused on using innovative technologies to further enhance our member experience. For example, we recently introduced a new technology, Trupanion Express, which is designed to facilitate the direct payment of claims to the veterinarian.
Improve online lead generation and conversion. We are investing in our online marketing capabilities, and intend to continue to do so in order to fully capture the online opportunity.
Explore other member acquisition channels. We regularly evaluate new member acquisition channels. We intend to aggressively pursue those channels that we believe will generate an attractive ratio of lifetime value relative to acquisition cost.

5

Table of Contents
Expand internationally. While we are currently focused on capturing the large opportunity in the U.S. and Canadian markets, we continue to explore international expansion.
Pursue other revenue opportunities. We may opportunistically engage in other revenue opportunities. For example, American Pet Insurance Company, which we acquired in 2007, has written policies for an unaffiliated managing general agent since the end of 2012. As the industry grows and other providers consider entering the pet insurance market, we are uniquely positioned to partner with them.
Risks Affecting Us
Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:
 
 	•	 	we have incurred significant net losses since our inception and may not be able to achieve or maintain profitability in the future;	
 
 	•	 	we base our decisions regarding our member acquisition expenditures primarily on our analysis of the revenue that we expect new pets to generate over their lifetimes based on our historical experience, which may not accurately reflect our future results;	
 
 	•	 	if we are unable to maintain high member retention rates, our growth prospects and revenue will be adversely affected;	
 
 	•	 	the prices of our medical plan subscriptions are based on assumptions and estimates, and if our actual experience differs from the assumptions and estimates used in pricing our medical plan subscriptions, our revenue and financial condition could be adversely affected;	
 
 	•	 	the anticipated benefits of our analytics platform may not be fully realized;	
 
 	•	 	our actual claims expenses may exceed our current reserve, which was $5.0 million as of March 31, 2014, and may adversely affect our operating results and financial condition;	
 
 	•	 	we rely significantly on our Territory Partners, veterinarians and other third parties to recommend our medical plan to potential members;	
 
 	•	 	as of December 31, 2013, we did not, and at future measurement dates we may fail to, maintain the amount of risk-based capital required to avoid additional regulatory oversight, which amount was $16.8 million as of December 31, 2013;	
 
 	•	 	if we fail to comply with the numerous laws and regulations that are applicable to the sale of a pet medical plan, our business and operating results could be harmed;	
 
 	•	 	our outstanding indebtedness, which was $29.9 million as of March 31, 2014 and is secured by all of our assets, could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations; and	
 
 	•	 	the outcome of litigation or regulatory proceedings could subject us to significant monetary damages, restrict our ability to conduct our business, harm our reputation and otherwise negatively impact our business.	
See “Risk Factors” beginning on page 13.
Corporate Information
We were founded in Canada in 2000 as Vetinsurance Ltd. In 2006, we effected a business reorganization whereby Vetinsurance Ltd. became a consolidated subsidiary of Vetinsurance International, Inc., a Delaware corporation. In

6

Table of Contents
2007, we began doing business as Trupanion. In 2013, we formally changed our name from Vetinsurance International, Inc. to Trupanion, Inc. Our principal executive offices are located at 907 NW Ballard Way, Seattle, Washington 98107, and our telephone number is (855) 727-9079. Our website address is www.trupanion.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
We use various trade names, trademarks and service marks throughout this prospectus, including “Trupanion” and “Trupanion Express.” This prospectus contains additional trade names, trademarks and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. We have omitted the ® and ™ designations, as applicable, for the trademarks we name in this prospectus.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in The Jumpstart Our Business Startups Act of 2012 (JOBS Act), and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company. In addition, the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

7

Table of Contents
The Offering
 
Common stock to be offered	             shares	
 
Common stock to be outstanding immediately after this offering	             shares	
 
Option to purchase additional shares	We have granted the underwriters an option for 30 days from the date of this prospectus to purchase up to             additional shares of common stock.	
 
Use of proceeds	We intend to use the net proceeds to us to repay $         million of our outstanding indebtedness and for working capital and other general corporate purposes. We also may use a portion of the net proceeds to satisfy our risk-based capital requirements or for the acquisition of, or investment in, technologies, assets or businesses that complement our business. See “Use of Proceeds.”	
 
Proposed New York Stock Exchange symbol	“TRUP”	
 
Risk factors	For a discussion of factors to consider carefully before deciding to invest in shares of our common stock, see “Risk Factors.”	
The number of shares of our common stock to be outstanding after this offering is based on (i) 19,346,760 shares of our common stock outstanding as of March 31, 2014 and (ii) the issuance of 86,956 shares of our Series A convertible preferred stock upon the exercise of a warrant in April 2014, and excludes:
 
 	•	 	4,833,400 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2014, with a weighted average exercise price of $2.39 per share;	
 
 	•	 	168,750 shares of common stock issuable upon the exercise of options granted after March 31, 2014, with an exercise price of $12.27 per share;	
 
 	•	 	35,672 shares of common stock issuable upon the exercise of convertible preferred stock warrants outstanding as of March 31, 2014, with a weighted average exercise price of $2.94 per share;	
 
 	•	 	748,439 shares of common stock issuable upon the exercise of common stock warrants outstanding as of March 31, 2014, with an exercise price of $4.81 per share, which exercise price will automatically become our initial public offering price upon the completion of this offering (for example, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, these warrants would become warrants to purchase             shares of common stock at an exercise price of $             per share upon the completion of this offering); and	
 
 	•	 	4,718,453 shares of common stock reserved for future issuance under our equity compensation plans, consisting of (i) 718,453 shares of common stock reserved for future issuance under our 2007 Equity Compensation Plan as of March 31, 2014, which shares will be added to the shares to be reserved under our 2014 Equity Incentive Plan upon the completion of this offering, (ii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan, which will become effective upon the completion of this offering and (iii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Employee Stock Purchase Plan, which will become effective upon the completion of this offering. Our 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan will also provide for automatic annual increases in the number of shares reserved under such plans.	

8

Table of Contents
Except as otherwise indicated, all information in this prospectus assumes:
 
 	•	 	the conversion of (i) all outstanding shares of our convertible preferred stock as of March 31, 2014 and (ii) 86,956 shares of our Series A convertible preferred stock issued upon the exercise of a warrant in April 2014, into an aggregate of 14,944,945 shares of common stock upon the completion of this offering;	
 
 	•	 	the issuance of 2,247,130 shares of our common stock upon the exchange of all of the outstanding exchangeable shares as of March 31, 2014 of our subsidiary Trupanion Canadian Shareholders, Ltd., a company organized under the laws of Canada, upon the completion of this offering, as described in “Description of Capital Stock—Exchangeable Shares in Canadian Subsidiary”;	
 
 	•	 	the filing of our restated certificate of incorporation in Delaware and the adoption of our restated bylaws, each of which will occur upon the completion of this offering;	
 
 	•	 	no exercise of options or warrants outstanding as of the date of this prospectus; and	
 
 	•	 	no exercise of the underwriters’ option to purchase additional shares.	

9

Table of Contents
 Summary Consolidated Financial and Other Data
The following summary consolidated financial and other data should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2011, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2013 and 2014 and the summary consolidated balance sheet data as of March 31, 2014 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in any future period.

 	 	YEARS ENDED
DECEMBER 31,	 	 	    THREE MONTHS    
ENDED MARCH 31,	 	
 	 	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
 	 	(in thousands)	 	
Consolidated Statements of Operations Data:	 				 				 				 				 				
Revenue:	 				 				 				 				 				
Subscription business	 	$	 37,045	  	 	$	 55,352	  	 	$	 76,818	  	 	$	 17,017	  	 	$	 23,089	  	
Other business	 	 	—  	  	 	 	178	  	 	 	7,011	  	 	 	825	  	 	 	2,551	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue	 	 	37,045	  	 	 	55,530	  	 	 	83,829	  	 	 	17,842	  	 	 	25,640	  	
						
Cost of revenue:	 				 				 				 				 				
Subscription business (1)	 	 	29,002	  	 	 	44,185	  	 	 	61,905	  	 	 	13,473	  	 	 	18,602	  	
Other business	 	 	—  	  	 	 	134	  	 	 	6,280	  	 	 	761	  	 	 	2,282	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenue	 	 	29,002	  	 	 	44,319	  	 	 	68,185	  	 	 	14,234	  	 	 	20,884	  	
						
Gross profit:	 				 				 				 				 				
Subscription business	 	 	8,043	  	 	 	11,167	  	 	 	14,913	  	 	 	3,544	  	 	 	4,487	  	
Other business	 	 	—  	  	 	 	44	  	 	 	731	  	 	 	64	  	 	 	269	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total gross profit	 	 	8,043	  	 	 	11,211	  	 	 	15,644	  	 	 	3,608	  	 	 	4,756	  	
						
Operating expenses:	 				 				 				 				 				
Sales and marketing (1)	 	 	5,206	  	 	 	7,149	  	 	 	9,091	  	 	 	2,572	  	 	 	2,646	  	
Technology and development (1)	 	 	1,499	  	 	 	3,406	  	 	 	4,888	  	 	 	883	  	 	 	2,200	  	
General and administrative (1)	 	 	4,289	  	 	 	6,195	  	 	 	8,652	  	 	 	1,927	  	 	 	2,786	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	10,994	  	 	 	16,750	  	 	 	22,631	  	 	 	5,382	  	 	 	7,632	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(2,951	) 	 	 	(5,539	) 	 	 	(6,987	) 	 	 	(1,774	) 	 	 	(2,876	) 	
						
Interest expense	 	 	690	  	 	 	535	  	 	 	609	  	 	 	120	  	 	 	736	  	
Other expense, net	 	 	186	  	 	 	252	  	 	 	671	  	 	 	111	  	 	 	1,286	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(3,827	) 	 	 	(6,326	) 	 	 	(8,267	) 	 	 	(2,005	) 	 	 	(4,898	) 	
Income tax expense (benefit)	 	 	92	  	 	 	84	  	 	 	(92	) 	 	 	(79	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(footnotes appear on following page)

10

Table of Contents

 	  	YEARS ENDED
DECEMBER 31,	 	 	PERIOD ENDED
MARCH 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
Other Financial and Operational Data (2) :	  				 				 				 				 				
Total pets enrolled	  	 	88,707	  	 	 	125,387	  	 	 	169,570	  	 	 	136,027	  	 	 	181,634	  	
Monthly adjusted revenue per pet	  	$	41.00	  	 	$	41.99	  	 	$	42.57	  	 	$	42.30	  	 	$	43.12	  	
Lifetime value of a pet	  	$	500	  	 	$	557	  	 	$	612	  	 	$	590	  	 	$	610	  	
Average pet acquisition cost	  	$	84	  	 	$	100	  	 	$	103	  	 	$	132	  	 	$	111	  	
Average monthly retention	  	 	98.24	% 	 	 	98.51	% 	 	 	98.65	% 	 	 	98.56	% 	 	 	98.65	% 	
Adjusted EBITDA (in thousands)	  	$	(1,862	) 	 	$	(3,904	) 	 	$	(4,351	) 	 	$	(1,208	) 	 	$	(2,079	) 	

(1)  	Includes stock-based compensation expense as follows:	

 	  	YEARS ENDED
DECEMBER 31,	 	  	    THREE MONTHS    
ENDED MARCH 31,	 	
 	  	    2011    	 	  	    2012    	 	  	    2013    	 	  	    2013    	 	  	    2014    	 	
 	  	(in thousands)	 	
Cost of revenues	  	$	     65	  	  	$	109	  	  	$	230	  	  	$	     40	  	  	$	     81	  	
Sales and marketing	  	 	288	  	  	 	428	  	  	 	677	  	  	 	143	  	  	 	149	  	
Technology and development	  	 	165	  	  	 	268	  	  	 	351	  	  	 	71	  	  	 	98	  	
General and administrative	  	 	464	  	  	 	629	  	  	 	680	  	  	 	147	  	  	 	239	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	982	  	  	$	1,434	  	  	$	1,938	  	  	$	401	  	  	$	567	  	

(2)	For more information about how we calculate total pets enrolled, monthly adjusted revenue per pet, lifetime value of a pet, average pet acquisition cost, average monthly retention and adjusted EBITDA, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.” In addition, certain of these metrics are calculated using non-GAAP financial measures. For more information about these measures and the applicable reconciliations, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	

11

Table of Contents
Our consolidated balance sheet data as of March 31, 2014 is presented on:
 
 	•	 	an actual basis;	
 
 	•	 	a pro forma basis, giving effect to (i) the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2014 and 86,956 shares of our Series A convertible preferred stock issued upon the exercise of a warrant in April 2014 into an aggregate of 14,944,945 shares of common stock, (ii) the conversion of warrants to purchase 35,672 shares of our preferred stock into warrants to purchase an equivalent number of shares of our common stock and (iii) the issuance of 2,247,130 shares of our common stock on the exchange of all of the outstanding exchangeable shares of our subsidiary Trupanion Canadian Shareholders, Ltd.; and	
 
 	•	 	a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments and the sale of             shares of common stock in this offering, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, (ii) the adjustment in the number of shares of common stock issuable upon the exercise of warrants to purchase common stock from 748,439 shares to             shares of common stock, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, and the related revaluation and reclassification of such warrants, (iii) the revaluation of warrants to purchase 35,672 shares of our common stock based on an assumed initial public offering price of $         per share, the midpoint of the range reflected on the cover page of this prospectus, and (iv) the repayment of $         million in outstanding indebtedness and the related accretion of debt discount upon the completion of this offering.	
The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

 	  	MARCH 31, 2014	 	
 	  	ACTUAL	 	 	PRO FORMA	 	  	PRO FORMA
AS ADJUSTED (1)	 	
 	  	(in thousands)	 	
Consolidated Balance Sheet Data:	  				 				  				
Cash and cash equivalents	  	$	10,593	  	 	$	            	  	  	$	            	  	
Investments in fixed maturities, current	  	 	14,954	  	 				  				
Working capital	  	 	7,220	  	 				  				
Total assets	  	 	48,969	  	 				  				
Warrant liability	  	 	6,119	  	 				  				
Current and long-term debt	  	 	26,254	  	 				  				
Total liabilities	  	 	54,475	  	 				  				
Convertible preferred stock	  	 	31,724	  	 				  				
Total stockholders’ (deficit) equity	  	 	(37,230	) 	 				  				

(1)  	Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, would increase (decrease) our cash and cash equivalents, working capital (deficiency), total assets and total stockholders’ equity (deficit) by approximately $             million, assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.	

12

Table of Contents
 RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that are not expressly stated, that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, operating results, financial condition and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business and Industry
We have incurred significant net losses since our inception and may not be able to achieve or maintain profitability in the future.
We have incurred significant net losses since our inception. We had a net loss of $3.9 million, $6.4 million and $8.2 million for the years ended December 31, 2011, 2012 and 2013, respectively, and a net loss of $1.9 million and $4.9 million for the three months ended March 31, 2013 and 2014, respectively. Additionally, as of March 31, 2014, our accumulated deficit was $40.9 million. We have funded our operations through equity financings and borrowings under our revolving line of credit and term loans. We may not be able to achieve or maintain profitability in the near future or at all. Our recent growth, including our growth in revenue and membership, may not be sustainable or may decrease, and we may not generate sufficient revenue to achieve or maintain profitability. Additionally, our expense levels are based, in significant part, on our estimates of future revenue and many of these expenses are fixed in the short term. As a result, we may be unable to adjust our spending in a timely manner if our revenue falls short of our expectations. Accordingly, any significant shortfall of revenue in relation to our estimates could have an immediate negative effect on our financial results.
We expect to continue to make significant expenditures to maintain and expand our business, including expenditures relating to the acquisition of new members, retention of our existing members and development of our technology platform. We also expect to incur increased operating expenses as we hire additional personnel and invest in our infrastructure to support anticipated future growth and the reporting and compliance obligations to which we are subject as a public company. These increased expenditures will make it more difficult for us to achieve and maintain future profitability. Our ability to achieve and maintain profitability depends on a number of factors, including our ability to attract and service members on a profitable basis. If we are unable to achieve or maintain profitability, we may not be able to execute our business plan, our prospects may be harmed and our stock price could be materially and adversely affected.
We have made and plan to continue to make significant investments to grow our member base. Our average pet acquisition cost and the number of new pets we enroll depends on a number of factors, including the effectiveness of our sales execution and marketing initiatives, changes in costs of media, the mix of our sales and marketing expenditures and the competitive environment. Our average pet acquisition cost may vary from period to period based upon specific marketing initiatives. For example, veterinary trade show costs have traditionally increased our acquisition costs in the first quarter of each year. We also periodically test new member acquisition channels and marketing initiatives, each of which impacts our average acquisition costs. We plan to expand the number of Territory Partners we use to reach veterinarians and other referral sources, which is likely to increase our acquisition costs.
We base our decisions regarding our member acquisition expenditures primarily on our analysis of the revenue that we expect new pets to generate over their lifetimes based on our historical experience. Our estimates and assumptions may not accurately reflect our future results, we may overspend on member acquisition and we may not be able to recover our member acquisition costs or generate profits from these investments.
We invest significantly in member acquisition. We spent $5.2 million, $7.1 million and $9.1 million on sales and marketing to acquire new members in the years ended December 31, 2011, 2012 and 2013, respectively, and
 
13

Table of Contents
$2.6 million for each of the three-month periods ended March 31, 2013 and 2014. We expect to continue to spend significant amounts to acquire additional members. We utilize Territory Partners, who are paid fees based on activity in their regions, to communicate the benefits of our medical plan to veterinarians through in-person visits. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about, and potentially enroll in, our medical plan. We also invest in other third-party referrals and online member acquisition channels, though we have limited experience with some of them.
We base our decisions regarding our member acquisition expenditures primarily on our analysis of the revenue that we expect new pets to generate over their lifetimes. This analysis depends substantially on estimates and assumptions based on our historical experience with pets enrolled in earlier periods, including our key financial and operating metrics described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.” We also consider the analysis of historical cohort patterns, such as the analysis that we present in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cohort Analysis.” While we believe the trends reflected by this cohort are illustrative of our broader member base, the 2010 cohort results inherently reflect a distinct group of pets and may not be representative of our other current or future cohorts, particularly as we grow and our membership broadens.
If our estimates and assumptions regarding the revenue that we expect new pets to generate over their lifetimes and our related decisions regarding investments in member acquisition prove incorrect, or if the revenue generated by new pets over the lifetime of their medical plan differs significantly from that of pets acquired in prior periods, we may be unable to recover our member acquisition costs or generate profits from our investment in acquiring new members. Moreover, if our member acquisition costs increase or we invest in member acquisition channels that do not ultimately result in new member enrollments, the return on our investment may be lower than we anticipate irrespective of the revenue generated by new members. If we cannot generate profits from this investment, we may need to alter our growth strategy, and our growth rate and operating results may be adversely affected.
If we are unable to maintain high member retention rates, our growth prospects and revenue will be adversely affected.
We have historically experienced high average monthly retention rates. For example, our average monthly retention rate was 98.5% over 2011, 2012 and 2013. This loyalty is also reflected in our retention of annual cohorts of members, both on an average monthly and cumulative basis. For example, the pets that we enrolled in our medical plan in 2010 had average monthly retention rates of 98.15%, 98.85% and 99.07% at the end of 2011, 2012 and 2013, respectively, which resulted in a cumulative impact of 56% of the original cohort pets remaining enrolled at December 31, 2013. If our efforts to satisfy our existing members are not successful, we may not be able to maintain our retention rates. Members we obtain through aggressive promotions or other channels that do not involve meaningful contact between us and the member may be more likely to terminate their medical plan subscription. In the past we have experienced reduced retention rates during periods of rapid member growth, as our retention rate is generally lower during the first year of member enrollment. Members may choose to terminate their medical plan subscription for a variety of reasons, including increased subscription fees, perceived or actual lack of value, delays or other unsatisfactory experiences in claims administration, unsatisfactory member service, an economic downturn, loss of a pet, a more attractive offer from a competitor, changes in our medical plan or other reasons, including reasons that are outside of our control. When a member terminates his or her medical plan subscription, we no longer receive the related revenue and may not be able to recover the member acquisition cost or other expenses, including claims expenses, related to that member. Our cost of acquiring a new member is substantially greater than the cost involved in maintaining our relationship with an existing member. If we are not able to successfully retain existing members and limit medical plan subscription terminations, our revenue and operating margins will be adversely impacted and our business, operating results and financial condition would be harmed.
 
14

Table of Contents
The prices of our medical plan subscriptions are based on assumptions and estimates. If our actual experience differs from the assumptions and estimates used in pricing our medical plan subscriptions, our revenue and financial condition could be adversely affected.
The pricing of our medical plan subscriptions reflect expected claim payment patterns derived from assumptions that we make regarding a number of factors, including a pet’s species, breed, age, gender and pet location. Factors related to pet location include the current and assumed changes in the cost and availability of veterinary technology and treatments and local veterinary practice preferences. The prices of our medical plan subscriptions also include assumptions and estimates regarding our own operating costs and expenses. We monitor and manage our pricing and overall sales mix to achieve target returns. Profitability from new members emerges over a period of years depending on the nature and length of time a pet is enrolled in our medical plan, and is subject to variability as actual results may differ from pricing assumptions. If the subscription fees we collect are insufficient to cover actual claim costs, operating costs and expenses within anticipated pricing allowances, or if our member retention rates are not high enough to ensure recovery of member acquisition costs, then our gross profit could be adversely affected and our revenue may be insufficient to achieve profitability. Conversely, if our pricing assumptions differed from actual results such that we overpriced risks, our competitiveness and growth prospects could be adversely affected.
The anticipated benefits of our analytics platform may not be fully realized.
Our analytics platform draws upon our proprietary pet data to price our medical plan subscriptions. The assumptions we make about breeds and other factors in pricing medical plan subscriptions may prove to be inaccurate, and, accordingly, these pricing analytics may not accurately reflect the claims expense that we will ultimately incur. If our competitors developed similar data systems, adopted similar underwriting criteria and pricing models or received our data, our competitive advantage could decline or be lost.
Our actual claims expenses may exceed our current reserve established for claims and may adversely affect our operating results and financial condition.
As of March 31, 2014, our claims reserve was $5.0 million. Our recorded claims reserve is based on our best estimates of claims, both reported and incurred but not reported, after considering known facts and interpretations of circumstances. We consider internal factors, including data from our proprietary data analytics platform, experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, claims management programs and contractual terms. We also consider external factors, including changes in the law, court decisions, changes to regulatory requirements and economic conditions. Because reserves are estimates of the unpaid portion of claims that have occurred, including claims incurred but not reported, the establishment of appropriate reserves is an inherently uncertain and complex process that involves significant subjective judgment. Further, we do not purchase any reinsurance, the process by which an insurer transfers, or cedes, part of the risk the insurer has assumed to a reinsurance company, and, therefore, we maintain more risk than we would if we purchased reinsurance. The ultimate cost of claims may vary materially from recorded reserves, and such variance may result in adjustments to the claims reserve, which could have a material effect on our operating results.
We rely significantly on our Territory Partners, veterinarians and other third parties to recommend our medical plan to potential members.
We rely significantly on our Territory Partners and third parties to cultivate direct veterinary relationships and build awareness of the benefits that our medical plan offers veterinarians and their clients. In turn, we rely on veterinarians to introduce and refer our medical plan to their clients. We also rely significantly on other third parties, such as existing members, online and offline businesses, animal shelters, breeders and veterinary affiliates, including veterinarian purchasing groups, to help generate leads for our medical plan. Veterinary practices represent our largest member acquisition channel, accounting for approximately 80% of our
 
15

Table of Contents
enrollments in 2013 and in the first quarter of 2014, excluding existing members adding pets and referring their friends and family members. Many factors influence the success of our relationships with these referral sources, including:
 
 	•	 	the continued positive market presence, reputation and growth of our company and of the referral sources;	
 
 	•	 	the effectiveness of referral sources;	
 
 	•	 	the decision of such referral source to support one of our competitors;	
 
 	•	 	the interest of the referral sources’ customers or clients in the medical plan we offer;	
 
 	•	 	the relationship and level of trust between our Territory Partners and veterinarians, and between us and the referral source;	
 
 	•	 	the percentage of the referral sources’ customers or clients that submit applications or use trial certificates to enroll in a medical plan through our website or contact center; and	
 
 	•	 	our ability to work with the referral source to implement any changes in our marketing initiatives, including website changes, infrastructure and technology and other programs and initiatives necessary to generate positive consumer experiences.	
In order for us to implement our business strategy and grow our revenue, we must effectively maintain and increase our relationships with our Territory Partners, veterinarians and other referral sources, and continue to scale and improve our processes and procedures that support them. Those processes and procedures could become increasingly complex and difficult to manage. We expend significant time and resources attracting qualified Territory Partners and providing them with complete and current information about our business. Their relationship with us may be terminated at any time, and we may not recoup the costs associated with educating them about our medical plan or be able to maintain any relationships they have developed with veterinarians within their territories. Further, if we experience an increase in the rate at which our Territory Partner relationships are terminated, we may not develop relationships with veterinarians as quickly as we have in the past. If the financial cost to maintain our relationships with our Territory Partners outweighs the benefits provided by our Territory Partners, or if they feel unsupported or undervalued by us and terminate their relationship with us, our growth and financial performance could be adversely affected.
The success of our relationships with veterinary practices depends on the overall value our medical plan can provide to veterinarians. If the scope of our medical plan coverage is perceived to be inadequate or our claims settlement process is unsatisfactory to the veterinarian’s clients because, for example, claims are denied or we fail to timely settle claims, veterinarians may be unwilling to recommend our medical plan to their clients and they may encourage their existing clients who have subscribed to our medical plan to stop subscribing to our medical plan or to purchase a competing product. If veterinarians determine our medical plan is unreliable, cumbersome or otherwise does not provide sufficient value, they may terminate their relationship with us or begin recommending a competing product, which could negatively impact our ability to increase our member base and grow our business.
If we fail to establish or are unable to maintain successful relationships with Territory Partners, veterinarians and other referral sources, or experience an increase in the rate at which any of these relationships are terminated, it would negatively impact our ability to increase and retain our member base and our financial results. If we are unable to maintain our existing member acquisition channels and continue to add new member acquisition channels, or if the cost of our existing sources increase or does not scale as we anticipate, our member levels and sales and marketing expenses may be adversely affected.
Our Territory Partners are independent contractors and, as such, may pose additional risks to our business.
Our Territory Partners are “independent contractors” for all purposes and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight over our Territory Partners as we otherwise could if our Territory Partners were our own employees. Our Territory Partners may decide not to participate in our
 
16

Table of Contents
marketing initiatives, accept our introduction of new solutions or comply with our policies and procedures applicable to the Territory Partners, any of which may adversely affect our ability to develop relationships with veterinarians and grow our membership. Our sole recourse against Territory Partners who fail to perform is to terminate their contract, which could also trigger contractually obligated termination payments or result in disputes or threatened or actual legal proceedings.
We believe that our Territory Partners are not employees under existing interpretations of the applicable laws of the jurisdictions in which we operate. We do not pay or withhold any employment tax with respect to or on behalf of our Territory Partners or extend any benefits to them that we generally extend to our employees, and we otherwise treat our Territory Partners as independent contractors. Applicable authorities or the Territory Partners may challenge this classification. Further, the applicable laws or regulations, including tax laws or interpretations, may change. If it were determined that we had misclassified our Territory Partners, we may be subjected to penalties or be required to pay withholding taxes for, extend employee benefits to, provide compensation for unpaid overtime to, or otherwise incur substantially greater expenses with respect to, our Territory Partners. Any of the foregoing circumstances could have a material adverse impact on our operating results and financial condition.
Our member base has grown rapidly in recent periods, and we may not be able to maintain the same rate of membership growth.
Our ability to grow our business and to generate revenue depends significantly on attracting new members. For the year ended December 31, 2013 and the three months ended March 31, 2014, we generated 91.6% and 90.1%, respectively, of our revenue from medical plan subscriptions. In order to continue to increase our membership, we must continue to offer a medical plan that provides superior value to our members. Our ability to continue to grow our membership will also depend in part on the effectiveness of our sales and marketing programs. Our member base may not continue to grow or may decline as a result of increased competition or the maturation of our business.
We may not maintain our current rate of revenue growth.
Our revenue has increased quickly and substantially in recent periods. We believe that our continued revenue growth will depend on, among other factors, our ability to:
 
 	•	 	improve our market penetration through efficient and effective sales and marketing programs to attract new members;	
 
 	•	 	maintain high retention rates;	
 
 	•	 	increase the lifetime value per pet;	
 
 	•	 	maintain positive relationships with veterinarians and other referral sources, and convince them to recommend our medical plan;	
 
 	•	 	increase the number and efficiency of Territory Partners;	
 
 	•	 	continue to offer a superior value medical plan with competitive features and rates;	
 
 	•	 	accurately price our medical plan subscriptions in relation to actual membership claims costs and operating expenses;	
 
 	•	 	provide our members with superior member service, including a timely and efficient claims experience, including by recruiting, integrating and retaining skilled and experienced claims personnel who can appropriately and efficiently adjudicate member claims;	
 
 	•	 	recruit, integrate and retain skilled and experienced sales department professionals who can demonstrate our value proposition to new and existing members;	
 
 	•	 	react to changes in technology and challenges in the industry, including from existing and new competitors;	
 
17

Table of Contents

 	•	 	increase awareness of and positive associations with our brand; and	
 
 	•	 	successfully respond to any regulatory matters and defend any litigation.	
You should not rely on our historical rate of revenue growth as an indication of our future performance.
Our use of capital may be constrained by risk-based capital regulations.
Our subsidiary, American Pet Insurance Company (APIC), is subject to risk-based capital regulations that require us to maintain certain levels of surplus to support our overall business operations in consideration of our size and risk profile. As of December 31, 2013, we did not, and at future measurement dates we may not, maintain the amount of risk-based capital required to avoid additional regulatory oversight, which amount was $16.8 million as of December 31, 2013. To comply with these regulations, we may be required to maintain capital that we would otherwise invest in our growth and operations, which may require us to modify our operating plan or marketing initiatives, delay the implementation of new solutions or development of new technologies, decrease the rate at which we hire additional personnel and enter into relationships with Territory Partners, incur additional indebtedness or pursue equity or debt financings or otherwise modify our business operations, any of which could have a material adverse effect on our operating results and financial condition.
Unexpected increases in the severity or frequency of claims may prevent us from generating a profit.
Unexpected changes in the severity or frequency of claims may prevent us from generating a profit. Changes in claim severity are driven primarily by inflation in the cost of veterinary care and the increasing availability and usage of expensive technologically advanced medical treatments. Increases in claim severity also could arise from unexpected events that are inherently difficult to predict, such as a pandemic that spreads through the pet population, tainted pet food or supplies or an unusually high number of serious injuries. Our loss management initiatives may not successfully identify or mitigate any such future increases in claim severity. In addition, we may experience volatility in claim frequency from time to time, and short-term trends may not continue over the longer term. The frequency of claims may be affected by the level of care and attentiveness an owner provides to the pet, the pet’s breed and age and other factors outside of our control, as well as fluctuations in member retention rates and new member acquisition. A significant increase in claim severity or frequency could increase our cost of revenue and have a material adverse effect on our financial condition.
Our success depends on our ability to adjust claims quickly and accurately.
We must accurately evaluate and pay claims that are made under our medical plan very quickly and in a manner that gives our members high satisfaction. Many factors can affect our ability to pay claims accurately, quickly and in a manner that gives our members high satisfaction, including the training, experience and skill of our claims representatives, our ability to reduce claims for non-covered conditions, our ability to recognize and respond to fraudulent or inflated claims, the claims department’s culture and the effectiveness of its management, and our ability to develop or select and implement appropriate procedures, technologies and systems to support our claims functions. Our failure to pay claims fairly, accurately and in a timely manner, or to deploy claims resources appropriately, could result in unanticipated costs to us, lead to material litigation, undermine customer goodwill and our reputation, and impair our brand image and, as a result, materially and adversely affect our competitiveness, financial results, prospects and liquidity.
We are and will continue to be faced with many competitive challenges, any of which could adversely affect our prospects, operating results and financial condition.
The market for medical insurance for pets is highly competitive. We compete with pet owners that self-fund with cash or credit, as well as traditional pet insurance providers and new entrants to our market. The vast majority of pet owners in the United States and Canada do not currently have medical coverage for their pets. We are focused primarily on expanding the overall size of the market, and we view our primary competitive challenge as educating pet owners on why our medical plan is a better alternative to self-funding.
 
18

Table of Contents
Additionally, there are traditional insurance companies that provide pet insurance products, either as a stand-alone product or along with a broad range of other insurance products. The largest of these traditional pet insurance providers is Veterinary Pet Insurance Company, a division of Nationwide Insurance. In addition, new entrants backed by large insurance companies have attempted to enter the pet insurance market in the past and may do so again in the future. Further, traditional pet insurance providers may consolidate, resulting in the emergence of new providers that are vertically integrated or able to create other operational efficiencies, which could lead to increased competition.
Some of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, technical, marketing and other resources than we do. Some of our competitors may be able to undertake more extensive marketing initiatives for their brands and services, devote more resources to website and systems development and make more attractive offers to potential employees, referral sources and third-party service providers.
To compete effectively, we will need to continue to invest significant resources in sales and marketing and invest and improve the service at our contact center and the online experience and functionalities of our website. Failure to compete effectively against our current or future competitors could result in loss of current or potential members, medical plan subscription terminations or a reduction in member retention rates, which could adversely affect our pricing, lower our revenue and prevent us from achieving or maintaining profitability. We may not be able to compete effectively for members in the future against existing or new competitors, and the failure to do so could result in loss of existing or potential members, increased sales and marketing expenses or diminished brand strength, any of which could harm our business.
If we are not successful in cost-effectively converting visitors to our website and contact center into members, our business and operating results would be harmed.
Our growth depends in large part upon growth in our member base. We seek to convert consumers who visit our website and call our contact center into members. The rate at which consumers visiting our website and contact center seeking to enroll in our medical plan are converted into members is a significant factor in the growth of our member base. A number of factors have influenced, and could in the future influence, the conversion rates for any given period, some of which are outside of our control. These factors include:
 
 	•	 	the competitiveness of the medical plan we offer, including its perceived value, coverage, simplicity and fairness;	
 
 	•	 	changes in consumer shopping behaviors due to circumstances outside of our control, such as economic conditions and consumers’ ability or willingness to pay for a pet medical plan;	
 
 	•	 	the quality of and changes to the consumer experience on our website or with our contact center;	
 
 	•	 	regulatory requirements, including those that make the experience on our website cumbersome or difficult to navigate or that hinder our call center’s ability to speak with potential members in a way that is conducive to converting leads or to enroll new members;	
 
 	•	 	system failures or interruptions in the operation of our abilities to write policies or operate our website or contact center; and	
 
 	•	 	changes in the mix of consumers who are referred to us through various member acquisition channels, such as veterinary referrals, existing members adding a pet and referring their friends and family members and other third-party referrals and online member acquisition channels.	
Our ability to convert consumers into members can be impacted by a change in the mix of referrals received through our member acquisition channels. In addition, changes to our website or contact center, or other initiatives we undertake, may adversely impact our ability to convert consumers into members at our current rate, or at all. These changes may have the unintended consequence of adversely impacting our conversion rates. A decline in the
 
19

Table of Contents
percentage of members who enroll in our medical plan on our website or telephonically through our contact center also could result in increased member acquisition costs. To the extent the rate at which we convert consumers into members suffers, the growth rate of our member base may decline, which would harm our business, operating results and financial condition.
We have made and plan to continue to make substantial investments in features and functionality for our website and training and staffing for our contact center that are designed to drive traffic, increase member engagement and improve new and existing member service. These activities do not directly generate revenue, however, and we may never realize any benefit from these investments. If the expenses that we incur in connection with these activities do not result in sufficient growth in members to offset the cost, our business, operating results and financial condition will be adversely affected.
If we are unable to maintain and enhance our brand recognition and reputation, our business and operating results will be harmed.
We believe that maintaining and enhancing our brand recognition and reputation is critical to our relationships with existing members, Territory Partners, veterinarians and other referral sources, and to our ability to attract new members, new Territory Partners, additional supportive veterinarians and other referral sources. We also believe that the importance of our brand recognition and reputation will continue to increase as competition in our market continues to develop and mature. Our success in this area will depend on a wide range of factors, some of which are out of our control, including the following:
 
 	•	 	the efficacy of our sales and marketing programs;	
 
 	•	 	the perceived value of our medical plan;	
 
 	•	 	quality of service provided by our contact center and claims professionals, including the fairness, ease and timeliness of our claims administration process;	
 
 	•	 	actions of our competitors, our Territory Partners, veterinarians and other third parties;	
 
 	•	 	positive or negative publicity, including material on the Internet;	
 
 	•	 	regulatory and other government-related developments; and	
 
 	•	 	litigation-related developments.	
The promotion of our brand may require us to make substantial investments, and we anticipate that, as our market becomes increasingly competitive, these branding initiatives may become increasingly difficult and expensive. Our brand promotion activities may not be successful or yield increased revenue, and to the extent that these activities result in increased revenue, the increased revenue may not offset the expenses we incur and our operating results could be harmed. If we do not successfully maintain and enhance our brand, our business may not grow and our relationships with veterinarians and other referral sources could be terminated, which would harm our business, operating results and financial condition.
Our business depends on our ability to maintain and scale the infrastructure necessary to operate our technology platform.
Our business depends on our ability to maintain and scale the infrastructure necessary to operate our technology platform, which includes our analytics and pricing engine, pet organizer, customer relationship management system, contact center phone system and website. We use these technology frameworks to price our medical plan subscriptions, enroll members, engage with current members and administer claims under our medical plan. Additionally, our members review and purchase subscriptions to our medical plan and submit claims through our website and contact center. Our reputation and ability to acquire, retain and serve our members depends on the reliable performance of our technology platform and the underlying network systems and infrastructure, and on
 
20

Table of Contents
providing best-in-class member service through our contact center and website. As our member base continues to grow, the amount of information collected and stored on the systems and infrastructure supporting our technology platform will continue to grow, and we will need an increasing amount of network capacity, computing power and information technology personnel to develop and maintain our technology platform and service our contact center.
We have made, and expect to continue to make, substantial investments in equipment and related network infrastructure to handle the operational demands on our technology platform, including increasing data collection, software development, traffic on our website and the volume of calls at our contact center. The operation of the systems and infrastructure supporting our technology platform is expensive and complex and could experience operational failures. In the event that our data collection, member base or amount of traffic on these systems grows more quickly than anticipated, we may be required to incur significant additional costs to increase the capacity in our systems. Any system failure that causes an interruption in or decreases the responsiveness of our services could impair our revenue-generating capabilities, harm our business and operating results and damage our reputation. In addition, any loss or mishandling of data could result in breach of confidence, competitive disadvantage or loss of members, and subject us to potential liability. Any failure of the systems and infrastructure that we rely on could negatively impact our enrollment as well as our relationship with members. If we do not maintain or expand the systems and infrastructure underlying our technology platform successfully, or if we experience operational failures, our reputation could be harmed and we could lose current and potential members, which could harm our operating results and financial condition.
We have made, and expect to continue to make, significant investments in new solutions and enhancements to our technology platform. These new solutions and enhancements may not be successful, and we may not recognize the expected benefits.
We have a team of product and engineering professionals dedicated in part to enhancing our technology platform and developing new solutions. We have made, and expect to continue to make, significant investments in these new solutions and enhancements. For example, we are currently making significant investments to develop Trupanion Express, which is designed to facilitate the direct payment of claims to veterinary practices. Similarly, we are in the process of redesigning our website, which has required, and based on our forecasted expenditures will continue to require, a significant amount of time and expense. These development activities may not be successful, and we may incur delays or cost overruns or elect to curtail our currently planned expenditures related to them. Further, if or when these new solutions or enhancements are introduced, they may not be well received by veterinarians or by new or existing members, particularly if they are costly, cumbersome or unreliable. If new solutions and enhancements are not successful, we may not recognize the expect benefits of these investments, and our business and financial condition could be adversely affected.
If we fail to effectively manage our growth, our business, operating results and financial condition may suffer.
We have recently experienced, and expect to continue to experience, significant growth, which has placed, and may continue to place, significant demands on our management and our operational and financial systems and infrastructure. We expect that our growth strategy will require us to commit substantial financial, operational and technical resources. It may also result in increased costs, including unexpected increases in our underlying costs (such as member acquisition costs or the frequency or severity of claims costs) generated by our new business, which could prevent us from becoming profitable and could impair our ability to compete effectively for pet medical plan business. Additionally, we have in the past, and may in the future, experience increases in medical plan subscription terminations as our membership grows, which negatively affects our retention rate. If we do not effectively manage this growth, our financial condition could be harmed and the quality of our services could suffer.
In order to successfully expand our business, we need to hire, integrate and retain highly skilled and motivated employees. We also need to continue to improve our existing systems for operational and financial management, including our reporting systems, procedures and controls. These improvements could require significant capital
 
21

Table of Contents
expenditures and place increasing demands on our management. We may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls. If we do not successfully implement improvements in these areas, our business, operating results and financial condition will be harmed.
Our operating results may vary, which could cause the trading price of our stock to fluctuate or decline, make period-to-period comparisons less meaningful, and make our future results difficult to predict.
We may experience fluctuations in our revenue, expenses and operating results in future periods. Our operating results may fluctuate in the future as a result of a number of factors, many of which are beyond our control. These fluctuations may lead analysts to change their long-term models for valuing our common stock, cause us to face short-term liquidity issues, impact our ability to retain or attract key personnel or cause other unanticipated issues, all of which could result in declines in our stock price. Moreover, these fluctuations may make comparing our operating results on a period-to-period basis less meaningful and make our future results difficult to predict. You should not rely on our past results as an indication of our future performance. In addition, if revenue levels do not meet our expectations, our operating results and ability to execute on our business plan are likely to be harmed. In addition to the other factors listed in this “Risk Factors” section, factors that could affect our operating results include the following:
 
 	•	 	our ability to retain our current members and grow our member base;	
 
 	•	 	the effectiveness of our sales and marketing programs;	
 
 	•	 	our ability to improve veterinarians’ and other third-parties’ willingness to provide referrals for our medical plan;	
 
 	•	 	the timing, volume and severity of our claims and the adequacy of our claims reserve;	
 
 	•	 	the level of demand for and the price of our medical plan subscriptions or those of our competitors;	
 
 	•	 	the perceived value of our medical plan to veterinarians and pet owners;	
 
 	•	 	spending decisions by our members and prospective members;	
 
 	•	 	our costs and expenses, including pet acquisition costs and claims expenses;	
 
 	•	 	the level of operating expense we elect to incur related to sales and marketing and technology and development initiatives that are discretionary in nature;	
 
 	•	 	our ability to expand the number and efficiency of our Territory Partners;	
 
 	•	 	our ability to effectively manage our growth;	
 
 	•	 	the effects of increased competition in our business;	
 
 	•	 	our ability to keep pace with changes in technology and our competitors;	
 
 	•	 	the impact of any security incidents or service interruptions;	
 
 	•	 	costs associated with defending any regulatory action or litigation or with enforcing our intellectual property, contractual or other rights;	
 
 	•	 	the impact of economic conditions on our revenue and expenses;	
 
 	•	 	fluctuations in foreign currency exchange rates; and	
 
 	•	 	changes in government regulation affecting our business.	
Seasonal or periodic variations in the behavior of our members also may cause fluctuations in our financial results. Enrollment in our medical plan tends to be discretionary in nature and may be sporadic, reflecting overall economic conditions, budgeting constraints, pet-buying patterns and a variety of other factors, many of which are outside our control. For example, we expect to experience some effects of seasonal trends in member behavior in the fourth quarter and in the beginning of the first quarter of each year in connection with the traditional holiday
 
22

Table of Contents
season. While we believe seasonal trends have affected and will continue to affect our quarterly results, our growth may have overshadowed these effects to date. We believe that our business will continue to be subject to seasonality in the future, which may result in fluctuations in our financial results.
Due to these and other factors, our financial results for any quarterly or annual period may not meet our expectations or the expectations of investors or analysts that follow our stock and may not be meaningful indications of our future performance.
Our vertical integration may result in higher costs.
We manage all aspects of our business, including writing our medical plan, implementing our own national independent referral network, pricing our medical plan subscriptions with our in-house actuarial team, administering claims made with respect to our medical plan, operating our own contact center and owning our own brand. While we believe this vertically integrated approach reduces frictional costs and enhances member experiences, third-party providers may, now or in the future, be able to replicate this model on a more efficient and effective basis. If our in-house services are or become less efficient or less effective than the same services provided by a third party, we will not realize the related cost savings and may be unable to provide a superior membership experience, which may have an adverse effect on our operating results.
The forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the market for medical coverage for cats and dogs in North America achieves the forecasted growth, our business may not grow at similar rates, if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Although we believe that the North American market for pet medical coverage will grow over time if consumers are offered a high-value product, the market for medical coverage for cats and dogs in North America has been historically growing slowly or stagnant and may not be capable of growing further. Even if this market experiences significant growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.
We depend on key personnel to operate our business and, if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.
Our success depends to a significant extent on the continued services of our current management team, including Darryl Rawlings, our founder and Chief Executive Officer. The loss of Mr. Rawlings or several other key executives or employees within a short timeframe could have a material adverse effect on our business. We employ all of our executive officers and key employees on an at-will basis, and their employment can be terminated by us or them at any time, for any reason and without notice, subject, in certain cases, to severance payment rights. In order to retain valuable employees, in addition to salary and cash incentives, we provide stock options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to maintain their retention benefit or counteract offers from other companies. Additionally, if we were to lose a large percentage of our current employees in a relatively short time period, or our employees were to engage in a work stoppage or unionize, we may be unable to hire and train new employees quickly enough to prevent disruptions in our operations, which may result in the loss of members, Territory Partners or referral sources.
Our success also depends on our ability to attract, retain and motivate additional skilled management personnel. We plan to continue to expand our work force, which we believe will enhance our business and operating results. We believe that there is significant competition for qualified personnel with the skills and knowledge that we require. Many of the other companies with which we compete for qualified personnel have greater financial and
 
23

Table of Contents
other resources than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those we have to offer. If we are unable to attract and retain the necessary qualified personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our business objectives and our ability to pursue our business strategy. New hires require significant training and, in most cases, take significant time before they achieve full productivity. New employees may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our recruiting, training and retention efforts are not successful or do not generate a corresponding increase in revenue, our business will be harmed.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business.
Our culture is fundamental to our success and defines who we are and how we operate our business. We were founded on a deep appreciation of the special relationship between pet owners, their beloved pets and their trusted veterinarians. We have invested substantial time, energy and resources in developing a culture that fosters teamwork, innovation, creativity and a focus on providing value for our members as well as for Territory Partners and veterinarians. As we continue to develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain personnel, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
Our business and financial condition is subject to risks related to our writing of policies for an unaffiliated managing general agent.
In November 2012, we began writing one-year pet insurance policies for an unaffiliated managing general agent. These policies provide different coverage and are subject to materially different terms and conditions than the Trupanion medical plan. Further, the unaffiliated managing general agent administers these policies and markets them to consumers. For the year ended December 31, 2013 and the three months ended March 31, 2014, premiums from these policies accounted for 8.4% and 9.7%, respectively, of our total revenue. This relationship can be terminated by either party and, if terminated, would result in a reduction in our revenue to the extent we cannot enter into another relationship and generate equivalent revenues with a different managing general agent. In addition, the managing general agent controls a trust account it maintains on our behalf. If the managing general agent makes operating decisions that adversely affect its business or brand, our business or brand could also be adversely affected.
We have limited experience in writing policies for unaffiliated managing general agents, and this business may not grow at the same rate as our core business and may decline. As a result of this new line of business, we may be subject to additional regulatory requirements and scrutiny, which may have an adverse effect on our operations.
In Canada, our medical plan is written by Omega General Insurance Company (Omega). If it were to terminate its underwriting arrangement with us, our business could be adversely affected.
In Canada, our medical plan is written by Omega, and we assume 100% of all premiums written by Omega and the related claims through a fronting and reinsurance agreement. This agreement may be terminated by either party with 180 days written notice until it terminates pursuant to its terms on December 31, 2014, at which time it will automatically renew for successive one-year periods and be terminable by either party with 90 days’ written notice. If Omega were to terminate our agreement or be unable to write insurance for regulatory or other reasons, we may have to terminate subscriptions with our existing members or suspend member enrollment and renewals in Canada until we entered into a relationship with another third party to write our medical plan, which may take a significant amount of time and require significant expense. We may not be able to enter into a new relationship, and any new relationship may be on less favorable terms. Any delay in entry into a new relationship or suspension of member enrollment and renewals could have a material adverse effect on our operating results and financial condition.
 
24

Table of Contents
We are exploring opportunities to expand our operations globally, and we may therefore become subject to a number of risks associated with international expansion and operations.
As part of our growth plan, we intend to expand our operations globally. We have no history of marketing, selling, administrating and supporting our medical plan to consumers outside of the United States, Canada and Puerto Rico. International sales and operations are subject to a number of risks, including the following:
 
 	•	 	regulatory rules and practices, foreign exchange controls, tariffs, tax laws and treaties that are different than those we operate under in the United States, Canada and Puerto Rico and that carry a greater risk of unexpected changes;	
 
 	•	 	the costs and resources required to modify our technology and sell our medical plan in non-English speaking countries;	
 
 	•	 	the costs and resources required to modify our medical plan appropriately to suit the needs and expectations of residents and veterinarians in such foreign countries;	
 
 	•	 	our data analytics platform may have limited applicability in foreign countries, which may impact our ability to develop adequate underwriting criteria and accurately price subscriptions to our medical plan in such countries;	
 
 	•	 	increased expenses incurred in establishing and maintaining office space and equipment for our international operations;	
 
 	•	 	technological incompatibility;	
 
 	•	 	fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business;	
 
 	•	 	difficulties in attracting and retaining personnel with experience in international operations;	
 
 	•	 	difficulties in modifying our business model in a manner suitable for any particular foreign country, including any modifications to our Territory Partner model to the extent we determine that our existing model is not suitable for use in foreign countries;	
 
 	•	 	our lack of experience in marketing to consumers and veterinarians, and encouraging online marketing, in foreign countries;	
 
 	•	 	our relative lack of industry connections in many foreign countries;	
 
 	•	 	difficulties in managing operations due to language barriers, distance and time zone differences, staffing, cultural differences and business infrastructure constraints, including difficulty in obtaining foreign and domestic visas;	
 
 	•	 	application of foreign laws and regulations to us, including more stringent or materially different insurance, employment, consumer and data protection laws;	
 
 	•	 	the uncertainty of protection for intellectual property rights in some countries;	
 
 	•	 	greater risk of a failure of foreign employees to comply with applicable U.S. and foreign laws, including antitrust regulations, the U.S. Foreign Corrupt Practices Act and any trade regulations ensuring fair trade practices; and	
 
 	•	 	general economic and political conditions in these foreign markets.	
These factors and other factors could harm our ability to gain future international revenue and, consequently, materially impact our business and operating results. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources, detracting from management attention and financial resources otherwise available to our existing business. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business and could have an adverse effect on our operating results and financial condition.
 
25

Table of Contents
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
In connection with the preparation of our 2010, 2011 and 2012 financial statements, our independent registered public accounting firm identified a material weakness in internal control over financial reporting with respect to the design and operation of internal control over accounting for income and other taxes, such as goods and services tax and harmonized sales tax, and with respect to the design and operation of internal control over accounting for complex equity matters, such as preferred stock issuances and share repurchase arrangements. Under standards established by the Public Company Accounting Oversight Board, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. While we believe that we have remediated the material weakness identified by our independent registered public accounting firm, we cannot assure you that there will not be additional material weaknesses or significant deficiencies that our independent registered public accounting firm or we will identify. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with the New York Stock Exchange listing requirements.
In addition, as a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the fiscal year ending December 31, 2015, provide a management report on the internal control over financial reporting, which must be attested to by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by The Jumpstart Our Business Startups Act of 2012 (JOBS Act). We are in the process of designing and implementing internal control over financial reporting required to comply with this obligation, which process has been and will continue to be time consuming, costly and complicated.
We may not detect errors on a timely basis and our financial statements may be materially misstated. If we identify future material weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner, are unable to assert that our internal control over financial reporting is effective or our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. We could also become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (SEC) or other regulatory authorities, which could require additional financial and management resources.
If our security measures are breached and unauthorized access is obtained to our data, including our members’ data, we may lose our competitive advantage and our systems may be perceived as not being secure.
Our data repository contains proprietary information that we believe gives us a competitive advantage, including claims data and other data with respect to members, Territory Partners, veterinarians and other third parties. Security breaches could expose us to a risk of loss of our data or disclosure of this data, either publicly or to a third party who could use the information to gain a competitive advantage. In the event of a loss of our systems or data, we could experience increased costs or delays, which in turn may harm our financial condition, damage our brand and result in the loss of members. Such a disclosure also could lead to litigation and possible liability.
We store and transmit our members’ confidential information, including credit card and bank account numbers, pet medical records and other private information. Security breaches could expose us to a risk of loss of this
 
26

Table of Contents
information, litigation and possible liability. Our payment services may be susceptible to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit cards or bank account information, identity theft or merchant fraud.
If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to our data, including data of our members, our reputation may be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security occurs, the public perception of the effectiveness of our security measures could be harmed, and we could lose members and our medical plan subscriptions may be terminated, which could adversely affect our business.
Any legal liability, regulatory penalties or negative publicity for the information on our website or that we otherwise distribute or provide, directly or through our Territory Partners or other referral sources, could harm our business, operating results and financial condition.
We provide information on our website, through our contact center and in other ways regarding pet health, the pet insurance industry in general and our medical plan, including information relating to subscription fees, coverage, benefits, exclusions, limitations, availability and medical plan comparisons. A significant amount of both automated and manual effort is required to maintain the medical plan information on our website. Separately, from time to time, we use the information provided on our website and otherwise collected by us to publish reports designed to educate consumers. For example, we produce a significant amount of marketing materials regarding our medical plan. If the information we provide on our website, through our contact centers or otherwise is not accurate or is construed as misleading, or if we improperly assist individuals in purchasing subscriptions to our medical plan, our members, competitors or others could attempt to hold us liable for damages, our relationships with veterinarians and other referral sources could be terminated and regulators could attempt to subject us to penalties, revoke our licenses to transact our business in a particular jurisdiction or compromise the status of our licenses to transact our business in other jurisdictions, which could result in our loss of revenue. In the ordinary course of operating our business, we may receive complaints that the information we provided was not accurate or was misleading. These types of claims could be time-consuming and expensive to defend, could divert our management’s attention and other resources and could cause a loss of confidence in our business. As a result, whether or not we are able to successfully resolve these claims, they could harm our business, operating results and financial condition.
We are subject to a number of risks related to accepting automatic fund transfers and credit card and debit card payments.
We accept payments of subscription fees from our members through automatic fund transfers and credit and debit card transactions. For credit and debit card payments, we pay interchange and other fees, which may increase over time. An increase in the number of members who utilize credit and debit cards to pay their subscription fees or related credit and debit card fees would reduce our margins and could require us to increase the subscription fees for our medical plan, which could cause us to lose members and revenue, or suffer an increase in our operating expenses, either of which could adversely affect our operating results.
If we, any of our processing vendors or banks have problems with our billing software, or if the billing software malfunctions, it could have an adverse effect on our member satisfaction and could cause one or more of the major credit card companies or banks to disallow our continued use of their payment products. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our members’ credit cards on a timely basis or at all, or a bank withdraws the incorrect amount or fails to timely transfer the correct amount to us, we could lose revenue and harm our member experience, which could adversely affect our business and operating results.
 
27

Table of Contents
We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, including the Payment Card Industry Data Security Standard (PCI DSS), a security standard applicable to companies that collect, store or transmit certain data regarding credit and debit cards, holders and transactions. In the past we may not have been, we currently are not and in the future we may not be, fully compliant with PCI DSS. Our failure to comply fully with the PCI DSS now or at any point in the future may violate payment card association operating rules, federal and state laws and regulations, and the terms of our contracts with payment processors and merchant banks. Such failure to comply fully also may subject us to fines, penalties, damages and civil liability, and may result in the loss of our ability to accept credit and debit card payments. In addition, there is no guarantee that PCI DSS compliance will prevent illegal or improper use of our payment systems or the theft, loss or misuse of data pertaining to credit and debit cards, credit and debit card holders and credit and debit card transactions.
If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, each of which could adversely affect our business, operating results and financial condition.
If we are unable to maintain our chargeback rate at acceptable levels, our credit card fees for chargeback transactions, or our fees for many or all categories of credit and debit card transactions, credit card companies and debit card issuers may increase our fees or terminate their relationship with us. Any increases in our credit card and debit card fees could adversely affect our operating results, particularly if we elect not to raise our subscription fees to offset the increase. The termination of our ability to process payments on any major credit or debit card would significantly impair our ability to operate our business.
Failure to adequately protect our intellectual property could substantially harm our business and operating results.
We rely on a combination of intellectual property rights, including trade secrets, copyrights, trademarks and domain names, as well as contractual restrictions, to establish and protect our intellectual property. As of March 31, 2014, we had two pending patent applications in the United States, one pending international patent filed under the Patent Cooperation Treaty, one pending patent application in Europe and no issued patents. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy our digital content, pricing analytics, technology, software, branding and functionality, or obtain and use information that we consider proprietary. Moreover, policing our proprietary rights is difficult and may not always be effective. As we continue to expand internationally, we may need to enforce our rights under the laws of countries that do not protect proprietary rights to as great an extent as do the laws of the United States, which may be expensive and divert management’s attention away from other operations.
Our digital content is not protected by any registered copyrights or other registered intellectual property. Rather, our digital content is protected by statutory and common law rights, user agreements that limit access to and use of our data and by technological measures. Compliance with use restrictions is difficult to monitor, and our proprietary rights in our digital content databases may be more difficult to enforce than other forms of intellectual property rights.
As of March 31, 2014, we had five registered trademarks in the United States, including “Trupanion,” and three additional trademark applications. We have three pending trademark applications in Canada. Many of our unregistered trademarks, however, contain words or terms having a common usage and, as a result, may not be protectable under applicable law. Trademark protection may also not be available, or sought by us, in every country in which our medical plan may become available. Competitors may adopt names similar to ours, or purchase our trademarks and confusingly similar terms as keywords in Internet search engine advertising programs, thereby impeding our ability to build brand identity and possibly confusing members. Moreover, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate marks similar to our trademarks. We may take action, including initiating litigation, to protect our intellectual property rights and the integrity of our brand, and these efforts may prove costly, ineffective and increase the likelihood of counterclaims against us.
 
28

Table of Contents
We currently hold the “Trupanion.com” Internet domain name and numerous other related domain names. Domain names generally are regulated by Internet regulatory bodies. If we lose the ability to use a domain name in the United States, Canada or any other country, we may be forced to acquire domain names at significant cost or, in the alternative, be forced to incur significant additional expenses to market our medical plan, including the development of a new brand and the creation of new promotional materials, which could substantially harm our business and operating results. The regulation of domain names in the United States, Canada and in other foreign countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain the domain names that utilize the “Trupanion” name in all of the countries in which we currently intend to conduct business.
We control access to our proprietary technology, software and documentation by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us. These agreements may not prevent disclosure of trade secrets and other confidential information, and may not provide an adequate remedy in the event of misappropriation of trade secrets or any unauthorized disclosure of trade secrets and other confidential information. In addition, others may independently discover trade secrets and confidential information and, in such cases, we may not be able to assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions, and failure to obtain or maintain trade secret protection, or our competitors being able to obtain our trade secrets or to independently develop technology similar to ours or competing technologies, could adversely affect our competitive business position.
Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights, to protect our domain names and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective, could result in substantial costs and diversion of resources and could substantially harm our operating results.
Assertions by third parties of infringement or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.
Third parties have in the past and may in the future claim that our services infringe or otherwise violate their intellectual property rights. We may be subject to legal proceedings and claims, including claims of alleged infringement by us of the intellectual property rights of third parties. Any dispute or litigation regarding intellectual property could be expensive and time consuming, regardless of the merits of any claim, and could divert our management and key personnel from our operations.
If we were to discover or be notified that our services potentially infringe or otherwise violate the intellectual property rights of others, we may need to obtain licenses from these parties in order to avoid infringement. We may not be able to obtain the necessary licenses on acceptable terms, or at all, and any such license may substantially restrict our use of the intellectual property. Moreover, if we are sued for infringement and lose the lawsuit, we could be required to pay substantial damages or be enjoined from offering the infringing services. Any of the foregoing could cause us to incur significant costs and prevent us from selling subscriptions to our medical plan.
We rely on third parties to provide intellectual property and technology necessary for the operation of our business.
We utilize intellectual property and technology owned by third parties in developing and operating our technology platform and operating our business. From time to time, we may be required to renegotiate with these
 
29

Table of Contents
third parties or negotiate with other third parties to include or continue using their intellectual property or technology in our existing technology platform or business operations or in modifications or enhancements to our technology platform or business operations. We may not be able to obtain the necessary rights from these third parties on commercially reasonable terms, or at all, and the third-party intellectual property and technology we use or desire to use may not be appropriately supported, maintained or enhanced by the third parties. If we are unable to obtain the rights necessary to use or continue to use third-party intellectual property and technology in our operations, or if those third parties are unable to support, maintain and enhance their intellectual property and technology, we could experience increased costs or delays, which in turn may harm our financial condition, damage our brand and result in the loss of members.
Our technology platform and our data are also hosted by a third-party service provider. The terms under which such third-party service provider provides us services may change and we may be required to renegotiate with that third party. If we are unable to renegotiate satisfactory terms, we may not be able to transition to an alternative service provider without interrupting the availability of our technology platform and any interruption could materially and adversely affect our business. Additionally, if our third-party service provider experiences any disruptions, outages or catastrophes, or if it ceases to conduct business for any reason, we could experience an interruption in our business, which may in turn, damage our brand, result in a loss of members and harm our financial condition.
Changes in the economy may negatively impact our business, operating results and financial condition.
Our business may be affected by changes in the economic environment. Pet medical plans are a discretionary purchase, and members may reduce or eliminate their discretionary spending during an economic downturn, resulting in an increase in medical plan subscription terminations and a reduction in the number of new members. We may experience a material increase in medical plan subscription terminations or a material reduction in our member retention rate in the future, especially in the event of a prolonged recessionary period or a downturn in economic conditions. Conversely, consumers may have more income to pay for pet healthcare out-of-pocket and less desire to purchase a pet medical plan during a period of economic growth. In addition, media prices may increase during a period of economic growth, which could increase our sales and marketing expenses. As a result, our business, operating results and financial condition may be significantly affected by changes in the economic environment.
Covenants in the credit agreements governing our revolving line of credit and term loans may restrict our operations, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely affected.
The credit agreements governing our revolving line of credit and term loans contain various restrictive covenants, including restrictions on our ability to dispose of our assets, change the name, location, office or executive management of our business, merge with or acquire other entities, incur other indebtedness, incur encumbrances, pay dividends or make distributions to holders of our capital stock, make investments, engage in transactions with our affiliates, permit withdrawals from APIC (with certain exceptions) and conduct operations in certain of our Canadian subsidiaries. Our credit agreements also contain financial covenants, including those that require APIC to maintain certain capital and surplus, us to maintain certain minimum cash balances and us to achieve specified monthly revenue, claims ratios and EBITDA levels (each as defined in the credit agreements). Our ability to meet these restrictive covenants can be affected by events beyond our control, and we have been in the past, and may be in the future, unable to do so. In addition, our failure to maintain effective internal controls to measure compliance with our financial covenants could affect our ability to take corrective actions on a timely basis and could result in our being in breach of these covenants. Our credit agreements provide that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under one or more of our credit agreements to be immediately due and payable. If we are unable to repay those amounts, our financial condition could be adversely affected.
 
30

Table of Contents
Our indebtedness could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations.
As of March 31, 2014, we had outstanding indebtedness of $29.9 million, which was secured by substantially all of our assets. We may incur additional indebtedness in the future, including any additional borrowings available under our revolving line of credit. Any substantial indebtedness and the fact that a substantial portion of our cash flow from operating activities could be needed to make payments on this indebtedness could have adverse consequences, including the following:
 
 	•	 	reducing the availability of our cash flow for our operations, capital expenditures, future business opportunities and other purposes;	
 
 	•	 	limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, which could place us at a competitive disadvantage compared to our competitors that may have less debt;	
 
 	•	 	limiting our ability to borrow additional funds; and	
 
 	•	 	increasing our vulnerability to general adverse economic and industry conditions.	
Our ability to borrow any funds needed to operate and expand our business will depend in part on our ability to generate cash. Our ability to generate cash is subject to the performance of our business, as well as general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may also need to borrow additional funds to support risk-based capital requirements related to APIC’s growth. If our business does not generate sufficient cash flow from operating activities or if future borrowings are not available to us, under our revolving credit facility or otherwise, in amounts sufficient to enable us to fund our liquidity needs, our operating results, financial condition and ability to expand our business and meet our risk-based capital requirements may be adversely affected. Moreover, our inability to make scheduled payments on our debt obligations in the future would require us to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity.
The outcome of litigation or regulatory proceedings could subject us to significant monetary damages, restrict our ability to conduct our business, harm our reputation and otherwise negatively impact our business.
From time to time, we have been, and in the future may become, subject to litigation, claims and regulatory proceedings and inquiries, including market conduct exams by state insurance regulatory agencies. For example, we are currently addressing an inquiry from the California Department of Insurance alleging that our trial medical plan is being issued in violation of California law and an inquiry from the Washington State Office of Insurance Commissioner alleging that one of our subsidiaries and its employees are not properly licensed under Washington law.
We cannot predict the outcome of these or any future actions or proceedings, and the cost of defending such actions or proceedings could be material. Furthermore, defending such actions or proceedings could divert our management and key personnel from our business operations. If we are found liable in any action or proceeding, we may have to pay substantial damages or fines, or change the way we conduct our business, either of which may have a material adverse effect on our business, operating results, financial condition and prospects. There may also be negative publicity associated with litigation or regulatory proceedings that could harm our reputation or decrease acceptance of our services. These claims may be costly to defend and may result in assessment of damages, adverse tax consequences and harm to our reputation.
We do not believe the nature of any pending regulatory or legal proceeding will have a material adverse effect on our business, operating results and financial condition. Our assessment, however, may be incorrect, and is subject to change at any time based on the discovery of facts or circumstances that are not presently known to us. Therefore, it is possible that pending or future litigation may have a material adverse effect on our business, reputation, operating results and financial condition.
 
31

Table of Contents
Our revenue may be negatively affected if we are required to pay income tax, premium tax, transaction tax or other taxes in jurisdictions where we are currently not collecting and reporting tax.
We currently pay income tax, premium tax, transaction tax and other taxes in certain jurisdictions in which we do business. We are also currently in the process of voluntarily self-disclosing and paying goods and services tax and harmonized sales tax in Canada with respect to charges from our U.S. subsidiary to one of our Canadian subsidiaries, as well as income tax for APIC in certain states in the United States. A successful assertion by any jurisdictions that we should be paying income, premium, transaction or other taxes on our income or in connection with enrollment in our medical plan or intercompany services, or the enactment of new laws requiring the payment of income, premium, transfer or other taxes in connection with enrollment in our medical plan or intercompany services, could result in substantial tax liabilities. Our voluntary disclosure of tax obligations and any future assertions by any jurisdiction that we should be paying taxes may create increased administrative burdens or costs, requirement payment of substantial fines and penalties, discourage consumers from enrolling in our medical plan, reduce our operational efficiencies, decrease our ability to compete or otherwise substantially harm our business and operating results.
If consumer acceptance of the Internet as an acceptable marketplace for a pet medical plan does not continue to increase, our growth prospects will be harmed.
Our success depends in part on widespread consumer acceptance of the Internet as a marketplace for the purchase of a pet medical plan. Internet use may not continue to develop at historical rates, and consumers may not continue to use the Internet to research, select and purchase a pet medical plan. In addition, the Internet may not be accepted as a viable resource for a number of reasons, including lack of security of information or privacy protection, possible disruptions, computer viruses or other damage to Internet servers or to users’ computers, and excessive governmental regulation.
Our success will depend, in large part, on third parties maintaining the Internet infrastructure to provide a reliable network backbone with the speed, data capacity, security and hardware necessary for reliable Internet access and services.
We depend in part on Internet search engines to attract potential new members to visit our website. If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, our new customer growth could decline, and our business and operating results could be harmed.
We derive a significant amount of traffic to our website from consumers who search for pet medical insurance through Internet search engines, such as Google, Bing and Yahoo!. A critical factor in attracting consumers searching for pet medical insurance on the Internet to our website is whether we are prominently displayed in response to an Internet search relating to pet insurance. Algorithmic search result listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular Internet search engine, which may change from time to time. If we are listed less prominently in, or removed altogether from, search result listings for any reason, the traffic to our websites would decline and we may not be able to replace this traffic, which in turn would harm our business, operating results and financial condition. If we decide to attempt to replace this traffic, we may be required to increase our sales and marketing expenditures, including by utilizing paid search advertising, which would also increase our pet acquisition costs and harm our business, operating results and financial condition.
We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.
We may decide to acquire businesses, products and technologies. Our ability to successfully make and integrate acquisitions is unproven. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they
 
32

Table of Contents
are consummated. Furthermore, even if we successfully acquire additional businesses or technologies, we may not be able to migrate the policyholders to our medical plan, integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business or technology. In addition, we may unknowingly inherit liabilities from future acquisitions that arise after the acquisition and are not adequately covered by indemnities. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. If an acquired business or technology fails to meet our expectations, our business, operating results and financial condition may suffer.
A downgrade in the financial strength rating of our insurance company may have an adverse effect on our competitive position, the marketability of our medical plan, and our liquidity, access to and cost of borrowing, operating results and financial condition.
Financial strength ratings are important factors in establishing the competitive position of insurance companies and generally have an effect on an insurance company’s business. On an ongoing basis, rating agencies review the financial performance and condition of APIC and could downgrade or change the outlook on its ratings due to, for example, a change in its statutory capital, a change in the rating agency’s determination of the amount of risk-based capital required to maintain a particular rating or a reduced confidence in management or its business strategy, as well as a number of other considerations that may or may not be under our control. As of May 2014, APIC was rated “A—Exceptional” by Demotech, Inc. The insurance financial strength rating of APIC is subject to quarterly review, and APIC may not retain the current rating. A downgrade in this or any future ratings could have a material effect on our sales, our competitiveness, the marketability of our medical plan, our liquidity, access to and cost of borrowing, operating results and financial condition.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2013, we had U.S. federal net operating loss carryforwards of approximately $24.4 million that will begin to expire in 2027. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” generally occurs if there is a cumulative change in our ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We may have experienced an ownership change in the past and may experience ownership changes in the future as a result of this offering or future transactions in our stock, some of which may be outside our control. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards, or other pre-change tax attributes, to offset U.S. federal and state taxable income and taxes may be subject to limitations.
Our business is subject to the risks of earthquakes, floods, fires and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.
Our systems and operations are vulnerable to damage or interruption from earthquakes, human error, intentional bad acts, hurricanes, floods, fires, power losses, telecommunications failures, hardware and system failures, terrorist attacks, acts of war, break-ins or similar events. For example, our corporate headquarters and facilities are located in Seattle, Washington near known earthquake fault zones and are vulnerable to significant damage from earthquakes. In addition, acts of terrorism could cause disruptions in our business or the economy as a whole. Our servers and systems may also be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the unauthorized disclosure of confidential member data. We currently have limited disaster recovery capability, and our business interruption insurance may be insufficient to compensate us for losses that may occur. Such disruptions could negatively impact our ability to run our business, which could have an adverse effect on our operating results and financial condition.
 
33

Table of Contents
Risks Related to Compliance with Laws and Regulations
As of December 31, 2013, we did not, and at future measurement dates we may not, maintain the amount of risk-based capital required to avoid additional regulatory oversight, which may adversely affect our ability to generate a profit and our ability to compete in the pet insurance market.
Memberships in our U.S. medical plan are written by APIC. APIC is an insurance company domiciled in the state of New York and licensed by the New York Department of Financial Services (NY DFS). Regulators in the states in which we do business impose National Association of Insurance Commissioners approved risk-based capital requirements on APIC to ensure it maintains reasonably appropriate levels of surplus to support our operations and to protect members against adverse developments, taking into account the risk characteristics of our assets, liabilities and certain other items. Generally, the NY DFS will compare, on an annual basis as of December 31, an insurer’s total adjusted capital and surplus against what is referred to as an “Authorized Control Level” of risk-based capital that is calculated based on a formula designed to estimate an insurer’s capital adequacy. There generally are five outcomes possible from this comparison, depending on the insurer’s level of risk-based capital as compared to the applicable Authorized Control Level.
 
 	•	 	No Action Level : Insurer’s total adjusted capital is equal to or greater than 200% of the Authorized Control Level.	
 
 	•	 	Company Action Level : Insurer’s total adjusted capital is less than 200% but greater than 150% of the Authorized Control Level. When at this level, an insurer must prepare and submit a financial plan to the NY DFS for review and approval. Generally, a risk-based capital plan would identify the conditions that contributed to the Company Action Level and include the insurer’s proposed plans for increasing its risk-based capital in order to satisfy the No Action Level. The failure to provide the NY DFS with a risk-based capital plan on a timely basis or the inability of the NY DFS and the insurer to mutually agree on an appropriate risk-based capital plan could trigger a Regulatory Action Level outcome, subject to the insurer’s right to a hearing on the issue.	
 
 	•	 	Regulatory Action Level : Insurer’s total adjusted capital is less than 150% but greater than 100% of the Authorized Control Level. When at this level, an insurer generally must provide a risk-based capital plan to the NY DFS and be subject to examination or analysis by the NY DFS to the extent it deems necessary, including such corrective actions as the NY DFS may require.	
 
 	•	 	Authorized Control Level : Insurer’s total adjusted capital is less than 100% but greater than 70% of the Authorized Control Level. At this level, the NY DFS generally could take remedial actions that it determines necessary to protect the insurer’s assets, including placing the insurer under regulatory control.	
 
 	•	 	Mandatory Control Level : Insurer’s total adjusted capital is less than 70% of the Authorized Control Level. At this level, the NY DFS generally is required to take steps to place the insurer under regulatory control, even if the insurer is still solvent.	
As of December 31, 2013, APIC was required to maintain (i) at least $16.8 million of risk-based capital to satisfy the No Action Level, (ii) between $12.6 million and $16.8 million of risk-based capital to satisfy the Company Action Level, (iii) between $8.4 million and $12.6 million of risk-based capital to satisfy the Regulatory Action Level and (iv) between $5.9 million and $8.4 million of risk-based capital to satisfy the Authorized Control Level. As of December 31, 2013, APIC maintained $16.3 million of risk-based capital, placing it within the Company Action Level and, as such, APIC is preparing a risk-based capital plan for submission to the NY DFS for its review and approval. If such plan is approved, we expect APIC will be deemed to have satisfied the No Action Level until the NY DFS conducts its next annual assessment. The NY DFS will not conduct its next annual assessment until December 31, 2014, however, as of May 31, 2014, APIC maintained $17.1 million of risk-based capital. The NY DFS may increase the required levels of risk-based capital in the future, and we anticipate that we will need to maintain greater amounts of risk-based capital if our pet enrollment continues to grow.
 
34

Table of Contents
Additionally, because our risk-based capital falls below the Company Action Level, the unaffiliated managing general agent that we write pet insurance policies for may have the ability to terminate its relationship with us and require us to reimburse it for its expenses in finding and transitioning to a new company to write its policies. If this were to occur, we would lose the revenue generated from that relationship and incur additional expenses, which could have a material adverse effect on our financial condition.
We may require additional capital to meet our risk-based capital requirements, pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us at any time, our business, operating results and financial condition may be harmed.
We may require additional capital to meet our risk-based capital requirements, operate or expand our business or respond to unforeseen circumstances. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our common stock could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of holders of our common stock. Furthermore, volatility in the credit or equity markets may have an adverse effect on our ability to obtain debt or equity financing or the cost of such financing. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. If a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient and, in such case, we may not be able to successfully obtain additional financing on favorable terms. If funds are unavailable to us on reasonable terms when we need them, we may be unable to meet our risk-based capital requirements, train and support our employees and Territory Partners, maintain the competitiveness of our technology, pursue business opportunities, service our existing debt, pay claims or acquire new members, any of which could have an adverse effect on our business, operating results and financial condition.
If we fail to comply with the numerous laws and regulations that are applicable to the sale of a pet medical plan, our business and operating results could be harmed.
The sale of a pet medical plan, which is considered a type of property and casualty insurance, is heavily regulated by each state in the United States and by Canadian provincial governments. In the United States, state insurance regulators are charged with protecting policyholders and have broad regulatory, supervisory and administrative powers over our business practices. Because we do business in all 50 states, the District of Columbia, all Canadian provinces and Puerto Rico, compliance with insurance-related laws, rules and regulations is difficult and imposes significant costs on our business. Each jurisdiction’s insurance department typically has the power, among other things, to:
 
 	•	 	grant and revoke licenses to transact insurance business;	
 
 	•	 	conduct inquiries into the insurance-related activities and conduct of agents and agencies and others in the sales, marketing and promotional channels;	
 
 	•	 	require and regulate disclosure in connection with the sale and solicitation of insurance policies;	
 
 	•	 	authorize how, by which personnel and under what circumstances insurance premiums can be quoted and published and an insurance policy sold;	
 
 	•	 	approve which entities can be paid commissions from carriers and the circumstances under which they may be paid;	
 
 	•	 	regulate the content of insurance-related advertisements, including web pages, and other marketing practices;	
 
 	•	 	approve policy forms, require specific benefits and benefit levels and regulate premium rates;	
 
 	•	 	impose fines and other penalties; and	
 
 	•	 	impose continuing education requirements.	
 
35

Table of Contents
While the U.S. federal government does not directly regulate the insurance industry, federal legislation and administrative policies can also affect us. Congress and various federal agencies periodically discuss proposals that would provide for federal oversight of insurance companies. We cannot predict whether any such laws will be enacted or the effect that such laws would have on our business. We also do business in all ten provinces and three territories of Canada. The provincial and territorial insurance regulators have the power to regulate the market conduct of insurers and insurance intermediaries, and the licensing and supervision of insurance agents, brokers, and adjusters, along with enforcement rights, including the right to assess administrative monetary penalties in certain provinces.
Insurance companies are also regulated at the federal level in Canada, and the Insurance Companies Act prohibits foreign entities from insuring in Canada unless it is authorized by an Order made by the Superintendent of Financial Institutions (Canada) permitting it to do so.
Due to the complexity, periodic modification and differing interpretations of insurance laws and regulations, we have not always been, and we may not always be, in compliance with them. New insurance laws, regulations and guidelines also may not be compatible with the manner in which we market and sell subscriptions to our medical plan in all of our member acquisition channels, including over the Internet. Failure to comply with insurance laws, regulations and guidelines or other laws and regulations applicable to our business could result in significant liability, additional department of insurance licensing requirements, the revocation of licenses in a particular jurisdiction or our inability to sell subscriptions to our medical plan, which could significantly increase our operating expenses, result in the loss of our revenue and otherwise harm our business, operating results and financial condition. Additionally, if new or modified requirements of the NY DFS resulted in APIC’s noncompliance or other problematic regulatory circumstances, we may also consider redomiciling APIC in another state, which may be costly and result in interruptions in our business.
Moreover, an adverse regulatory action in one jurisdiction could result in penalties and adversely affect our license status or reputation in other jurisdictions due to the current requirement that adverse regulatory actions in one jurisdiction be reported to other jurisdictions. Even if the allegations in any regulatory or other action against us ultimately are determined to be unfounded, we could incur significant time and expense defending against the allegations, and any related negative publicity could harm consumer and third-party confidence in us, which could significantly damage our brand.
In addition, we have received, and may in the future receive, inquiries from regulators regarding our marketing and business practices. These inquires may include investigations regarding a number of our business practices, including the manner in which we market and sell subscriptions to our medical plan. Any modification of our marketing or business practices in response to regulatory inquiries could harm our business, operating results or financial condition.
A regulatory environment that limits rate increases may adversely affect our operating results and financial condition.
Many states, including New York, have adopted laws or are considering proposed legislation that, among other things, limit the ability of insurance companies to effect rate increases or to cancel, reduce or not renew insurance coverage with respect to existing policies, and many state regulators have the power to reduce, or to disallow increases in premium rates. Most states, including New York, require licensure and regulatory approval prior to marketing new insurance products. Our practice has been to regularly reevaluate the price of our medical plan subscriptions, with any pricing changes implemented annually, subject the review and approval of the state regulators, who may reduce or disallow our pricing changes. Such review may result in delayed implementation of any pricing changes or prevent us from making changes we believe are necessary to achieve our targeted claims payout ratio, which could adversely affect our operating results and financial condition. In addition, we may be prevented by regulators from limiting significant pricing changes, requiring us to raise rates more quickly than we otherwise might have desired.
 
36

Table of Contents
In addition to regulating rates, certain states have enacted laws that require a property-casualty insurer, which includes a pet insurance company, conducting business in that state to participate in assigned risk plans, reinsurance facilities, joint underwriting associations (JUAs), Fair Access to Insurance Requirements (FAIR) plans and wind pools. In these markets, if the state reinsurance facilities, wind pools, FAIR plans or JUAs recognize a financial deficit, they may in turn have the ability to assess participating insurers, adversely affecting our operating results and financial condition. Additionally, certain states require insurers to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our operating results and financial condition could be adversely affected by any of these factors.
Regulations that require individuals or entities that sell pet insurance to be licensed may be interpreted to apply to our business, which could require us to modify our business practices.
Insurance regulators generally require that each individual who transacts pet insurance business on our behalf must maintain a valid license in one or more jurisdictions. Canadian provincial and territorial insurance legislation requires that individuals that solicit the sale of pet insurance must be validly licensed in the applicable province or territory. If regulators determined that any of our contact center employees, Territory Partners, veterinarians or other referral sources were selling subscriptions to our medical plan on our behalf, and therefore needed to be licensed in a particular jurisdiction, we could become liable for significant penalties and would have to modify our business practices and sales and marketing programs, or license the affected individuals, which may be impractical or costly and time-consuming to implement. Any modification of our business or marketing practices in response to regulatory licensing requirements could harm our business, operating results or financial condition.
Most Canadian provincial and territorial insurance legislation requires entities that solicit the sale of pet insurance to be validly licensed in the applicable jurisdiction. If any such regulator were to determine that any entity soliciting the sale of a medical plan on our behalf did not hold the required license, we may have to modify our business practices or marketing efforts, or license the affected entities, which may be costly and time-consuming to implement.
We are subject to numerous laws and regulations, and compliance with one law or regulation may result in non-compliance with another.
We are subject to numerous laws and regulations that are administered and enforced by a number of different governmental authorities, each of which exercises a degree of interpretive latitude, including, in the United States, state insurance regulators, state securities administrators, state attorneys general and federal agencies including the SEC and the U.S. Department of Justice. Consequently, we are subject to the risk that compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue, particularly when compliance is judged in hindsight. In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment may, even absent any particular regulator’s or enforcement authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thus necessitating changes to our practices that may, in some cases, increase our costs and limit our ability to grow or to improve the profitability of our business. Furthermore, in some cases, these laws and regulations are designed to protect or benefit the interests of a specific constituency rather than a range of constituencies. For example, state insurance laws and regulations are generally intended to protect or benefit purchasers or users of insurance products, not holders of securities, which is generally the jurisdiction of the SEC. In many respects, these laws and regulations limit our ability to grow or to improve the profitability of our business.
 
37

Table of Contents
Regulation of the sale of pet insurance is subject to change, and future regulations could harm our business and operating results.
The laws and regulations governing the offer, sale and purchase of pet insurance are subject to change, and future changes may be adverse to our business. For example, if a jurisdiction were to increase or alter the requirements for obtaining or maintaining an agent’s license in connection with the enrollment of a member in our medical plan, it could have a material adverse effect on our operations. For example, some states in the United States have adopted, and others are expected to adopt, new laws and regulations related to the insurance industry. It is difficult to predict how these new laws and regulations will impact our business, but, in some cases, changes in insurance laws, regulations and guidelines may be incompatible with various aspects of our business and require that we make significant modifications to our existing technology or practices, which may be costly and time-consuming to implement and could also harm our business, operating results and financial condition.
Failure to comply with federal and state laws and regulations relating to privacy and security of personal information, and civil liabilities relating to breaches of privacy and security of personal information, could create liabilities for us, damage our reputation and harm our business.
A variety of U.S. and Canadian federal, state and provincial laws and regulations govern the collection, use, retention, sharing and security of personal information. We collect and utilize demographic, credit and other private information from and about our members when they visit our website, call our contact center and apply for enrollment in our medical plan. Further, we use tracking technologies, including “cookies,” to help us manage and track our members’ interactions and deliver relevant advice and advertising. Claims or allegations that we have violated applicable laws or regulations related to privacy and data security could in the future result in negative publicity and a loss of confidence in us by our members and our participating service providers, and may subject us to fines by credit card companies and the loss of our ability to accept credit and debit card payments. In addition, we have posted privacy policies and practices concerning the collection, use and disclosure of member data on our website. Several Internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. In addition, our use and retention of personal information could lead to civil liability exposure in the event of disclosure of such information due to hacking, viruses, inadvertent action or other use or disclosure. Several companies have been subject to civil actions, including class actions, relating to this exposure.
We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols for personal information imposed by law, regulation, self-regulatory bodies, industry standards and contractual obligations. Such laws, standards and regulations, however, are evolving and subject to potentially differing interpretations, and federal, state and provincial legislative and regulatory bodies may expand current or enact new laws or regulations regarding privacy matters. We are unable to predict what additional legislation, standards or regulation in the area of privacy of personal information could be enacted or its effect on our operations and business.
Government regulation of the Internet and email could adversely affect our business.
The laws governing general commerce on the Internet remain unsettled and it may take years to fully determine whether and how existing laws such as those governing insurance, intellectual property, privacy and taxation apply to the Internet. In addition, the growth and development of the market for electronic commerce and Internet-related pet medical plan advertisements and transactions may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies conducting business and selling subscriptions to a pet medical plan over the Internet. Any new laws or regulations or new interpretations of existing laws or regulations relating to the Internet could harm our business and we could be forced to incur substantial costs in order to comply with them, which would harm our business, operating results and financial condition.
 
38

Table of Contents
Additionally, we use email to market our services to potential members and as a means of communicating with our existing members. The laws and regulations governing the use of email for marketing purposes continue to evolve and the growth and development of the market for commerce over the Internet may lead to the adoption of additional legislation. Canada’s new anti-spam legislation will be effective July 1, 2014, and requires the consent of the recipient, either express or implied, to the receipt of commercial electronic messages, subject to certain exceptions. If new laws or regulations are adopted, or existing laws and regulations are interpreted, to impose additional restrictions on our ability to send email to our members or potential members, we may not be able to communicate with them in a cost-effective manner. In addition to legal restrictions on the use of email, Internet service providers, email service providers and others attempt to block the transmission of unsolicited email, commonly known as “spam.” Many Internet and email service providers have relationships with organizations whose purpose it is to detect and notify the Internet and email service providers of entities that the organization believes is sending unsolicited email. If an Internet or email service provider identifies email from us as “spam” as a result of reports from these organizations or otherwise, we could be placed on a restricted list that will block our emails to members or potential members. If we are unable to communicate by email with our members and potential members as a result of legislation, blockage or otherwise, our business, operating results and financial condition would be harmed.
Applicable insurance laws regarding the change in control of our company may impede potential acquisitions that our stockholders might consider to be desirable.
We are subject to statutes and regulations of the state of New York that generally require that any person or entity desiring to acquire direct or indirect control of APIC obtain prior regulatory approval. These laws may discourage potential acquisition proposals and may delay, deter or prevent a change in control of our company, including through transactions, and in particular unsolicited transactions, that some of our stockholders might consider to be desirable. Similar regulations may also apply in other states in which we may operate.
We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the JOBS Act, as well as rules and regulations subsequently implemented by the SEC and the stock exchange on which our common stock is listed, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined by the JOBS Act. Our management and other personnel also have limited experience operating a public company, which may result in operational inefficiencies or errors. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and may need to establish an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
We also expect that operating as a public company will make it more expensive for us to obtain director and officer liability insurance on the terms that we would like. As a public company, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.
 
39

Table of Contents
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which we have total annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) five years from the date of this prospectus.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
Risks Related to this Offering and Ownership of Our Common Stock
The market price of our common stock is likely to be volatile, and you may be unable to sell your shares at or above the offering price.
Prior to this offering, there has not been a public market for our common stock. It is possible that no active trading market for our common stock will develop following this offering. You may not be able to sell your shares of common stock quickly or at the market price if trading in our common stock is not active. The initial public offering price for our shares of common stock will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. In addition, the market price of our common stock may be subject to wide fluctuations. Factors affecting the market price of our common stock include:
 
 	•	 	variations in our operating results, earnings per share, cash flows from operating activities, and key financial and operational metrics, and how those results compare to analyst expectations;	
 
 	•	 	forward-looking guidance to industry and financial analysts related to future revenue and earnings per share;	
 
 	•	 	the net increases in the number of members, either independently or as compared with published expectations of industry, financial or other analysts that cover our company;	
 
40

Table of Contents

 	•	 	changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock;	
 
 	•	 	announcements of changes to our medical plan, strategic alliances or significant agreements by us or by our competitors;	
 
 	•	 	announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors;	
 
 	•	 	recruitment or departure of key personnel;	
 
 	•	 	the economy as a whole and market conditions in our industry;	
 
 	•	 	trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock; and	
 
 	•	 	any other factors discussed herein.	
In addition, if the market for stock in our industry or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of our management’s attention and resources.
We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.
We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government that may not generate a high yield to our stockholders.
We do not intend to pay dividends on our common stock and, therefore, any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our common stock is limited by the terms of our credit agreements, and APIC’s ability to pay dividends is limited by New York state insurance laws. Any return to stockholders will therefore be limited to the increase, if any, of our stock price.
Our directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
As of March 31, 2014, our directors, five percent or greater stockholders and their respective affiliates beneficially held in the aggregate approximately 77% of our outstanding voting stock and, upon completion of this offering, that same group will hold in the aggregate approximately     % of our outstanding voting stock (assuming no exercise of the underwriters’ option to purchase additional shares). Therefore, after this offering these stockholders will continue to have the ability to influence us through this ownership position. These
 
41

Table of Contents
stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you or other stockholders may feel are in your or their best interest as one of our stockholders.
If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.
The initial public offering price is substantially higher than the net tangible book value per share of our common stock. Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing common stock in this offering will incur immediate dilution of $             per share, assuming an initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus.
This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering, the exchange by holders of exchangeable shares of our subsidiary for shares of our common stock and the exercise of stock options granted to our employees and warrants granted to investors. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation.
Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
Substantially all of our existing stockholders are subject to lock-up agreements with the underwriters of this offering that restrict the stockholders’ ability to transfer shares of our common stock for 180 days from the date of this prospectus. The lock-up agreements limit the number of shares of common stock that may be sold immediately following the public offering. Subject to certain limitations, approximately              shares will become eligible for sale upon expiration of the lock-up period. In addition, shares issued or issuable upon exercise of options or warrants vested as of the expiration of the lock-up period will be eligible for sale at that time. Sales of stock by these stockholders could have a material adverse effect on the trading price of our common stock.
Certain holders of shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act of 1933, as amended (Securities Act), subject to the 180-day lock-up arrangement described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
Provisions in our restated certificate of incorporation and restated bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our common stock.
Our restated certificate of incorporation and restated bylaws, as we expect they will be in effect upon completion of the offering, will contain provisions that could depress the market price of our common stock by acting to
 
42

Table of Contents
discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things:
 
 	•	 	establish a classified board of directors so that not all members of our board are elected at one time;	
 
 	•	 	permit only the board of directors to establish the number of directors and fill vacancies on the board;	
 
 	•	 	provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;	
 
 	•	 	require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;	
 
 	•	 	authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”);	
 
 	•	 	eliminate the ability of our stockholders to call special meetings of stockholders;	
 
 	•	 	prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;	
 
 	•	 	prohibit cumulative voting; and	
 
 	•	 	establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.	
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable evaluations of our company or our stock, the price of our stock could decline. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause our stock price to decline.
 
43

Table of Contents
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan” and “expect,” and similar expressions that convey uncertainty of future events or outcomes, are intended to identify forward-looking statements.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the registration statement, of which this prospectus is a part, with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
 
44

Table of Contents
 MARKET AND INDUSTRY DATA
Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations, market opportunity and market size, is based on information from various sources and on assumptions that are based on data and other similar sources, as well as on our knowledge of the market in which we operate. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
Certain information provided in this prospectus is contained in independent industry publications. This information is identified by a footnote. The source of these independent industry publications is provided below:
 
 	1.	The Harris Poll, conducted by Harris Interactive, May 2012.	
 
 	2.	Kelton Research LLC, The Milo’s Kitchen Pet Parent Survey, 2011.	
 
 	3.	The American Pet Products Association, U.S. Pet Industry Spending Figures & Future Outlook Statistics, 2013.	
 
 	4.	The American Pet Products Association, Health and Services Drive Pet Industry, 2007.	
 
 	5.	The American Pet Products Association, National Pet Owners Survey, 2013-2014.	
 
 	6.	Ipsos Reid on behalf of The Canadian Animal Health Institute, 2007-2010-2012 CAHI Estimate of the Canadian Dog and Cat Population Survey, 2012.	
 
 	7.	The European Pet Food Industry Federation, Facts and Figures, 2012.	
 
 	8.	Packaged Facts, a division of Market Research Group, LLC, “Pet Insurance in North America,” 5th Edition, October 2013.	
 
 	9.	Munich RE, “How to Unlock the Potential of Pet Health Insurance?,” May 2013.	
 
 	10.	DVM Newsmagazine, “Veterinary Practices Performing More Euthanasias Despite Increase in Stop Treatment Point,” October 2012.	
 
 	11.	Brakke Consulting, Inc. on behalf of The Bayer Healthcare Animal Health, Bayer Veterinary Care Usage Study III: Feline Findings, 2012.	
 
 	12.	DVM Newsmagazine, “State of the Profession: Veterinary Practices Still Facing Financial Challenges,” October 2012.	
 
45

Table of Contents
 USE OF PROCEEDS
We estimate that the net proceeds from our sale of             shares of common stock in this offering at an assumed initial public offering price of $         per share, the midpoint of the range reflected on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses, will be approximately $         million, or $         million if the underwriters’ option to purchase additional shares is exercised in full. A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by $         million, assuming the number of shares offered remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
The principal purposes of this offering are to increase our financial flexibility, create a public market for our stock, obtain additional capital and increase our visibility in the marketplace. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the net proceeds of this offering to us. We currently intend to use a portion of the net proceeds we receive from this offering to repay $         million of our outstanding indebtedness, which we incurred for working capital purposes. As of March 31, 2014, we had $12.0 million outstanding under our term loan with PEPI Capital, L.P. and entities associated with Highland Consumer Fund, which bears interest at a fixed rate of 11% per annum and matures in December 2016 or upon the completion of this offering, whichever occurs first, and $3.0 million outstanding under our term loan with Square 1 Bank, which bears interest at a variable rate of the greater of 5.5% or the prime rate plus 2.0% and matures in September 2016. For additional information about our outstanding indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-Term Debt.”
We expect to use the balance of the net proceeds to us for working capital and other general corporate purposes, which may include sales and marketing activities, general and administrative matters and capital expenditures. We also may use a portion of the net proceeds to satisfy our risk-based capital requirements or for the acquisition of, or investment in, technologies, assets or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments. We will have broad discretion over the uses of the net proceeds of this offering to us. Pending these uses, we intend to invest the net proceeds in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.
 DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. Under our credit agreements, we are restricted from paying any dividends or making any distributions on account of our capital stock. Additionally, the ability of our subsidiary, American Pet Insurance Company, to pay dividends is limited by New York state insurance laws. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate declaring or paying any cash dividends on our common stock for the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
 
46

Table of Contents
 CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2014 on:
 
 	•	 	an actual basis;	
 
 	•	 	a pro forma basis, giving effect to (i) the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2014 and 86,956 shares of our Series A convertible preferred stock issued upon the exercise of a warrant in April 2014 into an aggregate of 14,944,945 shares of common stock, (ii) the conversion of warrants to purchase 35,672 shares of our preferred stock into warrants to purchase an equivalent number of shares of our common stock, (iii) the issuance of 2,247,130 shares of our common stock upon the exchange of all of the outstanding exchangeable shares of our subsidiary Trupanion Canadian Shareholders, Ltd. and (iv) the effectiveness of our restated certificate of incorporation; and	
 
 	•	 	a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments and the sale of             shares of common stock in this offering, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, (ii) the adjustment in the number of shares of common stock issuable upon the exercise of warrants to purchase common stock from 748,439 shares to             shares of common stock, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, and the related revaluation and reclassification of such warrants, (iii) the revaluation of warrants to purchase 35,672 shares of our common stock based on an assumed initial public offering price of $         per share, the midpoint of the range reflected on the cover page of this prospectus, and (iv) the repayment of $         million in outstanding indebtedness and the related accretion of debt discount upon the completion of this offering.	

 	 	AS OF MARCH 31, 2014	 	
 	 	        ACTUAL        	 	 	PRO
        FORMA        	 	 	 	 	PRO FORMA
AS ADJUSTED  (1)	 	
 	 	(in thousands, except share data)	 	
Cash and cash equivalents	 	$	            10,593	  	 	$	                        	  	 		 	$	                        	  	
	 	 	 	 	 	 	 	 	 		 	 	 	 	
Current and long-term debt	 	$	26,254	  	 	$	            	  	 		 	$	            	  	
Warrant liability	 	 	6,119	  	 				 		 				
Convertible preferred stock, $0.00001 par value per share; 15,666,748 shares authorized, 14,857,989 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted	 	 	31,724	  	 	 	—  	  	 		 	 	—  	  	
Stockholders’ equity (deficit):	 				 				 		 				
Preferred stock, $0.00001 par value per share; no shares authorized, issued or outstanding, actual and pro forma; 10,000,000 shares authorized, no shares issued or outstanding, pro forma as adjusted	 	 	—  	  	 	 	—  	  	 		 	 	—  	  	
Common stock, $0.00001 par value per share; 26,000,000 shares authorized, 2,241,641 shares issued and outstanding, actual; 26,000,000 authorized, 19,433,716 issued and outstanding, pro forma; 200,000,000 shares authorized,              shares issued and outstanding, pro forma as adjusted	 	 	—  	  	 				 		 				
Special voting shares, $0.00001 par value per share; 2,500,030 shares authorized, 2,247,130 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted	 	 	—  	  	 	 	—  	  	 		 	 	—  	  	
Additional paid-in capital	 	 	6,365	  	 				 		 				
Accumulated other comprehensive loss	 	 	(78	) 	 				 		 				
Accumulated deficit	 	 	(40,916	) 	 				 		 				
Treasury stock	 	 	(2,601	) 	 				 		 				
	 	 	 	 	 	 	 	 	 		 	 	 	 	
Total stockholders’ equity (deficit)	 	 	(37,230	) 	 				 		 				
	 	 	 	 	 	 	 	 	 		 	 	 	 	
Total capitalization	 	$	26,867	  	 	$	 	  	 		 	$	 	  	

47

Table of Contents

(1)  	Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $             million, assuming that the number of shares offered remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.	
You should read the table above together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus.
The pro forma as adjusted information set forth in the table above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.
The table above excludes the following shares:
 
 	•	 	4,833,400 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2014, with a weighted average exercise price of $2.39 per share;	
 
 	•	 	168,750 shares of common stock issuable upon the exercise of options granted after March 31, 2014, with an exercise price of $12.27 per share;	
 
 	•	 	35,672 shares of common stock issuable upon the exercise of convertible preferred stock warrants outstanding as of March 31, 2014, with a weighted average exercise price of $2.94 per share;	
 
 	•	 	748,439 shares of common stock issuable upon the exercise of common stock warrants outstanding as of March 31, 2014, with an exercise price of $4.81 per share, which exercise price will automatically become our initial public offering price upon the completion of this offering (for example, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, these warrants would become warrants to purchase              shares of common stock at an exercise price of $              per share upon the completion of this offering); and	
 
 	•	 	4,718,453 shares of common stock reserved for future issuance under our equity compensation plans, consisting of (i) 718,453 shares of common stock reserved for future issuance under our 2007 Equity Compensation Plan as of March 31, 2014, which shares will be added to the shares to be reserved under our 2014 Equity Incentive Plan upon the completion of this offering, (ii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan, which will become effective upon the completion of this offering and (iii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Employee Stock Purchase Plan, which will become effective upon the completion of this offering. Our 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan will also provide for automatic annual increases in the number of shares reserved under such plans.	
 
48

Table of Contents
 DILUTION
If you invest in our common stock, your interest will be diluted to the extent of the difference between the amount per share paid by purchasers of shares of common stock in this initial public offering and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.
As of March 31, 2014, our pro forma net tangible book value was approximately $             million, or $             per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of March 31, 2014, assuming (i) the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2014 and 86,956 shares of our Series A convertible preferred stock issued upon the exercise of a warrant in April 2014 into an aggregate of 14,944,945 shares of common stock and (ii) the exchange of all of the outstanding exchangeable shares of our subsidiary Trupanion Canadian Shareholders, Ltd.
After giving effect to our sale in this offering of             shares of our common stock, at an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of March 31, 2014, would have been approximately $             million, or $             per share of our common stock. This represents an immediate increase in pro forma net tangible book value of $             per share to our existing stockholders and an immediate dilution of $             per share to investors purchasing shares in this offering.
The following table illustrates this dilution:

Assumed initial public offering price per share	  				  	$	            	  	
Pro forma net tangible book value per share as of March 31, 2014, before giving effect to this offering	  	$	            	  	  				
Increase in pro forma net tangible book value per share attributable to new investors in this offering	  				  				
	  	 	 	 	  				
Pro forma net tangible book value, as adjusted to give effect to this offering	  				  				
	  				  	 	 	 	
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering	  				  	$	 	  	
	  				  	 	 	 	
A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, would increase (decrease) our pro forma net tangible book value, as adjusted to give effect to this offering, by $             per share, and increase (decrease) the dilution in pro forma as adjusted net tangible book value per share to new investors in this offering by $             per share, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
If the underwriters exercise in full their option to purchase additional shares, the pro forma net tangible book value per share of our common stock after giving effect to this offering would be $             per share, and the dilution in net tangible book value per share to investors in this offering would be $             per share.
The following table summarizes, on a pro forma as adjusted basis as of March 31, 2014, after giving effect to (i) the conversion of all outstanding shares of our convertible preferred stock, the exchange of all of the outstanding exchangeable shares of our subsidiary Trupanion Canadian Shareholders, Ltd. and the effectiveness of our restated certificate of incorporation and (ii) the issuance of             shares of common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, the difference between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price
 
49

Table of Contents
per share paid, before deducting estimated underwriting discounts and commissions and estimated offering expenses:

 	  	SHARES PURCHASED	 	 	TOTAL CONSIDERATION	 	 	AVERAGE PRICE
PER SHARE	 	
 	  	NUMBER	  	PERCENT	 	 	AMOUNT	 	  	PERCENT	 	 			
Existing stockholders	  		  	 	    	% 	 	$	            	  	  	 	    	% 	 	$	                        	  	
New public investors	  		  				 				  				 				
	  	 	  	 	 	 	 	 	 	 	  	 	 	 	 				
Total	  		  	 	100.0	% 	 	$	 	  	  	 	100.0	% 	 				
	  	 	  	 	 	 	 	 	 	 	  	 	 	 	 				
A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by approximately $             million, assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
To the extent that any outstanding options or warrants are exercised, investors will experience further dilution.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise in full their option to purchase additional shares, our existing stockholders would own         % and our new investors would own         % of the total number of shares of our common stock outstanding upon the completion of this offering.
The number of shares outstanding as of March 31, 2014 excludes:
 
 	•	 	4,833,400 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2014, with a weighted average exercise price of $2.39 per share;	
 
 	•	 	168,750 shares of common stock issuable upon the exercise of options granted after March 31, 2014, with an exercise price of $12.27 per share;	
 
 	•	 	35,672 shares of common stock issuable upon the exercise of convertible preferred stock warrants outstanding as of March 31, 2014, with a weighted average exercise price of $2.94 per share;	
 
 	•	 	748,439 shares of common stock issuable upon the exercise of common stock warrants outstanding as of March 31, 2014, with an exercise price of $4.81 per share, which exercise price will automatically become our initial public offering price upon the completion of this offering (for example, based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, these warrants would become warrants to purchase              shares of common stock at an exercise price of $              per share upon the completion of this offering); and	
 
 	•	 	4,718,453 shares of common stock reserved for future issuance under our equity compensation plans, consisting of (i) 718,453 shares of common stock reserved for future issuance under our 2007 Equity Compensation Plan as of March 31, 2014, which shares will be added to the shares to be reserved under our 2014 Equity Incentive Plan upon the completion of this offering, (ii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan, which will become effective upon the completion of this offering and (iii) 2,000,000 shares of common stock reserved for future issuance under our 2014 Employee Stock Purchase Plan, which will become effective upon the completion of this offering. Our 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan will also provide for automatic annual increases in the number of shares reserved under such plans.	
 
50

Table of Contents
 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected consolidated financial and other data should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated statements of operations data for the years ended December 31, 2011, 2012 and 2013 and the consolidated balance sheet data as of December 31, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations data for the year ended December 31, 2010 and the consolidated balance sheet data as of December 31, 2011 are derived from our audited consolidated financial statements not included in this prospectus. The selected consolidated statements of operations data for the three months ended March 31, 2013 and 2014 and the consolidated balance sheet data as of March 31, 2014 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in any future period.

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	 	2010	 	 	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
 	 	(in thousands, except share and per share data)	 	
Consolidated Statements of Operations Data:	 				 				 				 				 				 				
Revenue:	 				 				 				 				 				 				
Subscription business	 	$	       19,099	  	 	$	       37,045	  	 	$	       55,352	  	 	$	       76,818	  	 	$	       17,017	  	 	$	       23,089	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	178	  	 	 	7,011	  	 	 	825	  	 	 	2,551	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue	 	 	19,099	  	 	 	37,045	  	 	 	55,530	  	 	 	83,829	  	 	 	17,842	  	 	 	25,640	  	
Cost of revenue:	 				 				 				 				 				 				
Subscription business (1)	 	 	15,326	  	 	 	29,002	  	 	 	44,185	  	 	 	61,905	  	 	 	13,473	  	 	 	18,602	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	134	  	 	 	6,280	  	 	 	761	  	 	 	2,282	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenue	 	 	15,326	  	 	 	29,002	  	 	 	44,319	  	 	 	68,185	  	 	 	14,234	  	 	 	20,884	  	
Gross profit:	 				 				 				 				 				 				
Subscription business	 	 	3,773	  	 	 	8,043	  	 	 	11,167	  	 	 	14,913	  	 	 	3,544	  	 	 	4,487	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	44	  	 	 	731	  	 	 	64	  	 	 	269	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total gross profit	 	 	3,773	  	 	 	8,043	  	 	 	11,211	  	 	 	15,644	  	 	 	3,608	  	 	 	4,756	  	
Operating expenses:	 				 				 				 				 				 				
Sales and marketing (1)	 	 	4,264	  	 	 	5,206	  	 	 	7,149	  	 	 	9,091	  	 	 	2,572	  	 	 	2,646	  	
Technology and development (1)	 	 	1,098	  	 	 	1,499	  	 	 	3,406	  	 	 	4,888	  	 	 	883	  	 	 	2,200	  	
General and administrative (1)	 	 	3,636	  	 	 	4,289	  	 	 	6,195	  	 	 	8,652	  	 	 	1,927	  	 	 	2,786	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	8,998	  	 	 	10,994	  	 	 	16,750	  	 	 	22,631	  	 	 	5,382	  	 	 	7,632	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(5,225	) 	 	 	(2,951	) 	 	 	(5,539	) 	 	 	(6,987	) 	 	 	(1,774	) 	 	 	(2,876	) 	
Interest expense	 	 	577	  	 	 	690	  	 	 	535	  	 	 	609	  	 	 	120	  	 	 	736	  	
Other expense, net	 	 	146	  	 	 	186	  	 	 	252	  	 	 	671	  	 	 	111	  	 	 	1,286	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(5,948	) 	 	 	(3,827	) 	 	 	(6,326	) 	 	 	(8,267	) 	 	 	(2,005	) 	 	 	(4,898	) 	
Income tax expense (benefit)	 	 	50	  	 	 	92	  	 	 	84	  	 	 	(92	) 	 	 	(79	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(5,998	) 	 	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss attributable to common stockholders	 				 	$	(3,919	) 	 	$	(8,147	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	

51

Table of Contents

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	 	2010	 	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
 	 	(in thousands, except share and per share data)	 	
Net loss per share attributable to common stockholders—basic and diluted (2)	 		 	$	(5.34	) 	 	$	(9.76	) 	 	$	(6.23	) 	 	$	(1.76	) 	 	$	(3.22	) 	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding used to compute net loss per share attributable to common stockholders—basic and diluted (2)	 		 	 	734,411	  	 	 	834,648	  	 	 	1,312,019	  	 	 	1,094,989	  	 	 	1,524,028	  	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma net loss per share attributable to common stockholders—basic and diluted (unaudited)  (2)	 		 				 				 	$	(0.45	) 	 				 	$	(0.27	) 	
	 		 				 				 	 	 	 	 				 	 	 	 	
Pro forma weighted average shares outstanding used to compute pro forma net loss—basic and diluted (unaudited) (2)	 		 				 				 	 	18,370,403	  	 				 	 	18,441,179	  	

																									
 	 	YEARS ENDED
DECEMBER 31,	 	 	PERIOD ENDED
MARCH 31,	 	
 	 	2010	 	 	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
Other Financial and Operational Data (3) :	 				 				 				 				 				 				
Total pets enrolled	 	 	56,738	  	 	 	88,707	  	 	 	125,387	  	 	 	169,570	  	 	 	  136,027	  	 	 	  181,634	  	
Monthly adjusted revenue per pet (4)	 	$	36.61	  	 	$	41.00	  	 	$	41.99	  	 	$	42.57	  	 	$	42.30	  	 	$	43.12	  	
Lifetime value of a pet (5)	 	$	385	  	 	$	500	  	 	$	557	  	 	$	612	  	 	$	590	  	 	$	610	  	
Average pet acquisition cost (6)	 	$	98	  	 	$	84	  	 	$	100	  	 	$	103	  	 	$	132	  	 	$	111	  	
Average monthly retention	 	 	98.16	% 	 	 	98.24	% 	 	 	98.51	% 	 	 	98.65	% 	 	 	98.56	% 	 	 	98.65	% 	
Adjusted EBITDA (in thousands) (7)	 	$	(4,613	) 	 	$	(1,862	) 	 	$	(3,904	) 	 	$	(4,351	) 	 	$	(1,208	) 	 	$	(2,079	) 	

 	  	AS OF
DECEMBER 31,	 	 	AS OF
MARCH  31,
2014	 	
 	  	2011	 	 	2012	 	 	2013	 	 			
 	  	(in thousands)	 	
Consolidated Balance Sheet Data:	  				 				 				 				
Cash and cash equivalents	  	$	8,087	  	 	$	4,234	  	 	$	14,939	  	 	$	10,593	  	
Investments in fixed maturities, current	  	 	9,370	  	 	 	10,809	  	 	 	16,088	  	 	 	14,954	  	
Working capital	  	 	12,689	  	 	 	7,746	  	 	 	13,710	  	 	 	7,220	  	
Total assets	  	 	24,863	  	 	 	27,666	  	 	 	51,653	  	 	 	48,969	  	
Warrant liabilities	  	 	333	  	 	 	551	  	 	 	4,900	  	 	 	6,119	  	
Current and long-term debt	  	 	9,900	  	 	 	9,900	  	 	 	26,099	  	 	 	26,254	  	
Total liabilities	  	 	17,743	  	 	 	23,015	  	 	 	52,928	  	 	 	54,475	  	
Convertible preferred stock	  	 	25,792	  	 	 	31,724	  	 	 	31,724	  	 	 	31,724	  	
Stockholders’ deficit	  	 	(18,672	) 	 	 	(27,073	) 	 	 	(32,999	) 	 	 	(37,230	) 	
 
(footnotes appear on following page)
 
52

Table of Contents

(1)	Includes stock-based compensation expense as follows:	

 	  	YEARS ENDED
DECEMBER 31,	 	  	THREE MONTHS ENDED
MARCH 31,	 	
 	  	    2010    	 	  	    2011    	 	  	    2012    	 	  	    2013    	 	  	    2013    	 	  	    2014    	 	
 	  	(in thousands)	 	
Cost of revenue	  	$	23	  	  	$	65	  	  	$	109	  	  	$	230	  	  	$	40	  	  	$	81	  	
Sales and marketing	  	 	249	  	  	 	288	  	  	 	428	  	  	 	677	  	  	 	143	  	  	 	149	  	
Technology and development	  	 	15	  	  	 	165	  	  	 	268	  	  	 	351	  	  	 	71	  	  	 	98	  	
General and administrative	  	 	310	  	  	 	464	  	  	 	629	  	  	 	680	  	  	 	147	  	  	 	239	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	   597	  	  	$	   982	  	  	$	1,434	  	  	$	1,938	  	  	$	   401	  	  	$	   567	  	

(2)  	See note 2 to our consolidated financial statements included elsewhere in this prospectus for a description of the method used to compute basic and diluted net loss per share attributable to common stockholders and pro forma basic and diluted net loss per share attributable to common stockholders.	
(3)  	For more information about how we calculate total pets enrolled, monthly adjusted revenue per pet, lifetime value of a pet, average pet acquisition cost and average monthly retention, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.”	
(4)  	Monthly adjusted revenue per pet is calculated in part based on adjusted revenue, a non-GAAP financial measure, that we define as revenue from our subscription business segment excluding sign-up fee revenue and the change in deferred revenue between periods. For more information about adjusted revenue and a reconciliation of revenue to adjusted revenue, see “—Non-GAAP Financial Measures.”	
(5)	Lifetime value of a pet is calculated in part based on contribution margin, a non-GAAP financial measure, that we define as gross profit from our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. For more information about contribution margin and a reconciliation of gross profit to contribution margin, see “—Non-GAAP Financial Measures.”	
(6)  	Average pet acquisition cost is calculated in part based on acquisition cost, a non-GAAP financial measure, that we define as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. For more information about acquisition cost and a reconciliation of sales and marketing expenses to acquisition cost, see “—Non-GAAP Financial Measures.”	
(7)	Adjusted EBITDA is a non-GAAP financial measure that we define as net loss excluding stock-based compensation expense, depreciation and amortization expense, interest income, interest expense, change in fair value of warrant liabilities and income tax expense (benefit). For more information about adjusted EBITDA and a reconciliation of net loss to adjusted EBITDA, see “—Non-GAAP Financial Measures.”	
Non-GAAP Financial Measures
We believe that using adjusted EBITDA as one of our key metrics and using adjusted revenue, contribution margin and acquisition cost to calculate and present certain of our other key metrics is helpful to our investors. These measures, which are non-GAAP financial measures, are not prepared in accordance with U.S. generally accepted accounting principles (GAAP). We define adjusted revenue as revenue from our subscription business segment excluding sign-up fee revenue and the change in deferred revenue between periods. We define contribution margin as gross profit from our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. We define acquisition cost as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. We define adjusted EBITDA as net loss excluding stock-based compensation expense, depreciation and amortization expense, interest income, interest expense, change in fair value of warrant liabilities and income tax expense (benefit).
 
53

Table of Contents
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry as other companies in our industry may calculate or use non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on our reported financial results. Further, stock-based compensation expense and other items used in the calculation of adjusted EBITDA have been and will continue to be for the foreseeable future significant recurring expenses in our business. The presentation and utilization of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge our investors to review the reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures in our consolidated financial statements that is included below, and not to rely on any single financial or operating measure to evaluate our business.
Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash expenses, we believe that providing non-GAAP financial measures such as contribution margin, acquisition cost and adjusted EBITDA that exclude stock-based compensation expense and, in the case of adjusted EBITDA, the change in fair value of warrant liabilities allows for more meaningful comparisons between our operating results from period to period. We exclude sign-up fee revenue from the calculation of both adjusted revenue and contribution margin because we collect it from new members at the time of enrollment and consider it to be an offset to a portion of our sales and marketing expenses. For this reason, we also net sign-up fees with sales and marketing expenses in our calculation of acquisition cost. We exclude changes in deferred revenue from the calculation of both adjusted revenue and contribution margin in order to eliminate fluctuations caused by the timing of pet enrollment during the last month of any particular period in which such measures are being presented or utilized. We exclude the change in fair value of warrant liabilities from our calculation of adjusted EBITDA in order to eliminate fluctuations caused by changes in our stock price. We believe this allows us to calculate and present adjusted revenue, contribution margin and acquisition cost and the related financial measures we derive from them, as well as adjusted EBITDA, in a consistent manner across periods. Our non-GAAP financial measures and the related financial measures we derive from them are important tools for financial and operational decision-making and for evaluating our own operating results over different periods of time.
The following table reflects the reconciliation of adjusted revenue to revenue:

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	 	    2010    	 	 	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
 	 	(in thousands)	 	
Revenue	 	$	19,099	  	 	$	37,045	  	 	$	55,530	  	 	$	83,829	  	 	$	17,842	  	 	$	25,640	  	
Excluding:	 				 				 				 				 				 				
Other business revenue	 	 	—  	  	 	 	—  	  	 	 	(178	) 	 	 	(7,011	) 	 	 	(825	) 	 	 	(2,551	) 	
Change in deferred revenue	 	 	500	  	 	 	757	  	 	 	767	  	 	 	1,107	  	 	 	124	  	 	 	262	  	
Sign-up fee revenue	 	 	(623	) 	 	 	(953	) 	 	 	(1,189	) 	 	 	(1,418	) 	 	 	(332	) 	 	 	(377	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted revenue	 	$	18,976	  	 	$	36,849	  	 	$	54,930	  	 	$	76,507	  	 	$	16,809	  	 	$	22,974	  	

54

Table of Contents
The following table reflects the reconciliation of contribution margin to gross profit:

 	 	YEARS ENDED
DECEMBER 31,	 	 	TWELVE MONTHS ENDED
MARCH  31,	 	
 	 	    2010    	 	 	    2011    	 	 	    2012    	 	 	    2013    	 	 	        2013        	 	 	        2014        	 	
 	 	(in thousands)	 	
Gross profit	 	$	   3,773	  	 	$	   8,043	  	 	$	11,211	  	 	$	15,644	  	 	$	12,847	  	 	$	16,790	  	
Excluding:	 				 				 				 				 				 				
Stock-based compensation expense	 	 	23	  	 	 	65	  	 	 	109	  	 	 	230	  	 	 	123	  	 	 	270	  	
Other business segment gross profit	 	 	—  	  	 	 	—  	  	 	 	(44	) 	 	 	(731	) 	 	 	(108	) 	 	 	(935	) 	
Sign-up fee revenue	 	 	(623	) 	 	 	(953	) 	 	 	(1,189	) 	 	 	(1,418	) 	 	 	(1,229	) 	 	 	(1,464	) 	
Change in deferred revenue	 	 	500	  	 	 	757	  	 	 	767	  	 	 	1,107	  	 	 	725	  	 	 	1,246	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contribution margin	 	$	3,673	  	 	$	7,912	  	 	$	10,854	  	 	$	14,832	  	 	$	12,358	  	 	$	15,907	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reflects the reconciliation of acquisition cost to sales and marketing expenses:

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	 	    2010    	 	 	    2011    	 	 	    2012    	 	 	    2013    	 	 	        2013        	 	 	        2014        	 	
 	 	(in thousands)	 	
Sales and marketing expenses	 	$	   4,264	  	 	$	   5,206	  	 	$	  7,149	  	 	$	  9,091	  	 	$	  2,572	  	 	$	  2,646	  	
Excluding:	 				 				 				 				 				 				
Stock-based compensation expense	 	 	(249	) 	 	 	(288	) 	 	 	(428	) 	 	 	(677	) 	 	 	(143	) 	 	 	(149	) 	
Net of:	 				 				 				 				 				 				
Sign-up fee revenue	 	 	(623	) 	 	 	(953	) 	 	 	(1,189	) 	 	 	(1,418	) 	 	 	(332	) 	 	 	(377	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition cost	 	$	3,392	  	 	$	3,965	  	 	$	5,532	  	 	$	6,996	  	 	$	2,097	  	 	$	2,120	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reflects the reconciliation of adjusted EBITDA to net loss:

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	 	    2010    	 	 	    2011    	 	 	    2012    	 	 	    2013    	 	 	        2013        	 	 	        2014        	 	
 	 	(in thousands)	 	
Net loss	 	$	(5,998)	  	 	$	(3,919)	  	 	$	(6,410)	  	 	$	(8,175)	  	 	$	(1,926)	  	 	$	(4,913)	  	
Excluding:	 				 				 				 				 				 				
Stock-based compensation expense	 	 	598	  	 	 	982	  	 	 	1,434	  	 	 	1,938	  	 	 	401	  	 	 	567	  	
Depreciation and amortization expense	 	 	185	  	 	 	199	  	 	 	349	  	 	 	892	  	 	 	206	  	 	 	309	  	
Interest income	 	 	(69	) 	 	 	(115	) 	 	 	(107	) 	 	 	(102	) 	 	 	(30	) 	 	 	(18	) 	
Interest expense	 	 	578	  	 	 	699	  	 	 	546	  	 	 	645	  	 	 	122	  	 	 	742	  	
Change in fair value of warrant liabilities	 	 	43	  	 	 	200	  	 	 	200	  	 	 	543	  	 	 	98	  	 	 	1,219	  	
Income tax expense (benefit)	 	 	50	  	 	 	92	  	 	 	84	  	 	 	(92	) 	 	 	(79	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	(4,613	) 	 	$	(1,862	) 	 	$	(3,904	) 	 	$	(4,351	) 	 	$	(1,208	) 	 	$	(2,079	) 	

55

Table of Contents
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with the financial statements and the related notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and that involve risks and uncertainties. As a result of many factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those discussed in these forward-looking statements.
Overview
We are a direct-to-consumer monthly subscription service providing a medical insurance plan for cats and dogs throughout the United States, Canada and Puerto Rico. Our data-driven, vertically-integrated approach enables us to provide pet owners with what we believe is the highest value medical plan for their pets, priced specifically for each pet’s unique characteristics. Our growing and loyal member base provides us with highly predictable and recurring revenue. We operate our business with a focus on maximizing the lifetime value of each pet while sustaining a favorable ratio of lifetime value relative to acquisition cost.
Our target market is large and underpenetrated. We have pioneered a unique solution that sits at the center of the pet medical ecosystem, meeting the needs of pets, pet owners and veterinarians, and we believe we are uniquely positioned to disrupt the pet medical insurance market and drive increased market penetration. Our enrolled pets consisted of approximately 85% dogs and 15% cats as of March 31, 2014. The number of pets enrolled in our medical plan has increased every quarter for the last ten years. More recently, our total enrolled pets grew from 31,207 on January 1, 2010 to 181,634 on March 31, 2014, which represents a compound annual growth rate of 51.4%.
We operate in two business segments: subscription business and other business. We generate revenue in our subscription business segment primarily from subscription fees for our medical plan, which we actively market to consumers. Our medical plan automatically renews on a monthly basis, and members pay the subscription fee at the beginning of each subscription period, in most cases by authorizing us to directly charge their credit card, debit card or bank account through automatic funds transfer. Subscription revenue is recognized on a pro rata basis over the monthly enrollment term. We generate revenue in our other business segment primarily from writing policies for an unaffiliated managing general agent that offers pet insurance and from writing policies under a federal government program. These policies provide different coverage and are subject to materially different terms and conditions than the Trupanion medical plan. Further, the unaffiliated managing general agent administers the policies we write for it and markets those policies to consumers.
We generate leads through both third-party referrals and online member acquisition channels, which we then convert into members through our website and contact center. Veterinary practices represent our largest referral source. While these referrals accounted for a majority of our enrollments in 2013 and in the first quarter of 2014, we do not pay commissions to or otherwise compensate veterinarians for their referrals. We engage a national referral network of independent contractors who are paid fees based on activity in their regions, which we refer to as our Territory Partners. For the years ended December 31, 2011, 2012 and 2013 and the three months ended March 31, 2014, we paid our Territory Partners aggregate fees equal to $1.8 million, $2.7 million, $3.5 million and $1.0 million, respectively. Our Territory Partners are dedicated to cultivating direct veterinary relationships and building awareness of the benefits that our medical plan offers veterinarians and their clients. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about, and potentially enroll in, our medical plan. Our online member acquisition channels serve as important resources for pet owner education and drive new member leads and conversion. We also receive a significant number of new leads from existing members adding pets and referring their friends and family members. We constantly evaluate the effectiveness of our member acquisition channels and marketing initiatives based upon their return on investment, which we measure by comparing the ratio of the lifetime value of a pet generated through each specific channel or initiative to the related acquisition cost.
 
56

Table of Contents
Our subscription business segment, which is our core business, is characterized by highly predictable and recurring monthly subscription revenue from our large and growing member base. Since 2010, at least 88% of our subscription revenue every quarter has come from existing members who had active subscriptions at the beginning of the quarter. Due to our focus on providing a superior value proposition and member experience, our members are very loyal, as evidenced by our 98.5% average monthly retention rate over 2011, 2012 and 2013. The average life expectancy of a dog and a cat is estimated to be approximately 10-13 and 15 years, respectively. Historically, mortality has been one of the largest drivers of subscription cancellations.
Our revenue increased from $19.1 million for the year ended December 31, 2010 to $83.8 million for the year ended December 31, 2013, representing a compound annual growth rate of 64%. Additionally, our revenue increased from $17.8 million for the three months ended March 31, 2013 to $25.6 million for the three months ended March 31, 2014, representing 44% year-over-year growth. We have achieved sequential revenue growth in every quarter since the first quarter of 2010. From December 31, 2010 to December 31, 2013, we increased our employee headcount from 80 to 335. We have made and expect to continue to make substantial investments in member acquisition and in expanding our operations. For the years ended December 31, 2011, 2012 and 2013, we had a net loss of $3.9 million, $6.4 million and $8.2 million, respectively. For the three months ended March 31, 2013 and 2014, we had a net loss of $1.9 million and $4.9 million, respectively. As of March 31, 2014, our accumulated deficit was $40.9 million.
Key Financial and Operating Metrics
We believe that one of the key operating drivers for any online subscription business is the amount of sales and marketing expenses incurred to drive new customer acquisition, which is typically evaluated in relation to lifetime value. In order to assess this metric, we regularly review a number of financial and operating metrics, including per pet unit economics, to evaluate our subscription business, determine the allocation of resources and make decisions regarding business strategy.
The following table sets forth our key financial and operating metrics for our subscription business for the years ended December 31, 2011, 2012 and 2013 and the periods ended March 31, 2013 and 2014.

 	  	YEARS ENDED
DECEMBER 31,	 	 	PERIOD ENDED
MARCH  31,	 	
 	  	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
Total pets enrolled	  	 	  88,707	  	 	 	  125,387	  	 	 	  169,570	  	 	 	  136,027	  	 	 	  181,634	  	
Monthly adjusted revenue per pet	  	$	41.00	  	 	$	41.99	  	 	$	42.57	  	 	$	 42.30	  	 	$	43.12	  	
Lifetime value of a pet	  	$	500	  	 	$	557	  	 	$	612	  	 	$	590	  	 	$	610	  	
Average pet acquisition cost	  	$	84	  	 	$	100	  	 	$	103	  	 	$	132	  	 	$	111	  	
Average monthly retention	  	 	98.24	% 	 	 	98.51	% 	 	 	98.65	% 	 	 	98.56	% 	 	 	98.65	% 	
Adjusted EBITDA (in thousands)	  	$	(1,862	) 	 	$	(3,904	) 	 	$	(4,351	) 	 	$	(1,208	) 	 	$	(2,079	) 	
Total pets enrolled. Total pets enrolled reflects the number of pets subscribed to our plan at the end of each period presented. We monitor total pets enrolled because it provides an indication of the growth of our business.
Monthly adjusted revenue per pet. Monthly adjusted revenue per pet is calculated as adjusted revenue divided by the total number of pet months in that period. Adjusted revenue, a non-GAAP financial measure, is calculated as revenue, excluding sign-up fee revenue and the change in deferred revenue. We exclude sign-up fee revenue since it is collected at the time a new pet is enrolled and is used to cover initial setup costs, which are included in sales and marketing expenses. We exclude changes in deferred revenue in order to present monthly adjusted revenue per pet in a consistent manner across periods. Total pet months in a period represents the sum of all pets enrolled for each month during the period. We monitor monthly adjusted revenue per pet because it is an indicator of the effectiveness of our pricing for our business. For more information about adjusted revenue and a reconciliation of revenue to adjusted revenue, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”
 
57

Table of Contents
Lifetime value of a pet.  Lifetime value of a pet (LVP) is calculated in a reporting period as the average monthly contribution margin per pet over the 12 months prior to the period end date, multiplied by the implied average subscriber life in months. The average monthly contribution margin per pet is calculated by dividing gross profit for the period, excluding sign-up fee revenue, the change in deferred revenue and stock based compensation expense recorded in cost of revenue by the number of pet months in the 12-month period. Implied average subscriber life in months is calculated as the quotient obtained by dividing one by one minus the average monthly retention rate. We monitor LVP to assess how much lifetime contribution margin we might expect from new pets over their implied average subscriber life in months and to evaluate the amount of sales and marketing expenses we may want to incur to attract new pet enrollments.
Average pet acquisition cost. Pet acquisition cost (PAC) is calculated as acquisition cost divided by the total number of new pets enrolled in that period. Acquisition cost, a non-GAAP financial measure, is calculated in a reporting period as sales and marketing expenses, excluding stock-based compensation, offset by sign-up fee revenue. We offset sales and marketing expenses with sign-up fee revenue since it is a one-time charge to new members used to cover initial setup costs, which are included in sales and marketing expenses. We monitor average pet acquisition cost to evaluate the efficiency of our sales and marketing programs in acquiring new members. For more information about acquisition cost and a reconciliation of sales and marketing expenses to acquisition cost, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”
Average monthly retention. Average monthly retention is measured as the monthly retention rate of enrolled pets for each applicable period averaged over the 12 months prior to the period end date. As such, our average monthly retention rate as of December 31, 2013 is an average of each month’s retention from January 1, 2013 through December 31, 2013 and our average monthly retention rate as of March 31, 2014 is an average of each month’s retention from April 1, 2013 through March 31, 2014. We calculate monthly retention as the number of pets that remain after subtracting all pets that cancel during the month, including pets that enroll and cancel within that month, divided by the total pets enrolled at the beginning of the month. We monitor average monthly retention because it provides a measure of member satisfaction and allows us to calculate the implied average subscriber life in months and manage our business.
Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure, is calculated as net loss excluding stock-based compensation expense, depreciation and amortization expense, interest income, interest expense, change in fair value of warrant liabilities and income tax expense (benefit). Adjusted EBITDA is an important measure used by our management and board of directors to evaluate and discuss our operating performance. In addition, we believe that adjusted EBITDA and similar measures are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as a measure of financial performance and debt service capabilities.
These metrics are calculated based upon the historical results for specific periods and do not represent a projection or other indication of future financial performance. They should only be used to compare period to period results. Our actual future results will vary based upon a number of factors. For example, monthly adjusted revenue per pet can be impacted by the deductibles chosen by members and the ages of the pets at the time of enrollment. Lifetime value of a pet can be adversely impacted by any reduction of our average monthly retention rate, fluctuations in our average cost of claims or increases in our other cost of revenue. For more information about additional factors that may impact our future results, see “—Factors Affecting Our Performance” and “Risk Factors.”
Cohort Analysis
Our subscription business is characterized by recurring monthly subscription revenue from our large and growing member base. Since 2010, at least 88% of our subscription business revenue every quarter has come from existing members who had active subscriptions at the beginning of the quarter. Due to our focus on providing a superior value proposition and member experience, our members are very loyal, as evidenced by our 98.5% average monthly retention rate over 2011, 2012 and 2013.
 
58

Table of Contents

Quarterly Adjusted Revenue by New vs. Existing Pets	  	Quarterly Adjusted Revenue by Cohort	
(dollars, in millions)	  	(dollars, in millions)	

As a result of the predictable nature of our subscription business, our business model yields attractive per unit economics. Pets that enrolled in the first quarter of 2014 cost us an average of $111 to acquire and have an implied lifetime value of $610. This represents a 5.5x ratio of LVP divided by PAC. We continually refine our sales and marketing strategies to optimize this ratio.
To illustrate the cost of acquiring new pets and their contribution to our operating results, we analyzed the subscription business adjusted revenue and estimated contribution margin generated from all pets that we acquired during 2010, which we refer to as our 2010 cohort, and the pet acquisition cost we incurred to acquire those pets. We present this cohort because it provides more historical data than recent cohorts. Although we believe that this cohort is illustrative of our member base generally, the 2010 cohort results inherently reflect a distinct group of pets and may not be representative of our existing or future cohorts, especially as we continue to grow.
Our 2010 cohort included 34,583 pets that we enrolled during that year. We incurred $3.4 million in acquisition cost to acquire these pets. In the aggregate, this cohort has generated $42.2 million of adjusted revenue through the end of 2013 and $5.7 million of estimated contribution margin, net of acquisition cost, over the four year period from January 1, 2010 through December 31, 2013. This cohort reached break even during 2011, when cumulative contribution margin equaled pet acquisition cost. Additionally, the pets enrolled in this cohort had average monthly retention rates of 98.15%, 98.85% and 99.07% at the end of 2011, 2012 and 2013, respectively, which resulted in a cumulative impact of 56% of the original cohort pets remaining enrolled at December 31, 2013. At the end of 2013, 19,267 of the original 34,583 cohort pets remained enrolled in our medical plan. We believe these results demonstrate our high average monthly retention rates, our ability to increase our pricing and the quick recovery of pet acquisition cost. We expect our cumulative contribution margin from the 2010 cohort to continue to increase over time from the pets that remain enrolled in our medical plan. These results are reflected in the table below:

   	  	NEW IN
2010	 	 	END OF
2010	 	 	END OF
2011	 	 	END OF
2012	 	 	END OF
2013	 	
 	  	(in thousands, except percentages, pet and per pet data)	 	
2010 Cohort:	  				 				 				 				 				
Total enrolled pets (1)	  	 	34,583	  	 	 	30,958	  	 	 	24,753	  	 	 	21,542	  	 	 	19,267	  	
Average monthly retention (1)	  				 	 	97.14	% 	 	 	98.15	% 	 	 	98.85	% 	 	 	99.07	% 	
Monthly adjusted revenue per pet (1)	  				 	$	35.11	  	 	$	39.51	  	 	$	43.20	  	 	$	44.28	  	
Adjusted revenue (2)	  				 	$	6,466	  	 	$	13,041	  	 	$	11,861	  	 	$	10,790	  	
Contribution margin (3)	  				 	$	1,901	  	 	$	2,598	  	 	$	2,681	  	 	$	1,932	  	
Acquisition cost (4)	  	$	(3,393	) 	 				 				 				 				
Cumulative adjusted revenue	  				 	$	6,466	  	 	$	19,507	  	 	$	31,368	  	 	$	42,158	  	
Cumulative contribution margin, net of acquisition cost	  				 	$	(1,492	) 	 	$	1,106	  	 	$	3,787	  	 	$	5,719	  	
 
(footnotes appear on following page)
 
59

Table of Contents

(1)  	For more information about total enrolled pets, average monthly retention and monthly adjusted revenue per pet, including an explanation of how we calculate those metrics, see “—Key Financial and Operating Metrics.”	
(2)  	Adjusted revenue, which is a non-GAAP financial measure, is defined as revenue from our subscription business segment excluding sign-up fee revenue and the change in deferred revenue between periods. For more information about adjusted revenue, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
(3)  	Contribution margin, which is a non-GAAP financial measure, is defined as gross profit from our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. For more information about contribution margin, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.” In order to calculate contribution margin for our 2010 cohort, our total other costs of revenue for the period were allocated evenly to each pet month during the period. We then summed the other cost of revenue applicable to the pet months from the 2010 cohort. We calculate this average per pet month to facilitate comparisons among cohorts, but it may not represent actual costs incurred related to each cohort.	
(4)  	Acquisition cost, which is a non-GAAP financial measure, is defined as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. For more information about acquisition cost, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
Factors Affecting Our Performance
Average monthly retention. Our performance depends on our ability to continue to retain our existing and newly enrolled pets and is impacted by our ability to provide a best-in-class value and member experience. Our average monthly retention rate improved from 98.16% in 2010 to 98.65% in 2013 and in the first quarter of 2014. Our ability to continue to improve the retention rate of enrolled pets may be affected by a number of factors, including the actual and perceived value of our services and the quality of our member experience, including our claims payment process and competitive environment. In addition, if the number of new pets enrolled increases at a faster rate than our historical experience, our average monthly retention rate could be adversely impacted, as our retention rate is generally lower during the first year of member enrollment.
Investment in pet acquisition. We have made and plan to continue to make significant investments to grow our member base. Our pet acquisition costs and the number of new members we enroll depends on a number of factors, including the amount we elect to invest in sales and marketing activities in any particular period, effectiveness of our sales execution and marketing initiatives, changes in costs of media, the mix of our sales and marketing expenditures and the competitive environment. Our average pet acquisition cost may vary from period to period based upon specific marketing initiatives. For example, veterinary trade show costs have traditionally increased our average pet acquisition costs in the first quarter of each year. We also periodically test new member acquisition channels and marketing initiatives, each of which impacts our average pet acquisition cost. We plan to expand the number of Territory Partners we use to reach veterinarians, which is likely to increase our average pet acquisition cost. We continually assess our sales and marketing activities by monitoring the ratio of LVP to PAC.
Geographic mix of sales. The relative mix of our business between the United States and Canada impacts the monthly adjusted revenue per pet we receive. Prices for our plan in Canada are generally higher than in the United States, which is consistent with the relative cost of veterinary care in each country. As our revenue has grown faster in the United States compared to Canada, this geographic shift in the mix of business has reduced the growth in our monthly adjusted revenue per pet. In addition, as our mix of revenue changes between the United States and Canada, our exposure to foreign exchange fluctuations will be impacted.
Investments to grow our business. We plan to continue to invest to grow our business. Any investments in the development of new technology, continued improvements to our member experience and the costs associated with being a public company will increase our operating expenses in the near term.
 
60

Table of Contents
Other business segment . Our other business segment includes revenue and expenses related to our writing of policies for an unaffiliated managing general agent. This relationship can be canceled by the unaffiliated managing general agent with 360 days notice and we are unlikely to be able to replace it with a similar contract quickly, if at all. A cancellation of this contract would result in the policies and revenue being run off over a period of 12 months and could have a material impact on our results of operations. Our other business segment also includes revenue and expenses related to policies written under a federal government program. While we expect our other business segment to remain relatively stable over time and become a proportionately smaller component of our overall business as we continue to expand our subscription business, we may enter into additional relationships to the extent we believe they will be profitable to us, which could also impact our operating results.
Basis of Presentation
General
We operate in two business segments: subscription business and other business. Our subscription business segment includes revenue and expenses related to monthly subscriptions for our medical plan. Our other business segment includes revenue and expenses related to our other operations, including the writing of policies for an unaffiliated managing general agent and policies written under a federal government program. We report our financial information in accordance with U.S. generally accepted accounting principles (GAAP).
Revenue
We generate revenue in our subscription business segment primarily from subscription fees for our medical plan. Our medical plan automatically renews on a monthly basis, and members pay the subscription fee at the beginning of each subscription period, in most cases by authorizing us to directly charge their credit card, debit card or bank account through automatic funds transfer. Subscription revenue is recognized on a pro rata basis over the monthly enrollment term. Membership may be canceled at any time without penalty, and we issue a refund for the unused portion of the canceled membership.
We generate revenue in our other business segment primarily from writing policies for an unaffiliated managing general agent that offers pet insurance and from writing policies under a federal government program. Revenue from our other business segment is recognized on a pro rata basis over the enrollment term for each policy.
Cost of Revenue
Cost of revenue in each of our segments is comprised of claims expenses and other cost of revenue.
Claims expenses. Claims expenses include claims incurred, the cost of personnel administering the claims and providing member service relating to the claims and other operating expenses directly or indirectly related to claims administration. Claims incurred are the claims approved for payment plus an accrual for claims incurred that have not yet been submitted or approved for payment. This accrual is based on our historical experience and developments in claims and the cost of veterinary care, and also includes the cost of administering such claims.
Other cost of revenue. Other cost of revenue for our subscription business segment includes direct and indirect member service expenses, credit card transaction fees and premium tax expenses. Other cost of revenue for our other business segment includes the commission we pay to the unaffiliated managing general agent.
For both our subscription business and our other business segments, we generally expect our cost of revenue to remain relatively constant as a percentage of revenue. Claims expenses as a percentage of our subscription business revenue may increase over time as part of our strategy is to return more value to our members to further enhance our member experience, retention rates and lifetime value of a pet. These increases will generally be offset by economies of scale in our other cost of revenue.
 
61

Table of Contents
Gross Profit
Gross profit is total revenue less cost of revenue. We expect gross profit as a percentage of revenue in each of our segments to remain relatively consistent. As the mix of subscription business and other business changes, this may impact our total gross profit as a percentage of revenue.
Operating Expenses
Our operating expenses are classified into three categories: sales and marketing, technology and development, and general and administrative. For each category, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and stock-based compensation.
Sales and Marketing
Sales and marketing expenses consist of referral fees paid with respect to newly enrolled pets, print, online and promotional advertising costs, and employee compensation and related costs. Sales and marketing expenses are driven primarily by investments to acquire new members and retain our existing members. We plan to continue to invest in existing and new member acquisition channels and marketing initiatives to grow our business. We expect sales and marketing expenses to increase in absolute dollars, although it may fluctuate as a percentage of revenue.
Technology and Development
Technology and development expenses consist primarily of personnel costs and related expenses for our operations staff, which includes information technology development and infrastructure support, third-party services and depreciation of hardware and amortization of capitalized software and intangible assets. We expect technology and development expenses to increase in absolute dollars and as a percentage of total revenue as we continue to devote significant resources to enhance our member experience, and then decrease as a percentage of revenue over time.
General and Administrative
General and administrative expenses consist primarily of personnel costs and related expenses for our finance, actuarial, human resources, business development and general management functions, as well as facilities and professional services. We have recently incurred additional expenses as a result of expanding our management team and preparing for our initial public offering, and will continue to incur additional expenses associated with being a public company, including higher legal, corporate insurance and accounting expenses. We expect general and administrative expenses to continue to increase in the near term, both in absolute dollars and as a percentage of total revenue, and then decrease as a percentage of revenue over time.
 
62

Table of Contents
Results of Operations
The following tables set forth our results of operations for the periods presented in absolute dollars and as a percentage of our revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

 	  	YEARS ENDED
DECEMBER  31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
 	  	(in thousands)	 	
Consolidated Statement of Operations Data:	  				 				 				 				 				
Revenue:	  				 				 				 				 				
Subscription business	  	$	37,045	  	 	$	55,352	  	 	$	76,818	  	 	$	17,017	  	 	$	23,089	  	
Other business	  	 	—  	  	 	 	178	  	 	 	7,011	  	 	 	825	  	 	 	2,551	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue	  	 	37,045	  	 	 	55,530	  	 	 	83,829	  	 	 	17,842	  	 	 	25,640	  	
						
Cost of revenue:	  				 				 				 				 				
Subscription business (1)	  	 	29,002	  	 	 	44,185	  	 	 	61,905	  	 	 	13,473	  	 	 	18,602	  	
Other business	  	 	—  	  	 	 	134	  	 	 	6,280	  	 	 	761	  	 	 	2,282	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenue	  	 	29,002	  	 	 	44,319	  	 	 	68,185	  	 	 	14,234	  	 	 	20,884	  	
Gross profit:	  				 				 				 				 				
Subscription business	  	 	8,043	  	 	 	11,167	  	 	 	14,913	  	 	 	3,544	  	 	 	4,487	  	
Other business	  	 	—  	  	 	 	44	  	 	 	731	  	 	 	64	  	 	 	269	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total gross profit	  	 	8,043	  	 	 	11,211	  	 	 	15,644	  	 	 	3,608	  	 	 	4,756	  	
						
Operating expenses:	  				 				 				 				 				
Sales and marketing (1)	  	 	5,206	  	 	 	7,149	  	 	 	9,091	  	 	 	2,572	  	 	 	2,646	  	
Technology and development (1)	  	 	1,499	  	 	 	3,406	  	 	 	4,888	  	 	 	883	  	 	 	2,200	  	
General and administrative (1)	  	 	4,289	  	 	 	6,195	  	 	 	8,652	  	 	 	1,927	  	 	 	2,786	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	10,994	  	 	 	16,750	  	 	 	22,631	  	 	 	5,382	  	 	 	7,632	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	  	 	(2,951	) 	 	 	(5,539	) 	 	 	(6,987	) 	 	 	(1,774	) 	 	 	(2,876	) 	
						
Interest expense	  	 	690	  	 	 	535	  	 	 	609	  	 	 	120	  	 	 	736	  	
Other expense, net	  	 	186	  	 	 	252	  	 	 	671	  	 	 	111	  	 	 	1,286	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	  	 	(3,827	) 	 	 	(6,326	) 	 	 	(8,267	) 	 	 	(2,005	) 	 	 	(4,898	) 	
Income tax expense (benefit)	  	 	92	  	 	 	84	  	 	 	(92	) 	 	 	(79	) 	 	 	15	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	  	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	

(1)  	Includes stock-based compensation expense as follows:	

 	  	YEARS ENDED
DECEMBER  31,	 	  	THREE MONTHS ENDED
MARCH 31,	 	
 	  	    2011    	 	  	    2012    	 	  	    2013    	 	  	    2013    	 	  	    2014    	 	
 	  	(in thousands)	 	
Cost of revenue	  	$	       65	  	  	$	     109	  	  	$	     230	  	  	$	       40	  	  	$	       81	  	
Sales and marketing	  	 	288	  	  	 	428	  	  	 	677	  	  	 	143	  	  	 	149	  	
Technology and development	  	 	165	  	  	 	268	  	  	 	351	  	  	 	71	  	  	 	98	  	
General and administrative	  	 	464	  	  	 	629	  	  	 	680	  	  	 	147	  	  	 	239	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	982	  	  	$	1,434	  	  	$	1,938	  	  	$	401	  	  	$	567	  	

63

Table of Contents

 	  	YEARS ENDED
DECEMBER  31,	 	 	THREE MONTHS ENDED
MARCH 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
 	  	(as a percentage of revenue)	 	
Revenue	  	 	       100	% 	 	 	       100	% 	 	 	       100	% 	 	 	       100	% 	 	 	       100	% 	
Cost of revenue	  	 	78	  	 	 	80	  	 	 	81	  	 	 	80	  	 	 	81	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	  	 	22	  	 	 	20	  	 	 	19	  	 	 	20	  	 	 	19	  	
Operating expenses:	  				 				 				 				
Sales and marketing	  	 	14	  	 	 	13	  	 	 	11	  	 	 	14	  	 	 	10	  	
Technology and development	  	 	4	  	 	 	6	  	 	 	6	  	 	 	5	  	 	 	9	  	
General and administrative	  	 	12	  	 	 	11	  	 	 	10	  	 	 	11	  	 	 	11	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	30	  	 	 	30	  	 	 	27	  	 	 	30	  	 	 	30	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	  	 	(8	) 	 	 	(10	) 	 	 	(8	) 	 	 	(10	) 	 	 	(11	) 	
Interest expense	  	 	(2	) 	 	 	(1	) 	 	 	(1	) 	 	 	(1	) 	 	 	(3	) 	
Other expense, net	  	 	(1	) 	 	 	(1	) 	 	 	(1	) 	 	 	—  	  	 	 	(5	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	  	 	(11	) 	 	 	(12	) 	 	 	(10	) 	 	 	(11	) 	 	 	(19	) 	
Income tax expense (benefit)	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	  	 	(11	)% 	 	 	(12	)% 	 	 	(10	)% 	 	 	(11	)% 	 	 	(19	)% 	

 	  	YEARS ENDED
DECEMBER  31,	 	 	THREE MONTHS ENDED
MARCH 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	 	    2013    	 	 	    2014    	 	
 	  	(as a percentage of subscription revenue)	 	
Subscription business revenue	  	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	
Subscription business cost of revenue	  	 	78	  	 	 	80	  	 	 	81	  	 	 	79	  	 	 	81	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subscription business gross profit	  	 	22	% 	 	 	20	% 	 	 	19	% 	 	 	21	% 	 	 	19	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comparison of Three Months Ended March 31, 2013 and 2014
Revenue

 	 	THREE MONTHS ENDED
MARCH 31,	 	 	2014 TO
2013
%  CHANGE	 	
 	 	     2013     	 	 	     2014     	 	 			
 	 	(in thousands, except percentages, pet
and per pet data)	 	 	 	 	
Revenue:	 				 				 				
Subscription business	 	$	17,017	  	 	$	23,089	  	 	 	36	% 	
Other business	 	 	825	  	 	 	2,551	  	 	 	        209	  	
	 	 	 	 	 	 	 	 	 				
Total revenue	 	$	17,842	  	 	$	25,640	  	 	 	44	  	
				
Percentage of Revenue by Segment:	 				 				 				
Subscription business	 	 	95	% 	 	 	90	% 	 				
Other business	 	 	5	  	 	 	10	  	 				
	 	 	 	 	 	 	 	 	 				
Total revenue	 	 	100	% 	 	 	100	% 	 				
				
Subscription Business:	 				 				 				
Total pets enrolled	 	 	136,027	  	 	 	181,634	  	 	 	34	  	
Monthly adjusted revenue per pet	 	$	42.30	  	 	$	43.12	  	 	 	2	  	
Average monthly retention	 	 	98.56	% 	 	 	98.65	% 	 				
 
64

Table of Contents
Total revenue increased by $7.8 million to $25.6 million for the three months ended March 31, 2014, or 44%. Revenue for our subscription business segment increased by $6.1 million to $23.1 million for the three months ended March 31, 2014, or 36%. The increase in subscription business revenue was primarily due to a 34% increase in enrolled pets compared to March 31, 2013, in addition to a slight increase in adjusted revenue per pet month primarily due to pricing increases. The impact of pricing increases was partially offset by a higher percentage of newly enrolled pets in the United States as compared to Canada, for which the monthly adjusted revenue per pet is lower, and approximately a $0.6 million impact of foreign exchange rates on our Canadian dollar-denominated revenue. Revenue from our other business segment increased $1.7 million to $2.6 million for the three months ended March 31, 2014, or 209%. Revenue in our other business segment increased primarily as a result of the policies written for the unaffiliated managing general agent being fully transferred from its previous insurance company, whereas only a portion of such policies were transferred from its previous insurance company during the three months ended March 31, 2013.
Cost of Revenue

 	  	THREE MONTHS ENDED
MARCH  31,	 	 	2014 TO  2013
% CHANGE	 	
 	  	    2013    	 	 	    2014    	 	 			
 	  	(in thousands, except
percentages)	 	 	 	 	
Cost of Revenue:	  				 				 				
Subscription business:	  				 				 				
Claims expenses	  	$	11,744	  	 	$	16,104	  	 	 	37	% 	
Other cost of revenue	  	 	1,729	  	 	 	2,498	  	 	 	44	  	
	  	 	 	 	 	 	 	 	 				
Total cost of revenue	  	 	13,473	  	 	 	18,602	  	 	 	38	  	
Gross profit	  	 	3,544	  	 	 	4,487	  	 	 	27	  	
				
Other business:	  				 				 				
Claims expenses	  	 	379	  	 	 	930	  	 	 	145	  	
Other cost of revenue	  	 	382	  	 	 	1,352	  	 	 	254	  	
	  	 	 	 	 	 	 	 	 				
Total cost of revenue	  	 	761	  	 	 	2,282	  	 	 	200	  	
Gross profit	  	 	64	  	 	 	269	  	 	 	320	  	
				
Percentage of Revenue by Segment:	  				 				 				
Subscription business:	  				 				 				
Claims expenses	  	 	69	% 	 	 	70	% 	 				
Other cost of revenue	  	 	10	  	 	 	11	  	 				
Total cost of revenue	  	 	79	  	 	 	81	  	 				
Gross profit	  	 	21	  	 	 	19	  	 				
				
Other business:	  				 				 				
Claims expenses	  	 	46	  	 	 	36	  	 				
Other cost of revenue	  	 	46	  	 	 	53	  	 				
Total cost of revenue	  	 	92	  	 	 	89	  	 				
Gross profit	  	 	8	  	 	 	11	  	 				
Cost of revenue for our subscription business segment increased $5.1 million to $18.6 million for the three months ended March 31, 2014, or 38%. This increase was primarily as a result of the $4.4 million increase in claims expenses resulting from the 34% increase in enrolled pets, offset by a $0.4 million benefit from fluctuating foreign exchange rates on our Canadian dollar-denominated payments to Canadian members. The other cost of revenue in our subscription business segment increased $0.8 million due to an increase in enrolled pets and $0.2 million due to an increase in compensation expenses and related costs primarily as a result of increased headcount.
 
65

Table of Contents
Cost of revenue for our other business segment increased $1.5 million to $2.3 million for the three months ended March 31, 2014 as a result of all of the policies written for the unaffiliated managing general agent being fully transferred from its previous insurance company, whereas only a portion of such policies were transferred from its previous insurance company during the three months ended March 31, 2013.
Sales and Marketing Expenses

 	  	THREE MONTHS ENDED
MARCH 31,	 	2014 TO 2013
% CHANGE	
 	  	    2013    	 	    2014    	 		
 	  	(in thousands, except
percentages and
per pet data)	 	 	
Sales and marketing	  	 	$	2,572	 	 	 	$	2,646	 	 	 	 	3	%	
Percentage of total revenue	  	 	 	14	%	 	 	 	10	%	 	 	 	(29	)	
				
Subscription Business:	  	 				 	 				 	 				
Average pet acquisition cost (PAC)	  	 	$	132	 	 	 	$	111	 	 	 	 	(16	)	
Sales and marketing expenses remained relatively consistent between periods with only a $0.1 million increase in total expenses for the three months ended March 31, 2014. This slight increase was related to a $0.2 million increase in new marketing initiatives offset by a reduction of $0.1 million in trade show-related expenses. This increase in sales and marketing expenses did not correlate directly with the increase in enrolled pets primarily due to the realization of economies of scale in our operations, which resulted in a decrease in pet acquisition cost of 16% from $132 for the three months ended March 31, 2013 to $111 for the three months ended March 31, 2014.
Technology and Development Expenses

 	  	THREE MONTHS ENDED
MARCH 31,	 	2014 TO 2013
% CHANGE	
 	  	    2013    	 	    2014    	 		
 	  	(in thousands, except
percentages)	 	 	
Technology and development expenses	  	 	$	    883	 	 	 	$	2,200	 	 	 	 	149	%	
Percentage of total revenue	  	 	 	5	%	 	 	 	9	%	 	 				
Technology and development expenses increased $1.4 million to $2.2 million for the three months ended March 31, 2014, or 149%. Of this increase, $1.1 million was due to investments to support new technology to enhance our member experience, which increased from $0.2 million for the three months ended March 31, 2013. In addition, $0.2 million was related to an increase in compensation expense and related costs as a result of increased headcount and $0.1 million was related to changes in technology infrastructure.
General and Administrative Expenses

 	  	THREE MONTHS ENDED
MARCH 31,	 	2014 TO 2013
% CHANGE	
 	  	    2013    	 	    2014    	 		
 	  	(in thousands, except
percentages)	 	 	
General and administrative expenses	  	 	$	1,927	 	 	 	$	2,786	 	 	 	 	45	%	
Percentage of total revenue	  	 	 	11	%	 	 	 	11	%	 	 				
General and administrative expenses increased $0.8 million to $2.8 million for the three months ended March 31, 2014, or 45%. General and administrative expenses, however, remained consistent as a percentage of revenue between periods. The increase in general and administrative expenses was primarily attributable to preparation to become a public company. Specifically, $0.4 million was the result of increased compensation expense and related costs as a result of increased headcount and $0.3 million was the result of increased legal and accounting fees.
 
66

Table of Contents
Other Expense, Net

 	  	THREE MONTHS ENDED
MARCH 31,	  	2014 TO 2013
% CHANGE	
 	  	    2013    	  	    2014    	  		
 	  	(in thousands, except percentages)	  	 	
Interest expense	  	 	$	    120	 	  	 	$	736	 	  	 	 	513	%	
Other expense, net	  	 	 	111	 	  	 	 	1,286	 	  	 	 	NM	  	
	  	 	 	 	 	  	 	 	 	 	  	 				
Total other expense, net	  	 	$	231	 	  	 	$	  2,022	 	  	 	 	775	 	
	  	 	 	 	 	  	 	 	 	 	  	 				
Other expense, net increased $1.8 million to $2.0 million for the three months ended March 31, 2014. The increase in other expense, net was primarily attributable to a $1.0 million increase due to the revaluation of warrants classified as liabilities on our consolidated balance sheet and a $0.7 million increase in interest expense and accretion of a debt discount on debt issued during 2013.
Comparison of Years Ended December 31, 2011, 2012 and 2013
Revenue

 	 	YEARS ENDED DECEMBER 31,	 	2012 TO 2011
% CHANGE	 	2013 TO 2012
% CHANGE	
 	 	      2011      	 	      2012      	 	      2013      	 		 		
 	 	(in thousands, except percentages, pet and per pet data)	 	 	
Revenue :	 	 				 	 				 	 				 	 				 	 				
Subscription business	 	 	$	37,045	 	 	 	$	55,352	 	 	 	$	76,818	 	 	 	 	49	%	 	 	 	39	%	
Other business	 	 	 	—  	 	 	 	 	178	 	 	 	 	7,011	 	 	 	 	NM	  	 	 	 	NM	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				 	 				
Total revenue	 	 	$	37,045	 	 	 	$	55,530	 	 	 	$	83,829	 	 	 	 	50	  	 	 	 	51	  	
						
Percentage of Revenue by Segment :	 	 				 	 				 	 				 	 				 	 				
Subscription business	 	 	 	100	%	 	 	 	100	%	 	 	 	92	%	 	 				 	 				
Other business	 	 	 	—  	 	 	 	 	—  	 	 	 	 	8	 	 	 				 	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				 	 				
Total revenue	 	 	 	100	%	 	 	 	100	%	 	 	 	100	%	 	 				 	 				
						
Subscription Business:	 	 				 	 				 	 				 	 				 	 				
Total pets enrolled	 	 	 	88,707	 	 	 	 	125,387	 	 	 	 	169,570	 	 	 	 	41	  	 	 	 	35	  	
Monthly adjusted revenue per pet	 	 	$	41.00	 	 	 	$	41.99	 	 	 	$	42.57	 	 	 	 	2	  	 	 	 	1	  	
Average monthly retention	 	 	 	98.24	%	 	 	 	98.51	%	 	 	 	98.65	%	 	 				 	 				
Year ended December 31, 2012 compared to year ended December 31, 2013. Total revenue increased by $28.3 million to $83.8 million in 2013, or 51%. Revenue for our subscription business segment increased by $21.5 million to $76.8 million in 2013, or 39%. This increase in subscription business revenue was primarily due to a 35% increase in pets enrolled as of December 31, 2013 compared to December 31, 2012 and a slight increase in monthly adjusted revenue per pet during this period due to increases in our pricing. The impact of these price increases were partially offset by a higher percentage of newly enrolled pets in the United States as compared to Canada, which have a lower monthly adjusted revenue per pet, and approximately $0.8 million impact of foreign exchange rates on our Canadian revenue. Revenue from our other business segment increased $6.8 million to $7.0 million in 2013. We began generating revenue for our other business segment in November 2012, by writing policies for an unaffiliated managing general agent.
Year ended December 31, 2011 compared to year ended December 31, 2012. Total revenue increased $18.5 million to $55.5 million in 2012, or 50%. Revenue for our subscription business segment increased by $18.3 million to $55.4 million in 2012, or 49%. This increase in our subscription business revenue was primarily due to a 41% increase in total pets enrolled as of December 31, 2012 compared to December 31, 2011. Monthly adjusted revenue per pet during this period increased slightly due to increases in our pricing.
 
67

Table of Contents
Cost of Revenue

 	  	YEARS ENDED DECEMBER 31,	 	 	2012 TO 2011
% CHANGE	 	 	2013 TO 2012
% CHANGE	 	
 	  	2011	 	 	2012	 	 	2013	 	 			 			
 	  	(in thousands, except percentages)	 	 	 	 	
Cost of Revenue:	  				 				 				 				 				
Subscription business:	  				 				 				 				 				
Claims expenses	  	$	    24,995	  	 	$	37,773	  	 	$	53,787	  	 	 	         51	% 	 	 	         42	% 	
Other cost of revenue	  	 	4,007	  	 	 	6,412	  	 	 	8,118	  	 	 	60	  	 	 	27	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Total cost of revenue	  	 	29,002	  	 	 	44,185	  	 	 	61,905	  	 				 				
Gross profit	  	 	8,043	  	 	 	11,167	  	 	 	14,913	  	 	 	39	  	 	 	34	  	
						
Other business:	  				 				 				 				 				
Claims expenses	  	 	—  	  	 	 	83	  	 	 	2,850	  	 	 	NM	  	 	 	NM	  	
Other cost of revenue	  	 	—  	  	 	 	51	  	 	 	3,430	  	 	 	NM	  	 	 	NM	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Total cost of revenue	  	 	—  	  	 	 	134	  	 	 	6,280	  	 				 				
Gross profit	  	 	—  	  	 	 	44	  	 	 	731	  	 				 				
						
Percentage of Revenue by Segment :	  				 				 				 				 				
Subscription business:	  				 				 				 				 				
Claims expenses	  	 	68	% 	 	 	68	% 	 	 	70	% 	 				 				
Other cost of revenue	  	 	11	  	 	 	12	  	 	 	11	  	 				 				
Total cost of revenue	  	 	79	  	 	 	80	  	 	 	81	  	 				 				
Gross profit	  	 	21	  	 	 	20	  	 	 	19	  	 				 				
						
Other business:	  				 				 				 				 				
Claims expenses	  	 	—  	  	 	 	47	  	 	 	41	  	 				 				
Other cost of revenue	  	 	—  	  	 	 	29	  	 	 	49	  	 				 				
Total cost of revenue	  	 	—  	  	 	 	76	  	 	 	90	  	 				 				
Gross profit	  	 	—  	  	 	 	24	  	 	 	10	  	 				 				
Year ended December 31, 2012 compared to year ended December 31, 2013. Cost of revenue for our subscription business segment increased $17.7 million to $61.9 million in 2013, or 40%. This increase was primarily a result of the $16.0 million increase claims expenses resulting from the 35% increase in enrolled pets, offset by a $0.5 million benefit from fluctuating foreign exchange rates on our Canadian dollar-denominated payments to Canadian members. The other cost of revenue decreased as a percentage of revenue due to economies of scale resulting from the timing of a headcount increase in 2012, which we made in anticipation of continued growth in 2013.
Cost of revenue for our other business segment increased $6.1 million to $6.3 million during 2013 due to increased business with the unaffiliated managing general agent.
Year ended December 31, 2011 compared to year ended December 31, 2012. Cost of revenue for our subscription business segment increased $15.2 million to $44.2 million in 2012, or 52%, primarily due to claims expenses increase of $12.8 million during this period. The increase in claims expenses is primarily a result of the 41% increase in enrolled pets and to a lesser degree to the intentional increase in claims expenses as a percentage of revenue. During 2012, we adjusted our coverage and our pricing to provide greater value to our members. Other cost of revenue in our subscription business segment increased consistent with our increase in enrolled pets during the period due to the timing of a headcount increase in 2012, which we made in anticipation of continued growth in 2013.
 
68

Table of Contents
Sales and Marketing Expenses

 	  	YEARS ENDED DECEMBER 31,	 	2012 TO
2011
% CHANGE	 	2013 TO
2012
% CHANGE	
 	  	2011	 	2012	 	2013	 		 		
 	  	(in thousands, except percentages
and per pet data)	 	 	
Sales and marketing	  	 	$	5,206	 	 	 	$	7,149	 	 	 	$	9,091	 	 	 	 	37	%	 	 	 	27	%	
Percentage of total revenue	  	 	 	14	%	 	 	 	13	%	 	 	 	11	%	 	 				 	 				
						
Subscription Business:	  	 				 	 				 	 				 	 				 	 				
Average pet acquisition cost (PAC)	  	 	$	84	 	 	 	$	100	 	 	 	$	103	 	 	 	 	19	 	 	 	 	3	 	
Year ended December 31, 2012 compared to year ended December 31, 2013. Sales and marketing expenses increased $1.9 million to $9.1 million in 2013, or 27%. The increase in sales and marketing expenses was primarily due to a $1.4 million increase in salaries and related employee expenses resulting from an 8% increase in sales and marketing headcount from December 31, 2012 to December 31, 2013 and an increase of $0.5 million in expenditures related to new and expanded sales and marketing initiatives. The decrease as a percentage of revenue in part reflects the impact of recurring revenue from existing members.
Year ended December 31, 2011 compared to year ended December 31, 2012. Sales and marketing expenses increased $1.9 million to $7.1 million in 2012, or 37%. The increase in sales and marketing expenses was primarily due to a $0.9 million increase in salaries and related employee expenses resulting from a 50% increase in sales and marketing headcount from December 31, 2011 to December 31, 2012 and an increase of $0.5 million in expenditures related to new and expanded sales and marketing initiatives. The decrease as a percentage of revenue in part reflects the impact of recurring revenue from existing members.
Technology and Development Expenses

 	  	YEARS ENDED DECEMBER 31,	 	 	2012 TO
2011
% CHANGE	 	 	2013 TO
2012
% CHANGE	 	
 	  	2011	 	 	2012	 	 	2013	 	 			 			
 	  	(in thousands, except percentages)	 	 	 	 	
Technology and development expenses	  	$	1,499	  	 	$	3,406	  	 	$	4,888	  	 	 	127	% 	 	 	44	% 	
Percentage of total revenue	  	 	4	% 	 	 	6	% 	 	 	6	% 	 				 				
Year ended December 31, 2012 compared to year ended December 31, 2013. Technology and development expenses increased $1.5 million to $4.9 million in 2013, or 44%. The increase was primarily due to a $1.5 million increase in compensation expenses and related costs as a result of an increase in headcount as we made investments to support new technology to enhance our member experience.
Year ended December 31, 2011 compared to year ended December 31, 2012. Technology and development expenses increased $1.9 million to $3.4 million in 2012, or 127%. This increase was primarily due to a $1.3 million increase in compensation expenses and related costs as a result of increased headcount and an increase of $0.4 million in costs for external consultants and other expenditures related to the development of new claims technology, which began in 2012.
 
69

Table of Contents
General and Administrative Expenses

 	  	YEARS ENDED DECEMBER 31,	 	 	2012 TO
2011
% CHANGE	 	 	2013 TO
2012
% CHANGE	 	
 	  	2011	 	 	2012	 	 	2013	 	 			 			
 	  	(in thousands, except percentages)	 	 	 	 	 	 	 	
General and administrative expenses	  	$	4,289	  	 	$	6,195	  	 	$	8,652	  	 	 	44	% 	 	 	40	% 	
Percentage of total revenue	  	 	12	% 	 	 	11	% 	 	 	10	% 	 				 				
Year ended December 31, 2012 compared to year ended December 31, 2013. General and administrative expenses increased $2.5 million to $8.7 million in 2013, or 40%. We moved our U.S. operations to a new facility during the third quarter of 2012, resulting in a $0.5 million increase in facilities and related expenses during 2013. Additionally, employee compensation and related expenses increased $0.4 million as we increased headcount primarily in our actuarial, legal and accounting departments and incurred other expenses in preparation for an initial public offering. We also incurred $0.4 million related to public company readiness activities.
Year ended December 31, 2011 compared to year ended December 31, 2012. General and administrative expenses increased $1.9 million to $6.2 million in 2012, or 44%. During 2012 employee compensation and related expenses increased $1.1 million primarily due to a 25% increase in headcount to accommodate the growth of our company.
Other Expense, Net

 	  	YEARS ENDED DECEMBER 31,	 	  	2012 TO
2011
% CHANGE	 	 	2013 TO
2012
% CHANGE	 	
 	  	    2011    	 	  	    2012    	 	  	    2013    	 	  			 			
 	  	(in thousands)	 	  	 	 	
Interest expense	  	$	690	  	  	$	535	  	  	$	609	  	  	 	(22	)% 	 	 	14	% 	
Other expense, net	  	 	186	  	  	 	252	  	  	 	671	  	  	 	35	  	 	 	166	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				
Total other expense, net	  	$	876	  	  	$	787	  	  	$	1,280	  	  	 	(10	) 	 	 	63	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				
Year ended December 31, 2012 compared to year ended December 31, 2013. Other expense, net increased $0.5 million to $1.3 million in 2013. This increase was primarily due to the revaluation of warrants classified as liabilities in our consolidated balance sheet.
Year ended December 31, 2011 compared to year ended December 31, 2012. Other expense, net decreased $0.1 million to $0.8 million in 2012. This decrease was primarily due to an increase in capitalized interest in 2012 relating to our capitalized software projects. This was offset by an increase in other expenses due to the revaluation of warrants classified as liabilities in our consolidated balance sheet.
Provision for Income Taxes
The provision (benefit) for income tax of $0.1 million, $0.1 million and $(0.1) million in 2011, 2012 and 2013, respectively, primarily related to taxes payable in Canada and in certain states in the United States. We provided a full valuation allowance against our net deferred tax assets as of December 31, 2011, 2012 and 2013.
 
70

Table of Contents
Quarterly Results of Operations
The following tables set forth selected unaudited quarterly statements of operations data for the last eight fiscal quarters. The unaudited interim financial statements for each of these quarters have been prepared on the same basis as the audited financial statements included elsewhere in this prospectus and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to a fair statement of our results of operations and financial position for these periods. This data should be read in conjunction with the audited consolidated financial statements and accompanying notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for any future period.

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Consolidated Statements of Operations Data:	 				 				 				 				 				 				 				 				 				
Revenue:	 				 				 				 				 				 				 				 				 				
Subscription business	 	$	11,992	  	 	$	13,170	  	 	$	14,505	  	 	$	15,685	  	 	$	17,017	  	 	$	18,368	  	 	$	20,007	  	 	$	21,426	  	 	$	23,089	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	178	  	 	 	825	  	 	 	1,474	  	 	 	2,127	  	 	 	2,585	  	 	 	2,551	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue	 	 	11,992	  	 	 	13,170	  	 	 	14,505	  	 	 	15,863	  	 	 	17,842	  	 	 	19,842	  	 	 	22,134	  	 	 	24,011	  	 	 	25,640	  	
										
Cost of revenue:	 				 				 				 				 				 				 				 				 				
Subscription business (1)	 	 	10,014	  	 	 	10,763	  	 	 	10,911	  	 	 	12,497	  	 	 	13,473	  	 	 	14,698	  	 	 	16,117	  	 	 	17,617	  	 	 	18,602	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	134	  	 	 	761	  	 	 	1,315	  	 	 	1,898	  	 	 	2,306	  	 	 	2,282	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenue	 	 	10,014	  	 	 	10,763	  	 	 	10,911	  	 	 	12,631	  	 	 	14,234	  	 	 	16,013	  	 	 	18,015	  	 	 	19,923	  	 	 	20,884	  	

Gross profit:	 				 				 				 				 				 				 				 				 				
Subscription business	 	 	1,978	  	 	 	2,407	  	 	 	3,594	  	 	 	3,188	  	 	 	3,544	  	 	 	3,670	  	 	 	3,890	  	 	 	3,809	  	 	 	4,487	  	
Other business	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	44	  	 	 	64	  	 	 	159	  	 	 	229	  	 	 	279	  	 	 	269	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total gross profit	 	 	1,978	  	 	 	2,407	  	 	 	3,594	  	 	 	3,232	  	 	 	3,608	  	 	 	3,829	  	 	 	4,119	  	 	 	4,088	  	 	 	4,756	  	
										
Operating expenses:	 				 				 				 				 				 				 				 				 				
Sales and marketing (1)	 	 	1,597	  	 	 	1,677	  	 	 	1,714	  	 	 	2,161	  	 	 	2,572	  	 	 	2,268	  	 	 	2,013	  	 	 	2,238	  	 	 	2,646	  	
Technology and
development (1)	 	 	671	  	 	 	708	  	 	 	885	  	 	 	1,142	  	 	 	883	  	 	 	1,152	  	 	 	1,156	  	 	 	1,697	  	 	 	2,200	  	
General and
administrative (1)	 	 	1,335	  	 	 	1,428	  	 	 	1,465	  	 	 	1,967	  	 	 	1,927	  	 	 	2,022	  	 	 	2,033	  	 	 	2,670	  	 	 	2,786	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	3,603	  	 	 	3,813	  	 	 	4,064	  	 	 	5,270	  	 	 	5,382	  	 	 	5,442	  	 	 	5,202	  	 	 	6,605	  	 	 	7,632	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(1,625	) 	 	 	(1,406	) 	 	 	(470	) 	 	 	(2,038	) 	 	 	(1,774	) 	 	 	(1,613	) 	 	 	(1,083	) 	 	 	(2,517	) 	 	 	(2,876	) 	
										
Interest expense	 	 	142	  	 	 	144	  	 	 	144	  	 	 	105	  	 	 	120	  	 	 	138	  	 	 	148	  	 	 	203	  	 	 	736	  	
Other (income) expense, net	 	 	(3	) 	 	 	52	  	 	 	42	  	 	 	161	  	 	 	111	  	 	 	78	  	 	 	(7	) 	 	 	489	  	 	 	1,286	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(1,764	) 	 	 	(1,602	) 	 	 	(656	) 	 	 	(2,304	) 	 	 	(2,005	) 	 	 	(1,829	) 	 	 	(1,224	) 	 	 	(3,209	) 	 	 	(4,898	) 	
Income tax expense (benefit)	 	 	21	  	 	 	21	  	 	 	21	  	 	 	21	  	 	 	(79	) 	 	 	(5	) 	 	 	(2	) 	 	 	(6	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(1,785	) 	 	$	(1,623	) 	 	$	(677	) 	 	$	(2,325	) 	 	$	(1,926	) 	 	$	(1,824	) 	 	$	(1,222	) 	 	$	(3,203	) 	 	$	(4,913	) 	

71

Table of Contents

 	  	PERIOD ENDED	 	
 	  	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
Other Financial and Operational Data (2) :	  				 				 				 				 				 				 				 				 				
Total pets enrolled	  	 	98,109	  	 	 	107,362	  	 	 	117,217	  	 	 	125,387	  	 	 	136,027	  	 	 	147,868	  	 	 	160,065	  	 	 	169,570	  	 	 	181,634	  	
Monthly adjusted revenue per pet (3)	  	$	41.63	  	 	$	41.70	  	 	$	42.08	  	 	$	42.43	  	 	$	42.30	  	 	$	42.21	  	 	$	42.59	  	 	$	43.07	  	 	$	43.12	  	
Lifetime value of a pet (4)	  	$	513	  	 	$	499	  	 	$	538	  	 	$	557	  	 	$	604	  	 	$	641	  	 	$	617	  	 	$	611	  	 	$	610	  	
Average pet acquisition cost (5)	  	$	88	  	 	$	91	  	 	$	88	  	 	$	134	  	 	$	132	  	 	$	99	  	 	$	80	  	 	$	105	  	 	$	111	  	
Average monthly retention	  	 	98.36	% 	 	 	98.41	% 	 	 	98.44	% 	 	 	98.51	% 	 	 	98.56	% 	 	 	98.62	% 	 	 	98.64	% 	 	 	98.65	% 	 	 	98.65	% 	
Adjusted EBITDA (in thousands) (6)	  	$	(1,109	) 	 	$	(1,052	) 	 	$	(57	) 	 	$	(1,686	) 	 	$	(1,208	) 	 	$	(985	) 	 	$	(378	) 	 	$	(1,780	) 	 	$	(2,079	) 	

(1)  	Includes stock-based compensation expense as follows:	

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Cost of revenue	 	$	        26	  	 	$	        28	  	 	$	        28	  	 	$	        27	  	 	$	        40	  	 	$	        48	  	 	$	        56	  	 	$	        85	  	 	$	        81	  	
Sales and marketing	 	 	107	  	 	 	110	  	 	 	107	  	 	 	104	  	 	 	143	  	 	 	202	  	 	 	147	  	 	 	185	  	 	 	149	  	
Technology and development	 	 	64	  	 	 	69	  	 	 	68	  	 	 	67	  	 	 	71	  	 	 	94	  	 	 	84	  	 	 	103	  	 	 	98	  	
General and administrative	 	 	235	  	 	 	113	  	 	 	139	  	 	 	142	  	 	 	147	  	 	 	141	  	 	 	191	  	 	 	201	  	 	 	239	  	
 
(2)  	For more information about how we calculate total pets enrolled, monthly adjusted revenue per pet, lifetime value of a pet, average pet acquisition cost and average monthly retention, see “—Key Financial and Operating Metrics.”	
(3)  	Monthly adjusted revenue per pet is calculated in part based on adjusted revenue, a non-GAAP financial measure, that we define as revenue from our subscription business segment excluding sign-up fee revenue and the change in deferred revenue between periods. For more information about adjusted revenue, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
(4)  	Lifetime value of a pet is calculated in part based on contribution margin, a non-GAAP financial measure, that we define as gross profit from our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. For more information about contribution margin, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
(5)  	Average pet acquisition cost is calculated in part based on acquisition cost, a non-GAAP financial measure, that we define as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. For more information about acquisition cost, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
(6)  	Adjusted EBITDA is a non-GAAP financial measure that we define as net loss excluding stock-based compensation expense, depreciation and amortization expense, interest income, interest expense, change in fair value of warrant liabilities and income tax expense (benefit). For more information about adjusted EBITDA, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”	
 
72

Table of Contents

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(as a percentage of revenue)	 	
Revenue	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	
										
Cost of revenue	 	 	84	  	 	 	82	  	 	 	75	  	 	 	80	  	 	 	80	  	 	 	81	  	 	 	81	  	 	 	83	  	 	 	81	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	16	  	 	 	18	  	 	 	25	  	 	 	20	  	 	 	20	  	 	 	19	  	 	 	19	  	 	 	17	  	 	 	19	  	
										
Operating expenses:	 				 				 				 				 				 				 				 				 				
Sales and marketing	 	 	13	  	 	 	13	  	 	 	12	  	 	 	14	  	 	 	14	  	 	 	11	  	 	 	9	  	 	 	9	  	 	 	10	  	
Technology and development	 	 	6	  	 	 	5	  	 	 	6	  	 	 	7	  	 	 	5	  	 	 	6	  	 	 	5	  	 	 	7	  	 	 	9	  	
General and administrative	 	 	11	  	 	 	11	  	 	 	10	  	 	 	12	  	 	 	11	  	 	 	10	  	 	 	9	  	 	 	11	  	 	 	11	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	30	  	 	 	29	  	 	 	28	  	 	 	33	  	 	 	30	  	 	 	27	  	 	 	23	  	 	 	27	  	 	 	30	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(14	) 	 	 	(11	) 	 	 	(3	) 	 	 	(13	) 	 	 	(10	) 	 	 	(8	) 	 	 	(4	) 	 	 	(10	) 	 	 	(11	) 	

Interest expense	 	 	1	  	 	 	1	  	 	 	1	  	 	 	1	  	 	 	1	  	 	 	1	  	 	 	1	  	 	 	1	  	 	 	3	  	
Other expense, net	 	 	—	  	 	 	—	  	 	 	—	  	 	 	1	  	 	 	1	  	 	 	—	  	 	 	—	  	 	 	2	  	 	 	5	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(15	) 	 	 	(12	) 	 	 	(4	) 	 	 	(15	) 	 	 	(12	) 	 	 	(9	) 	 	 	(5	) 	 	 	(13	) 	 	 	(19	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense (benefit)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	(15	)% 	 	 	(12	)% 	 	 	(4	)% 	 	 	(15	)% 	 	 	(12	)% 	 	 	(9	)% 	 	 	(5	)% 	 	 	(13	)% 	 	 	(19	)% 	

																																					
 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(as a percentage of subscription revenue)	 	
										
Subscription business revenue	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	 	 	100	% 	
Subscription business cost of revenue	 	 	83	  	 	 	82	  	 	 	75	  	 	 	80	  	 	 	79	  	 	 	80	  	 	 	81	  	 	 	82	  	 	 	81	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subscription business gross profit	 	 	17	% 	 	 	18	% 	 	 	25	% 	 	 	20	% 	 	 	21	% 	 	 	20	% 	 	 	19	% 	 	 	18	% 	 	 	19	% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reflects the reconciliation of adjusted revenue to revenue:

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Revenue	 	$	11,992	  	 	$	13,170	  	 	$	14,505	  	 	$	15,863	  	 	$	17,842	  	 	$	19,842	  	 	$	22,134	  	 	$	24,011	  	 	$	25,640	  	
Excluding:	 				 				 				 				 				 				 				 				 				
Other business revenue	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(178	) 	 	 	(825	) 	 	 	(1,474	) 	 	 	(2,127	) 	 	 	(2,585	) 	 	 	(2,551	) 	
Change in deferred revenue	 	 	166	  	 	 	182	  	 	 	201	  	 	 	218	  	 	 	124	  	 	 	218	  	 	 	314	  	 	 	452	  	 	 	262	  	
Sign-up fee revenue	 	 	(292	) 	 	 	(300	) 	 	 	(315	) 	 	 	(282	) 	 	 	(332	) 	 	 	(356	) 	 	 	(386	) 	 	 	(345	) 	 	 	(377	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted revenue	 	$	11,866	  	 	$	13,052	  	 	$	14,391	  	 	$	15,621	  	 	$	16,809	  	 	$	18,230	  	 	$	19,935	  	 	$	21,533	  	 	$	22,974	  	

73

Table of Contents
The following table reflects the reconciliation of contribution margin to gross profit:

 	 	TWELVE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Gross profit	 	$	8,376	  	 	$	8,835	  	 	$	10,323	  	 	$	11,217	  	 	$	12,847	  	 	$	14,268	  	 	$	14,791	  	 	$	15,642	  	 	$	16,790	  	
Excluding:	 				 				 				 				 				 				 				 				 				
Stock-based compensation expense	 	 	65	  	 	 	84	  	 	 	99	  	 	 	109	  	 	 	123	  	 	 	143	  	 	 	171	  	 	 	229	  	 	 	270	  	
Other business segment gross profit	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(44	) 	 	 	(108	) 	 	 	(267	) 	 	 	(496	) 	 	 	(730	) 	 	 	(935	) 	
Change in deferred revenue	 	 	767	  	 	 	721	  	 	 	728	  	 	 	767	  	 	 	725	  	 	 	761	  	 	 	874	  	 	 	1,108	  	 	 	1,246	  	
Sign-up fee revenue	 	 	(835	) 	 	 	(957	) 	 	 	(1,076	) 	 	 	(1,189	) 	 	 	(1,229	) 	 	 	(1,285	) 	 	 	(1,356	) 	 	 	(1,419	) 	 	 	(1,464	)  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contribution margin	 	$	8,373	  	 	$	8,683	  	 	$	10,074	  	 	$	10,860	  	 	$	12,358	  	 	$	13,620	  	 	$	13,984	  	 	$	14,830	  	 	$	15,907	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reflects the reconciliation of acquisition cost to sales and marketing expenses:

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Sales and marketing expenses	 	$	1,597	  	 	$	1,677	  	 	$	1,714	  	 	$	2,161	  	 	$	2,572	  	 	$	2,268	  	 	$	2,013	  	 	$	2,238	  	 	$	2,646	  	
Excluding:	 				 				 				 				 				 				 				 				 				
Stock-based compensation expense	 	 	(107	) 	 	 	(110	) 	 	 	(107	) 	 	 	(104	) 	 	 	(143	) 	 	 	(202	) 	 	 	(147	) 	 	 	(185	) 	 	 	(149	) 	
Net of:	 				 				 				 				 				 				 				 				 				
Sign-up fee revenue	 	 	(292	) 	 	 	(300	) 	 	 	(315	) 	 	 	(282	) 	 	 	(332	) 	 	 	(356	) 	 	 	(386	) 	 	 	(345	) 	 	 	(377	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition cost	 	$	1,198	  	 	$	1,267	  	 	$	1,292	  	 	$	1,775	  	 	$	2,097	  	 	$	1,710	  	 	$	1,480	  	 	$	1,708	  	 	$	2,120	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reflects the reconciliation of adjusted EBITDA to net loss:

 	 	THREE MONTHS ENDED	 	
 	 	MAR. 31,
2012	 	 	JUN. 30,
2012	 	 	SEPT. 30,
2012	 	 	DEC. 31,
2012	 	 	MAR. 31,
2013	 	 	JUN. 30,
2013	 	 	SEPT. 30,
2013	 	 	DEC. 31,
2013	 	 	MAR. 31,
2014	 	
 	 	(in thousands)	 	
Net loss	 	$	(1,785	) 	 	$	(1,623	) 	 	$	(677	) 	 	$	(2,325	) 	 	$	(1,926	) 	 	$	(1,824	) 	 	$	(1,222	) 	 	$	(3,203	) 	 	$	(4,913	) 	
Excluding:	 				 				 				 				 				 				 				 				 				
Stock-based compensation expense	 	 	432	  	 	 	320	  	 	 	    342	  	 	 	340	  	 	 	401	  	 	 	485	  	 	 	478	  	 	 	574	  	 	 	567	  	
Depreciation and amortization expense	 	 	68	  	 	 	71	  	 	 	74	  	 	 	136	  	 	 	206	  	 	 	214	  	 	 	243	  	 	 	229	  	 	 	309	  	
Interest income	 	 	(31	) 	 	 	(33	) 	 	 	(28	) 	 	 	(15	) 	 	 	(30	) 	 	 	(27	) 	 	 	(32	) 	 	 	(13	) 	 	 	(18	) 	
Interest expense	 	 	142	  	 	 	144	  	 	 	144	  	 	 	116	  	 	 	122	  	 	 	144	  	 	 	154	  	 	 	225	  	 	 	742	  	
Change in fair value of warrant liabilities	 	 	44	  	 	 	48	  	 	 	67	  	 	 	41	  	 	 	98	  	 	 	28	  	 	 	3	  	 	 	414	  	 	 	1,219	  	
Income tax expense (benefit)	 	 	21	  	 	 	21	  	 	 	21	  	 	 	21	  	 	 	(79	) 	 	 	(5	) 	 	 	(2	) 	 	 	(6	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	(1,109	) 	 	$	(1,052	) 	 	$	(57	) 	 	$	(1,686	) 	 	$	(1,208	) 	 	$	(985	) 	 	$	(378	) 	 	$	(1,780	) 	 	$	(2,079	) 	

74

Table of Contents
We have experienced revenue growth in all periods presented primarily due to increases in total pets enrolled, monthly adjusted revenue per pet and average monthly retention. In addition, our other business began generating revenue in the fourth quarter of 2012.
The fourth quarter of each year tends to be a lower quarter for new enrollments as we believe families have many competing priorities during the traditional holiday season. We also have experienced a small decrease in claims incurred during the fourth quarter of each year, which we believe primarily is due to members taking their pets to the veterinarian less during the traditional holiday season. During the third and fourth quarters of 2012, we experienced a slightly lower than average rate of claims occurrence. The decrease in lifetime value of a pet during the second quarter of 2012 and the increase in lifetime value of a pet during the second quarter of 2013 were primarily due to variability in the timing of claims. There is inherent uncertainty in predicting the timing of claims incurrence within a quarter. Normal variations in claims may arise for any number of reasons in a given period including the frequency and magnitude of claims.
We have made and plan to continue to make sales and marketing expenditures when we perceive attractive opportunities to increase our market penetration, either on a short or long term basis. Sales and marketing expenses fluctuated quarter by quarter during 2012 and 2013 primarily due to new marketing initiatives. Also, we attend a number of trade shows during the first quarter of each fiscal year, which has resulted in an increase in sales and marketing expenses during the quarter. Furthermore, the timing of recent hiring has impacted our expenses, as we have increased sales and marketing headcount 8% in 2013, and 47% in 2012. During the fourth quarter of 2012, our average pet acquisition cost was unusually high due to an increase in severance payments resulting in a lower ratio of LVP to PAC. During the third quarter of 2013, we experienced a lower than average pet acquisition cost due to a higher than average increase in enrolled pets during the period.
Technology and development expenses fluctuate quarter over quarter based upon the specific initiatives we undertake in the quarter. The majority of the quarter over quarter changes in technology and development expenses are related to changes in headcount. Technology and development expenses increased during the second and fourth quarters of 2013 primarily due to key hires to accommodate our growth, investments to enhance our member experience and an upgrade of our website. In addition, technology and development expenses increased in the first quarter of 2014 primarily as a result of investments to support new technology to enhance our member experience.
General and administrative expenses increased during the fourth quarters of 2012 and 2013 primarily due to the timing of our annual audit and other fees for third-party specialists. During all quarters of 2013, we incurred significant expenses relating to our preparation to become a public company. In addition, during the fourth quarter of 2013 and the first quarter of 2014, we increased our general and administrative expenses for legal and accounting services in anticipation of this offering.
Adjusted EBITDA is primarily impacted period-over-period by the expense fluctuations discussed above.
Liquidity and Capital Resources
Since inception, we have financed our operations and met capital requirements primarily through the sale of equity securities and from borrowings. Our principal uses of cash are paying claims, funding operations, investing in new member acquisition and further enhancements to our member experience, and debt service payments as described below. We also face regulatory limitations on our ability to access the assets held by our insurance company subsidiary, American Pet Insurance Company (APIC), which could impact our ability to service our debt obligations without adjusting our forecasted expenditures. As of December 31, 2013, our total liabilities exceeded our total assets by $1.3 million, but, excluding the assets and liabilities held by APIC, our liabilities exceeded our assets by $11.5 million.
Sources of Funds 
As of March 31, 2014, we had cash and cash equivalents of $10.6 million and short-term investments of $15.0 million. We believe that our existing cash and cash equivalents and short-term investments will be
 
75

Table of Contents
sufficient to fund our operations and statutory capital requirements for at least the 12 months following the completion of this offering. If we do not complete this offering, we may need to adjust our forecasted expenditures to reduce discretionary spending or seek other sources of financing.
From time to time, we may explore additional financing, which could include equity, equity-linked and debt financing. However, there can be no assurance that any additional financing will be available to us on acceptable terms, or at all.
Long-Term Debt 
Square 1 Bank Loan and Security Agreement
In April 2007 we entered into a loan and security agreement with Square 1 Bank (Square 1), which we amended and restated in August 2012 and most recently amended in March 2014. We refer to this amended and restated loan and security agreement as our Square 1 credit facility. The Square 1 credit facility provides for a revolving line of credit, under which we may take advances up to $15.0 million, and a term loan in aggregate principal amount up to $3.0 million. The maximum amount for borrowing under the Square 1 credit facility, inclusive of any amounts outstanding under the revolving line of credit and the term loan, is the lesser of $15.0 million or the total amount of cash and securities held by APIC, less up to $0.5 million for obligations we may have outstanding from Square 1 for other ancillary services.
Interest on the revolving line of credit accrues at a variable annual rate equal to the greater of 5.0% or the prime rate plus 1.5%. Interest accrued under the revolving line of credit is payable monthly, though we may prepay any amounts under the revolving credit line at any time without penalty or premium. The revolving line of credit matures in July 2015, at which time it will need to be renewed or all amounts outstanding under it, including accrued interest, become immediately due and payable.
Interest on the term loan accrues at a variable annual rate equal to the greater of 5.5% or the prime rate plus 2.0%. We may prepay any amounts under the revolving credit line at any time without penalty or premium. Interest accrued under the term loan was payable monthly until March 2014, and, beginning in April 2014, all amounts outstanding under the term loan, including principal and accrued interest, became payable in 30 equal monthly installments. The term loan matures in September 2016, at which time all amounts outstanding under it, including accrued interest, become immediately due and payable.
The Square 1 credit facility requires us to maintain certain financial covenants, including having APIC maintain statutory capital and surplus at all times of not less than the greater of $0.5 million or 110% of the highest amount of statutory capital and surplus required in any state in which APIC is licensed, maintaining a minimum cash balance of $0.5 million in our accounts at Square 1 (including for such purposes, APIC’s cash and depository products at Square 1), achieving certain monthly revenue and remaining within certain maximum EBITDA loss levels. EBITDA is defined for such purposes as earnings, plus an amount equal to the sum of (i) tax, plus (ii) depreciation and amortization, plus (iii) interest and non-cash expenses, plus (iv) any non-cash stock compensation expense, less (a) any increase in capitalized expenditures from the prior period, plus (b) any increase in capitalized software from the prior period, plus (c) any increase in deferred acquisition costs from the prior period.
The Square 1 credit facility also requires us to maintain certain non-financial covenants, including those that restrict our ability to dispose of our assets, change the name, location, office or executive management of our business, merge with or acquire other entities, incur other indebtedness, incur encumbrances, pay dividends or make distributions to holders of our capital stock, make investments, engage in transactions with our affiliates, permit withdrawals from APIC (with certain exceptions) and conduct operations in certain of our Canadian subsidiaries. As of March 31, 2014, we were in compliance with each of the financial and non-financial covenants.
 
76

Table of Contents
Our obligations under the Square 1 credit facility are secured by substantially all of our assets, including pledged cash collateral held in a cash security account, and a pledge of our subsidiaries’ stock. We must at all times maintain a balance in the cash security account of an amount greater than or equal to the aggregate of all obligations outstanding under the Square 1 credit facility less $15.0 million. If our aggregate borrowings under the Square 1 credit facility exceed the $15.0 maximum, then Square 1 may credit such excess amount to the cash security account. As of March 31, 2014, our aggregate borrowings outstanding under the Square 1 credit facility were $17.9 million, of which $14.9 million was outstanding under the revolving credit facility and $3.0 million was outstanding under the term loan.
PEPI Capital, L.P. Credit Agreement
In December 2013, we entered into a credit agreement with PEPI Capital, L.P., one of our preferred stockholders (PEPI), to obtain a subordinated term loan of $12.0 million. Interest accrues under the PEPI term loan at a fixed interest rate of 11.0% per year and payable on December 2014 and December 2015, though PEPI may elect to compound the accrued interest to principal amounts outstanding on such dates. Subject to certain conditions, we may prepay the PEPI term loan without penalty or premium. The PEPI term loan also requires repayment in the event of certain occurrences, including the completion of this offering. Our obligations under the PEPI loan are secured by substantially all of our assets, including pledged cash collateral held in a cash security account, and a pledge of our subsidiaries’ stock. The PEPI term loan matures in December 2016, at which time all amounts outstanding under it, including accrued interest, become immediately due and payable. As of March 31, 2014, our aggregate borrowings outstanding under the PEPI term loan were $12.0 million. In February 2014, PEPI transferred $2.0 million of this loan to entities associated with Highland Consumer Fund.
Use of Funds 
Our principal uses of cash are paying claims, sales and marketing efforts to acquire new members and funding our operations. Over the past several years, our revenue has increased significantly from year to year. However, our operating expenses have also increased as we have invested in sales and marketing expenses to acquire new pets with the cash flow benefits from such investment expected to be realized over time. At the same time we are increasing our expenditures in new member acquisition and further enhancements to our member experience. As a result, our cash used in operating activities has remained significant. Significant portions of our operating cash expenditures relate to investments in membership and organizational growth and are not directly related to servicing and maintaining the enrollment of our existing members or otherwise operating our existing business. We currently expect such operating cash expenditures to increase in the future as we continue to focus on acquiring new pets, improving our members’ experience and further developing relationships with veterinarians.
We will need to continue to fund our operations and maintain certain statutory capital levels in the near term as we continue to acquire new pets. We believe the proceeds from this offering will be sufficient for this purpose, but should we need to raise additional funds, such funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders.
Regulation 
As of December 31, 2013, APIC held $16.1 million in investments and $7.8 million in other current assets. Most of the assets in APIC are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which it is authorized to operate and cannot be transferred outside of that subsidiary without prior approval from regulatory authorities. As of December 31, 2013, total assets and liabilities held outside of APIC totaled $26.9 million and $38.4 million, respectively.
 
77

Table of Contents
The majority of our investments are held by APIC to satisfy risk-based capital requirements of the National Association of Insurance Commissioners. The requirements provide a method for analyzing the minimum amount of risk-based capital (statutory capital and surplus plus other adjustments) appropriate for an insurance company to support its overall business operations, taking into account the risk characteristics of the company’s assets, liabilities and certain other items . An insurance company found to have insufficient statutory capital based on its risk-based capital ratio may be subject to varying levels of additional regulatory oversight depending on the level of capital inadequacy. APIC must hold certain capital amounts in order to comply with the statutory regulations and, therefore, we cannot use these amounts for general operating purposes. As our business grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements may increase significantly. As of December 31, 2013, APIC was required to maintain at least $16.8 million of risk-based capital to avoid this additional regulatory oversight. As of that date, APIC maintained $16.3 million of risk-based capital, placing it within a level of additional oversight referred to as the “Company Action Level” and, as such, APIC is required to and is preparing a risk-based capital plan for submission to the New York Department of Financial Services for its review and approval. If such plan is approved, we expect APIC will be deemed to have satisfied the No Action Level until the NY DFS conducts its next annual assessment. The NY DFS will not conduct its next annual assessment until December 31, 2014, however, as of May 31, 2014, APIC maintained $17.1 million of risk-based capital. The NY DFS may increase the required levels of risk-based capital in the future, and we anticipate that we will need to maintain greater amounts of risk-based capital if our pet enrollment continues to grow. For additional information about the consequences of failure to satisfy risk-based capital requirements, see “Business—Regulation—Financial Regulation of Insurers—Risk-Based Capital Requirements.”
To comply with these regulations, we may be required to maintain capital that we would otherwise invest in our growth and operations, which may require us to modify our operating plan or marketing initiatives, delay the implementation of new solutions or development of new technologies, decrease the rate at which we hire additional personnel and enter into relationships with Territory Partners, incur additional indebtedness or pursue equity or debt financings or otherwise modify our business operations.
New York law also restricts the ability of APIC to pay dividends to our parent holding company. The dividend restrictions are based in part on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. In general, dividends or distributions that, in the aggregate in any 12-month period exceed the lesser of (i) 10% of surplus as of the preceding December 31 or (ii) the insurer’s adjusted net investment income for such 12-month period ended the preceding December 31, not including realized capital gains, are subject to approval by regulatory authorities. As of December 31, 2013, less than $0.1 million was able to be paid in the form of a dividend from APIC to our parent holding company without prior approval from regulatory authorities.
Investments
As of March 31, 2014, we had $15.8 million of short-term and long-term investments. These investments are held to satisfy statutory requirements. The majority of our investments are highly rated U.S. treasury securities, certificates of deposit, and U.S. government funds. In addition we have one investment in a municipal bond, the principal of which is insured by a third-party insurance company.
 
78

Table of Contents
Historical Cash Flow Trends
The following table shows a summary of our cash flows for the periods indicated:

 	  	YEARS ENDED
DECEMBER  31,	 	 	THREE MONTHS
ENDED MARCH  31,	 	
 	  	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
 	  	(in thousands)	 	
Net cash used in operating activities	  	$	(112	) 	 	$	(1,543	) 	 	$	(1,023	) 	 	$	(1,338	) 	 	$	(3,953	) 	
Net cash used in investing activities	  	 	(1,669	) 	 	 	(4,544	) 	 	 	(5,997	) 	 	 	179	  	 	 	116	  	
Net cash provided by (used in) financing activities	  	 	8,328	  	 	 	2,274	  	 	 	17,551	  	 	 	2,311	  	 	 	(599	) 	
Effect of exchange rates on cash	  	 	(98	) 	 	 	(40	) 	 	 	174	  	 	 	17	  	 	 	90	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	$	6,449	  	 	$	(3,853	) 	 	$	10,705	  	 	$	1,169	  	 	$	(4,346	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Cash Flows
We derive operating cash flows from cash collected from the sale of subscriptions to our medical plan, which is used to pay claims and other cost of revenue. Additionally, cash is used to support the growth of our business. As a result, we have historically experienced negative cash flows from operating activities as we have expanded our business and this will likely continue for the foreseeable future. We anticipate that we will continue to make material capital expenditures on company initiatives, including investments to support new technology to enhance our member experience.
Net cash used in operating activities for the three months ended March 31, 2014 consisted of our net loss of $4.9 million and changes in our operating assets and liabilities of $1.4 million, which were primarily driven by a decrease in accrued liabilities due to an annual employee incentive compensation payout. This was partially offset by non-cash expense items, including expense relating to the remeasurement of warrant liabilities to fair value of $1.2 million, stock-based compensation of $0.6 million, and depreciation and amortization of $0.3 million.
Net cash used in operating activities for the three months ended March 31, 2013 consisted of a net loss of $1.9 million and changes in operating assets and liabilities of $0.1 million, which were partially offset by non-cash expense items, including stock-based compensation of $0.4 million.
Net cash used in operating activities for 2013 consisted of our net loss of $8.2 million and changes in our operating assets and liabilities of $3.6 million, which were primarily driven by increased receivables related to writing policies for an unaffiliated managing general agent, which began in November 2012 and increased monthly until November 2013 as the unaffiliated managing general agent transitioned its business from the company that previously wrote its policies. This was partially offset by non-cash expense items including stock-based compensation of $1.9 million, depreciation and amortization of $0.9 million and expense relating to the remeasurement of warrant liabilities to fair value of $0.5 million.
Net cash used in operating activities for 2012 consisted of our net loss of $6.4 million and changes in our operating assets and liabilities of $2.8 million, which were partially offset by non-cash expense items including stock-based compensation of $1.4 million.
Net cash used in operating activities for 2011 consisted of our net loss of $3.9 million and changes in our operating assets and liabilities of $2.5 million, which were partially offset by non-cash expense items including stock-based compensation of $1.0 million, depreciation and amortization of $0.2 million and expense relating to warrant liabilities to fair value of $0.2 million.
 
79

Table of Contents
Investing Cash Flows
Net cash used in investing activities for each of the periods presented was primarily related to the purchase of investments. In addition, we made investments in software to be used internally for our technology initiatives and purchased other fixed assets related to our operations. We expect to continue increasing our statutory capital as we expand our operations.
Financing Cash Flows
Historically, we have funded our operations through the issuance of common and preferred stock and the incurrence of indebtedness.
For the three months ended March 31, 2014, net cash used by financing activities consisted primarily of deferred financing fees of $0.5 million incurred in connection with this offering.
For the three months ended March 31, 2013, net cash provided by financing activities consisted of the incurrence of an aggregate of $2.0 million of borrowings under our revolving credit facility and term loans. In addition, we received $0.3 million in proceeds from exercised stock options.
For 2013, net cash provided by financing activities consisted of the incurrence of an aggregate of $20.0 million of borrowings under our revolving line of credit and term loans. Of this amount, $3.0 million was designated as restricted cash at December 31, 2013. In addition, we received $0.6 million in proceeds from the exercise of stock options.
For 2012, net cash provided by financing activities consisted of the issuance of $6.9 million of Series C convertible preferred stock and $0.5 million in proceeds from the exercise of stock options, offset by $2.3 million for the repurchase of common stock and $2.7 million for the redemption of Series A and Series B convertible preferred stock.
For 2011, net cash provided by financing activities consisted of the issuance of $8.7 million of Series C convertible preferred stock, offset by a $0.5 million repayment on our revolving line of credit.
Commitments
We enter into long-term contractual obligations and commitments in the normal course of business, primarily debt obligations and non-cancellable operating leases. Our contractual cash obligations as of December 31, 2013 are set forth below.

 	  	TOTAL	 	  	LESS THAN
1 YEAR	 	  	1-3 YEARS	 	 	3-5 YEARS	 	  	MORE THAN
5 YEARS	 	
Long-term debt obligations, including interest	  	$	35,181	  	  	$	3,109	  	  	$	32,072	(1)  	 	$	—  	  	  	$	    —  	  	
Operating lease obligations	  	 	1,761	  	  	 	737	  	  	 	1,024	  	 	 	—  	  	  	 	—  	  	
Other obligations	  	 	372	  	  	 	51	  	  	 	102	  	 	 	102	  	  	 	117	  	

(1)  	Includes $         million of outstanding indebtedness that we expect to repay in connection with this offering.	
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet activities. We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities.
 
80

Table of Contents
Critical Accounting Policies and Significant Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include those related to:
 
 	•	 	stock-based compensation and warrant liabilities;	
 
 	•	 	income taxes; and	
 
 	•	 	claims reserve.	
Stock-Based Compensation and Warrant Liabilities
Compensation expense related to stock-based transactions, including employee and non-employee stock option awards, is measured and recognized in the financial statements based on fair value. The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton option-pricing model. The stock-based compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service periods of the awards, which are generally four years. All of our stock-based awards have been for instruments tied to our common stock.
All warrants were classified as liabilities as of December 31, 2013 and March 31, 2014, as they were for redeemable shares and contained terms that allowed for the modification of the exercise price or the number of shares issuable upon exercise. Warrants to purchase shares of common stock and convertible preferred stock are recorded as a discount on the related debt and as a liability at fair value on the date of issuance. The fair value of the award is estimated on the grant date using the Black-Scholes-Merton option-pricing model. The discount on debt is accreted to interest expense using the effective interest method over the term of the related loan. The warrant liability is revalued each period and recorded at fair value as of the period end date with any gain or loss in value recorded in other expense, net in our consolidated statement of operations.
Key assumptions . Our Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying stock, the expected volatility of the price of our stock, the expected term of the option or warrant, risk-free interest rates and the expected dividend yield of our stock. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based expense could be materially different in the future. These assumptions are estimated as follows:
 
 	•	 	Fair value of our stock —Because our stock was not publicly traded prior to our initial public offering, we estimated the fair value of our stock, as discussed in “—Stock valuations.” Upon the completion of our initial public offering, our common stock will be valued by reference to the publicly traded price of our common stock. Our preferred stock valuation was based on the fair value of our common stock and the preferential rights of holders of our preferred stock over the holders of our common stock.	
 
 	•	 	Expected volatility —As we do not have a significant trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the average historic price volatility for identified peers based on daily price observations over a period equivalent to the expected term of the stock option grants and warrant issuances. We did not rely on implied volatilities of traded options or	
 
81

Table of Contents

 	warrants in our industry peers’ common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own share price becomes available.	
 
 	•	 	Expected term —The expected term represents the period that our stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock-based awards granted, we have based our expected term for awards issued to employees on the simplified method, which represents the average period from vesting to the expiration of the stock option. The expected term for warrants is equal to the contract term.	
 
 	•	 	Risk-free interest rate —The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.	
 
 	•	 	Expected dividend yield —We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.	
The following table presents the range of assumptions used to estimate the fair value of options granted during the periods presented:

 	 	YEARS ENDED DECEMBER 31,	 	THREE MONTHS ENDED
MARCH 31,	
 	 	           2011            	 	           2012            	 	           2013            	 	           2013            	 	           2014            	
Expected volatility	 	60%	 	60%	 	54.9% – 57.4%	 	57.3% – 57.4%	 	55.9% – 58.2%	
Expected term (in years)	 	6.25	 	6.25	 	6.25	 	6.25	 	6.25	
Risk-free interest rate	 	1.1% – 2.5%	 	0.9% – 1.3%	 	1.0% – 2.0%	 	1.1%	 	1.8% – 1.9%	
Expected dividend yield	 	—  %	 	—  %	 	—  %	 	—  %	 	—  %	
In addition to the assumptions used in the Black-Scholes-Merton option-pricing model, the amount of stock option expense we recognize in our consolidated statements of operations includes an estimate of stock option forfeitures. Forfeitures did not have a material impact on our assumptions in 2011, 2012, 2013 or the first quarter of 2014.
The following table presents the range of assumptions used to estimate the fair value of warrants outstanding at the end of the periods presented:

 	  	YEARS ENDED DECEMBER 31,	  	THREE MONTHS ENDED
MARCH 31,	
 	  	2012	  	2013	  	2013	  	2014	
Expected volatility	  	43% – 60%	  	35% – 43%	  	40% – 46%	  	34% – 45%	
Expected term (in years)	  	1.3 – 6.7	  	0.3 – 6.3	  	1.0 – 7.0	  	0.1 – 6.0	
Risk-free interest rate	  	0.2% – 1.2%	  	0.1% – 2.1%	  	0.1% –1.2%	  	0.0% – 2.0%	
Expected dividend yield	  	—  %	  	—  %	  	—  %	  	—  %	
Stock valuations . The fair value of the stock underlying our stock options and warrants was determined by our board of directors, which intended all instruments granted to be exercisable at a price per share not less than the per share fair value of our stock underlying those instruments on the date of award. The valuations of our stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation . The assumptions we used in the valuation model are based on future expectations combined with management’s judgment. In the absence of a public trading market, our board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our stock, including the following factors:
 
 	•	 	contemporaneous valuations performed by independent third-party specialists;	
 
82

Table of Contents

 	•	 	the rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;	
 
 	•	 	lack of marketability on our common stock;	
 
 	•	 	actual operating and financial performance;	
 
 	•	 	current business conditions and projections;	
 
 	•	 	the prices of preferred stock sold to third-party investors in arms-length transactions;	
 
 	•	 	prices of common stock sold between third parties in arms-length transactions;	
 
 	•	 	ongoing enhancements to our service;	
 
 	•	 	trends and developments in our industry;	
 
 	•	 	the market performance of comparable publicly traded companies;	
 
 	•	 	likelihood of achieving a liquidity event, such as an initial public offering; and	
 
 	•	 	U.S. and global economic and capital market conditions.	
We granted stock options with the following exercise prices between January 1, 2013 and the date of this prospectus:

Option Grant Dates	  	NUMBER OF
SHARES
SUBJECT TO
OPTIONS
GRANTED	 	  	COMMON
STOCK
FAIR  VALUE
PER
SHARE FOR
FINANCIAL
REPORTING
PURPOSES	 	  	EXERCISE
PRICE	 	  	INTRINSIC
VALUE PER
UNDERLYING
COMMON
SHARE	 	
February 4, 2013	  	 	617,700	  	  	$	4.50	  	  	$	4.05	  	  	$	0.45	  	
February 6, 2013	  	 	50,500	  	  	 	4.50	  	  	 	4.05	  	  	 	0.45	  	
June 16, 2013	  	 	25,000	  	  	 	4.55	  	  	 	4.55	  	  	 	—  	  	
August 2, 2013	  	 	360,250	  	  	 	4.77	  	  	 	4.77	  	  	 	—  	  	
November 7, 2013	  	 	236,100	  	  	 	7.35	  	  	 	4.81	  	  	 	2.55	  	
December 23, 2013	  	 	4,600	  	  	 	8.64	  	  	 	4.81	  	  	 	3.83	  	
February 26, 2014	  	 	178,400	  	  	 	9.07	  	  	 	9.07	  	  	 	—  	  	
March 17, 2014	  	 	28,950	  	  	 	9.07	  	  	 	9.07	  	  	 	—  	  	
June 13, 2014	  	 	168,750	  	  	 	12.27	  	  	 	12.27	  	  	 	—  	  	
Based upon the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, the aggregate intrinsic value of options outstanding as of March 31, 2014 was $            , of which $             related to vested options and $             related to unvested options.
In valuing our common stock, our board of directors determined the equity value of our business generally using the income approach and the market comparable approach valuation methods. The income approach estimates value based on the expectation of future cash flows that a company will generate such as cash earnings, cost savings, tax deductions, and the proceeds from disposition of assets. These future cash flows are discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar lines of business as of each valuation date and is adjusted to reflect the risks inherent in our cash flows.
The market comparable approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. We selected a mix of technology companies, consumer subscription companies, and animal healthcare companies for the purposes of this approach due to the unique nature of our business relative to traditional industry groups. Our peer group companies have been analyzed and
 
83

Table of Contents
updated quarterly due to changes in market participants. The companies selected for comparison were based on a number of factors, including the similarity of their industry, growth rate, and stage of development. A representative market value multiple was determined based on the subject company’s operating results to the value of the subject company. In our valuations, the multiple of the comparable companies was determined using a ratio of the market value of invested capital less cash to each of the trailing 12 months’ total revenue and forecasted future total revenue. Each of these revenue multiples was weighted equally. As some of the comparable companies were significantly larger and had different rates of revenue growth and profitability than us, we generally selected multiples that were above the mean of these selected companies to make adjustment for our historical and expected higher rates of revenue growth.
In some cases, we also considered the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation determined pursuant to one of the methods described above or an estimated fair value between the two valuation dates. This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.
Once we determined an equity value, we utilized the option-pricing method (OPM) to allocate the equity value to each of our classes of stock. An OPM values each equity class by creating a series of call options on our equity value, with exercise prices based on the liquidation preferences, participation rights, and strike prices of derivatives. This method is generally preferred when future outcomes are difficult to predict and dissolution or liquidation is not imminent. The estimated value based on the income and market approach is then discounted by a non-marketability factor (DLOM), due to the fact that stockholders of private companies do not have access to trading markets similar to those enjoyed by stockholders of public companies, which impacts liquidity.
For the valuations in December 2013, February 2014, March 2014 and June 2014, the equity value was allocated to the shares of preferred stock, common stock, warrants and options using the hybrid method consisting of both the option-pricing method and the probability-weighted expected return method (PWERM), and then weighted to arrive at overall equity value. Under the PWERM, the value of equity is estimated based on analysis of future values for the enterprise assuming various possible outcomes and timing of those outcomes, as well as the rights of each share class. In the PWERM, management and the third-party valuation firm considered two initial public offering scenarios based on information obtained from third parties, a scenario where we remained a private company for the foreseeable future, and a scenario where we could be acquired by a third party. Additionally, we applied a discount for lack of marketability. As an initial public offering began to become a possible near-term outcome, we began to allocate a greater relative weighting to the PWERM in our valuation methodology as opposed to the OPM, since the PWERM more closely correlates with the expected value for an enterprise in an initial public offering.
In connection with the preparation of our financial statements for the year ended December 31, 2013, we re-evaluated our estimate of fair value of our common stock for financial reporting purposes as a result of our rapidly improving financial prospects, our evolving belief that an initial public offering was increasingly viable and the generally improving conditions in the capital markets in the fourth quarter of 2013. As a result of our re-evaluation, we determined that, solely for financial reporting purposes, the fair values of our common stock were higher than the fair values of our common stock determined in good faith by our board of directors for option grant dates in February, November and December 2013. As a result, we retrospectively adjusted the fair value per share of our common stock for financial reporting purposes as of these grant dates and recognized additional stock-based compensation expense for the year ended December 31, 2013.
Income Taxes
We use the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using
 
84

Table of Contents
enacted tax rates expected to be in effect when such assets and liabilities are recovered or settled. We determine deferred tax assets including net operating losses (NOLs) and liabilities, based on temporary differences between the book and tax bases of assets and liabilities. We believe that it is currently more likely than not that our deferred tax assets will not be realized, and as such, a full valuation allowance is required. In addition, utilization of NOLs and credits to offset future income subject to taxes may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986, and similar state provisions. We have not performed a significant analysis to determine whether a qualifying change in ownership that would limit the utilization of our NOLs has taken place or will take place upon this offering.
We utilize a two-step approach for evaluating uncertain tax positions. Step one, recognition, requires us to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. If a tax position is not considered “more likely than not” to be sustained, no benefits of the position are recognized. If we determine that a position is “more likely than not” to be sustained, then we proceed to step two, measurement, which is based on the largest amount of benefit which is more likely than not to be realized on effective settlement. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and financial reporting purposes. If actual results differ from our estimates, our net operating loss and credit carryforwards could be materially impacted.
Claims Reserve
Our claims reserve represents estimated claims and claim settlement costs with respect to covered claims that have occurred as of the balance sheet date. The liabilities for claims and claim adjustment expenses are recorded at the estimated ultimate payment amounts. Estimated ultimate payment amounts are based upon a number of factors, including claims information received from members and estimates of incurred but not reported claims. Historical claims data as well as expected developments in the industry, internal claims adjustment expense forecasts, and the economy as a whole are considered by our team of pet medical insurance actuaries when developing our claims reserve.
In establishing estimates for these factors, we must make various assumptions regarding frequency and severity of claims, length of time to achieve ultimate settlement of claims, estimated deductible applicable to incurred claims, and changes in the cost of veterinary care. Due to the inherent uncertainty associated with these estimates, and the cost of incurred but unreported claims, our actual liabilities may be different from our original estimates. On a monthly basis, we review our reserve for claims and claims settlement costs to determine whether further adjustments are required. Any resulting adjustments are included in the current period’s results.
As of December 31, 2012 and 2013 and March 31, 2014, our reserve for claims incurred but not yet reported was $2.6 million, $5.6 million and $5.0 million, respectively. We believe the amount of our claims reserve as of March 31, 2014 is adequate and we do not believe that there are any reasonably likely changes in the facts or circumstances underlying key assumptions that would result in the reserve for claims being insufficient in an amount that would have a material impact on our reported results, financial position or liquidity. The ultimate liability, however, may be in excess of or less than the amount we have reserved. In both 2011 and 2012, we experienced actual claims in excess of our estimate for our prior year reserves of less than $0.1 million. During 2013, we experienced actual claims that were below our estimate for prior year reserves by $0.1 million. Historically, approximately 95% of claims have been settled within three months of the claim date.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks, including the risks inherent in our insurance business and changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices.
 
85

Table of Contents
Interest Rate Risk
The principal market risk we face is interest rate risk. We had cash and cash equivalents of $10.6 million, $3.0 million of restricted cash, and $15.0 million in short-term investments as of March 31, 2014, which consisted of both highly-liquid investments with an original maturity of twelve months or less and a long-term low-risk investment which is secured. We believe that we do not have significant exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of most of our investments coupled with the security behind our long-term investment. Historically, our investment income has not been a material part of our operations.
In addition, we have a revolving line of credit and two term loans bearing interest. As of March 31, 2014, our aggregate outstanding indebtedness was $29.9 million, which consisted of (i) $12.0 million borrowed pursuant to our term loan with PEPI Capital, L.P. and entities associated with Highland Consumer Fund, which bears interest at the rate of 11% per annum and matures in December 2016 or upon the completion of this offering, whichever occurs first, (ii) $14.9 million borrowed pursuant to our revolving line of credit with Square 1 Bank, which bears interest at the rate of the greater of 5.0% or the prime rate plus 1.5% and matures in July 2015, and (iii) $3.0 million borrowed pursuant to our term loan with Square 1 Bank, which bears interest at the rate of the greater of 5.5% or the prime rate plus 2.0% and matures in September 2016. We do not believe an immediate 10% increase in interest rates would have a material effect on interest expense for this facility, and therefore we do not expect our operating results or cash flows to be materially affected to any degree by a sudden change in market interest rates. Our other term loan bears a fixed rate and would not be impacted by a sudden change in interest rates. For more information regarding these credit agreements, see “—Liquidity and Capital Resources—Long-Term Debt.”
Foreign Currency Exchange Risk
Our company was founded in Canada and continues to have material revenue and expenses denominated in Canadian Dollars. As we continue to operate internationally our results of operations and cash flows will remain subject to fluctuations due to changes in other foreign currency exchange rates. Our revenue and expenses are generally denominated in the currencies in which our operations are located, which is the United States and Canada. The effect of a 10% adverse change in exchange rates on foreign denominated cash, receivables and payables would not have been material for the periods presented. As our operations in Canada grow, our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any material foreign currency hedging contracts although we may do so in the future.
 
86

Table of Contents
 BUSINESS
Our Mission
Our mission is to help the pets we all love receive the best veterinary care.
Our Company and Approach
We are a direct-to-consumer monthly subscription service providing a medical insurance plan for cats and dogs throughout the United States, Canada and Puerto Rico. Our data-driven, vertically-integrated approach enables us to provide pet owners with what we believe is the highest value medical plan for their pets, priced specifically for each pet’s unique characteristics. Our growing and loyal member base provides us with highly predictable and recurring revenue. We operate our business with a focus on maximizing the lifetime value of each pet while sustaining a favorable ratio of lifetime value relative to acquisition cost.
Our target market is large and underpenetrated. We have pioneered a unique solution that sits at the center of the pet medical ecosystem, meeting the needs of pets, pet owners and veterinarians, and we believe we are uniquely positioned to disrupt the pet medical insurance market and drive increased market penetration. Our enrolled pets consisted of approximately 85% dogs and 15% cats as of March 31, 2014. The number of pets enrolled in our medical plan has increased every quarter for the last ten years. More recently, our total enrolled pets grew from 31,207 on January 1, 2010 to 181,634 on March 31, 2014, which represents a compound annual growth rate of 51.4%.
Total Enrolled Pets
(in thousands)

Pet owners are often surprised by the cost of veterinary care and can be financially unprepared if their beloved pets become injured or ill. The costs of medical treatments for pets have become more onerous over time due to the availability and usage of increasingly advanced veterinary care. Although traditional pet insurance products have been offered for years, many of these products are poorly designed and confusing to pet owners and their veterinarians. Because these products provide limited value to both pet owners and veterinarians, they have low adoption rates. Consequently, pet owners without medical coverage or with traditional insurance products may be forced to accept sub-standard care for their pets due to financial constraints.
To address these challenges, we offer a simple, fair and comprehensive plan that pays 90% of veterinary costs for covered accident and illness claims, has no payout limitations and can be used to cover the costs incurred at any veterinary practice, emergency care center or specialty hospital. This differentiated approach aligns the interests of pet owners and veterinarians, which allows them to focus on providing the best care for pets rather than minimizing the cost of treatment.
 
87

Table of Contents
Some of our key differentiators include:
 
 	•	 	Superior Value Proposition. Our vertically integrated infrastructure eliminates significant frictional costs that constrain many of our competitors, which allows us to provide superior value to our members. For example, while many traditional providers spend approximately $0.45 to $0.64 per dollar of premium on claims, we spent $0.67, $0.68, $0.70 and $0.70 per subscription dollar in 2011, 2012, 2013 and the first quarter of 2014, respectively.	
 
 	•	 	Proprietary Database and Technology Platform. Our custom-built technology platform and proprietary database contains 14 years of pet health records and gives us unique insights into how to both manage our business and accurately price subscriptions to our medical plan.	
 
 	•	 	Strong Relationship with Veterinary Community. We have invested significant time and energy communicating our value proposition to thousands of veterinarians. We engage a national referral network of independent contractors who are paid fees based on activity in their regions, which we refer to as our Territory Partners. Our Territory Partners communicate the benefits of our medical plan to veterinarians through in-person visits. For example, through our Territory Partners, we made over 70,000 visits to veterinary practices in 2013 and over 15,000 visits in the first quarter of 2014 to develop new and expand existing relationships.	
We believe that these differentiators serve as competitive advantages, making our business model difficult to replicate.
We generate revenue primarily from subscription fees for our medical plan. Our medical plan automatically renews on a monthly basis, and members pay the subscription fee at the beginning of each subscription period. Since 2010, at least 88% of our subscription business revenue every quarter has come from existing members who had active subscriptions at the beginning of the quarter. Due to our focus on providing a superior value proposition and member experience, our members are very loyal, as evidenced by our 98.5% average monthly retention rate over 2011, 2012 and 2013. This loyalty is also reflected in our retention of annual cohorts of members, both on an average monthly and cumulative basis. For example, the pets that we enrolled in our medical plan in 2010 had average monthly retention rates of 98.15%, 98.85% and 99.07% at the end of 2011, 2012 and 2013, respectively, which resulted in a cumulative impact of 56% of the original cohort pets remaining enrolled at December 31, 2013. For more information regarding average monthly retention, including an explanation of how we calculate this metric, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Metrics.”
We enrolled our first pet in Canada in 2000 and our first pet in the United States in 2008. Our revenue increased from $19.1 million for the year ended December 31, 2010 to $83.8 million for the year ended December 31, 2013, representing a compound annual growth rate of 64%. Additionally, our revenue increased from $17.8 million for the three months ended March 31, 2013 to $25.6 million for the three months ended March 31, 2014, representing 44% year-over-year growth. We have achieved sequential revenue growth in every quarter since the first quarter of 2010. We have made and expect to continue to make substantial investments in member acquisition and in expanding our operations to support our expected growth. For the years ended December 31, 2011, 2012 and 2013, we had a net loss of $3.9 million, $6.4 million and $8.2 million, respectively. For the three months ended March 31, 2013 and 2014, we had a net loss of $1.9 million and $4.9 million, respectively. As of March 31, 2014, our accumulated deficit was $40.9 million.
Our Industry
The role pets play in their owners’ lives is constantly evolving, with each generation allowing pets to play a more prominent role in family life. Over the course of the last two generations, pets have transitioned from the backyard, to the kitchen, and into the bedroom. Innovations in pharmaceutical technologies, including flea and tick medications, have been important factors enabling increased physical proximity and emotional attachment between pet owners and pets. According to a 2012 survey conducted by Harris Interactive, 91% of U.S. pet
 
88

Table of Contents
owners consider their pets to be family members. ( 1 ) Additionally, 81% of U.S. pet owners consider their pets as equal members of the family and 58% think of their pets as their children and refer to themselves as their pets’ mom or dad, according to a 2011 survey conducted by Kelton Research LLC. ( 2 )  As further evidence of this growing human-animal bond, 77% of cat owners and 66% of dog owners said they let their cats or dogs sleep in their beds, according to a 2012 survey conducted by Harris Interactive. (1) A growing number of pet owners pamper their cats and dogs, and are spending significant amounts on relatively expensive products and services for their pets, such as premium organic food and doggy day care. According to the American Pet Products Association (APPA), U.S. consumers are estimated to have spent $55.5 billion on their pets in 2013, which is an increase of approximately 44% from the $38.5 billion spent in 2006. ( 3 )
Industry Challenges
While both pet owners and veterinarians share the common goal of ensuring the best possible care for pets, they face several challenges.
Problems Facing Pet Owners
Cost of medical care is becoming increasingly burdensome on pet owners. Historically, pet owners have paid for veterinary care using discretionary income, savings, high-interest-rate credit cards or other loans. As veterinary costs have risen and new relatively expensive treatments have become increasingly available and used, veterinary care has become increasingly difficult for pet owners to afford and adequately plan for, particularly in the current economic environment where discretionary income has been stagnant for several years. Because unexpected expenses can be financially burdensome, pet owners without medical coverage may be forced to choose a less expensive, sub-standard care alternative, and may even face the difficult decision of stopping care for their beloved pet.
Pet owners are often surprised by and unprepared for the costs of veterinary care. We believe the lack of compelling solutions creates a natural reluctance between pet owners and veterinarians to discuss potential medical costs over the lifetime of their pet. Consequently, we believe that most pet owners significantly underestimate the likelihood that their beloved pet will experience an injury or illness. For example, 35% of our members who enrolled in 2012 had a claim in their first year of enrollment. Even if pet owners are aware of these probabilities, they are often unaware of the breadth of potential treatment options that are available today. They also tend to significantly underestimate how costly treatment can be, preventing them from planning appropriately. We have paid many member claims related to individual incidents in excess of $20,000.
Traditional pet insurance products provide poor value and customer experiences. Traditional pet insurance products in the United States have been characterized by generic pricing with low monthly premiums and limited coverage. These products often feature complex policy language, extensive coverage exclusions and a variety of payout caps over the life of the policy and per condition. These traditional products frequently prove to be low value for pet owners, as common health issues are excluded from coverage. We believe that this short-sighted approach has led to low customer satisfaction, generally unfavorable opinions of pet insurance products and, accordingly, low levels of adoption.
Problems Facing Veterinarians
Veterinarians are constrained by pet owners’ inability to pay for optimal care. When a pet experiences an injury or illness, veterinarians are frequently faced with having to recommend less expensive alternatives that are sub-optimal for the pet as opposed to what they may believe would be more appropriate and effective treatment methods. According to a 2012 report in DVM Newsmagazine, 45% of the average veterinarian’s cases are limited by his or her clients’ willingness and ability to pay for treatment. (4)

(1)  	See note 1 in the section entitled “Market and Industry Data.”	
(2)  	See note 2 in the section entitled “Market and Industry Data.”	
(3)  	See note 3 in the section entitled “Market and Industry Data.”	
(4)  	See note 10 in the section entitled “Market and Industry Data.”	
 
89

Table of Contents
Veterinary practices face challenging business economics. According to a case study conducted by Brakke Consulting, Inc., on behalf of Bayer Healthcare Animal Health, (5) while 60% of veterinary practices increased their fees in 2012, only 45% reported growth in revenue in 2011 or 2012. Among those practices that did increase revenue, 23% attributed this growth to fee increases, while 26% cited more and improved services as the reasons. Among those practices experiencing lower revenue, 46% identified fewer patient visits, 31% identified a poor economy and 23% identified clients with less income as the main reasons. Eighty-one percent of practices said they planned to increase fees in 2013 .
Traditional pet insurance products have created conflicts between veterinarians and pet owners. We believe that many veterinarians have negative perceptions of traditional pet insurance providers, which likely stems from problems their clients have experienced with traditional providers. Traditional providers often do not cover the cost to treat injured or ill pets because of restrictive coverage exclusions, onerous fees schedules and payout caps. Although 83% of veterinarians who have graduated from veterinary school since 2000 want to see wider use of pet medical coverage by clients according to a 2012 report in DVM Newsmagazine, (6) we believe that negative past experiences have resulted in few veterinarians actively recommending pet medical coverage to their clients.
Our Market Opportunity
We believe the growing human-animal bond has led to an increasing willingness by pet owners to spend on pet health. According to the APPA, of the $55.5 billion that is estimated to have been spent on pets in 2013, U.S. consumers spent an estimated $14.2 billion on veterinary care, which is an increase of 54% from the $9.2 billion spent in 2006. (7) Veterinary expenditures are rising due to technological advancements in veterinary medicine and increased utilization of care. More sophisticated and costly treatments, such as ultrasound, radiation therapy, MRIs, CT scans, transplants and chemotherapy, are gaining wider acceptance. The cost of diagnostic testing alone can be expensive, in part because pets are unable to communicate their symptoms. For example, even a seemingly minor issue can potentially cost thousands of dollars to diagnose and treat since the pet cannot communicate its symptoms.
We believe the addressable market for medical coverage for cats and dogs in North America is the largest in the world. Pet owners in the United States and Canada collectively owned approximately 193 million cats and dogs according to surveys conducted by the APPA in 2013 and the Canadian Animal Health Institute in 2012. (8) By comparison, pet owners in Europe collectively owned approximately 165 million cats and dogs in 2012, according to the European Pet Food Industry Federation. (9) Despite the growing human-animal bond, approximately 1% of pet owners in the United States and Canada had pet medical coverage in 2013, according to a 2013 report from Packaged Facts, a division of Market Research Group, LLC. (10) Many European countries have significantly higher penetration rates of pet medical coverage, which range from 5% in France and Denmark to 25% in the United Kingdom and 40% in Sweden, according to a 2013 study conducted by Munich Re. (11) We believe that these higher penetration rates stem from active collaboration between pet medical coverage providers and veterinary communities to design and deliver high-value medical coverage.
Our Solution
We are uniquely positioned to provide a superior solution due to our expertise in veterinary medicine, data analytics and technology. Our plan aligns the interests of pet owners and veterinarians, which allows them to focus on providing the best care for their pets rather than cost of treatment.

(5)  	See note 11 in the section entitled “Market and Industry Data.”	
(6)  	See note 12 in the section entitled “Market and Industry Data.”	
(7)  	See notes 3 and 4 in the section entitled “Market and Industry Data.”	
(8)  	See notes 5 and 6 in the section entitled “Market and Industry Data.”	
(9)  	See note 7 in the section entitled “Market and Industry Data.”	
(10)  	See note 8 in the section entitled “Market and Industry Data.”	
(11)  	See note 9 in the section entitled “Market and Industry Data.”	
 
90

Table of Contents
Benefits to Pet Owners
Predictability of costs and peace of mind. Our members can be confident that their pets will be covered in the event of injury or illness. When they make a claim that is covered by our plan, we pay 90% of the veterinary costs actually charged by the member’s veterinarian. While a significant number of our members choose a plan with no deductible, our members have the option to choose a deductible up to $1,000 and can change their deductible at any time. Our members may obtain treatment from any licensed veterinarian that they select within the United States, Canada or Puerto Rico. Our coverage has no payout limits, is not subject to a lifetime maximum payout and is not limited by the amount that a veterinarian charges or the treatment that a veterinarian recommends. Our coverage is designed to be comprehensive and to cover the treatment costs of any accident or illness. Generally, the only costs not covered by our plan are those relating to conditions existing prior to the pet’s enrollment and to routine or preventative care, including examination fees. Our goal is to enable pets to receive the best medical care while helping pet owners manage the financial burdens stemming from injuries or illnesses.
Awareness of cost of care. We believe veterinarians typically have consultative relationships with pet owners and play a major role in influencing the decisions they make to care for their pets. We actively market the value of our medical plan to veterinarians, enabling them to educate pet owners effectively about the costs of veterinary care and the benefits of our medical plan. Leads generated from veterinary referrals drive membership engagement across multiple touch points ranging from our member-friendly contact center to our easy-to-use website.
Superior value proposition. We offer a comprehensive medical plan with no limitations for chronic, congenital or hereditary conditions, no payout limits and no mandates to veterinarians on the cost of treatment. We focus on providing high value to our members, rather than minimizing the monthly subscription price. We spent $0.67, $0.68, $0.70 and $0.70 of every subscription dollar on claims in 2011, 2012, 2013 and the first quarter of 2014, respectively, while many traditional providers spent only approximately $0.45 to $0.64 on claims. As a result, we believe our plan provides superior value.
Exceptional member experience. We are highly focused on providing an exceptional member experience. We offer a simple and easy to understand medical plan. We have designed our claims process to be fair, efficient and transparent. Our goal is to help eliminate the high levels of frustration associated with traditional insurance products. Our members frequently utilize our medical plan. Thirty-five percent of our members who enrolled in 2012 had a claim in their first year of enrollment. This provides us with the opportunity to demonstrate the value of our solution. As a result, our members report very high satisfaction rates, as evidenced by our net promoter score of 57.1 in 2012 and our high retention rates.
Benefits to Veterinarians
Freedom to be the most effective advocate for pets. Our medical plan does not limit how much can be paid for an injury or illness. This provides veterinarians with the freedom to practice veterinary medicine at the highest level and be the most effective advocate for the health of the pets.
More loyal client base. Our members visit veterinarians more frequently, which can generate significantly more annual revenue for veterinarians compared to clients without pet medical coverage. Furthermore, pet owners with medical coverage typically spend significantly more on their seriously injured or ill pet before opting to stop treatment. The result is a client base that is more engaged, spends more money on care and has healthier cats and dogs.
Reduces potential conflicts with cost-sensitive pet owners. We enable veterinarians to recommend optimal treatment without having their decisions dictated by the cost of treatment and the financial burden on the pet owner. As a result, veterinarians are able to establish stronger ties with their clients.
 
91

Table of Contents
Our Strengths
Our deep understanding of the needs of our members and veterinarians, supported by our extensive proprietary data and advanced technology, enhances our ability to innovate and design solutions that solve their challenges. This understanding drives our mission to help the pets we all love receive the best veterinary care.
We have the following strengths, which we believe are competitive advantages and not easily replicated:
Compelling value proposition drives a powerful network effect. Our differentiated solution aligns the interests of both pet owners and veterinarians, creating a unique network effect. Our members benefit because their pets receive the best care possible and we pay 90% of the covered costs. Veterinarians benefit because they can recommend the optimal treatment and provide a high standard of care regardless of cost, which improves their business fundamentals. Nineteen percent of our enrollments in 2013 and 21% of enrollments in the first quarter of 2014 came from our existing members adding pets and referring their friends and family members. As more pet owners and veterinarians experience the compelling benefits of our medical plan, we believe they act as ambassadors for our brand and drive additional enrollments.
Unique “go-to-market” strategy enables cost-efficient member acquisition. We invest significantly in developing relationships with veterinarians because we believe they are uniquely positioned to introduce our value proposition to pet owners. Since 2003, we have been building a national independent referral network, comprised of 62 Territory Partners as of March 31, 2014, dedicated to cultivating direct veterinary relationships and building awareness of the benefits that our medical plan offers veterinarians and their clients. For the three months ended December 31, 2013, we received referrals from over 5,000 veterinary practices. Veterinary practice referrals accounted for approximately 80% of our total leads in 2013 and in the first quarter of 2014, excluding existing members adding pets and referring their friends and family members. Through our Territory Partners, we made over 70,000 visits to veterinary practices in 2013 and over 15,000 visits in the first quarter of 2014, to develop new and expand existing relationships. The market for veterinary services is highly fragmented and includes many sole-owner veterinary practices and small veterinary practices that are difficult to reach. We believe that none of our competitors have a national independent referral network and it would be difficult, costly and time consuming to try to replicate our strategy.
Vertically integrated approach reduces frictional costs and improves member value . We believe that we have significant structural competitive advantages over traditional pet insurance providers and potential new market entrants. We manage all aspects of our business using a vertically integrated approach that eliminates many of the significant frictional costs and member experience complications that can result from outsourcing key business functions to third-party service providers:
 
 	•	 	Underwriting: It took us six years to fully license American Pet Insurance Company in all 50 states. Because we own our insurance company, we do not have to share profit from writing our medical plan with a third party, which allows us to provide more value back to our members. We believe that many of our competitors pay 10% or more of their gross revenue to third parties that write medical plans.	
 
 	•	 	Sales: Our exclusive Territory Partners generate referrals from veterinary practices that are converted by our website or contact center. This has been our most cost-efficient member acquisition channel besides existing members adding pets and referring their friends and family members.	
 
 	•	 	Actuarial: We believe that the size and experience of our in-house actuarial team, which is dedicated to pricing subscriptions to our medical plan, is unique in the industry. We are continually refining our pricing based on the vast and growing amount of proprietary data we have accumulated over time.	
 
 	•	 	Member Service: We handle all of our member services and claims internally rather than using a third party, allowing us to provide an exceptional member experience.	
 
 	•	 	Brand: We own the Trupanion brand and, unlike some others in the industry, do not have to pay royalties for the brand name.	
 
92

Table of Contents
We have strategically chosen to share these cost savings with our members in the form of higher claims payout ratios relative to traditional providers, which has enabled us to provide a superior value proposition. As our business continues to scale, we expect to be able to increase the value we share with our members.
Actionable data insights . Over the past 14 years, we have collected an extensive library of proprietary data that is not commercially available and that we believe is unparalleled in the industry. As of March 31, 2014, we had collected data from over 5,500,000 medical plan months, 750,000 claims, 18,000 veterinary practices, 60,000 postal codes and 440 cat and dog breeds. Our highly specialized team of actuaries uses advanced data analytics to effectively segment our members based on expected claims cost, retention and lifetime value. Using these insights, we are able to accurately price subscriptions to our medical plan, increase our retention rate and optimize lifetime value of a pet.
The specific monthly subscription fee for an enrolled pet varies greatly depending on that pet’s characteristics, including species, breed, age, gender and pet location. For example, a newly enrolled male Siberian Husky puppy living in the 19121 zip code of Philadelphia, Pennsylvania and having a $250 deductible may have a monthly subscription cost of about $34 while a newly enrolled seven year old female American Bulldog living in the 10021 zip code of Manhattan, New York and having the same deductible may have a monthly subscription cost of $105. As more pets enroll, the power of our data grows, and we anticipate being able to further expand our data library and analytics, improving our ability to acquire new members and retain existing members.
Powerful technology infrastructure. We have developed proprietary software systems that form the backbone of our technology platform, including our data analytics and pricing engine, claims processing software, customer relationship management system, contact center phone system and website. These solutions were custom built to meet the unique needs of our business. We believe our proprietary technology platforms enable us to achieve superior operational execution.
Proven management team. We have a management team of experienced professionals with deep industry knowledge, a strong track record of successful execution and an average of ten years of experience in the veterinary medicine and insurance industries. We believe that our management team is uniquely positioned to lead a company that operates at the intersection of three highly complex fields: veterinary medicine, data analytics and technology.
Our Strategy
Our strategy is focused on attracting and retaining members by providing a best-in-class value and member experience. We are focused on building a successful long-term business by pursuing the following growth strategies:
Increase the number of referring veterinary practices. We intend to increase the number of veterinary practices that are actively introducing our medical plan to their clients by continuing to expand our national independent referral network of Territory Partners and increasing direct marketing to veterinarians. While over 5,000 veterinary hospitals referred members to us during the three months ended December 31, 2013, these veterinary hospitals represented only approximately 19% of the approximately 26,000 veterinary hospitals in the United States and Canada.
Increase the number of referrals from active veterinary practices. We intend to continue increasing the number and quality of interactions that we have with veterinarians to accelerate the rate at which active veterinary practices refer us leads.
Increase the number of third-party referrals from members. We are focused on using innovative technologies to further enhance our member experience. For example, we recently introduced a new technology, Trupanion Express, which is designed to facilitate the direct payment of claims to veterinary practices. We believe this, if widely adopted, will transform the claims process and increase third-party referrals from pet owners and veterinarians acting as ambassadors for our board.
 
93

Table of Contents
Improve online lead generation and conversion . We are investing in our online marketing capabilities, and intend to continue to do so in order to fully capture the online opportunity. Our online marketing initiatives play an integral role in acquiring new leads. Our website is critical to converting leads from all of our member acquisition channels, with over 85% of our new members in the three months ended March 31, 2014 visiting our website prior to or during the enrollment process.
Explore other member acquisition channels. We regularly evaluate new member acquisition channels. We intend to aggressively pursue those channels that we believe will generate an attractive ratio of lifetime value relative to acquisition cost.
Expand internationally. While we are currently focused on capturing the large opportunity in the U.S. and Canadian markets, we continue to explore international expansion.
Pursue other revenue opportunities. We may opportunistically engage in other revenue opportunities. For example, American Pet Insurance Company, which we acquired in 2007, has written policies for an unaffiliated managing general agent since the end of 2012. As the industry grows and other providers consider entering the pet insurance market, we are uniquely positioned to partner with them.
Our Culture
Our culture is fundamental to our success and defines who we are and how we operate our business. We were founded on a deep appreciation of the special relationship between pet owners, their beloved pets and their trusted veterinarians. Our team is filled with dedicated professionals who are passionate about pets. This attitude permeates our corporate culture and offices, where the pitter patter of our four-legged friends is ever-present. Our five core values define our culture and guide our business decisions:
 
 	•	 	We do what we say	
 
 	•	 	Simple is better	
 
 	•	 	We do not punish unlucky pets	
 
 	•	 	We’re innovative and fair—not ‘insurance-like’	
 
 	•	 	We love pets!!	
We are committed to hiring and retaining the best talent and empowering them to channel their passion for pets into growing and improving our company. We believe that our consistent consideration of our core values fosters a work environment that facilitates teamwork, innovation, creativity and a focus on providing value for our members as well as for veterinarians.
 
94

Table of Contents
Sales and Marketing
Marketing to Veterinarians 
Veterinary practices represent our largest referral source, accounting for approximately 80% of our leads in 2013 and in the first quarter of 2014, excluding existing members adding pets and referring their friends and family members. Forming long-term relationships with veterinarians is critical to our continued success, as we believe veterinary recommendations are highly persuasive to our existing and prospective members and key to increasing overall awareness of our medical plan. To reach veterinarians effectively, we utilize a national independent referral network of Territory Partners. Each Territory Partner is assigned an exclusive geographic region containing approximately 250 to 300 veterinary practices. The map below depicts the locations of our Territory Partners as of March 31, 2014.

As of March 31, 2014, we had 62 Territory Partners dedicated to cultivating direct veterinary relationships and building awareness of the benefits that our medical plan offers veterinarians and their clients. Territory Partners serve as a critical resource for us, as the market for veterinary services is highly fragmented and includes many sole-owner veterinary practices and small veterinary practices that are difficult to reach. Our Territory Partners are independent contractors who exclusively market our medical plan and are paid fees based on activity in their regions. For the years ended December 31, 2011, 2012 and 2013 and three months ended March 31, 2014, we paid our Territory Partners aggregate fees equal to $1.8 million, $2.7 million, $3.5 million and $1.0 million, respectively. We believe this compensation structure aligns our interests and provides a platform that we can leverage over time to increase the contribution margin of membership generated through this channel.
Sales and Marketing to Pet Owners 
We generate leads through a diverse set of third-party referrals and online member acquisition channels, which we then convert into members through our website and contact center.
 
 	•	 	Third-party referrals. We actively promote the value of our plan with veterinarians, veterinary affiliates (including purchasing groups and other veterinary membership organizations), corporate employee benefit providers, shelters and breeders to introduce our medical plan to their clients.	
 
 	•	 	Online. We believe most of our members spend some time researching pet medical coverage online as part of their decision-making process. Online advertising represents a large source of new member enrollments. A significant portion of the members we acquire from online leads come through our paid search marketing, email marketing, social media marketing and search engine optimization initiatives.	
 
95

Table of Contents

 	•	 	Existing member referrals . For the year ended December 31, 2013 and the three months ended March 31, 2014, 19% and 21%, respectively, of our new member enrollments were generated from existing members adding a pet and referring their friends and family members.	
We constantly evaluate our marketing initiatives based on their respective returns on investment, which we generally measure by comparing total sales and marketing investment for an initiative against the applicable contribution margin generated.
Member Support and Claims Operations
We utilize our award-winning, in-house contact center to maximize the effectiveness of our sales, claims handling and overall member retention rate. Our contact center employees play an essential role in communicating our brand and values to our members. A core component of our member relationship strategy is spending time with members on the phone. We emphasize building rapport rather than trying to manage to the shortest possible call times. We appreciate that each member is calling about their beloved pet, and we have no talk time limits. When a member calls, our system automatically routes them to one of our professionals who is best equipped to handle the call, rather than sending them to an automated menu of options. Operationally, we provide 24-hour support, seven days a week, and offer support in English, Spanish and French. Members can select their preferred contact method of phone, email, chat or web co-browsing. We meticulously measure our contact center interactions to the second and capture meaningful member insights that are leveraged across our business.
One of the most significant opportunities we have to interact with our members is through our claims administration process. We view each interaction with our members as an opportunity to create an ambassador for our brand. Our claims adjustment team has significant first-hand experience in veterinary practices, and we have three veterinarians on staff. We have carefully engineered our claims process to be transparent, fair and fast, which is critical for membership experience and retention rates, and we are continually evaluating ways to improve the claims administration process.
Our Platform and Technology
We are a data and technology-driven company. We leverage state-of-the-art technology frameworks that allow us to rapidly scale our platform as our business grows. We have a team of product and engineering professionals dedicated to enhancing our technology platform, developing new solutions for pet owners and veterinarians and conducting product and quality assurance testing.
Our team has developed proprietary, in-house software that forms the backbone of our unique technology platform:
Analytics and pricing engine. Our dynamic analytics platform draws on our extensive library of proprietary data to effectively and accurately price subscriptions to our medical plan. We leverage a broad range of information, including species, breed, age, gender and pet location. As of March 31, 2014, we used approximately 1.2 million permutations, which are regularly refined to price each pet based on its unique characteristics. As data collection is a key part of our research and development process, we are constantly looking for new and relevant data to collect and shape for this purpose.
Pet Organizer. Our proprietary claims processing software is at the heart of our technology platform. Custom-built to facilitate our claims administration and billing, Pet Organizer enables us to collect an ever-increasing amount of unique pet data. Pet Organizer allows our claims administration team to process a voluminous number of claims in a flexible way, which we do not believe is possible using off-the-shelf claims software. Pet Organizer is designed to scale with our business and allow our claims team to find new efficiencies over time.
 
96

Table of Contents
Customer relationship management system. Using off-the-shelf technology that has been modified to support the unique processes of our sales and claims professionals, our customer relationship management system provides a robust, dynamic means of creating, tracking and storing all of the data we use to better understand and manage our interactions with members, Territory Partners and veterinarians.
Contact center. Our phone system uses a multi-channel solution that intelligently routes member interactions to the best-matched skilled professional. This technology includes a workforce management solution that forecasts call volumes and schedules our professionals to meet goals, providing us with robust data capture and reporting capabilities.
Trupanion.com. Our online enrollment process provides a simple interface that we believe provides members with significant benefits over the traditional, paper-intensive enrollment process. It employs dynamic business logic to help new members complete their enrollment forms in real time. Built using digital asset management and customer relationship management system technologies, the site provides a custom-built user experience for each new member, providing a unique experience based on who the member is and how the member arrived at the site.
We developed our website and related infrastructure with the goal of maximizing the availability of our platform to members, veterinarians and key member acquisition channels. Our website and related infrastructure are hosted on a network located at our headquarters in Seattle, Washington and in a redundant third-party facility in Santa Clara, California.
Competition
The market for medical coverage for pets is highly competitive. We compete with consumers that self-fund with cash or credit, as well as traditional pet insurance providers and new entrants to our market. The vast majority of pet owners in the United States and Canada do not currently have medical coverage for their pets. We are primarily focused on expanding the overall size of the market by improving the value proposition for consumers. We view our primary competitive challenge as educating pet owners on why our medical plan is a better alternative to self-funding.
Additionally, there are traditional insurance companies that provide pet insurance products, either as a stand-alone product or along with a broad range of other insurance products. The largest of these traditional providers is Veterinary Pet Insurance Company, a division of Nationwide Insurance. In addition, new entrants backed by large insurance companies with substantial financial resources have attempted to enter the market in the past and may do so again in the future. Further, traditional providers may consolidate, resulting in the emergence of new providers that are vertically integrated or able to create other operational efficiencies, which could lead to increased competition. We believe that we have competitive strengths that position us favorably, including a compelling value proposition, a unique member acquisition strategy, a vertically integrated approach that reduces frictional costs, actionable data insights, powerful technology infrastructure and an experienced management team.
Intellectual Property
We rely on federal, state, common law and international rights, as well as contractual restrictions, to protect our intellectual property. We control access to our proprietary technology, software and documentation by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us.
In addition to these contractual arrangements, we also rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks and domain names, as well as contractual protections, to establish and protect our intellectual property. As of March 31, 2014, we had two pending patent applications in
 
97

Table of Contents
the United States, one pending international patent filed under the Patent Cooperation Treaty, one pending patent application in Europe and no issued patents. We also had five registered trademarks in the United States, including “Trupanion,” and three additional trademark applications. We have three pending trademark applications in Canada. Many of our unregistered trademarks, however, contain words or terms having a common usage and, as a result, may not be protectable under applicable law. We also currently hold the “Trupanion.com” Internet domain name and numerous other related domain names.
Employees
As of March 31, 2014, we employed 335 people, including 31 in sales and marketing, 20 in finance and actuarial services, 228 in member support, 39 in information technology and product development and 17 in a general and administrative capacity. As of such date, we had 322 employees in the United States and 13 employees in Canada. We also engage a number of temporary employees and consultants.
Facilities
Our corporate headquarters are located in Seattle, Washington, where we lease two offices. Our primary office is approximately 37,500 square feet. The term of this lease expires in 2016, and we have two remaining one-year options to extend the lease. Our other Seattle, Washington office is approximately 12,000 square feet. The term for this lease expires in September 2015. We also maintain an office in Vancouver, Canada. We believe that our facilities are sufficient to meet our current needs and for the foreseeable future.
Regulation
Each U.S. state, the District of Columbia and U.S. territories and possessions, as well as all of the Canadian provinces and territories, have insurance laws that apply to companies licensed to transact insurance business in the jurisdiction. The primary regulator of an insurance company, however, is located in its state of domicile. Our subsidiary American Pet Insurance Company (APIC) is domiciled in New York State and its primary regulator is therefore the New York Department of Financial Services (NY DFS). APIC is currently licensed to do business in all 50 states, Puerto Rico and the District of Columbia in the United States. As such, APIC is subject to comprehensive regulation and supervision under U.S. state laws.
State insurance regulators have broad authority with respect to all aspects of the insurance industry, including the following:
 
 	•	 	licensing of APIC to transact its line of business and approval and issuance of its certificate of authority;	
 
 	•	 	establishing minimum levels of capital and reserves required by APIC to operate as an ongoing insurance company;	
 
 	•	 	assessing the officers and directors of APIC to ensure a minimum level of competency and trustworthiness;	
 
 	•	 	licensing of individual producers and agents and business entities marketing and selling insurance products and of claims adjusters settling claims;	
 
 	•	 	admittance of assets to statutory surplus and regulating the type of investments in which APIC can invest;	
 
 	•	 	regulating premium rate levels for the insurance products APIC offers;	
 
 	•	 	approving policy forms APIC issues;	
 
 	•	 	regulating unfair trade and claims practices; and	
 
 	•	 	establishing reserve requirements and solvency standards.	
 
98

Table of Contents
Regulators also have broad authority to conduct on-site market conduct examinations of our management and operations, marketing and sales, underwriting, customer service, claims handling and licensing. Market conduct examinations can involve direct, on-site contact with a company to identify potential regulatory violations, discuss and correct an identified problem or obtain a better understanding of how the company is operating in the marketplace.
Adverse state regulatory actions could include limiting APIC’s ability to write new policies, limiting APIC’s ability to effect rate increases or to cancel, reduce or non-renew insurance coverage with respect to existing policies, disallowing premium increases or policy coverage amendments APIC seeks, reviewing the adequacy and appropriateness of our insurance products before they can be made available to our members and restricting marketing and sales by our referral sources, contact centers and producers.
State insurance laws and regulations in the United States require APIC to file financial statements with state insurance regulators everywhere it is licensed and its operations and accounts are subject to examination at any time. APIC’s statutorily required financial statements are available to the public. APIC prepares statutory financial statements in accordance with accounting practices and procedures prescribed or permitted by these regulators. The National Association of Insurance Commissioners (NAIC) has approved a series of uniform statutory accounting principles (SAP) that have been adopted, in some cases with minor modifications, by all state insurance regulators. As a basis of accounting, SAP was developed to monitor and regulate the solvency of insurance companies. In developing SAP, insurance regulators were primarily concerned with assuring an insurer’s ability to pay all its current and future obligations to policyholders. As a result, statutory accounting focuses on conservatively valuing the assets and liabilities of insurers, generally in accordance with standards specified by the insurer’s domiciliary state. The values for assets, liabilities and equity reflected in financial statements prepared in accordance with U.S. generally accepted accounting principles are usually different from those reflected in financial statements prepared under SAP.
In Canada, our plan is written by an unaffiliated Canadian-licensed insurer, Omega General Insurance Company (Omega). Under the terms of our agreements with Omega, our subsidiary Trupanion Brokers Ontario acts as a managing general agent under which we write and issue policies on its behalf and our subsidiary APIC acts as a reinsurer whereby APIC, through a fronting and reinsurance agreement with Omega, assumes all of the financial risk associated with our Canadian business. This agreement may be terminated by either party with 180 days written notice until it terminates pursuant to its terms on December 31, 2014, at which time it will automatically renew for successive one-year periods and be terminable by either party with 90 days’ written notice. Omega’s Canadian insurance operations are supervised and regulated by both the Canadian federal and provincial governments. The federal Office of the Superintendent of Financial Institutions is concerned primarily with the solvency and stability of insurance companies that are registered under federal statutes. Financial supervision by provincial superintendents of insurance is limited mainly to insurers operating under provincial charters; however, provincial authorities predominate in the supervision of the terms and conditions of insurance contracts and the licensing of companies, agents, brokers and adjusters. Omega is a fully licensed insurer in all of the Canadian provinces we do business.
Insurance Holding Company Regulation 
APIC is subject to laws governing insurance holding companies in New York, its state of domicile. These laws impact us in a number of ways, including the following:
 
 	•	 	We must file periodic information reports with the NY DFS, including information concerning our capital structure, ownership, financial condition and general business operations.	
 
 	•	 	New York regulates certain transactions between APIC and our other affiliated entities, including the fee levels payable by APIC to affiliates that provide services to APIC.	
 
 	•	 	New York law restricts the ability of any one person to acquire certain levels of our voting securities without prior regulatory approval. State insurance holding company regulations generally provide that	
 
99

Table of Contents

 	no person, corporation or other entity may acquire control of an insurance company, or a controlling interest in any parent company of an insurance company, without the prior approval of such insurance company’s domiciliary state insurance regulator. Any person acquiring, directly or indirectly, 10% or more of the voting securities of an insurance company is presumed to have acquired “control” of the company. To obtain approval of any change in control, the proposed acquirer must file with the applicable insurance regulator an application disclosing, among other information, its background, financial condition, the financial condition of its affiliates, the source and amount of funds by which it will effect the acquisition, the criteria used in determining the nature and amount of consideration to be paid for the acquisition, proposed changes in the management and operations of the insurance company and other related matters. In considering an application to acquire control of an insurer, the insurance commissioner generally will consider such factors as the experience, competence and financial strength of the applicant, the integrity of the applicant’s board of directors and executive officers, the acquirer’s plans for the management and operation of the insurer and any anti-competitive results that may arise from the acquisition.	
 
 	•	 	New York law restricts the ability of APIC to pay dividends to its holding company parent. These restrictions are based in part on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. In general, dividends in larger amounts, or extraordinary dividends, are subject to approval by the NY DFS. An extraordinary dividend or distribution is defined as a dividend or distribution that, in the aggregate in any 12-month period exceeds the lesser of (1) 10% of surplus as of the preceding December 31 or (2) the insurer’s adjusted net investment income for such 12-month period ended the preceding December 31, not including realized capital gains.	
In December 2010, the NAIC adopted significant changes to the insurance holding company act and regulations (the NAIC Amendments). The NAIC Amendments are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States. One of the major changes is a requirement to file annually an “enterprise risk” report. “Enterprise risk” is defined as any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect on the financial condition or the liquidity of the insurer or its insurance holding company system as a whole. The NAIC Amendments impose more extensive informational requirements on the insurance holding company system to mitigate enterprise risk, including requiring it to prepare an annual enterprise risk report that identifies the material risks within the insurance company holding system that could pose enterprise risk to the licensed insurer. New York adopted its version of the NAIC Amendments with certain amendments currently in effect and certain amendments, including those related to enterprise risk that took effect in October 2013. We cannot predict whether the NAIC Amendments will be adopted in whole or in part by other states or the impact, if any, these changes will have on our business, operating results and financial condition.
Financial Regulation of Insurers 
Risk-Based Capital Requirements
The NAIC has adopted risk-based capital requirements for life, health and property and casualty insurance companies . The requirements provide a method for analyzing the minimum amount of adjusted capital (statutory capital and surplus plus other adjustments) appropriate for an insurance company to support its overall business operations, taking into account the risk characteristics of the company’s assets, liabilities and certain other items . Generally, the NY DFS will compare, on an annual basis as of December 31, an insurer’s total adjusted capital and surplus against what is referred to as an “Authorized Control Level” of risk-based capital that is calculated based on a formula designed to estimate an insurer’s capital adequacy. There generally are five outcomes possible from this comparison, depending on the insurer’s level of risk-based capital as compared to the applicable Authorized Control Level.
 
 	•	 	No Action Level : Insurer’s total adjusted capital is equal to or greater than 200% of the Authorized Control Level.	
 
100

Table of Contents

 	•	 	Company Action Level : Insurer’s total adjusted capital is less than 200% but greater than 150% of the Authorized Control Level. When at this level, an insurer must prepare and submit a financial plan to the NY DFS for review and approval. Generally, a risk-based capital plan would identify the conditions that contributed to the Company Action Level and include the insurer’s proposed plans for increasing its risk-based capital in order to satisfy the No Action Level. The failure to provide the NY DFS with a risk-based capital plan on a timely basis or the inability of the NY DFS and the insurer to mutually agree on an appropriate risk-based capital plan could trigger a Regulatory Action Level outcome, subject to the insurer’s right to a hearing on the issue.	
 
 	•	 	Regulatory Action Level : Insurer’s total adjusted capital is less than 150% but greater than 100% of the Authorized Control Level. When at this level, an insurer generally must provide a risk-based capital plan to the NY DFS and be subject to examination or analysis by the NY DFS to the extent it deems necessary, including such corrective actions as the NY DFS may require.	
 
 	•	 	Authorized Control Level : Insurer’s total adjusted capital is less than 100% but greater than 70% of the Authorized Control Level. At this level, the NY DFS generally could take remedial actions that it determines necessary to protect the insurer’s assets, including placing the insurer under regulatory control.	
 
 	•	 	Mandatory Control Level : Insurer’s total adjusted capital is less than 70% of the Authorized Control Level. At this level, the NY DFS generally is required to take steps to place the insurer under regulatory control, even if the insurer is still solvent.	
As of December 31, 2013, APIC was required to maintain (i) at least $16.8 million of risk-based capital to satisfy the No Action Level, (ii) between $12.6 million and $16.8 million of risk-based capital to satisfy the Company Action Level, (iii) between $8.4 million and $12.6 million of risk-based capital to satisfy the Regulatory Action Level and (iv) between $5.9 million and $8.4 million of risk-based capital to satisfy the Authorized Control Level. As of December 31, 2013, APIC maintained $16.3 million of risk-based capital, placing it within the Company Action Level and, as such, APIC is preparing a risk-based capital plan for submission to the NY DFS for its review and approval. If such plan is approved, we expect APIC will be deemed to have satisfied the No Action Level until the NY DFS conducts its next annual assessment. The NY DFS will not conduct its next annual assessment until December 31, 2014, however, as of May 31, 2014, APIC maintained $17.1 million of risk-based capital. The NY DFS may increase the required levels of risk-based capital in the future, and we anticipate that we will need to maintain greater amounts of risk-based capital if our pet enrollment continues to grow.
State insurance regulators use the risk-based capital requirements as an early warning tool to identify possibly inadequately capitalized insurers . An insurance company found to have insufficient statutory capital based on its risk-based capital ratio may be subject to varying levels of additional regulatory oversight depending on the level of capital inadequacy. Risk-based capital requirements reduce the amount of risk a company can take. Risk-based capital requirements generally obligate a company with a higher amount of risk to hold a higher amount of capital relative to the premiums written. Risk-based capital provides a cushion to a company against insolvency if it fails to adequately price its insurance products and the sum of losses and expenses is greater than the premium. Risk-based capital is intended to be a minimum regulatory capital standard and not necessarily the full amount of capital that an insurer would ideally want to hold to meet its financial obligations. The risk-based capital formulas are designed to require insurers that are growing premiums quickly to hold more capital; as a result, growth of our business may increase significantly the amount we are required to retain as risk-based capital.
NAIC Insurance Regulatory Information Systems Ratios
The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System, or IRIS, to assist state regulators in monitoring the financial condition of U.S. insurance companies and identifying companies requiring special attention or action. IRIS consists of a statistical phase and an analytical phase whereby financial examiners review insurers’ annual statements and financial ratios. The statistical phase
 
101

Table of Contents
consists of 12 key financial ratios based on year-end data that are generated from the NAIC database annually; each ratio has a “usual range” of results. For IRIS ratio purposes, APIC submits data annually to state insurance regulators who then analyze our data using prescribed financial data ratios. A ratio falling outside the prescribed “usual range” is not considered a failing result. Rather, unusual values are viewed as part of the regulatory early monitoring system. In many cases, it is not unusual for financially sound companies to have one or more ratios that fall outside the usual range. As of December 31, 2013, APIC had three such ratios outside the usual range, relating to net premiums written to surplus, change in net premiums written and investment yield.
Regulators may investigate or monitor an insurance company if its IRIS ratios fall outside the prescribed usual range . The inquiries made by state insurance regulators into an insurance company’s IRIS ratios can take various forms . In some instances, regulators may require the insurance company to provide a written explanation as to the causes of the particular ratios being outside the usual range, management’s actions to produce results that will be within the usual range in future years and what, if any, actions the insurance company’s domiciliary state insurance regulators have taken . Regulators are not required to take action if an IRIS ratio is outside the usual range, but, depending on the nature and scope of the particular insurance company’s exception, regulators may request additional information to monitor going forward and, as a consequence, may take additional regulatory action.
Insurance Guaranty Associations, Residual Markets, Wind Pools and State-specific Reinsurance Mechanisms
Most jurisdictions in which we operate have laws or regulations that require insurance companies doing business in the state to participate in various types of guaranty associations or other similar arrangements designed to protect policyholders from losses under insurance policies issued by insurance companies that become impaired or insolvent. Typically, these associations levy assessments, up to prescribed limits, on member insurers on the basis of the member insurer’s proportionate share of the business in the relevant jurisdiction in the lines of business in which the impaired or insolvent insurer is engaged. Some jurisdictions permit member insurers to recover assessments that they paid through full or partial premium tax offsets, usually over a period of years.
Some states in which APIC operates have residual markets, wind pools or state reinsurance mechanisms. The general intent behind these is to provide coverage to individuals and businesses that cannot find coverage in the private marketplace. The intent of state-specific reinsurance mechanisms generally is to stabilize the cost of, and ensure access to, reinsurance for admitted insurers writing business in the state. Historically, APIC has had minimal financial exposure to guaranty associations, residual markets, wind pools and state-specific reinsurance mechanisms; however there is no guarantee that these items will continue to be of low financial impact to APIC.
Licensing of Producers and Other Entities
Insurance agencies, producers, third-party administrators, claims adjusters, service providers and administrators are subject to licensing requirements and regulation by insurance regulators in various jurisdictions in which they conduct business. If any of our subsidiaries, referral sources, contact centers or service providers engage in these functions, they will be subject to licensing requirements and regulation by insurance regulators in various jurisdictions. If a subsidiary, referral source, contact center or service provider does not comply with licensing requirements and regulation by any insurance regulator, such insurance regulator could penalize such entity, including restricting certain activity of such entity.
Federal Initiatives 
The U.S. federal government generally does not directly regulate the insurance business. From time to time, various regulatory and legislative changes have been proposed in the insurance industry. Among the proposals that have in the past been, or are at present being, considered are the possible introduction of federal regulation in addition to, or in lieu of, the current system of state regulation of insurers and proposals in various state legislatures (some of which have been enacted) to conform portions of their insurance laws and regulations to
 
102

Table of Contents
various model acts adopted by the NAIC. The NAIC has undertaken a Solvency Modernization Initiative focused on updating the U.S. insurance solvency regulation framework, including capital requirements, governance and risk management, group supervision, accounting and financial reporting and reinsurance. The NAIC Amendments are a result of these efforts. Additional requirements are also expected. For example, the NAIC has adopted the Risk Management and Own Risk and Solvency Assessment (ORSA) Model Act, which when adopted by the states will require insurers to perform an ORSA and, upon request of a state, file an ORSA Summary Report with the state. The ORSA Summary Report will be required in 2014, subject to the various dates of adoption by states, and will describe our process for assessing our own solvency.
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established a Federal Insurance Office within the U.S. Department of the Treasury. The Federal Insurance Office initially is charged with monitoring all aspects of the insurance industry (other than health insurance, certain long-term care insurance and crop insurance), gathering data and conducting a study on methods to modernize and improve the insurance regulatory system in the United States. It is not possible to predict whether, in what form or in what jurisdictions any of these proposals might be adopted, or the effect federal involvement in insurance will have, if any, on us.
Privacy and Data Collection Regulation 
There are numerous federal, state and foreign laws regarding privacy and the protection of member data. The regulatory environment in this area for online businesses is very unsettled in the United States and internationally and new legislation is frequently being proposed and enacted.
In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security breach for personal data, such as the Massachusetts Data Breach Notification Law, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. In addition, our operations subject us to certain payment card association operating rules, certification requirements and rules, including the Payment Card Industry Data Security Standard, a security standard with which companies that collect, store or transmit certain data regarding credit and debit cards, credit and debit card holders and credit and debit card transactions are required to comply.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or obtain and use our technology or data to develop products that may compete with our offerings. Policing unauthorized use of our technology or data is difficult. The laws of other countries in which we market our medical plan may offer little or no effective protection of our proprietary technology. Our competitors could also independently develop technologies equivalent to ours, and our intellectual property rights may not be broad enough for us to prevent competitors from selling products incorporating those technologies.
Companies in our industry and in other industries may own a large number of patents, copyrights and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights. From time to time, we face, and we expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors. As we face increasing competition and as our business grows, we will likely face more claims of infringement.
Legal Proceedings
California Department of Insurance 
In 2011, APIC received an inquiry from the California Department of Insurance (CDOI) alleging APIC’s trial insurance policies are issued in violation of California law, including California laws that generally prohibit insurers such as APIC from providing residents of California with “free insurance.” We have disputed this assertion. In January 2013, APIC responded to a CDOI request submitting certain additional information to
 
103

Table of Contents
CDOI. In June 2013, APIC further corresponded with CDOI reaffirming APIC’s position denying such allegations. CDOI recently sent a draft notice of non-compliance regarding the matter, stating that the notice will be filed if APIC and CDOI cannot resolve the issue. APIC is currently discussing the matter with CDOI. To the extent the parties are not able to resolve the matter and a notice of non-compliance is filed, APIC would have the opportunity to request a hearing to contest such notice.
Washington State Office of Insurance Commissioner 
We received an inquiry from the Washington State Office of Insurance Commissioner (OIC) in December 2012 concerning whether one of our subsidiaries, Trupanion Managers USA, Inc., was properly licensed, and whether its employees were also properly licensed under Washington law. We responded in January 2013 confirming that our subsidiary is in fact licensed, and that its employees are not required to be licensed under Washington law. In October 2013, OIC sent further correspondence to another of our subsidiaries, APIC, informing APIC that the results of a market conduct examination regarding its use of unlicensed non-appointed producers were being referred to OIC’s enforcement committee and that such committee would notify APIC in the event action is taken in regard to possible violations. As of the date of this prospectus, no such notice or additional information has been provided.
We cannot predict the ultimate outcome of the above-mentioned proceedings and claims, and we are unable to estimate any potential liability we may incur.
In addition to the matters described above, from time to time we may be subject to various legal proceedings and claims in the ordinary course of business activities, including claims of alleged infringement of trademarks, copyrights and other intellectual property rights; employment claims; and general contract or other claims. We may, from time to time, also be subject to various other legal or government claims, disputes or investigations.
 
104

Table of Contents
 MANAGEMENT
Executive Officers, Other Executive Management and Directors
Our executive officers, other executive management and directors, and their respective ages and positions as of June 1, 2014, are as follows:

NAME	  	AGE	  	POSITION	
Executive Officers	
Darryl Rawlings	  	45	  	Chief Executive Officer, President and Director	
Michael Banks	  	55	  	Chief Financial Officer	
Other Executive Management	  		  		
Alison Andrew	  	41	  	Chief Marketing Officer	
Asher Bearman	  	36	  	General Counsel and Secretary	
Andrew Bren	  	49	  	Vice President of Actuarial Services	
Denise Connors	  	39	  	Vice President of Customer Service	
Tim Graff	  	53	  	President of American Pet Insurance Company	
Kerri Marshall	  	55	  	Chief Veterinary Officer	
Ian Moffat	  	38	  	Vice President of Operations	
Darin Nelson	  	48	  	Senior Vice President	
Tricia Plouf	  	35	  	Controller	
Craig Susen	  	38	  	Chief Technology Officer	
Erich Wuhrman	  	41	  	Vice President of Human Resources	
Non-Employee Directors	  		  		
Murray Low (1)(2)	  	61	  	Chairman of the Board of Directors	
Peter R. Beaumont	  	65	  	Director	
Michael Doak (2)	  	39	  	Director	
Dan Levitan (1)(2)	  	57	  	Director	
H. Hays Lindsley (1)(3)	  	55	  	Director	
Glenn Novotny (3)	  	67	  	Director	
Edward Philip (3)	  	49	  	Director	
Howard Rubin	  	61	  	Director	

(1)  	Member of our compensation committee.	
(2)  	Member of our nominating and corporate governance committee.	
(3)  	Member of our audit committee.	
Executive Officers
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.
Michael Banks has served as our Chief Financial Officer since June 2012. Previously, Mr. Banks served as the Chief Financial Officer at Penn Millers Holding Corporation, a provider of property casualty insurance, from August 2002 to May 2012. Prior to that, Mr. Banks served as the Vice President, Treasurer and Comptroller at Atlantic Mutual Insurance Company, Inc. and as the Vice President and Assistant Controller at AMBAC Indemnity Corporation. Mr. Banks holds a B.S. from the University of Delaware.
 
105

Table of Contents
Other Executive Management
Alison Andrew has served as our Chief Marketing Officer since February 2014 and previously served as our Vice President of Marketing from October 2012 to February 2014. Previously, Ms. Andrew served as the Head of Marketing of Allianz Insurance plc, a global insurance and financial services company, from July 2007 to July 2011. Prior to that, Ms. Andrew served as the Account Director at RSM Ltd., a provider of marketing and public relations solutions. Ms. Andrew holds a B.A. from Heriot-Watt University.
Asher Bearman has served as our General Counsel and Secretary since September 2013. Previously, Mr. Bearman was an attorney at DLA Piper LLP (US), a law firm, from August 2006 to September 2013. Prior to that, Mr. Bearman was an attorney at Pearson Merriam, PC and Dorsey & Whitney LLP. Mr. Bearman has served as a member of the board of directors of Seattle Humane Society, a nonprofit animal welfare organization, since July 2011. Mr. Bearman holds an L.L.M. from the New York University School of Law, a J.D. from the University of Washington School of Law and a B.A. from the University of Washington.
Andrew Bren has served as our Vice President of Actuarial Services since August 2010. Previously, Mr. Bren served as the Director of Pricing at UnitedHealthcare Group, a hospital and medical service plans company, from September 2007 to August 2010. Prior to that, Mr. Bren served as an Actuarial Consultant at Milliman, Inc., a provider of actuarial and related products and services, in 2007. Mr. Bren holds an M.S. from Temple University and a B.S. from North Dakota State University.
Denise Connors has served as our Vice President of Customer Service since July 2013. Ms. Connors initially joined us as Manager of Customer Care in December 2009. Previously, Ms. Connors was a Vice President of Customer Care at Washington Mutual, a banking institution, from January 2001 to October 2009. Ms. Connors holds an A.A. from North Seattle Community College.
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.
Kerri Marshall has served as our Chief Veterinary Officer since January 2013 and as our Executive Vice President of Customer Experience from June 2011 to December 2012. Dr. Marshall has also been a co-founder of Nanoport Technologies, a technology firm focusing on LED lighting solutions and standards, since April 2007. Previously, Dr. Marshall served as the President of the Association for Veterinary Informatics, an organization that develops and promotes standards in veterinary information management, from July 2010 to August 2012. Prior to that, Dr. Marshall served as the Vice Chairman of the board of directors of Banfield Charitable Trust, a charitable trust supporting veterinary care assistance, from January 2009 to June 2011. Dr. Marshall has also served in various leadership roles at Banfield Pet Hospital, also known as Medical Management International, Inc., which was acquired by Mars, Inc. in 2007. Dr. Marshall holds an M.B.A. from the University of Oregon, and a D.V.M. and a B.S. from Washington State University.
Ian Moffat has served as our Vice President of Operations since October 2012. Previously, Mr. Moffat served as the Operations Manager and in various other roles at Allianz Insurance plc from June 1997 to August 2012.
Darin Nelson has served as our Senior Vice President since October 2012. From August 1991 to October 2012, Mr. Nelson served in various leadership roles at VCA Antech, Inc., an animal and health services company, where he most recently served as the Senior Vice President of Development.
Tricia Plouf has served as our Controller since October 2012. Previously, Ms. Plouf served as the SEC Reporting and Compliance Manager at Concur Technologies, Inc., a provider of integrated travel and expense management
 
106

Table of Contents
solutions, from July 2011 to October 2012. Prior to that, Ms. Plouf served in various roles at KPMG, an accounting firm, from September 2005 to July 2011, and most recently served as Audit Manager from July 2010 to July 2011. Ms. Plouf holds a B.A. from Seattle University and a B.S. from the University of Minnesota.
Craig Susen has served as our Chief Technology Officer since September 2013, and previously served as our Acting Chief Technology Officer from March 2013 to September 2013 and as Architect from October 2012 to March 2013. Mr. Susen also served as an Architect at Hitachi Consulting, a global business and IT consulting company of Hitachi, Ltd., from December 2007 to October 2012. Mr. Susen holds a B.S. from the University of Hawaii at Manoa.
Erich Wuhrman has served as our Vice President of Human Resources since July 2010. Previously, Mr. Wuhrman served as the Director of Recruiting at iMatch, Inc., a provider of recruiting services, from September 2009 to June 2010. He served as the Vice President of Recruiting at a Place for Mom, Inc., a senior healthcare referral service company, from August 2007 to September 2008. Mr. Wuhrman has also served as a director of recruiting for Market Leader Inc., a provider of marketing solutions for real estate professionals, from September 2003 to September 2007.
Non-Employee Directors
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 also been a professor at Columbia Business School since 1990 and the Director of Entrepreneurship Education since September 2013. He has served as the founder and Director of the Eugene M. Lang Center for Entrepreneurship at Columbia Business School since September 2013. 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 as a member of our board of directors since inception.
Peter R. Beaumont has served as a member of our board of directors since March 2010. Dr. Beaumont has also served as the Chairman of our Veterinary Advisory Board and Panel of Independent Third Party Veterinarians since July 2007 and as a director of APIC since May 2007. In addition, he has served as the Chairman of Medi-productions SAS, a veterinary media company, since July 2013, and as a principal of companies affiliated with Yorkshire Homes, Inc., a real property management company, since April 2006. Previously, he was a practicing veterinarian and veterinary practice owner for 25 years. He is a member of the Royal College of Veterinary Surgeons and the Association of Corporate Directors. Dr. Beaumont received an M.B.A. from New York University’s Stern Business School and earned an M.R.C.V.S. and a B.V.M. S. from the University of Edinburgh, Scotland. Dr. Beaumont was chosen to serve on our board of directors based on his significant experience as a board member of several veterinary organizations and pet services companies, his deep understanding of our industry as a practicing veterinarian and his continuing involvement in various aspects of the veterinary profession.
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, most recently as Senior Vice President of RenaissanceRe Ventures Ltd. and Renaissance Underwriting Managers, Ltd., and as a Director of DaVinci Reinsurance Ltd. since June 2010. 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 upon his experience advising insurance and high-growth companies and his financial and investment expertise.
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
 
107

Table of Contents
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, zulily, inc., various private consumer companies and two 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 an A.B. 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 financial expertise.
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.
Glenn Novotny has served as a member of our board of directors since February 2013. Mr. Novotny has been an Operating Partner Telegraph Hill Partners, a private equity firm investing in life science and healthcare companies, since February 2008. Previously, Mr. Novotny held key management positions, including most recently, Chief Executive Officer, and served as a member of the board of directors at Central Garden & Pet Company, a lawn and garden and pet supplies company. Prior to that, he served in a number of operating, strategic planning, sales and executive management roles with Weyerhaeuser Company. 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 and his extensive experience serving on various boards of directors.
Edward Philip has served as a member of our board of directors since October 2011. Mr. Philip has served as Chief Operating Officer at Partners in Health, a nonprofit corporation, since January 2013, and as a director of Partners in Health since September 2006. Mr. Philip is currently Special Partner of the Highland Consumer Fund, an investment fund focusing on consumer-facing businesses, where he was a Managing General Partner from September 2006 to December 2012. Prior to joining Highland Consumer Fund, he was a co-founder of Decision Matrix Group. Previously, Mr. Philip was one of the founding members of Lycos, Inc., serving at various times as President, Chief Operating Officer and Chief Financial Officer. He also serves on the board of directors of Hasbro, Inc. and Bombardier Recreational Products, Inc. Mr. Philip holds an M.B.A. from Harvard Business School and a B.S. from Vanderbilt University. Mr. Philip was chosen to serve on our board of directors based on his experience as an entrepreneur, operating executive and investor in many consumer product and service businesses.
Howard Rubin has served as a member of our board of directors since March 2010. Mr. Rubin also 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 the 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.
 
108

Table of Contents
Election of Officers
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.
Codes of Business Conduct and Ethics
Our board of directors will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The full text of our code of conduct will be posted on the investor relations section of our website. The reference to our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus. We intend to disclose future amendments to certain provisions of our code of conduct, or waivers of these provisions, on our website or in public filings.
Board Composition
Our board of directors may establish the authorized number of directors from time to time by resolution. Our board of directors currently consists of nine members. Six of our directors are independent within the meaning of the independent director guidelines of the New York Stock Exchange. Our current certificate of incorporation and shareholders agreement among us and certain of our investors provide for (i) one director to be designated by Darryl Rawlings for so long as Mr. Rawlings, together with his affiliates, holds at least 20% of the shares that were held by him on the effective date of the shareholders agreement; (ii) six directors to be designated by holders of a majority of our Series A and Series B convertible preferred stock, voting together as a single class; (iii) one director to be designated by Highland Consumer Fund I Limited Partnership; (iv) one director to be the then-current Chief Executive Officer for so long as he or she holds such position; and (v) one director to be the then-current Chief Operating Officer for so long as he or she holds such position. Dr. Low is the designee of Mr. Rawlings; Dr. Beaumont and Messrs. Doak, Levitan, Novotny and Lindsley are the designees of holders of a majority of our Series A and Series B convertible preferred stock, voting together as a single class; and Mr. Philip is the designee of Highland Consumer Fund I Limited Partnership. Mr. Rawlings serves as the director who is our current Chief Executive Officer.
The shareholders agreement and the provisions of our certificate of incorporation by which all of our current directors were elected will terminate upon, and no contractual obligations regarding the election of our directors will remain following, the completion of this offering. Each of our current directors will continue to serve until the election and qualification of his successor, or his earlier death, resignation or removal.
Classified Board of Directors
Upon the completion of this offering, our board of directors will be divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors will be divided among the three classes as follows:
 
 	•	 	the Class I directors will be Messrs. Lindsley, Novotny and Philip, and their terms will expire at the annual meeting of stockholders to be held in 2015;	
 
 	•	 	the Class II directors will be Messrs. Beaumont, Doak and Rawlings, and their terms will expire at the annual meeting of stockholders to be held in 2016; and	
 
 	•	 	the Class III directors will be Dr. Low and Messrs. Levitan and Rubin, and their terms will expire at the annual meeting of stockholders to be held in 2017.	
Each director’s term will continue until the election and qualification of his successor, or his earlier death, resignation or removal. Our restated certificate of incorporation and restated bylaws, as we expect them to be in effect upon the completion of this offering, will authorize only our board of directors to fill director vacancies.
 
109

Table of Contents
Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. See “Description of Capital Stock—Anti-Takeover Provisions—Restated Certificate of Incorporation and Restated Bylaw Provisions.”
Director Independence
In connection with this offering, we have applied to list our common stock on the New York Stock Exchange. Under the rules of the New York Stock Exchange, independent directors must comprise a majority of a listed company’s board of directors within a specified period of the completion of this offering. In addition, the rules of the New York Stock Exchange require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the rules of the New York Stock Exchange, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other committee of our board of directors (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 prior to the completion of this offering.
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 compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our board of directors determined that Dr. Low and Messrs. Doak, Levitan, Lindsley, Novotny and Philip, representing six of our nine directors, are “independent directors” as defined under the applicable rules and regulations of the Securities and Exchange Commission (SEC) and the listing requirements and rules of the New York Stock Exchange. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to 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 the transactions involving them described in the section entitled “Certain Relationships and Related-Party Transactions.”
Committees of the Board of Directors
Our board of directors has an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below upon the completion of this offering. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Our board of directors has established corporate governance guidelines in connection with this offering, which state that when the Chairman and Chief Executive Officer positions are held by the same person, a lead independent director shall be designated. Because Mr. Rawlings is our Chief Executive Officer and Dr. Low is our Chairman, we do not have a lead independent director.
Audit Committee
Our audit committee is comprised of Messrs. Lindsley, Novotny and Philip. Mr. Novotny is the chairman of our audit committee. The composition of our audit committee meets the requirements for independence under the
 
110

Table of Contents
current New York Stock Exchange and SEC rules and regulations. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Mr. Philip 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. 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 proxy statement.	
Compensation Committee
Our compensation committee is comprised of Messrs. Levitan and Lindsley and Dr. Low. Mr. Lindsley is the chairman of our compensation committee. The composition of our compensation committee meets the requirements for independence under the current New York Stock Exchange 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. 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.	
Nominating and Governance Committee
Our nominating and governance committee is comprised of Messrs. Doak and Levitan and Dr. Low. Dr. Low is the chairman of our nominating and governance committee. Our nominating and governance committee’s principal functions include, among other things:
 
 	•	 	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.	
Compensation Committee Interlocks and Insider Participation
None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during the fiscal year ended December 31, 2013.
Non-Employee Director Compensation
The non-employee members of our board of directors who are not affiliated with our significant stockholders generally receive a stock option award upon commencement of their service as a director. The following table presents the total compensation for each person who served as a non-employee member of our board of directors
 
111

Table of Contents
in the year ended December 31, 2013. Other than as set forth in the table, in the year ended December 31, 2013, we did not pay any fees to, reimburse any expenses of, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our board of directors. Mr. Rawlings, our Chief Executive Officer, and Mr. Rubin, our former Chief Operating Officer, received no compensation for their service as directors in the year ended December 31, 2013.

NAME (1)	  	OPTION
AWARDS   (2)	 	 	STOCK
AWARDS   (2)	 	 	ALL OTHER
COMPENSATION	 	 	TOTAL	 	
Peter R. Beaumont	  	$	—  	  	 	$	7,788	(3)  	 	$	78,095	(4)  	 	$	85,883	  	
Murray Low	  	 	106,313	(5)  	 	 	—  	  	 	 	—  	  	 	 	106,313	  	

(1)	Darrell Cavens, Dan Levitan, H. Hays Lindsley, Glenn Novotny and Edward Philip also served as non-employee members of our board of directors in 2013. None of these directors were paid any compensation during 2013, nor did they hold any outstanding options to purchase shares of our common stock as of December 31, 2013, except for Mr. Novotny, who held options to purchase 50,000 shares of common stock at an exercise price of $1.04 per share. Mr. Cavens resigned from our board of directors in May 2014.	
(2)	The amounts reported in these columns represent the aggregate grant date fair value of the stock options and restricted stock granted to our directors during the year ended December 31, 2013, 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 elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these stock options and the restricted stock, and do not correspond to the actual economic value that may be received by our directors from the stock options and restricted stock shares.	
(3)	On February 4, 2013, our board of directors granted Dr. Beaumont 1,923 shares of common stock in connection with his services rendered as a member of our veterinary advisory board. As of December 31, 2013, Dr. Beaumont held options outstanding to purchase 56,303 shares of common stock at an exercise price of $1.04 per share.	
(4)  	Represents compensation paid to Dr. Beaumont for consulting services and the reimbursement of related expenses.	
(5)	On February 4, 2013, our board of directors granted Dr. Low options to purchase 26,250 shares of common stock at an exercise price of $4.05 per share, of which Dr. Low exercised 17,500 shares in December 2013. As of December 31, 2013, Dr. Low held options outstanding to purchase 8,750 shares of common stock at an exercise price of $4.05 per share.	
Following the completion of this offering, we intend to adopt a policy regarding the compensation of our non-employee directors.
 
112

Table of Contents
 EXECUTIVE COMPENSATION
The following tables and accompanying narrative disclosure set forth information about the compensation provided to our Chief Executive Officer, Chief Financial Officer and former Chief Operating Officer during the fiscal year ended December 31, 2013. These executive officers, who include our principal executive officer and the two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers as of the end of the fiscal year ended December 31, 2013, were:
 
 	•	 	Darryl Rawlings, Chief Executive Officer;	
 
 	•	 	Michael Banks, Chief Financial Officer; and	
 
 	•	 	Howard Rubin, former Chief Operating Officer.	
We refer to these individuals in this section as our “named executive officers.”
2013 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to, earned by and paid to our named executive officers during the fiscal year ended December 31, 2013.

NAME AND PRINCIPAL POSITION	  	SALARY	 	  	OPTION
AWARDS   (1)	 	  	STOCK
AWARDS  (1)	 	  	NON-EQUITY
INCENTIVE
COMPENSATION	 	  	TOTAL	 	
Darryl Rawlings,
Chief Executive Officer	  	$	320,960	  	  	 	—  	  	  	$	3,345,020	  	  	$	203,119	  	  	$	3,869,099	  	
						
Michael Banks,
Chief Financial Officer	  	$	250,723	  	  	$	260,286	  	  	 	—  	  	  	$	87,520	  	  	$	598,529	  	
						
Howard Rubin,
Former Chief Operating Officer (2)	  	$	300,722	  	  	 	—  	  	  	 	—  	  	  	$	147,393	  	  	$	448,115	  	

(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 year ended December 31, 2013, 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 this prospectus. 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 received by our named executive officers from the stock options and restricted stock.	
(2)	Mr. Rubin’s employment with our company ended in May 2014.	
2013 Non-Equity Incentive Plan Awards
Annual bonuses for our executive officers are based on the achievement of quarterly corporate performance objectives, which in 2013 included net new pet enrollment, profitability measures, cashflow, member retention rates, development and execution of Trupanion Express and veterinarian and Territory Partner satisfaction. The annual bonuses awarded to Messrs. Banks and Rubin were also based on individual performance objectives. In February 2014, based on the achievement of these quarterly corporate performance and individual objectives, our Chief Executive Officer, except with respect to his own compensation, and our compensation committee determined that approximately 70% of each executive officer’s target bonus should be awarded. For 2013, Messrs. Rawlings, Banks and Rubin had target bonuses equal to 100%, 50% and 67% of their annual base salaries. Accordingly, Messrs. Rawlings, Banks and Rubin were awarded the annual bonuses reflected in the table above.
 
113

Table of Contents
2013 Equity Awards
In August 2013, our board of directors, in its discretion, granted Mr. Rawlings a restricted stock award of 701,262 shares of our common stock and Mr. Banks an option to purchase 100,000 shares of our common stock with an exercise price of $4.77 per share, each for services performed during 2013. Subject to the completion of this offering, approximately 17% of Mr. Rawlings’ restricted stock will vest on August 2, 2014 and approximately 17% will vest annually thereafter. Mr. Banks’ stock option will vest with respect to 25% of the underlying shares on June 28, 2014 and approximately 2% monthly thereafter.
2013 Outstanding Equity Awards at Fiscal Year-End Table
The following table presents, for each of our named executive officers, information regarding outstanding stock options and other equity awards held as of December 31, 2013.

 	 	OPTION AWARDS	 	 	STOCK AWARDS	
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)  	 	 	174,194	  	 	 	135,485	  	 	$	1.04	  	 	 	9/23/2021	  	 				 		
	 	 	8/2/2013	(5)  	 				 				 				 				 	 	701,262	  	 		
Michael Banks	 	 	6/21/2012	(6)  	 	 	75,000	  	 	 	125,000	  	 	$	4.05	  	 	 	6/21/2022	  	 				 		
	 	 	8/2/2013	(7)  	 	 	—  	  	 	 	100,000	  	 	$	4.77	  	 	 	8/2/2023	  	 				 		
Howard Rubin	 	 	3/16/2010	(8)  	 	 	472,847	  	 	 	315,232	  	 	$	1.04	  	 	 	3/16/2020	  	 				 		

(1)	All of the outstanding equity awards were granted under our 2007 Equity Compensation Plan.	
(2)	The market price for our common stock is based on the assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus.	
(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% vests monthly thereafter.	
(5)	Subject to the completion of this offering, approximately 17% of these restricted shares vests on August 2, 2014 and approximately 17% vests annually 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 vests on June 28, 2014 and approximately 2% vests monthly thereafter.	
(8)	Twenty percent of the shares underlying this option initially vested on February 1, 2011 and 20% initially vested annually thereafter. Pursuant to the terms of an amended and restated stock option agreement entered into in May 2014 in connection with Mr. Rubin’s departure as Chief Operating Officer, the final 20% of the shares underlying this option vests on July 1, 2014.	
Employment Agreements
We entered into employment agreements with each of our named executive officers in connection with the commencement of their employment with us. Typically, these agreements provide for at-will employment and include the initial base salary, a discretionary annual incentive bonus opportunity and standard employee benefit plan participation. These agreements also provide for a recommended equity award grant to be submitted to our board of directors for approval, with an exercise price, in the case of stock options, equal to the fair market value
 
114

Table of Contents
of our common stock on the date of grant and subject to our specified vesting requirements. These employment agreements were each subject to execution of our standard confidential information and invention assignment agreement or directly contained provisions regarding confidentiality and invention assignment therein.
Darryl Rawlings
We entered into an employment agreement with Mr. Rawlings, our Chief Executive Officer, on June 30, 2006, which was amended and restated on April 20, 2007. Pursuant to the amended and restated employment agreement, Mr. Rawlings’ initial base salary was established at $200,000 per year, subject to adjustment by our board of directors or compensation committee. In addition, Mr. Rawlings was initially eligible to receive an annual target bonus of up to 60% of his base salary based on the achievement of company and personal objectives. On December 4, 2008, in accordance with the terms of his amended and restated employment agreement, Mr. Rawlings was granted a stock option to purchase 832,680 shares of our common stock at an exercise price of $0.90 per share. This option vested over a four-year period on a monthly basis in equal increments. Under Mr. Rawlings’ amended and restated employment agreement, he is also subject to covenants against competition with us and solicitation of our customers, clients, employees or other service providers for a period of 12 months following the termination of employment.
If we terminate Mr. Rawlings’ employment without “cause,” he is entitled to receive continued payment of his base salary for a period equal to the lesser of six months or through the end of the current term of his employment agreement, 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 nine months of a “change 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 vesting 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; provided, however, to the extent that such violation is subject to cure, Mr. Rawlings shall have an opportunity to cure such violation within 10 days following written notice of such violation; (v) after 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 breach 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 license 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 share 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 10 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’ initial base salary was established at $225,000 per year,
 
115

Table of Contents
subject to adjustment by our board of directors. In addition, Mr. Banks was initially eligible to receive an annual target bonus of $100,000 based on the achievement of company and personal objectives. On June 21, 2012, in accordance with the terms of his employment agreement, Mr. Banks was granted a stock option to purchase 200,000 shares of our common stock at an exercise price of $4.05 per share. This option vests over a four-year period with 25% of the shares subject to the option vesting on the one-year anniversary of the initial vesting commencement date, and the remaining shares vesting in equal monthly increments thereafter.
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 and accelerated vesting of 100% of the shares underlying his then-unvested options.
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 results in the holders of our voting securities outstanding immediately prior to such merger or consolidation failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of our voting securities or such surviving entity outstanding immediately after such merger or consolidation; or (iv) our dissolution or liquidation.
Howard Rubin
We entered into an employment agreement with Mr. Rubin, our former Chief Operating Officer, on February 1, 2010. Pursuant to the employment agreement, Mr. Rubin’s initial base salary was established at $300,000 per year, subject to adjustment by our board of directors. In addition, Mr. Rubin was eligible to receive an annual target bonus of up to 67% of his then-current annual base salary based on the achievement of company and personal objectives. On March 16, 2010, in accordance with the terms of his employment agreement, Mr. Rubin was granted a stock option to purchase 788,079 shares of our common stock at an exercise price of $1.04 per share. This option initially vested in equal annual increments over a five-year period. Under Mr. Rubin’s employment agreement, he was also subject to covenants against competition with us and solicitation of our customers, clients, employees or other service providers for a period of 12 months following the termination of employment.
If we terminated Mr. Rubin’s employment without “cause,” or Mr. Rubin resigned for “good reason,” he was entitled to receive a severance payment equivalent to one year of his then current base salary, in addition to
 
116

Table of Contents
standard entitlements such as earned but unpaid wages, including any bonus he was otherwise entitled to, reimbursement for unpaid expenses incurred and payment of other vested benefits, continued COBRA benefit coverage and accelerated vesting of 100% of the then-unvested shares underlying options that would have otherwise vested within one year of Mr. Rubin’s termination.
Upon a “change of control,” Mr. Rubin was entitled to receive accelerated vesting of 100% of the shares underlying his then-unvested options.
Under Mr. Rubin’s employment agreement, “cause” meant (i) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Mr. Rubin with respect to his obligations or otherwise relating to our business; (ii) any acts or conduct by Mr. Rubin that were materially adverse to our interests; (iii) Mr. Rubin’s material breach of his employment agreement; (iv) Mr. Rubin’s disclosure or misuse of breach of our confidential information; (v) Mr. Rubin’s 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 impacted his ability to effectively perform his duties under his employment agreement; or (vi) Mr. Rubin’s willful neglect of duties as reasonably determined by our board of directors.
Under Mr. Rubin’s employment agreement, “good reason” meant (i) our material breach of his employment agreement; (ii) our relocation more than 50 miles outside of Seattle; (iii) material diminution in title, authority, duties or responsibilities; (iv) failure to be on our board of directors during his employment; and (v) a “change in control.”
Under Mr. Rubin’s employment agreement, “change in control” meant our merger or consolidation with or into another corporation or any other entity or the exchange of substantially all of our outstanding stock for shares of another entity or other property in which, after any such transaction our prior stockholders owned less than 50% of the voting shares of the continuing or surviving entity, or in the event of the sale of all or substantially all of our assets.
In May 2014, Mr. Rubin’s employment with us ended, and we entered into a consulting agreement with him. For more information about the terms of the consulting agreement, see “Certain Relationships and Related-Party Transactions—Consulting Arrangements.”
Employee Benefit and Incentive Plans
2007 Equity Compensation Plan
Our board of directors and stockholders adopted our 2007 Equity Compensation Plan (2007 Plan) in December 2008. The 2007 Plan provides 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, own 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.
As of March 31, 2014, we had reserved 7,376,362 shares of our common stock for issuance under our 2007 Plan, of which 718,453 were unissued and remained available for future grant. We will cease issuing awards under the
 
117

Table of Contents
2007 Plan upon the implementation of our 2014 Equity Incentive Plan (2014 Plan). Our 2014 Plan will become effective on the date immediately prior to the date of this prospectus. As a result, we will not grant any additional options under the 2007 Plan following that date, and the 2007 Plan will terminate at that time. The outstanding options and restricted stock granted under the 2007 Plan will, however, remain outstanding, subject to 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. Options and restricted stock granted under the 2007 Plan have similar terms to those described below with respect to such awards to be granted under our 2014 Plan.
2014 Equity Incentive Plan
Our board of directors adopted our 2014 Plan in June 2014, which will become effective on the date immediately prior to the date of this prospectus and will serve 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. The number of shares reserved for issuance under our 2014 Plan will increase automatically on January 1 of each of the calendar years 2015 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. Our board of directors or compensation committee may, however, reduce the amount of the increase in any particular year. In addition, the following shares will again be available for grant and issuance under our 2014 Plan:
 
 	•	 	shares subject to options or stock appreciation rights (SARs) granted under our 2014 Plan that cease 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 are subsequently forfeited or repurchased by us at the original issue price;	
 
 	•	 	shares subject to awards granted under our 2014 Plan that otherwise terminate 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 the date of this prospectus;	
 
 	•	 	shares issuable upon the exercise of options or subject to other awards under our 2007 Plan prior to the date of this prospectus that cease to be subject to such options or other awards by forfeiture or otherwise after the date of this prospectus;	
 
 	•	 	shares issued under our 2007 Plan that are forfeited or repurchased by us after the date of this prospectus; and	
 
 	•	 	shares subject to awards under our 2007 Plan that are 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), 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 are designed to help ensure that any deductions to which we would otherwise be entitled with respect to such awards will not be subject 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.
 
118

Table of Contents
Our 2014 Plan permits the grant of performance-based stock and cash awards that may qualify as performance-based compensation that is not subject 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. 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.
Our 2014 Plan will be 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 will have 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 will provide 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.
We anticipate that in general, options granted under our 2014 Plan will vest over a four-year period. 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.
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 will be determined by the compensation committee. Unless otherwise determined by the compensation committee at the time of award, vesting will 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 a RSU has not been forfeited, then on the date specified in the RSU agreement, we will 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.
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 reprice 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 repricing under generally accepted accounting principles, with the consent of any adversely affected participant.
 
119

Table of Contents
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 will accelerate in full and expire upon the merger or consolidation.
Our 2014 Plan will terminate ten years from the date our board of directors approves the plan, 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.
2014 Employee Stock Purchase Plan
We have 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 following the completion of this offering. Purchases will 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 will increase automatically on January 1 of each of the first nine calendar years following the first offering date by the number of shares equal to the greater of 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 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 shares of our common stock.
Our compensation committee will administer our 2014 ESPP. Our U.S. employees generally are eligible to participate in our 2014 ESPP if they are employed by us for more than 20 hours per week and more than five months in a calendar year. Employees who are 5% stockholders, or would become 5% stockholders as a result 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 tenth 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 employee is enrolled, participation will be automatic in subsequent purchase periods. An employee’s participation automatically ends upon termination of employment for any reason.
 
120

Table of Contents
While the 2014 ESPP is in effect, our compensation committee will determine the duration and commencement date of each offering period, which will be no longer than 27 months, except as otherwise provided by an applicable subplan. The initial offering period will commence on a date determined by our compensation committee.
No participant will have the right to purchase shares of common stock in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the same calendar year(s), that has a fair market value of more than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in which that right is outstanding. In addition, no participant will be permitted to purchase more than 2,000 shares during any one purchase period or such lesser amount determined by our compensation committee. The purchase price for shares of our common stock purchased under our 2014 ESPP will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period.
If we experience a change in control transaction, each outstanding right to purchase shares under our 2014 ESPP may be assumed or an equivalent purchase right substituted by the successor corporation. In the event that the successor corporation refuses to assume or substitute the outstanding purchase rights, any offering period that commenced prior to the closing of the proposed change in control transaction will be shortened and terminated on a new purchase date. The new purchase date will occur prior to the closing of the proposed change in control transaction and our 2014 ESPP will then terminate on the closing of the proposed change in control transaction.
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.
Limitations on Liability and Indemnification Matters
Our restated certificate of incorporation, as we expect it to be in effect upon the completion of this offering, contains provisions that will limit the liability of our directors for monetary damages to the fullest extent permitted by the Delaware General Corporation Law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
 
 	•	 	any breach of the director’s duty of loyalty to us or our stockholders;	
 
 	•	 	any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;	
 
 	•	 	unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or	
 
 	•	 	any transaction from which the director derived an improper personal benefit.	
Our restated certificate of incorporation and our restated bylaws, as we expect them to be in effect upon the completion of this offering, will require us to indemnify our directors and officers to the maximum extent permitted by the Delaware General Corporation Law and allow us to indemnify other employees and agents as provided for in the Delaware General Corporation Law. Our restated bylaws will also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted, subject to very limited exceptions.
 
121

Table of Contents
We also entered into indemnification agreements with our directors and executive officers and certain key employees that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements require us, among other things, to indemnify our directors, executive officers and key employees against liabilities that may arise by reason of their status or service. These indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers. Prior to the completion of this offering, we also intend to obtain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties. Such provisions may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
122

Table of Contents
 CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
We describe below transactions and series of similar transactions, during our last three fiscal years, to which we were a party or will be a party, in which:
 
 	•	 	the amounts involved exceeded or will exceed $120,000; and	
 
 	•	 	any of our directors, executive officers or beneficial holders of more than 5% of any class of our capital stock had or will have a direct or indirect material interest.	
Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which are described where required under “Executive Compensation.”
Financing Transactions
Series C Convertible Preferred Stock Financing and Tender Offer
In October 2011, we sold an aggregate of 2,185,825 shares of our Series C convertible preferred stock at a purchase price of $4.1609 per share for an aggregate purchase price of approximately $9.1 million. The following table summarizes the Series C convertible preferred stock purchased in October 2011 by members of our board of directors and persons who hold more than 5% of our outstanding capital stock.

NAME OF STOCKHOLDER	  	SHARES OF SERIES C
CONVERTIBLE
PREFERRED STOCK	 	  	TOTAL PURCHASE
PRICE	 	
Entities affiliated with Highland Consumer Fund (1)	  	 	1,705,160	  	  	$	7,095,000	  	
Entities affiliated with Maveron (2)	  	 	480,665	  	  	 	2,000,000	  	

(1)  	Consists of shares held by Highland Consumer Entrepreneurs Fund I Limited Partnership (Highland Consumer Entrepreneurs), shares held by Highland Consumer Fund I Limited Partnership (Highland Consumer I) and shares held by Highland Consumer Fund I-B Limited Partnership (Highland Consumer IB, and together with Highland Consumer Entrepreneurs and Highland Consumer I, the Highland Consumer Entities). Highland Consumer GP GP LLC (HC LLC) is the general partner of Highland Consumer GP Limited Partnership (HC LP), which is the general partner of the Highland Consumer Entities. Edward Philip, a member of our board of directors, was formerly a Managing General Partner and is currently a Special Partner of the Highland Consumer Fund, which is affiliated with the Highland Consumer Entities.	
(2)  	Consists of shares held by Maveron Equity Partners III, L.P. (Maveron Equity), shares held by Maveron III Entrepreneurs’ Fund L.P. (Maveron Entrepreneurs) and shares held by MEP Associates III, L.P. (MEP, and together with Maveron Equity and Maveron Entrepreneurs, the Maveron Entities). Maveron General Partners III LLC (Maveron LLC) is the general partner of each of the Maveron Entities. Dan Levitan, a member of our board of directors, is one of the managing members of Maveron LLC and, as such, shares voting and investment power over the shares held by the Maveron Entities.	
In November 2011, shortly after closing the first sale of our Series C convertible preferred stock, we launched a tender offer in which we made offers to our existing stockholders to (i) redeem up to 1,445,783 outstanding shares of our common stock, Series A convertible preferred stock and Series B convertible preferred stock at $4.15 per share for up to $6 million in the aggregate and (ii) sell up to 1,659,497 additional shares of our Series C convertible preferred stock, at a purchase price of $4.1609 per share, for a maximum aggregate of $16 million.
Pursuant to redemption agreements we entered into, certain of our executive officers sold shares in the tender offer, including Mr. Low, who sold 25,000 shares of common stock to us for aggregate proceeds of $103,750, and Mr. Rawlings, who sold 252,839 shares of common stock to us for aggregate proceeds of approximately $1.0 million. An aggregate of 1,218,074 shares were tendered pursuant to the tender offer for an aggregate purchase price of approximately $5.1 million.
 
123

Table of Contents
Upon closing of the tender offer, we sold an additional 1,659,497 shares of our Series C convertible preferred stock in January 2012 and April 2012 at a purchase price of $4.1609 per share for an aggregate purchase price of approximately $6.9 million. The following table summarizes the Series C convertible preferred stock purchased in January 2012 or April 2012 by current and former members of our board of directors and persons who hold more than 5% of our outstanding capital stock.

NAME OF STOCKHOLDER	  	SHARES OF SERIES C
CONVERTIBLE
PREFERRED STOCK	 	  	TOTAL PURCHASE
PRICE	 	
Entities affiliated with Highland Consumer Fund (1)	  	 	1,359,080	  	  	$	5,654,996	  	
Entities affiliated with Maveron (2)	  	 	162,381	  	  	 	675,651	  	
Peter R. Beaumont (3)	  	 	24,033	  	  	 	99,999	  	
Glenn Novotny (3)	  	 	6,008	  	  	 	24,999	  	
Darrell Cavens (3)	  	 	3,604	  	  	 	14,996	  	

(1)  	Consists of shares held by Highland Consumer Entrepreneurs, shares held by Highland Consumer I and shares held by Highland Consumer IB. HC LLC is the general partner of HC LP, which is the general partner of the Highland Consumer Entities. Edward Philip, a member of our board of directors, was formerly a Managing General Partner and is currently a Special Partner of the Highland Consumer Fund, which is affiliated with the Highland Consumer Entities.	
(2)	Consists of shares held by Maveron Equity, shares held by Maveron Entrepreneurs and shares held by MEP. Maveron LLC is the general partner of each of the Maveron Entities. Dan Levitan, a member of our board of directors, is one of the managing members of Maveron LLC and, as such, shares voting and investment power over the shares held by the Maveron Entities.	
(3)  	Dr. Beaumont and Mr. Novotny are current members of our board of directors. Mr. Cavens resigned from our board of directors in May 2014.	
Each share of our Series C convertible preferred stock will convert automatically into one share of our common stock upon the completion of this offering. The purchasers of our Series C convertible preferred stock are entitled to specified registration rights. See “Description of Capital Stock—Registration Rights.”
PEPI Capital, L.P. Loan
In December 2013, we entered into a credit agreement with PEPI Capital, L.P. (PEPI), pursuant to which PEPI loaned us $12.0 million for working capital purposes. In connection with the credit agreement, we issued PEPI a warrant to purchase 748,440 shares of our common stock at an exercise price of $4.81 per share, which number of shares and exercise price are subject to adjustment by the warrant’s terms. PEPI is one of our stockholders, and in February 2014, PEPI transferred $2.0 million of this loan and a portion of this warrant to purchase up to 124,739 shares of our common stock to the Highland Consumer Entities. The Highland Consumer Entities together own more than 5% of our outstanding capital stock, and Edward Philip, a member of our board of directors, was formerly a Managing General Partner and is currently a Special Partner of the Highland Consumer Fund, which is affiliated with the Highland Consumer Entities. For more information regarding the PEPI loan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-Term Debt—PEPI Capital, L.P. Credit Agreement.” For more information regarding the PEPI warrant, see “Description of Capital Stock—Warrants—Common Stock Warrant.”
Consulting Arrangements
On May 5, 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’s employment with us ended effective May 1, 2014. From such date through December 31, 2014, Mr. Rubin is eligible to receive health and dental insurance coverage from us. Additionally, all of Mr. Rubin’s unvested stock options as of his separation date will vest on the earlier of July 1, 2014 or Mr. Rubin’s death or disability, and he will be permitted to exercise his stock options for a period of 12 months after his separation date. The consulting
 
124

Table of Contents
agreement also provides that we and Mr. Rubin intend for him to continue to serve as a member of our board of directors through the term of his consulting agreement, and, after July 1, 2015, Mr. Rubin will be eligible to receive compensation for his services as a director. Mr. Rubin also agreed to provide consulting services to us, which consist of his attendance on our behalf at trade shows and conferences. From May 1, 2014 through July 1, 2015, Mr. Rubin will be paid a monthly fee of $28,500 for up to 100 aggregate days spent consulting. From July 1, 2015 through July 1, 2017, he will be compensated $5,000 per day spent consulting, but will not be compensated for fewer than 40 days spent consulting during this period. The consulting agreement will terminate on July 1, 2017.
Since 2003, 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 years ended December 31, 2011, 2012 and 2013, we paid David Rawlings approximately $235,000, $268,000 and $310,000 for his services as a Territory Partner.
Amended and Restated Registration Rights Agreement
We have entered into an amended and restated registration rights agreement with certain holders of our convertible preferred stock and our exchangeable shares, including entities with which certain of our directors are affiliated. These stockholders are entitled to rights with respect to the registration of their shares following our initial public offering under the Securities Act. For a description of these registration rights, see “Description of Capital Stock—Registration Rights.”
Indemnification Agreements
We also entered into indemnification agreements with our directors and executive officers and certain key employees that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements and our restated certificate of incorporation and restated bylaws, as we expect there to be in effect upon the completion of this offering, will require us to indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Subject to certain very limited exceptions, our restated bylaws will also require us to advance expenses incurred by our directors and officers. For more information regarding these agreements, see “Executive Compensation—Limitations on Liability and Indemnification Matters.”
Policies and Procedures for Related-Party Transactions
We intend to adopt a written related-person transactions policy that will provide 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. We expect the policy to provide 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.
Although we have not had a written policy for the review and approval of transactions with related persons, our board of directors has historically reviewed and approved transactions where a director or officer had a financial interest. Prior to approving such a transaction, the material facts as to a director’s or officer’s relationship or interest as to the agreement or transaction were disclosed to our board of directors. Our board of directors would take this information into account when evaluating the transaction and in determining whether such transaction was fair to us and in the best interest of all of our stockholders.
 
125

Table of Contents
 PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of June 1, 2014, and as adjusted to reflect the sale of common stock in this offering, for:
 
 	•	 	each of our directors;	
 
 	•	 	each of our named executive officers;	
 
 	•	 	all of our current directors and executive officers as a group; and	
 
 	•	 	each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock.	
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
Applicable percentage ownership is based on 19,446,153 shares of common stock outstanding as of June 1, 2014 and assumes (i) the conversion of all outstanding shares of our convertible preferred stock as of June 1, 2014 into an aggregate of 14,944,945 shares of our common stock and (ii) the issuance of 2,247,130 shares of our common stock upon the exchange of all of the outstanding exchangeable shares as of June 1, 2014 of our subsidiary Trupanion Canadian Shareholders, Ltd. For purposes of the table below, we have assumed that we will issue              shares of common stock in this offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options and warrants held by that person or entity that are currently exercisable or that will become exercisable within 60 days of June 1, 2014. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Trupanion, Inc., 907 NW Ballard Way, Seattle, Washington 98107.

   	 	BENEFICIAL
OWNERSHIP
PRIOR TO THIS
OFFERING	 	 	BENEFICIAL
OWNERSHIP
AFTER THIS
OFFERING	
NAME OF BENEFICIAL OWNER	 	NUMBER	 	 	PERCENT	 	 	NUMBER	 	PERCENT	
5% Stockholders:	 				 				 		 		
Entities affiliated with Maveron (1)	 	 	6,553,586	  	 	 	33.7	% 	 		 		
Entities affiliated with Highland Consumer
Fund (2)	 	 	3,064,240	  	 	 	15.8	% 	 		 		
RenaissanceRe Ventures Ltd. (3)	 	 	2,464,380	  	 	 	12.7	% 	 		 		
Directors and Named Executive Officers:	 				 				 		 		
Darryl Rawlings (4)	 	 	2,611,319	  	 	 	12.9	% 	 		 		
Michael Banks (5)	 	 	137,424	  	 	 	* 	  	 		 		
Peter R. Beaumont (6)	 	 	281,343	  	 	 	1.4	% 	 		 		
Michael Doak	 	 	—  	  	 	 	—  	  	 		 		
Dan Levitan (1)	 	 	6,553,586	  	 	 	33.7	% 	 		 		
H. Hays Lindsley (7)	 	 	66,670	  	 	 	* 	  	 		 		
Murray Low (8)	 	 	249,958	  	 	 	1.3	% 	 		 		
Glenn Novotny (9)	 	 	103,248	  	 	 	* 	  	 		 		
Edward Philip	 	 	—  	  	 	 	—  	  	 		 		
Howard Rubin (10)	 	 	788,079	  	 	 	3.9	% 	 		 		
All executive officers and directors as a group (10 persons) (11)	 	 	10,795,231	  	 	 	50.9	% 	 		 		
 
( footnotes appear on following page )
 
126

Table of Contents

*	Represents beneficial ownership of less than one percent.	
(1)  	Consists of (i) 5,556,046 shares held by Maveron Equity Partners III, L.P. (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 Partners 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 investment power over the shares held by the Maveron Entities. The principal business address of each of the Maveron Entities is 411 First Avenue South, Suite 600, Seattle, Washington 98104.	
(2)  	The shares are held directly by Highland Consumer Fund I Limited Partnership (Highland Consumer I), Highland Consumer Fund 1-B Limited Partnership (Highland Consumer IB) and Highland Consumer Entrepreneurs’ Fund I, Limited Partnership (Highland Consumer Entrepreneurs and together with Highland Consumer I and Highland Consumer IB, the Highland Consumer Entities) are indirectly held by Highland Consumer GP Limited Partnership (HC LP), the general partner of the Highland Consumer Entities. Highland Consumer GP GP LLC (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 Consumer Entities, respectively, is deemed to have beneficial ownership of the shares held by the Highland Consumer 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.	
(3)  	RenaissanceRe Ventures Ltd. (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.	
(4)  	Consists of (i) 1,847,372 shares held by Mr. Rawlings, of which 701,262 are shares of unvested restricted stock subject to our right of repurchase, (ii) 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 and (iii) 763,947 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(5)  	Consists of (i) 6,175 shares held by Mr. Banks and (ii) 131,249 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(6)  	Consists of (i) 55,366 shares held by Peter R. Beaumont, (ii) 169,674 shares held by Mary Ruth Beaumont, Dr. Beaumont’s spouse, and (iii) 56,303 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(7)  	Consists of 66,670 shares held by Lindsley Partners, L.P. (Lindsley Partners). 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.	
(8)  	Consists of (i) 178,630 shares held by Murray Low, (ii) 67,500 shares held by Murray R. Low ROTH IRA # 90GK49015 and (iii) 3,828 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(9)  	Consists of (i) 3,004 shares held by Glenn and Linda Novotny 1996 Living Trust, of which Mr. and Mrs. Novotny are beneficiaries, (ii) 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 and (iii) 35,416 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(10)	Consists of 788,079 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014.	
(11)  	Consists of (i) 9,016,409 shares held by our directors and executive officers as a group and (ii) 1,778,822 shares underlying options to purchase common stock that are exercisable within 60 days of June 1, 2014 held by our directors and executive officers as a group.	
 
127

Table of Contents
 DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, $0.00001 par value per share, and 10,000,000 shares of undesignated convertible preferred stock, $0.00001 par value per share. The following description summarizes the most important terms of our capital stock and provisions of our restated certificate of incorporation and restated bylaws that will be in effect upon completion of this offering. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our restated certificate of incorporation and restated bylaws that will be in effect upon the completion of this offering, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
As of March 31, 2014, and after giving effect to (i) the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2014 and 86,956 shares of our Series A convertible preferred stock issued upon the exercise of a warrant in April 2014 into shares of our common stock and (ii) the issuance of shares of our common stock upon the exchange of all of the outstanding exchangeable shares of our subsidiary Trupanion Canadian Shareholders, Ltd., there were outstanding:
 
 	•	 	19,433,716 shares of our common stock held by 95 stockholders of record, of which 714,365 shares were unvested shares of restricted stock subject to our right of repurchase;	
 
 	•	 	4,833,400 shares issuable upon the exercise of outstanding options; and	
 
 	•	 	784,111 shares issuable upon the exercise of outstanding warrants.	
Common Stock
Dividend Rights
Subject to preferences that may apply to any shares of convertible preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See “Dividend Policy” above.
Voting Rights
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. We have not provided for cumulative voting for the election of directors in our restated certificate of incorporation that will be in effect upon completion of this offering. Accordingly, holders of a majority of the shares of our common stock will be able to elect all of our directors. Our restated certificate of incorporation that will be in effect upon completion of this offering establishes a classified board of directors, to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating convertible preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of convertible preferred stock.
 
128

Table of Contents
Convertible Preferred Stock
Pursuant to the provisions of our certificate of incorporation, all of our outstanding convertible preferred stock will convert into common stock, with such conversion to be effective upon the completion of this offering. As a result, each currently outstanding share of convertible preferred stock will be converted into common stock. All series of convertible preferred stock will convert at a ratio of one share of common stock for each share of convertible preferred stock.
Following the completion of this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue convertible preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors may increase or decrease the number of shares of any series of convertible preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of convertible preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of convertible preferred stock.
Options
As of March 31, 2014, we had outstanding options to purchase an aggregate of 4,833,400 shares of our common stock, with a weighted average exercise price of $2.39 per share.
Warrants
Convertible Preferred Stock Warrants
As of March 31, 2014, we had outstanding warrants to purchase an aggregate of 135,672 shares of our convertible preferred stock as described below. Upon the completion of this offering, each of these warrants will convert into warrants to purchase the same number of shares of our common stock. The exercise price of each of these warrants may be paid either in cash or by surrendering the right to receive shares having a value equal to the exercise price. Upon expiration, each of these warrants will automatically convert into that number of shares underlying such warrant, less the number of shares having a value equal to the aggregate exercise price.

CLASS OF SHARES UNDERLYING WARRANT	  	NUMBER OF
SHARES
UNDERLYING
WARRANT	 	  	ISSUANCE
DATE	 	  	EXERCISE
PRICE	 	  	EXPIRATION
DATE	 	
Series A Convertible Preferred Stock (1)	  	 	100,000	  	  	 	4/24/2007	  	  	$	1.50	  	  	 	4/24/2014	  	
Series B Convertible Preferred Stock	  	 	17,647	  	  	 	11/17/2010	  	  	$	1.70	  	  	 	11/17/2017	  	
Series C Convertible Preferred Stock	  	 	7,210	  	  	 	9/4/2012	  	  	$	4.1609	  	  	 	8/24/2019	  	
Series C Convertible Preferred Stock	  	 	10,815	  	  	 	3/28/2013	  	  	$	4.1609	  	  	 	3/28/2020	  	

(1)  	In April 2014, 86,956 shares of Series A convertible preferred stock were issued upon the net exercise of this warrant. As of the date of this prospectus, this warrant is no longer outstanding.	
Common Stock Warrant
As of March 31, 2014, we had warrants outstanding to purchase 748,439 shares of our common stock. These warrants have an initial exercise price of $4.81 per share, subject to adjustment as described below, and will
 
129

Table of Contents
expire on December 23, 2018. If this offering is completed by December 31, 2014, then, upon the completion of this offering, the exercise price of these warrants will become our initial public offering price, and the number of shares for which the warrants will be exercisable will be, in the aggregate, 3,600,000 divided by the exercise price. Based on an assumed initial public offering price of $             per share, the midpoint of the range reflected on the cover page of this prospectus, upon the completion of this offering, these warrants will automatically become warrants to purchase an aggregate of              shares of common stock at an exercise price of $             per share. The exercise price of these warrants may be paid either in cash or by surrendering the right to receive shares having a value equal to the aggregate exercise price. Upon expiration, these warrants will automatically convert into that number of shares underlying such warrants, less the number of shares having a value equal to the aggregate exercise price.
Exchangeable Shares in Canadian Subsidiary
Certain stockholders of our subsidiary Trupanion Canadian Shareholders, Ltd., a company organized under the laws of Alberta, Canada, as of March 31, 2014, held an aggregate of 224,713 exchangeable shares of Trupanion Canadian Shareholders, Ltd. and 2,247,130 shares of our special voting stock. In connection with our 2006 reorganization into the United States, these exchangeable shares and special voting shares were issued to defer the imposition of certain taxes under Canadian law until such time as the stockholders elected to exchange or were required to exchange their exchangeable shares for our common stock. Ten special voting shares are outstanding for every one exchangeable share, which reflects the 10-for-1 forward stock split that occurred in 2009. The exchangeable shares, together with the special voting shares, are intended to be the economic and voting equivalent of the shares of our common stock that are issuable upon the exchange of the exchangeable shares.
Pursuant to our shareholders agreement, upon the completion of this offering, each exchangeable share of Trupanion Canadian Shareholders, Ltd. will automatically be exchanged for ten shares of our common stock, which will trigger a mandatory redemption of each special voting share at $0.00001 per special voting share. This exchange will result in the issuance of an additional 2,247,130 shares of our common stock. The holders of substantially all of the exchangeable shares are subject to lock-up agreements with the underwriters that restrict the sale of our securities for 180 days following the date of this prospectus. See “Underwriting.”
Registration Rights
Following the completion of this offering, the holders of approximately 16.2 million shares of common stock will be entitled to rights with respect to the registration of these shares under the Securities Act. Additionally, the holders of all of our outstanding warrants will be entitled to these rights with respect to shares of common stock issuable upon exercise of their warrants. These rights are provided under the terms of our amended and restated registration rights agreement among us and the holders of these shares and warrants, and include demand registration rights, Form S-3 registration rights and piggyback registration rights. In any registration made pursuant to such amended and restated registration rights agreement, all fees, costs and expenses of underwritten registrations will be borne by us and all selling expenses, including estimated underwriting discounts and selling commissions, will be borne by the holders of the shares being registered.
The registration rights terminate on the earlier to occur of five years following the completion of this offering or, with respect to any such holder, such time when such holder can sell all of his, her or its shares during any 90-day period pursuant to Rule 144 of the Securities Act.
Demand Registration Rights
Under the terms of the amended and restated registration rights agreement, we will be required, upon the written request of holders of at least two-thirds of the shares that are entitled to registration rights, to register, as soon as practicable and in any event within 60 days, all or a portion of these shares for public resale. We are required to
 
130

Table of Contents
effect only one registration pursuant to this provision of the amended and restated registration rights agreement. We may postpone the filing of a registration statement for up to 120 days in a 12-month period if our board of directors determines that the filing would be seriously detrimental to us and our stockholders. We are not required to effect a demand registration under certain additional circumstances specified in the amended and restated registration rights agreement, including at any time earlier than 180 days after the effective date of this offering.
Form S-3 Registration Rights
Any holder of outstanding shares having registration rights can request that we register all or part of his, her or its shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $1.0 million. We are required to file a Form S-3 registration after receipt of such request as soon as practicable and, in any event, within 45 days, subject to limited exceptions. The stockholders may only require us to effect a maximum of two registration statements on Form S-3 during any 12-month period. We may postpone the filing of a registration statement on Form S-3 no more than once during any 12-month period for a total cumulative period of not more than 120 days if our board of directors determines that the filing would be detrimental to us and our stockholders.
Piggyback Registration Rights
If we register any of our securities for public sale, the holders of outstanding shares having registration rights will have the right to include their shares in the registration statement. This right, however, does not apply to a registration relating to shares issued under employee benefit plans, a registration relating to a corporate reorganization or a registration statement related only to stock issued upon conversion of debt securities that are also being registered. The underwriters of any underwritten offering will have the right to limit the number of shares registered by these holders if they determine in good faith that marketing factors require limitation, in which case the number of shares to be registered will be apportioned, first, to us for our own account and, second, pro rata among these holders, according to the total amount of securities entitled to be included by each holder, or in a manner mutually agreed upon by the holders. However, the number of shares to be registered by these holders cannot be reduced below 30% of the total shares covered by the registration statement, other than in the initial public offering.
Anti-Takeover Provisions
The provisions of Delaware law, our restated certificate of incorporation and our restated bylaws, as we expect them to be in effect upon the completion of this offering, could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Delaware Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date on which the person became an interested stockholder unless:
 
 	•	 	prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;	
 
131

Table of Contents

 	•	 	the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or	
 
 	•	 	at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.	
Generally, a business combination includes a merger, asset or stock sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
Restated Certificate of Incorporation and Restated Bylaw Provisions
Our restated certificate of incorporation and our restated bylaws, as we expect them to be in effect upon the completion of this offering, include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our company, including the following:
 
 	•	 	Board of directors vacancies . Our restated certificate of incorporation and restated bylaws will authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.	
 
 	•	 	Classified board . Our restated certificate of incorporation and restated bylaws will provide that our board of directors will be classified into three classes of directors, each with staggered three-year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See “Management—Board Composition.”	
 
 	•	 	Stockholder action; special meetings of stockholders . Our restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Further, our restated bylaws and restated certificate of incorporation will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of our board of directors, our Chief Executive Officer or our President, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.	
 
 	•	 	Advance notice requirements for stockholder proposals and director nominations . Our restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our restated bylaws also will specify certain requirements regarding the form and content	
 
132

Table of Contents

 	of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.	
 
 	•	 	No cumulative voting . The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Neither our restated certificate of incorporation nor our restated bylaws will provide for cumulative voting.	
 
 	•	 	Directors removed only for cause . Our restated certificate of incorporation will provide that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least two-thirds of our outstanding common stock.	
 
 	•	 	Amendment of charter provisions . Any amendment of the above expected provisions in our restated certificate of incorporation would require approval by holders of at least two-thirds of our outstanding common stock.	
 
 	•	 	Issuance of undesignated preferred stock . Our board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.	
 
 	•	 	Choice of forum . Our restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.	
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC. The transfer agent’s address is 6201 15th Avenue, Brooklyn, New York 11219.
Exchange Listing
We have applied to list our common stock on the New York Stock Exchange under the symbol “TRUP.”
 
133

Table of Contents
 MATERIAL U.S. FEDERAL TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section summarizes the material U.S. federal tax considerations relating to the acquisition, ownership and disposition of our common stock by “non-U.S. holders” (as defined below) pursuant to this offering. This summary does not provide a complete analysis of all potential U.S. federal tax considerations relating thereto. The information provided below is based upon provisions of the Internal Revenue Code, as amended (Code), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions currently in effect. These authorities may change at any time, possibly retroactively, or the Internal Revenue Service (IRS), might interpret the existing authorities differently. In either case, the tax considerations of owning or disposing of our common stock could differ from those described below. As a result, we cannot assure you that the tax consequences described in this discussion will not be challenged by the IRS or will be sustained by a court if challenged by the IRS.
This summary does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, the potential application of the Medicare contribution tax or tax considerations arising under U.S. federal gift and estate tax laws (except to the limited extent provided below). In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
 
 	•	 	banks, insurance companies or other financial institutions;	
 
 	•	 	corporations that accumulate earnings to avoid U.S. federal income tax;	
 
 	•	 	persons subject to the alternative minimum tax;	
 
 	•	 	tax-exempt organizations or tax-qualified retirement plans;	
 
 	•	 	real estate investment trusts or regulated investment companies;	
 
 	•	 	controlled foreign corporations or passive foreign investment companies;	
 
 	•	 	persons who acquired our common stock as compensation for services;	
 
 	•	 	dealers in securities or currencies;	
 
 	•	 	traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;	
 
 	•	 	persons that own, or are deemed to own, more than 5% of our capital stock (except to the extent specifically set forth below);	
 
 	•	 	certain former citizens or long-term residents of the United States;	
 
 	•	 	persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction;	
 
 	•	 	persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); or	
 
 	•	 	persons deemed to sell our common stock under the constructive sale provisions of the Code.	
In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the tax treatment of a partner in the partnership or an owner of the entity will depend upon the status of the partner or other owner and the activities of the partnership or other entity. Accordingly, this summary does not address tax considerations applicable to partnerships or other pass-through entities that hold our common stock, and partners in such partnerships or owners of such entities should consult their tax advisors.
 
134

Table of Contents
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE OR LOCAL LAWS, TAX TREATIES AND OTHER TAX CONSIDERATIONS OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF OUR COMMON STOCK.
Non-U.S. Holder Defined
For purposes of this summary, a “non-U.S. holder” is any holder of our common stock, other than a partnership, that is not:
 
 	•	 	an individual who is a citizen or resident of the United States;	
 
 	•	 	a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state therein or the District of Columbia;	
 
 	•	 	a trust if it (i) is subject to the primary supervision of a U.S. court and one of more U.S. persons have authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or	
 
 	•	 	an estate whose income is subject to U.S. income tax regardless of source.	
If you are a non-U.S. citizen and are an individual, you generally may be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For these purposes, all the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to U.S. federal income tax as if they are U.S. citizens. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.
Dividends
We do not expect to declare or make any distributions on our common stock in the foreseeable future. If we do pay dividends on shares of our common stock, however, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a non-U.S. holder’s adjusted tax basis in shares of our common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of our common stock. See “—Sale of Common Stock.”
Any dividend paid to a non-U.S. holder on our common stock that is not effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States will generally be subject to U.S. withholding tax at a 30% rate. The withholding tax may be subject to a reduced rate, under the terms of an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence. You should consult your tax advisors regarding your entitlement to benefits under an applicable income tax treaty. Generally, in order for us or our paying agent to withhold tax at a lower treaty rate, a non-U.S. holder must certify its entitlement to treaty benefits. A non-U.S. holder generally can meet this certification requirement by providing a Form W-8BEN (or any successor form) or appropriate substitute form to us or our paying agent. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to the agent. The holder’s agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS in a timely manner.
 
135

Table of Contents
Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder (and, if required by an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence, are attributable to a permanent establishment maintained by the non-U.S. holder in the United States) are not subject to U.S. withholding tax. To obtain this exemption, a non-U.S. holder must provide us or our paying agent with an IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition to being taxed at graduated tax rates, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.
Sale of Common Stock
Subject to the discussion below regarding the Foreign Account Tax Compliance Act, non-U.S. holders will generally not be subject to U.S. federal income tax on any gains realized on the sale, exchange or other disposition of our common stock unless:
 
 	•	 	the gain (i) is effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business and (ii) if required by an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence, is attributable to a permanent establishment (or, in certain cases involving individual holders, a fixed base) maintained by the non-U.S. holder in the United States (in which case the special rules described below apply);	
 
 	•	 	the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition of our common stock, and certain other requirements are met (in which case the gain would be subject to a flat 30% tax, or such reduced rate as may be specified by an applicable income tax treaty, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States); or	
 
 	•	 	the rules of the Foreign Investment in Real Property Tax Act (FIRPTA) treat the gain as effectively connected with a U.S. trade or business.	
The FIRPTA rules may apply to a sale, exchange or other disposition of our common stock if we are, or were within the shorter of the five-year period preceding the disposition and the non-U.S. holder’s holding period, a “U.S. real property holding corporation” (USRPHC). In general, we would be a USRPHC if interests in U.S. real estate comprised at least half of the value of our business assets. We do not believe that we are a USRPHC and we do not anticipate becoming one in the future. Even if we become a USRPHC, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if beneficially owned by a non-U.S. holder that actually or constructively owned more than 5% of our outstanding common stock at some time within the five-year period preceding the disposition.
If any gain from the sale, exchange or other disposition of our common stock (i) is effectively connected with a U.S. trade or business conducted by a non-U.S. holder and (ii) if required by an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence, is attributable to a permanent establishment (or, in certain cases involving individuals, a fixed base) maintained by such non-U.S. holder in the United States, then the gain generally will be subject to U.S. federal income tax at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. If the non-U.S. holder is a corporation, under certain circumstances, that portion of its earnings and profits that is effectively connected with its U.S. trade or business, subject to certain adjustments, generally would be subject also to a “branch profits tax.” The branch profits tax rate is 30%, although an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence might provide for a lower rate.
 
136

Table of Contents
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise.
Backup Withholding and Information Reporting
The Code and the Treasury regulations require those who make specified payments to report the payments to the IRS. Among the specified payments are dividends and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by “backup withholding” rules. These rules require the payors to withhold tax from payments subject to information reporting if the recipient fails to cooperate with the reporting regime by failing to provide his or her taxpayer identification number to the payor, furnishing an incorrect identification number, or failing to report interest or dividends on his or her returns. The backup withholding tax rate is currently 28%. The backup withholding rules do not apply to payments to corporations, whether domestic or foreign, provided they establish such exemption.
Payments to non-U.S. holders of dividends on common stock generally will not be subject to backup withholding, and payments of proceeds made to non-U.S. holders by a broker upon a sale of common stock will not be subject to information reporting or backup withholding, in each case so long as the non-U.S. holder certifies its nonresident status (and we or our paying agent do not have actual knowledge or reason to know the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied) or otherwise establishes an exemption. The certification procedures to claim treaty benefits described under “—Dividends” will generally satisfy the certification requirements necessary to avoid the backup withholding tax. We must report annually to the IRS any dividends paid to each non-U.S. holder and the tax withheld, if any, with respect to these dividends. Copies of these reports may be made available to tax authorities in the country where the non-U.S. holder resides
Under the Treasury regulations, the payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a U.S. office of a broker generally will be subject to information reporting and backup withholding unless the beneficial owner certifies, under penalties of perjury, among other things, its status as a non-U.S. holder (and the broker does not have actual knowledge or reason to know the holder is a U.S. person) or otherwise establishes an exemption. The payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except as noted below. Information reporting, but not backup withholding, will apply to a payment of proceeds, even if that payment is made outside of the United States, if the holder sells our common stock through a non-U.S. office of a broker that is:
 
 	•	 	a U.S. person (including a foreign branch or office of such person);	
 
 	•	 	a “controlled foreign corporation” for U.S. federal income tax purposes;	
 
 	•	 	a foreign person 50% or more of whose gross income from certain periods is effectively connected with a U.S. trade or business; or	
 
 	•	 	a foreign partnership if at any time during its tax year (a) one or more of its partners are U.S. persons who, in the aggregate, hold more than 50% of the income or capital interests of the partnership or (b) the foreign partnership is engaged in a U.S. trade or business;	
unless the broker has documentary evidence that the beneficial owner is a non-U.S. holder and certain other conditions are satisfied, or the beneficial owner otherwise establishes an exemption (and the broker has no actual knowledge or reason to know to the contrary).
 
137

Table of Contents
Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder of common stock under the backup withholding rules can be credited against any U.S. federal income tax liability of the holder and may entitle the holder to a refund, provided that the required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) will impose a U.S. federal withholding tax of 30% on certain “withholdable payments” (including U.S. source dividends and the gross proceeds from the sale or other disposition of U.S. stock) to foreign financial institutions and other non-U.S. entities that fail to comply with certain certification and information reporting requirements. The obligation to withhold under FATCA is currently expected to apply to, among other items, (i) dividends on our common stock that are paid after June 30, 2014 and (ii) gross proceeds from the disposition of our common stock paid after December 31, 2016.
THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
 
138

Table of Contents
 SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options or warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, we will have a total of              shares of our common stock outstanding, based on the 19,346,760 shares of our capital stock outstanding as of March 31, 2014. Of these outstanding shares, all of the shares of common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act of 1933, as amended (Securities Act), would only be able to be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, substantially all of our security holders have entered into market standoff agreements with us or lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 180 days following the date of this prospectus, as described below. As a result of these agreements, subject to the provisions of Rule 144 or Rule 701, based on an assumed offering date of                     , shares of our common stock will be available for sale in the public market as follows:
 
 	•	 	beginning on the date of this prospectus, all of the shares sold in this offering will be immediately available for sale in the public market; and	
 
 	•	 	beginning 181 days after the date of this prospectus,              additional shares will become eligible for sale in the public market, of which              shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below, and              shares will be unvested and subject to our right of repurchase.	
Lock-Up and Market Standoff Agreements
We, our officers, directors and holders of substantially all of our outstanding securities have agreed, subject to specified exceptions, not to directly or indirectly:
 
 	•	 	sell, offer, contract or grant any option to sell (including, without limitation, any short sale), grant any option, right or warrant to purchase, pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (Exchange Act);	
 
 	•	 	lend or otherwise dispose of, including, without limitation, entering into any swap or other arrangement that transfers, in whole or in part, the economic consequences of the ownership, any shares of our common stock, options, rights or warrants to acquire shares of our common stock, or securities exchangeable or exercisable for or convertible into shares of our common stock currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act); or	
 
 	•	 	publicly announce an intention to do any of the foregoing,	
for a period of 180 days after the date of this prospectus without the prior written consent of RBC Capital Markets, LLC, Barclays Capital Inc. and Stifel, Nicolaus & Company, Incorporated. See “Underwriting—No Sales of Similar Securities.”
 
139

Table of Contents
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, within any 90-day period, a number of shares that does not exceed the greater of:
 
 	•	 	1% of the number of shares of our common stock then outstanding, which will equal approximately                      shares immediately following the completion of this offering; or	
 
 	•	 	the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.	
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
Stock Options
As soon as practicable after the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of our common stock subject to outstanding options and the shares of our common stock reserved for issuance under our stock plans. In addition, we intend to file a registration statement on Form S-8 or such other form as may be required under the Securities Act for the resale of shares of our common stock issued upon the exercise of options that were not granted under Rule 701. We expect to file this registration statement as soon as permitted under the Securities Act. However, the shares registered on Form S-8 will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject. Of the 4,833,400 shares of our common stock that were subject to stock options outstanding as of March 31, 2014, options to purchase 3,014,118 shares of common stock were vested as of March 31, 2014.
Registration Rights
We have granted demand, piggyback and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement, except for shares purchased by affiliates. See “Description of Capital Stock—Registration Rights.”
 
140

Table of Contents
 UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement we intend to enter into with RBC Capital Markets, LLC, Barclays Capital Inc. and Stifel, Nicolaus & Company, Incorporated, as the representatives of the underwriters named below, we will agree to sell to the underwriters, and each of the underwriters will agree, severally and not jointly, to purchase from us, the respective number of shares of common stock shown opposite its name below:

UNDERWRITER	  	NUMBER OF
SHARES	
RBC Capital Markets, LLC	  		
Barclays Capital Inc.	  		
Stifel, Nicolaus & Company, Incorporated	  		
Canaccord Genuity Inc.	  		
Cowen and Company, LLC	  		
	  	 	
Total	  		
	  	 	
The underwriting agreement will provide that the underwriters will purchase all of the shares of common stock, if any of them are purchased, other than the shares of our common stock covered by the option described below unless and until the option is exercised. If an underwriter defaults, the underwriting agreement will provide that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated. We will agree to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act of 1933, as amended (Securities Act), and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
The underwriters have advised us that, following the completion of this offering, they currently intend to make a market in the common stock as permitted by applicable laws and regulations. However, the underwriters are not obligated to do so, and the underwriters may discontinue any market-making activities at any time without notice in their sole discretion. Accordingly, a liquid trading market may not develop for our common stock, you may not be able to sell any of the common stock you hold at a particular time, and the price you receive when you sell the shares you hold may not be favorable.
The underwriters will offer the shares of common stock subject to their acceptance of the shares of common stock from us and subject to prior sale. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. In addition, the underwriters have advised us that they do not expect sales to accounts over which they have discretionary authority to exceed 5% of the common stock being offered.
Commissions and Expenses
The underwriters have advised us that they propose to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers, which may include the underwriters, at that price less a concession not in excess of $             per share of common stock. After the offering, the initial public offering price and the concession to dealers may be reduced by the representatives. No such reduction will change the amount of proceeds to be received by us as set forth on the cover page of this prospectus.
 
141

Table of Contents
The following table shows the public offering price and the underwriting discounts and commissions that we are to pay the underwriters and the proceeds, before expenses, in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

 	  	PER SHARE	 	  	TOTAL	 	
 	  	WITH
OPTION TO
PURCHASE
ADDITIONAL
SHARES	 	  	WITHOUT
OPTION TO
PURCHASE
ADDITIONAL
SHARES	 	  	WITH
OPTION TO
PURCHASE
ADDITIONAL
SHARES	 	  	WITHOUT
OPTION TO
PURCHASE
ADDITIONAL
SHARES	 	
Public offering price	  	$	            	  	  	$	            	  	  	$	            	  	  	$	            	  	
Underwriting discounts and commissions	  	$	 	  	  	$	 	  	  	$	 	  	  	$	 	  	
Proceeds, before expenses	  	$	 	  	  	$	 	  	  	$	 	  	  	$	 	  	
We estimate expenses payable in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $              million, which include legal, accounting and printing costs, and various other fees associated with the registration and listing of our common stock. We have agreed to reimburse the underwriters for certain FINRA-related expenses incurred by them in connection with the offering, in an amount up to $            .
Determination of Offering Price
Prior to this offering, there has not been a public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
The initial public offering price may not correspond to the price at which our common stock will trade in the public market subsequent to this offering and an active trading market for the common stock may not develop or continue after this offering.
Listing
We have applied to list our common stock on the New York Stock Exchange under the symbol “TRUP.”
Option to Purchase Additional Shares
We have granted an option to the underwriters, exercisable for 30 days from the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of              shares at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. If the underwriters exercise this option, each underwriter will be obligated, subject to specified conditions, to purchase a number of additional shares proportionate to that underwriter’s initial purchase commitment as indicated in the table above. This option may be exercised only if the underwriters sell more shares than the total number set forth on the cover page of this prospectus.
No Sales of Similar Securities
We, our officers, directors and holders of substantially all of our outstanding securities have agreed, subject to specified exceptions, not to directly or indirectly:
 
 	•	 	sell, offer, contract or grant any option to sell (including, without limitation, any short sale), grant any option, right or warrant to purchase, pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (Exchange Act);	
 
142

Table of Contents

 	•	 	lend or otherwise dispose of, including, without limitation, entering into any swap or other arrangement that transfers, in whole or in part, the economic consequences of the ownership, any shares of our common stock, options, rights or warrants to acquire shares of our common stock, or securities exchangeable or exercisable for or convertible into shares of our common stock currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act); or	
 
 	•	 	publicly announce an intention to do any of the foregoing,	
for a period of 180 days after the date of this prospectus without the prior written consent of RBC Capital Markets, LLC, Barclays Capital Inc. and Stifel, Nicolaus & Company, Incorporated.
This restriction terminates after the close of trading of the common stock on and including the 180th day after the date of this prospectus. The representatives may, in their sole discretion and at any time or from time to time before the termination of the 180-day period, release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our stockholders who have or will execute a lock-up agreement providing consent to the sale of shares prior to the expiration of the lock-up period.
Stabilization
The underwriters have advised us that, pursuant to Regulation M under the Exchange Act, certain persons participating in this offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either “covered” short sales or “naked” short sales.
“Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares. “Naked” short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering.
A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriter’s purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member are purchased in a syndicate covering transaction and therefore have not been effectively placed by such syndicate member.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. The underwriters are not obligated to engage in these activities and, if commenced, any of the activities may be discontinued at any time.
 
143

Table of Contents
Electronic Distribution
A prospectus in electronic format may be made available by e-mail or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares of common stock for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ web sites and any information contained in any other web site maintained by any of the underwriters is not part of this prospectus, has not been approved or endorsed by us or the underwriters and should not be relied upon by investors.
Other Activities and Relationships
The underwriters and certain of their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their respective affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and certain of their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities or instruments issued by us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, we would expect them to routinely hedge their credit exposure to us consistent with their customary risk management policies. The underwriters and their respective affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the common stock offered hereby. Any such short positions could adversely affect future trading prices of the common stock offered hereby. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas, or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Solebury Capital LLC (Solebury), a FINRA member, is acting as our financial advisor in connection with this offering. We expect to pay Solebury, upon the successful completion of this offering, a fee of $             for its services, and, in our discretion, may pay Solebury an additional incentive fee of up to $             . We have also agreed to reimburse Solebury for certain expenses incurred in connection with the engagement of up to $25,000. Solebury is not acting as an underwriter and will not sell or offer to sell any securities and will not identify, solicit or engage directly with potential investors. In addition, Solebury will not underwrite or purchase any of the offered securities or otherwise participate in any such undertaking.
Notice to Residents of Canada
The securities may be sold only to purchasers purchasing as principal that are both “accredited investors” as defined in National Instrument 45-106 Prospectus and Registration Exemptions and “permitted clients” as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from the prospectus requirements and in compliance with the registration requirements of applicable securities laws.
 
144

Table of Contents
Notice to Prospective Investors in the EEA
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), an offer to the public of any shares of common stock that are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
 
 	(a)	to any legal entity that is a “qualified investor” as defined in the Prospectus Directive;	
 
 	(c)	by the underwriters to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or	
 
 	(d)	in any other circumstances falling within Article 3(2) of the Prospectus Directive;	
provided that no such offer of shares shall result in a requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive.
Any person making or intending to make any offer of shares within the EEA should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of shares through any financial intermediary, other than offers made by the underwriters which constitute the final offering of shares contemplated in this prospectus.
For the purposes of this provision, and your representation below, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, which we refer to as the Order, or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and
 
145

Table of Contents
has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold by means of any document other than (a) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (b) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (c) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Notice to Prospective Investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
 
146

Table of Contents
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Switzerland
We have not and will not register with the Swiss Financial Market Supervisory Authority (FINMA) as a foreign collective investment scheme pursuant to Article 119 of the Federal Act on Collective Investment Scheme of 23 June 2006, as amended (CISA), and accordingly the securities being offered pursuant to this prospectus have not and will not be approved, and may not be licenseable, with FINMA. Therefore, the securities have not been authorized for distribution by FINMA as a foreign collective investment scheme pursuant to Article 119 CISA and the securities offered hereby may not be offered to the public (as this term is defined in Article 3 CISA) in or from Switzerland. The securities may solely be offered to “qualified investors,” as this term is defined in Article 10 CISA, and in the circumstances set out in Article 3 of the Ordinance on Collective Investment Scheme of 22 November 2006, as amended (CISO), such that there is no public offer. Investors, however, do not benefit from protection under CISA or CISO or supervision by FINMA. This prospectus and any other materials relating to the securities are strictly personal and confidential to each offeree and do not constitute an offer to any other person. This prospectus may only be used by those qualified investors to whom it has been handed out in connection with the offer described herein and may neither directly or indirectly be distributed or made available to any person or entity other than its recipients. It may not be used in connection with any other offer and shall in particular not be copied or distributed to the public in Switzerland or from Switzerland. This prospectus does not constitute an issue prospectus as that term is understood pursuant to Article 652a or 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the securities on the SIX Swiss Exchange or any other regulated securities market in Switzerland, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.
 
147

Table of Contents
 LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will be passed upon for us by Fenwick & West LLP, Seattle, Washington. Certain legal matters relating to the offering will be passed upon for the underwriters by DLA Piper LLP (US), Seattle, Washington, which has in the past provided, and continues to provide, legal services to us.
 EXPERTS
The consolidated financial statements of Trupanion, Inc. at December 31, 2012 and 2013, and for each of the three years in the period ended December 31, 2013, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
 WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities Exchange Commission (SEC) a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC. Upon completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Securities Exchange Act of 1934, as amended. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, District of Columbia 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at (800) SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
 
148

Table of Contents
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
					
 	  	Page	 	
Report of Independent Registered Public Accounting Firm	  	 	F-2	  	
Consolidated Balance Sheets	  	 	F-3	  	
Consolidated Statements of Operations	  	 	F-4	  	
Consolidated Statements of Comprehensive Loss	  	 	F-5	  	
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit	  	 	F-6	  	
Consolidated Statements of Cash Flows	  	 	F-7	  	
Notes to Consolidated Financial Statements	  	 	F-8	  	
 
F-1

Table of Contents
 Report of Independent Registered Public Accounting Firm
Board of Directors
Trupanion, Inc.
We have audited the accompanying consolidated balance sheets of Trupanion, Inc. as of December 31, 2012 and 2013, and the related consolidated statements of operations, comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trupanion, Inc. at December 31, 2012 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
February 28, 2014,
except as to
the fourth paragraph of Note 18,
as to which the date is
May 1, 2014
 
F-2

Table of Contents
Trupanion, Inc.
 Consolidated Balance Sheets
(in thousands, except for share and per share data)

 	 	AS OF
DECEMBER 31,	 	 	AS OF
MARCH 31,	 	 	PRO FORMA
STOCKHOLDERS’
DEFICIT
MARCH 31,	 	
 	 	    2012    	 	 	    2013    	 	 	    2014    	 	 	    2014    	 	
 	 	 	 	 	 	 	 	(unaudited)	 	
Assets	 				 				 				 				
Current assets:	 				 				 				 				
Cash and cash equivalents	 	$	4,234	  	 	$	14,939	  	 	$	10,593	  	 				
Investments in fixed maturities, at amortized cost (fair value: $10,811, $16,088, and $14,954 (unaudited))	 	 	10,809	  	 	 	16,088	  	 	 	14,954	  	 				
Accounts and other receivables	 	 	2,289	  	 	 	7,771	  	 	 	7,915	  	 				
Prepaid expenses and other assets	 	 	939	  	 	 	935	  	 	 	1,116	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
Total current assets	 	 	18,271	  	 	 	39,733	  	 	 	34,578	  	 				
Restricted cash	 	 	—  	  	 	 	3,000	  	 	 	3,000	  	 				
Mortgage loan investment	 	 	770	  	 	 	—  	  	 	 	—  	  	 				
Investments in fixed maturities, at fair value (amortized cost: $1,000, $1,000 and $1,000 (unaudited))	 	 	939	  	 	 	832	  	 	 	867	  	 				
Equity method investment	 	 	500	  	 	 	—	  	 	 	—  	  	 				
Property and equipment, net	 	 	2,413	  	 	 	3,124	  	 	 	4,236	  	 				
Deferred offering costs	 	 	—  	  	 	 	54	  	 	 	1,394	  	 				
Intangible assets, net	 	 	4,773	  	 	 	4,910	  	 	 	4,894	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
Total assets	 	$	27,666	  	 	$	51,653	  	 	$	48,969	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
Liabilities, redeemable convertible preferred stock, and stockholders’ deficit	 				 				 				 				
Current liabilities:	 				 				 				 				
Accounts payable	 	$	1,008	  	 	$	1,263	  	 	$	2,427	  	 				
Accrued liabilities	 	 	2,262	  	 	 	3,660	  	 	 	2,681	  	 				
Claims reserve	 	 	2,582	  	 	 	5,612	  	 	 	4,955	  	 				
Deferred revenue	 	 	3,939	  	 	 	8,468	  	 	 	8,677	  	 				
Short-term debt	 	 	—  	  	 	 	900	  	 	 	1,200	  	 				
Warrant liabilities	 	 	551	  	 	 	4,900	  	 	 	6,119	  	 				
Other payables	 	 	107	  	 	 	1,138	  	 	 	1,217	  	 				
Deferred tax liabilities	 	 	76	  	 	 	82	  	 	 	82	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
Total current liabilities	 	 	10,525	  	 	 	26,023	  	 	 	27,358	  	 				
Long-term debt	 	 	9,900	  	 	 	25,199	  	 	 	25,054	  	 				
Deferred tax liabilities	 	 	1,546	  	 	 	1,540	  	 	 	1,538	  	 				
Other liabilities	 	 	1,044	  	 	 	166	  	 	 	525	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
Total liabilities	 	 	23,015	  	 	 	52,928	  	 	 	54,475	  	 				
Commitments and contingencies (Note 8)	 				 				 				 				
Redeemable convertible preferred stock: $0.00001 par value per share, 15,648,723 shares authorized at December 31, 2012, and December 31, 2013, and 15,666,748 shares authorized at March 31, 2014 (unaudited) and 15,648,723, 14,857,989 and 14,857,989 shares issued and outstanding at December 31, 2012, December 31, 2013, and March 31, 2014 (unaudited) pro forma, no shares outstanding (unaudited). Aggregate liquidation preference of $33,225.	 	 	31,724	  	 	 	31,724	  	 	 	31,724	  	 	$	—  	  	
Stockholders’ deficit:	 				 				 				 				
Common stock, $0.00001 par value per share, 26,000,000 shares authorized at December 31, 2012, December 31, 2013, and March 31, 2014 (unaudited) and 1,571,085 and 1,010,346 shares issued and outstanding at December 31, 2012, 2,857,620 and 2,236,641 shares issued and outstanding at December 31, 2013; 2,862,620 and 2,241,641 shares issued and outstanding at March 31, 2014 (unaudited) pro forma, 19,346,760 shares issued and outstanding (unaudited)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Special voting shares, $0.00001 par value per share, 2,500,030 shares authorized at December 31, 2012, December 31, 2013, and March 31, 2014 (unaudited), 2,247,130 shares issued and outstanding at December 31, 2012, December 31, 2013, and March 31, 2014 (unaudited); pro forma, no shares outstanding (unaudited)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Additional paid-in capital	 	 	3,224	  	 	 	5,769	  	 	 	6,365	  	 	 	   38,089	  	
Accumulated other comprehensive loss	 	 	(142	) 	 	 	(164	) 	 	 	(78	) 	 	 	(78	) 	
Accumulated deficit	 	 	(27,828	) 	 	 	(36,003	) 	 	 	(40,916	) 	 	 	(40,916	) 	
Treasury stock, at cost: 560,739, 620,979, and 620,979 shares at December 31, 2012, December 31, 2013, and March 31, 2014 (unaudited) respectively	 	 	(2,327	) 	 	 	(2,601	) 	 	 	(2,601	) 	 	 	(2,601	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ deficit	 	 	(27,073	) 	 	 	(32,999	) 	 	 	(37,230	) 	 	 	(5,506	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit	 	$	27,666	  	 	$	51,653	  	 	$	48,969	  	 				
	 	 	 	 	 	 	 	 	 	 	 	 	 				
See accompanying notes.
 
F-3

Table of Contents
Trupanion, Inc.
 Consolidated Statements of Operations
(in thousands, except for share and per share data)

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS
ENDED MARCH 31,	 	
 	 	2011	 	 	2012	 	 	2013	 	 	2013	 	 	2014	 	
 	 	 	 	 	 	 	 	 	 	 	(unaudited)	 	
Revenue	 	$	37,045	  	 	$	55,530	  	 	$	83,829	  	 	$	17,842	  	 	$	25,640	  	
Cost of revenue:	 				 				 				 				 				
Claims expenses	 	 	24,995	  	 	 	37,856	  	 	 	56,637	  	 	 	12,123	  	 	 	17,034	  	
Other cost of revenue	 	 	4,007	  	 	 	6,463	  	 	 	11,548	  	 	 	2,111	  	 	 	3,850	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	8,043	  	 	 	11,211	  	 	 	15,644	  	 	 	3,608	  	 	 	4,756	  	
Operating expenses:	 				 				 				 				 				
Sales and marketing	 	 	5,206	  	 	 	7,149	  	 	 	9,091	  	 	 	2,572	  	 	 	2,646	  	
Technology and development	 	 	1,499	  	 	 	3,406	  	 	 	4,888	  	 	 	883	  	 	 	2,200	  	
General and administrative	 	 	4,289	  	 	 	6,195	  	 	 	8,652	  	 	 	1,927	  	 	 	2,786	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	10,994	  	 	 	16,750	  	 	 	22,631	  	 	 	5,382	  	 	 	7,632	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(2,951	) 	 	 	(5,539	) 	 	 	(6,987	) 	 	 	(1,774	) 	 	 	(2,876	) 	
Interest expense	 	 	690	  	 	 	535	  	 	 	609	  	 	 	120	  	 	 	736	  	
Other expense, net	 	 	186	  	 	 	252	  	 	 	619	  	 	 	111	  	 	 	1,286	  	
Loss from equity method investment	 	 	—  	  	 	 	—  	  	 	 	52	  	 	 	—  	  	 	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(3,827	) 	 	 	(6,326	) 	 	 	(8,267	) 	 	 	(2,005	) 	 	 	(4,898	) 	
Income tax expense (benefit)	 	 	92	  	 	 	84	  	 	 	(92	) 	 	 	(79	) 	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Premium on preferred stock redemption	 	$	—  	  	 	$	1,737	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss attributable to common stockholders	 	$	(3,919	) 	 	$	(8,147	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss per share attributable to common stockholders:	 				 				 				 				 				
Basic and diluted	 	$	(5.34	) 	 	$	(9.76	) 	 	$	(6.23	) 	 	$	(1.76	) 	 	$	(3.22	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares used to compute net loss per share attributable to common stockholders:	 				 				 				 				 				
Basic and diluted	 	 	734,411	  	 	 	834,648	  	 	 	1,312,019	  	 	 	1,094,989	  	 	 	1,524,028	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma net loss per share attributable to common stockholders (unaudited):	 				 				 				 				 				
Basic and diluted	 				 				 	$	(0.45	) 	 				 	$	(0.27	) 	
	 				 				 	 	 	 	 				 	 	 	 	
Weighted average shares used to compute pro forma net loss per share attributable to common stockholders (unaudited):	 				 				 				 				 				
Basic and diluted	 				 				 	 	18,370,403	  	 				 	 	18,441,179	  	
	 				 				 	 	 	 	 				 	 	 	 	
See accompanying notes.
 
F-4

Table of Contents
Trupanion, Inc.
 Consolidated Statements of Comprehensive Loss
(in thousands)

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS
ENDED MARCH 31,	 	
 	 	2011	 	 	2012	 	 	2013	 	 	    2013    	 	 	    2014    	 	
 	 	 	 	 	 	 	 	 	 	 	(unaudited)	 	
Net loss	 	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
Other comprehensive income (loss):	 				 				 				 				 				
Foreign currency translation adjustments	 	 	(143	) 	 	 	(8	) 	 	 	85	  	 	 	(58	) 	 	 	51	  	
Change in unrealized losses on available-for-sale securities	 	 	—  	  	 	 	(61	) 	 	 	(107	) 	 	 	38	  	 	 	35	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive income (loss), net of taxes	 	 	(143	) 	 	 	(69	) 	 	 	(22	) 	 	 	(20	) 	 	 	86	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive loss	 	$	(4,062	) 	 	$	(6,479	) 	 	$	(8,197	) 	 	$	(1,946	) 	 	$	(4,827	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes.
 
F-5

Table of Contents
 Trupanion, Inc.
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except for share data)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	ACCUMULATED OTHER
COMPREHENSIVE LOSS	 	 	 	 	 	 	 	
 	 	REDEEMABLE
CONVERTIBLE
PREFERRED STOCK	 	 	COMMON STOCK	 	 	SPECIAL VOTING
SHARES	 	 	ADDITIONAL
PAID-IN
CAPITAL	 	 	ACCUMULATED
DEFICIT	 	 	UNREALIZED
LOSSES ON
AVAILABLE
FOR SALE
SECURITIES	 	 	FOREIGN
CURRENCY
GAIN (LOSS)	 	 	TREASURY
STOCK	 	 	TOTAL
STOCKHOLDERS’
DEFICIT	 	
 	 	SHARES	 	 	AMOUNT	 	 	SHARES	 	 	AMOUNT	 	 	SHARES	 	 	AMOUNT	 	 			 			 			 			 			 			
Balance at January 1, 2011	 	 	11,545,734	  	 	$	17,061	  	 	 	726,071	  	 	$	—  	  	 	 	2,500,030	  	 	$	—  	  	 	$	1,809	  	 	$	(17,499	) 	 	$	—  	  	 	$	70	  	 	$	—  	  	 	$	(15,620	) 	
Issuance of preferred stock, net of issuance costs	 	 	2,185,825	  	 	 	8,731	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Exercise of stock options	 	 	—  	  	 	 	—  	  	 	 	29,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	28	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	28	  	
Stock compensation expense	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	982	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	982	  	
Other comprehensive loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(143	) 	 	 	—  	  	 	 	(143	) 	
Net loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(3,919	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(3,919	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2011	 	 	13,731,559	  	 	 	25,792	  	 	 	755,071	  	 	 	—  	  	 	 	2,500,030	  	 	 	—  	  	 	 	2,819	  	 	 	(21,418	) 	 	 	—  	  	 	 	(73	) 	 	 	—  	  	 	 	(18,672	) 	
Issuance of preferred stock, net of issuance costs	 	 	1,783,767	  	 	 	6,922	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Issuance of common stock for investment	 	 	—  	  	 	 	—  	  	 	 	60,240	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	250	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	250	  	
Special voting shares exchanged for common stock	 	 	—  	  	 	 	—  	  	 	 	252,900	  	 	 	—  	  	 	 	(252,900	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Redemption of preferred stock	 	 	(657,337	) 	 	 	(990	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(1,737	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(1,737	) 	
Purchase of treasury stock	 	 	—  	  	 	 	—  	  	 	 	(560,739	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(2,327	) 	 	 	(2,327	) 	
Exercise of stock options	 	 	—  	  	 	 	—  	  	 	 	502,874	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	458	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	458	  	
Stock compensation expense	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	1,434	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	1,434	  	
Other comprehensive loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(61	) 	 	 	(8	) 	 	 	—  	  	 	 	(69	) 	
Net loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(6,410	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(6,410	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2012	 	 	14,857,989	  	 	 	31,724	  	 	 	1,010,346	  	 	 	—  	  	 	 	2,247,130	  	 	 	—  	  	 	 	3,224	  	 	 	(27,828	) 	 	 	(61	) 	 	 	(81	) 	 	 	(2,327	) 	 	 	(27,073	) 	
Issuance of restricted stock	 	 	—  	  	 	 	—  	  	 	 	732,708	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Issuance of common stock	 	 	—  	  	 	 	—  	  	 	 	5,846	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Purchase of treasury stock	 	 	—  	  	 	 	—  	  	 	 	(60,240	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(274	) 	 	 	(274	) 	
Exercise of stock options	 	 	—  	  	 	 	—  	  	 	 	547,981	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	607	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	607	  	
Stock compensation expense	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	1,938	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	1,938	  	
Other comprehensive loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(107	) 	 	 	85	  	 	 	—  	  	 	 	(22	) 	
Net loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(8,175	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(8,175	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2013	 	 	14,857,989	  	 	$	31,724	  	 	 	2,236,641	  	 	$	—  	  	 	 	2,247,130	  	 	$	—  	  	 	$	5,769	  	 	$	(36,003	) 	 	$	(168	) 	 	$	4	  	 	$	(2,601	) 	 	$	(32,999	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exercise of stock options (unaudited)	 	 	—  	  	 	 	—  	  	 	 	5,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	20	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	20	  	
Stock compensation expense (unaudited)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	576	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	576	  	
Other comprehensive income (unaudited)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	35	  	 	 	51	  	 	 	—  	  	 	 	86	  	
Net loss (unaudited)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(4,913	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(4,913	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at March 31, 2014 (unaudited)	 	 	14,857,989	  	 	$	31,724	  	 	 	2,241,641	  	 	$	—  	  	 	 	2,247,130	  	 	$	—  	  	 	$	6,365	  	 	$	(40,916	) 	 	$	(133	) 	 	$	55	  	 	$	(2,601	) 	 	$	(37,230	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes.
 
F-6

Table of Contents
Trupanion, Inc.
 Consolidated Statements of Cash Flows
(in thousands)

 	  	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS
ENDED MARCH 31,	 	
 	  	2011	 	 	2012	 	 	2013	 	 	    2013    	 	 	    2014    	 	
 	  	 	 	 	 	 	 	 	 	 	(unaudited)	 	
Operating activities	  				 				 				 				
Net loss	  	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	 	$	(1,926	) 	 	$	(4,913	) 	
Adjustments to reconcile net loss to cash used in operating activities:	  				 				 				 				 				
Depreciation and amortization	  	 	199	  	 	 	349	  	 	 	892	  	 	 	206	  	 	 	309	  	
Amortization of debt discount	  	 	9	  	 	 	11	  	 	 	36	  	 	 	2	  	 	 	227	  	
Loss on disposal of equipment	  	 	18	  	 	 	26	  	 	 	44	  	 	 	—  	  	 	 	43	  	
Warrant expense	  	 	200	  	 	 	200	  	 	 	543	  	 	 	98	  	 	 	1,219	  	
Stock-based compensation expense	  	 	982	  	 	 	1,434	  	 	 	1,938	  	 	 	401	  	 	 	567	  	
Loss from equity method investment	  	 	—  	  	 	 	—  	  	 	 	52	  	 	 	—  	  	 	 	—  	  	
Net (accretion) amortization on bonds	  	 	(46	) 	 	 	32	  	 	 	16	  	 	 	7	  	 	 	2	  	
Changes in operating assets and liabilities:	  				 				 				 				 				
Accounts receivable	  	 	(242	) 	 	 	(1,889	) 	 	 	(5,478	) 	 	 	(2,749	) 	 	 	(142	) 	
Prepaid expenses and other current assets	  	 	(155	) 	 	 	(432	) 	 	 	(22	) 	 	 	49	  	 	 	(178	) 	
Accounts payable	  	 	(141	) 	 	 	291	  	 	 	242	  	 	 	(221	) 	 	 	520	  	
Accrued liabilities	  	 	1,351	  	 	 	853	  	 	 	1,258	  	 	 	(665	) 	 	 	(1,554	) 	
Claims reserve	  	 	577	  	 	 	947	  	 	 	3,031	  	 	 	1,342	  	 	 	(657	) 	
Deferred revenue	  	 	757	  	 	 	2,574	  	 	 	4,529	  	 	 	2,069	  	 	 	208	  	
Other payables	  	 	298	  	 	 	471	  	 	 	71	  	 	 	49	  	 	 	396	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	  	 	(112	) 	 	 	(1,543	) 	 	 	(1,023	) 	 	 	(1,338	) 	 	 	(3,953	) 	
Investing activities	  				 				 				 				 				
Purchases of investment securities, available-for-sale	  	 	(1,000	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Purchases of investment securities, held-to-maturity	  	 	(7,670	) 	 	 	(10,379	) 	 	 	(26,064	) 	 	 	(2,753	) 	 	 	(2,677	) 	
Maturities of investment securities, held-to-maturity	  	 	7,621	  	 	 	8,909	  	 	 	20,770	  	 	 	3,561	  	 	 	3,809	  	
(Investment in) repayment of mortgage loan	  	 	—  	  	 	 	(770	) 	 	 	770	  	 	 	4	  	 	 	—  	  	
Equity method investment	  	 	—  	  	 	 	(249	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Purchases of property and equipment	  	 	(620	) 	 	 	(2,055	) 	 	 	(1,473	) 	 	 	(633	) 	 	 	(1,016	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash (used in) provided by investing activities	  	 	(1,669	) 	 	 	(4,544	) 	 	 	(5,997	) 	 	 	179	  	 	 	116	  	
Financing activities	  				 				 				 				 				
Restricted cash	  	 	—  	  	 	 	—  	  	 	 	(3,000	) 	 	 	—  	  	 	 	—  	  	
Issuance of preferred stock	  	 	8,731	  	 	 	6,922	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Issuance (settlement) of forward contract	  	 	52	  	 	 	(52	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Purchase of treasury stock	  	 	—  	  	 	 	(2,327	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Deferred financing costs	  	 	—  	  	 	 	—  	  	 	 	(56	) 	 	 	—  	  	 	 	(619	) 	
Redemption of preferred stock	  	 	—  	  	 	 	(2,727	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Proceeds from exercise of stock options	  	 	28	  	 	 	458	  	 	 	607	  	 	 	311	  	 	 	20	  	
Proceeds from debt financing	  	 	—  	  	 	 	—  	  	 	 	15,000	  	 	 	—  	  	 	 	—  	  	
(Payment) draw on outstanding line of credit	  	 	(483	) 	 	 	—  	  	 	 	5,000	  	 	 	2,000	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	  	 	8,328	  	 	 	2,274	  	 	 	17,551	  	 	 	2,311	  	 	 	(599	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of foreign exchange rates on cash, net	  	 	(98	) 	 	 	(40	) 	 	 	174	  	 	 	17	  	 	 	90	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	6,449	  	 	 	(3,853	) 	 	 	10,705	  	 	 	1,169	  	 	 	(4,346	) 	
Cash and cash equivalents at beginning of year	  	 	1,638	  	 	 	8,087	  	 	 	4,234	  	 	 	4,234	  	 	 	14,939	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	  	$	    8,087	  	 	$	4,234	  	 	$	14,939	  	 	$	5,403	  	 	$	10,593	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosures	  				 				 				 				 				
Income tax refunds received	  	$	50	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
Interest paid	  	 	(692	) 	 	 	(570	) 	 	 	(642	) 	 	 	(138	) 	 	 	(227	) 	
Noncash investing and financing activities:	  				 				 				 				 				
Warrants issued in conjunction with debt issuance	  	 	—  	  	 	 	18	  	 	 	3,806	  	 	 	—  	  	 	 	—  	  	
Exchange of stock and intangible asset for equity method investment	  	 	—  	  	 	 	(250	) 	 	 	448	  	 	 	—  	  	 	 	—  	  	
Increase in payables for property and equipment	  	 	—  	  	 	 	—  	  	 	 	134	  	 	 	—  	  	 	 	(422	) 	
Increase in payables for deferred financing costs	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(812	) 	
See accompanying notes.
 
F-7

Table of Contents
TRUPANION, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Nature of Operations and Summary of Significant Accounting Policies
Description of Business
Trupanion, Inc. (collectively with its wholly-owned subsidiaries, the Company) is a direct-to-consumer monthly subscription service provider of a medical insurance plan for cats and dogs throughout the United States, Canada and Puerto Rico.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies and the reported amounts of revenue and expenses. Significant items subject to such estimates and assumptions include the valuation of deferred tax assets, stock-based compensation, warrant liabilities, claims reserve, useful lives of software developed for internal use, and income tax uncertainties. Actual results could differ from the estimates used in preparing the consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Trupanion, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. The Company accounts for its investments in entities over which it has significant influence but not a controlling financial interest using the equity method of accounting.
Reclassifications
Certain prior year amounts have been reclassified within the Company’s consolidated financial statements from their original presentation to conform with the current period presentation.
Unaudited Interim Consolidated Financial Information
The interim consolidated balance sheet as of March 31, 2014, the consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2013 and 2014 and the consolidated statement of convertible preferred stock and stockholders’ deficit for the three months ended March 31, 2014 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements and, in the Company’s opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and statement of convertible preferred stock and stockholders’ deficit as of March 31, 2014 and the consolidated results of operations, comprehensive loss and cash flows for the three months ended March 31, 2013 and 2014. The financial data and other information disclosed in these notes to the consolidated financial statements related to the three-month periods are unaudited. The results of the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, cash on deposit may be in excess of the applicable federal deposit insurance corporation limits.
 
F-8

Table of Contents
Restricted Cash
The Company considers any cash account that is restricted as to withdrawal or use under the terms of certain financing agreements as restricted cash. Cash will be considered restricted for so long as any obligations are outstanding. Restricted cash pledged as collateral for the line of credit totaled $0 and $3,000 as of December 31, 2012 and December 31, 2013, respectively.
Accounts and Other Receivable
Receivables are comprised of trade receivables and other miscellaneous receivables. As of December 31, 2012 and 2013, receivables included $1,963 and $7,411, respectively, for one-year policies written by an unaffiliated managing general agent.
No single customer made up more than 5% of accounts receivable as of December 31, 2012 or 2013.
Deferred Acquisition Costs
The Company incurs certain costs related to the successful acquisition of new and renewal customer contracts, which are capitalized. These costs include premium taxes, commissions, and referral fees that directly relate to the successful acquisition of new or renewal customer contracts. Deferred acquisition costs are included in prepaid expenses and other assets on the consolidated balance sheets and amortized over the related policy term to the applicable financial statement line item including sales and marketing expenses and other cost of revenue. Total deferred acquisition costs are summarized below:

 	  	2011	 	  	2012	 	  	2013	 	
Deferred acquisition costs capitalized	  	$	1,732	  	  	$	2,334	  	  	$	5,919	  	
Deferred acquisition costs amortized:	  				  				  				
Sales and marketing	  	 	611	  	  	 	755	  	  	 	663	  	
Other cost of revenue	  	 	1,047	  	  	 	1,522	  	  	 	5,082	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total amortization	  	 	1,658	  	  	 	2,277	  	  	 	5,745	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Balance at December 31,	  	$	153	  	  	$	210	  	  	$	384	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Investments
The Company recognizes the following classifications of investments in fixed maturities:
Held-to-Maturity —Investments that the Company has the intent and ability to hold to maturity are reported at amortized cost.
Available-for-Sale —Investments not classified as held-to-maturity are reported at fair value, and the temporary declines or increases from amortized cost are included as a component of other comprehensive income.
Held-to-maturity securities are classified as either current or long-term based on their contractual maturities. Available-for-sale securities are classified based upon the availability to be used in current operations.
Premiums and discounts on fixed maturity securities are amortized or accreted over the life of the security. Such amortization expense and accretion is included in interest income. Interest income is recognized in other income when earned.
A decline in the fair value of any available-for-sale or held-to-maturity security below amortized cost that is deemed to be other than temporary results in an impairment to reduce the amortized cost to fair value or recovery value. To determine whether an impairment is other than temporary, the Company considers its intent to sell the security, intent and ability to hold the security, as well as all available information relevant to the collectability of the security, including past events, current conditions, and reasonable and supportable forecasts, when developing estimates of cash flows expected to be collected.
 
F-9

Table of Contents
Realized capital gains and losses are determined on a specific identification basis and recorded as a part of other expense, net in the statement of operations.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from three to five years. Leasehold improvements are generally depreciated over the remaining term of the related lease.
Costs related to internal-use software development are primarily related to the Company’s website, internal support systems, and proprietary billing and claims system. Costs are capitalized during the application development stage of the project and amortized on a straight-line basis over the estimated useful lives of the related assets, estimated between three and five years, once the software is placed into service.
Intangible Assets
Indefinite-lived intangible assets, which are not amortized, are assessed for impairment at least annually and more frequently if circumstances indicate a possible impairment. The Company first performs a qualitative analysis to assess whether it is more likely than not the asset is impaired and, if necessary, a quantitative analysis is performed to measure impairment.
Assets with finite lives are amortized over their estimated remaining useful life.
Asset Impairment
Long-lived assets, such as property and equipment and definite lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.
Claims Reserve
Claims reserve includes unpaid claims and claims adjustment expenses, which includes an estimate, based on past experience, for claims incurred but not reported. Such liabilities are necessarily based on assumptions and estimates, and while management believes the amount is adequate, the ultimate liability may be in excess of or less than the amount provided. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and any adjustments are reflected in the period in which they become known.
Warrants
The Company issued warrants to purchase common or convertible preferred stock to third parties as a part of certain business and financing transactions. The Company values warrants using the Black-Scholes-Merton option-pricing model. Certain warrants are considered liability awards and remeasured each reporting period. See Note 12 for additional information.
Mortgage Loan Investment
The Company carried its mortgage loan investment at the unpaid principal balance, net of any impairment in 2012. The mortgage loan was repaid in full during 2013 and the Company did not hold any mortgage loan investments as of December 31, 2013. See Note 15 for additional information.
 
F-10

Table of Contents
Revenue Recognition
The Company generates revenue primarily from subscription fees for its medical insurance plan and other policies the Company writes, which is earned pro rata over the terms of the customer contracts.
No single customer accounted for more than 5% of the Company’s revenue in 2011, 2012 or 2013.
Claims Expense
Claims expenses include claims incurred, the cost of personnel administering the claims and providing customer service related to claims, and other operating expenses directly or indirectly related to claims administration.
Other Cost of Revenue
Other cost of revenue includes direct and indirect customer service expenses, credit card transaction fees, premium tax expenses and expenses related to an unaffiliated managing general agent.
Sales and Marketing
Sales and marketing expenses consist of referral fees paid with respect to newly enrolled pets, print, online and promotional advertising costs and employee compensation and related costs.
Technology and Development
Technology and development expenses consist primarily of personnel costs and related expenses for the Company’s operations staff, which includes information technology development and infrastructure support, third-party services and depreciation of hardware and amortization of capitalized software and intangible assets.
General and Administrative
General and administrative expenses consist primarily of personnel costs and related expenses for the Company’s finance, actuarial, human resources, business development and general management functions, as well as facilities and professional services.
Other Expense, Net
Other expense, net includes the following:

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	
Interest income	  	$	69	  	 	$	75	  	 	$	86	  	
Foreign exchange gain (loss)	  	 	(36	) 	 	 	(3	) 	 	 	(76	) 	
Loss on disposal of fixed assets	  	 	(18	) 	 	 	(26	) 	 	 	(44	) 	
Warrant remeasurement	  	 	(200	) 	 	 	(200	) 	 	 	(543	) 	
Other	  	 	(1	) 	 	 	(98	) 	 	 	(42	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other expense, net	  	$	(186	) 	 	$	(252	) 	 	$	(619	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Fronting Agreement
For the Company’s Canadian business, all plans are written by Omega General Insurance Company (Omega) and the risk is assumed by the Company through a fronting and reinsurance agreement. Omega retains an annual fee for fronting the Company’s insurance business in Canada, and all risks are retained within the Company.
 
F-11

Table of Contents
Premiums are recognized and earned pro rata over the terms of the related customer contracts. Premiums recognized from the agreement in 2011, 2012 and 2013 were $17,371, $20,665 and $24,681, respectively and deferred revenue relating to this arrangement at December 31, 2012 and 2013 was $511 and $745, respectively. Reinsurance revenue was 47%, 37% and 29% of total revenue in 2011, 2012 and 2013, respectively. Cash designated for the purpose of paying claims related to this reinsurance agreement was $113 and $268 at December 31, 2012 and 2013, respectively.
The Company has not transferred any risk to third-party reinsurers.
Other Policies
In November 2012, the Company began writing one-year pet insurance policies for an unaffiliated managing general agent. Revenue during 2012 and 2013 totaled $178 and $7,011, respectively, and deferred revenue relating to this arrangement at December 31, 2012 and 2013 was $1,807 and $5,229, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising costs amounted to $157, $338 and $692, in 2011, 2012 and 2013, respectively.
Stock-Based Compensation
The Company measures compensation expense for stock-based transactions to employees at fair value on the grant date and recognizes such cost, net of estimated forfeitures, on a straight-line basis over the requisite service period (generally four years). Stock options are valued using the Black-Scholes-Merton option-pricing model. The fair value of restricted stock awards is based on the fair value of the Company’s stock on the date of the award.
The Company measures compensation cost for stock-based compensation to non-employees at fair value and remeasures each period until the award vests. Stock-based compensation to non-employees are measured using the fair value of the award.
Income Taxes
Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided for when it is considered more likely than not that deferred tax assets will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than a 50% likelihood of being realized. Penalties and interest are classified as a component of income taxes.
Foreign Currency
The Company’s consolidated financial statements are reported in U.S. dollars. Assets and liabilities of international subsidiaries with non-U.S. dollar functional currencies are translated to U.S. dollars at the exchange rates in effect on the balance sheet date. Revenue and expenses for each subsidiary are translated to U.S. dollars using a weighted-average rate for the relevant reporting period. Translation adjustments resulting from this process are included in accumulated other comprehensive loss. Gains and losses that arise from exchange rate fluctuations for monetary asset and liability balances that are not denominated in an entity’s functional currency are included within other income.
 
F-12

Table of Contents
Deferred Offering Costs
Deferred offering costs, including legal, accounting and other fees and costs relating to the initial public offering, are capitalized and included as a noncurrent asset in the consolidated balance sheets. The deferred offering costs will be offset against initial public offering proceeds upon the closing of the initial public offering. There were $54 and $1,394 (unaudited) of capitalized deferred offering costs as of December 31, 2013 and March 31, 2014, respectively, and no similar costs as of December 31, 2012.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, investments and accounts receivable. The Company manages its risk by investing cash equivalents and investment securities in money market instruments and securities of the U.S. government, U.S. government agencies and high-credit-quality issuers of debt securities.
Credit risk with respect to accounts receivable is dispersed due to the large number of customers. In addition, the Company’s credit risk is mitigated by the relatively short collection period.
Unaudited Pro Forma Stockholders’ Deficit
Immediately prior to the closing of a qualifying initial public offering, all of the outstanding shares of convertible preferred stock and exchangeable shares will automatically convert into shares of common stock. The December 31, 2013 unaudited pro forma consolidated stockholders’ deficit has been prepared assuming the automatic conversion of all shares of convertible preferred stock and exchangeable shares, resulting in additional 18,370,403 shares of common stock.
2. Net Loss per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Excluded from the weighted-average number of shares outstanding are shares which have been issued and are subject to future vesting and unvested restricted stock. Diluted net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of convertible preferred stock, warrants for the purchase of convertible preferred stock and common stock, exchangeable shares, unvested restricted stock, a forward contract, and options outstanding under the Company’s stock option plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
The following potential dilutive equity securities are not included in the diluted net loss per common share calculation because they would have had an antidilutive effect:

 	 	YEARS ENDED
DECEMBER 31,	 	 	THREE MONTHS
ENDED MARCH 31,	 	
 	 	2011	 	 	2012	 	 	2013	 	 	      2013      	 	 	      2014      	 	
 	 	 	 	 	 	 	 	 	 	 	(unaudited)	 	
Stock options	 	 	4,506,708	  	 	 	4,226,883	  	 	 	4,663,445	  	 	 	4,042,012	  	 	 	4,833,400	  	
Restricted stock	 	 	—  	  	 	 	—  	  	 	 	722,226	  	 	 	—  	  	 	 	714,365	  	
Warrants	 	 	149,265	  	 	 	124,857	  	 	 	884,111	  	 	 	135,672	  	 	 	884,111	  	
Series A convertible preferred stock	 	 	7,975,350	  	 	 	7,466,283	  	 	 	7,466,283	  	 	 	7,466,283	  	 	 	7,466,283	  	
Series B convertible preferred stock	 	 	3,570,384	  	 	 	3,546,384	  	 	 	3,546,384	  	 	 	3,546,384	  	 	 	3,546,384	  	
Series C convertible preferred stock	 	 	2,185,825	  	 	 	3,845,322	  	 	 	3,845,322	  	 	 	3,845,322	  	 	 	3,845,322	  	
Exchangeable shares	 	 	2,500,030	  	 	 	2,247,130	  	 	 	2,247,130	  	 	 	2,247,130	  	 	 	2,247,130	  	
Forward contract	 	 	1,359,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 
F-13

Table of Contents
Convertible preferred stock is presented on an as converted basis to reflect the applicable conversion ratio.
Unaudited Pro Forma Net Loss per Share
Pro forma net loss per share attributable to common stockholders has been computed to give effect to the automatic conversion of the convertible preferred stock and exchangeable shares into 18,370,403 shares of common stock, as though the conversion had taken place at the beginning of their respective periods.
3. Property and Equipment, Net
Property and equipment for the years ended December 31, along with their useful lives, are as follows:

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	    2012    	 	 	    2013    	 	
Office and telephone equipment (5 years)	  	$	148	  	 	$	128	  	
PC and networking hardware (4 years)	  	 	532	  	 	 	827	  	
Software (3–5 years)	  	 	2,043	  	 	 	3,222	  	
Furniture and fixtures (5 years)	  	 	444	  	 	 	497	  	
Leasehold improvement (over life of lease)	  	 	208	  	 	 	212	  	
	  	 	 	 	 	 	 	 	
Property and equipment	  	 	3,375	  	 	 	4,886	  	
Accumulated depreciation	  	 	(962	) 	 	 	(1,762	) 	
	  	 	 	 	 	 	 	 	
Property and equipment, net	  	$	2,413	  	 	$	3,124	  	
	  	 	 	 	 	 	 	 	
Depreciation and amortization expense was $199, $349, and $856 for 2011, 2012 and 2013, respectively.
The Company capitalized interest of $33 and $64 in 2012 and 2013, respectively, related software developed for internal use.
4. Intangible Assets
The Company acquired an insurance company in 2007, which originally included licenses in 23 states. These licenses were valued at $4,773. The Company is currently licensed in all 50 states, the District of Columbia and Puerto Rico. Most licenses are renewed annually upon payment of various fees assessed by the issuing state. Renewal costs are expensed as incurred. This is considered an indefinite-lived intangible asset given the planned renewal of the certificates of authority and applicable licenses for the foreseeable future. No impairments have been recorded on this asset as of December 31, 2013.
The Company also has another intangible asset, which is being amortized over the expected useful life of the asset. The amortization expense for 2011, 2012 and 2013 was $0, $0 and $37, respectively and the value of the intangible asset at December 31, 2012 and 2013 was $0 and $137, respectively. Future amortization expense for this asset is expected to be as follows:

Year ending December 31:	  				
2014	  	$	63	  	
2015	  	 	63	  	
2016	  	 	11	  	
	  	 	 	 	
Total future amortization:	  	$	137	  	

F-14

Table of Contents
5. Investment Securities
The amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale and held-to-maturity fixed maturity securities by major security type and class of security were as follows:

 	 	AMORTIZED
COST	 	 	GROSS
UNREALIZED
HOLDING
GAINS	 	 	GROSS
UNREALIZED
HOLDING
LOSSES	 	 	FAIR
VALUE	 	
At December 31, 2012	 				 				 				 				
Available-for-sale:	 				 				 				 				
Municipal bond	 	$	1,000	  	 	$	—  	  	 	$	(61	) 	 	$	939	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	1,000	  	 	$	—  	  	 	$	(61	) 	 	$	939	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Held-to-maturity:	 				 				 				 				
U.S. Treasury securities	 	$	5,906	  	 	$	2	  	 	$	—  	  	 	$	5,908	  	
Certificates of deposit	 	 	2,831	  	 	 	—  	  	 	 	—  	  	 	 	2,831	  	
U.S. government funds	 	 	2,072	  	 	 	—  	  	 	 	—  	  	 	 	2,072	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	10,809	  	 	$	         2	  	 	$	     —  	  	 	$	10,811	  	

 	 	AMORTIZED
COST	 	 	GROSS
UNREALIZED
HOLDING
GAINS	 	 	GROSS
UNREALIZED
HOLDING
LOSSES	 	 	FAIR
VALUE	 	
At December 31, 2013	 				 				 				 				
Available-for-sale:	 				 				 				 				
Municipal bond	 	$	1,000	  	 	$	—  	  	 	$	(168	) 	 	$	832	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	1,000	  	 	$	—  	  	 	$	(168	) 	 	$	832	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Held-to-maturity:	 				 				 				 				
U.S. Treasury securities	 	$	5,778	  	 	$	—  	  	 	$	—  	  	 	$	5,778	  	
Certificates of deposit	 	 	2,700	  	 	 	—  	  	 	 	—  	  	 	 	2,700	  	
U.S. government funds	 	 	7,610	  	 	 	—  	  	 	 	—  	  	 	 	7,610	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	16,088	  	 	$	—  	  	 	$	—  	  	 	$	16,088	  	

 	 	AMORTIZED
COST	 	 	GROSS
UNREALIZED
HOLDING
GAINS	 	 	GROSS
UNREALIZED
HOLDING
LOSSES	 	 	FAIR
VALUE	 	
 	 	(unaudited)	 	
At March 31, 2014	 				 				 				 				
Available-for-sale:	 				 				 				 				
Municipal bond	 	$	1,000	  	 	$	—  	  	 	$	(133	) 	 	$	867	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	1,000	  	 	$	—  	  	 	$	(133	) 	 	$	867	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Held-to-maturity:	 				 				 				 				
U.S. Treasury securities	 	$	5,776	  	 	$	—  	  	 	$	—  	  	 	$	5,776	  	
Certificates of deposit	 	$	2,700	  	 	$	—  	  	 	$	—  	  	 	$	2,700	  	
U.S. government funds	 	$	6,478	  	 	$	—  	  	 	$	—  	  	 	$	6,478	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	$	14,954	  	 	$	—  	  	 	$	—  	  	 	$	14,954	  	

F-15

Table of Contents
Maturities of debt securities classified as available-for-sale and held-to-maturity were as follows:

 	  	 AS OF DECEMBER 31, 2013 	 	  	AS OF MARCH 31, 2014	 	
 	  	AMORTIZED
COST	 	  	FAIR
VALUE	 	  	AMORTIZED
COST	 	  	FAIR
VALUE	 	
 	  	 	 	  	 	 	  	(unaudited)	 	
Available-for-sale:	  				  				  				  				
Due under one year	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	
Due after one year through five years	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Due after five years through ten years	  	 	1,000	  	  	 	832	  	  	 	1,000	  	  	 	867	  	
Due after ten years	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
	  	$	1,000	  	  	$	832	  	  	$	1,000	  	  	$	867	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Held-to-maturity:	  				  				  				  				
Due under one year	  	$	16,088	  	  	$	16,088	  	  	$	14,954	  	  	$	14,954	  	
Due after one year through five years	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Due after five years through ten years	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Due after ten years	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
	  	$	16,088	  	  	$	16,088	  	  	$	14,954	  	  	$	14,954	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The Company had one investment with an unrealized loss of $61 and a fair value of $939 at December 31, 2012, an unrealized loss of $168 and a fair value of $832 at December 31, 2013 and an unrealized loss of $133 and a fair value of $867 at March 31, 2014 (unaudited). The debt security has been in the unrealized loss position for more than 12 months. The Company has assessed the bond for credit impairment and has determined that there is no intent to sell this bond and it is likely that it will hold the investment for a period of time sufficient to allow for a recovery. Furthermore, future payments on this bond are insured by a financial guarantee insurer. Therefore, the Company believes that the unrealized loss on this bond constitutes a temporary impairment.
6. Fair Value Measurements
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.
When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
 
 	•	 	Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.	
 
 	•	 	Level 2 inputs: Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.	
 
 	•	 	Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.	
 
F-16

Table of Contents
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:

 	  	AS OF DECEMBER 31,	 	
 	  	2012	 	  	LEVEL 1	 	  	LEVEL 2	 	  	LEVEL 3	 	
Assets	  				  				  				  				
Municipal bond	  	$	939	  	  	$	—  	  	  	$	939	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	939	  	  	$	—  	  	  	$	939	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities	  				  				  				  				
Warrant liabilities	  	$	551	  	  	$	—  	  	  	$	—  	  	  	$	551	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	551	  	  	$	—  	  	  	$	—  	  	  	$	551	  	

 	  	AS OF DECEMBER 31,	 	
 	  	2013	 	  	LEVEL 1	 	  	LEVEL 2	 	  	LEVEL 3	 	
Assets	  				  				  				  				
Restricted cash	  	$	3,000	  	  	$	3,000	  	  	$	—  	  	  	$	—  	  	
Municipal bond	  	 	832	  	  	 	—  	  	  	 	832	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	3,832	  	  	$	3,000	  	  	$	832	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities	  				  				  				  				
Warrant liabilities	  	$	4,900	  	  	$	—  	  	  	$	—  	  	  	$	4,900	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	4,900	  	  	$	—  	  	  	$	—  	  	  	$	4,900	  	

 	  	AS OF MARCH 31,	 	
 	  	2014	 	  	LEVEL 1	 	  	LEVEL 2	 	  	LEVEL 3	 	
 	  	(unaudited)	 	
Assets	  				  				  				  				
Restricted cash	  	$	3,000	  	  	$	3,000	  	  	$	—  	  	  	$	—  	  	
Municipal bond	  	 	867	  	  	 	—  	  	  	 	867	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	3,867	  	  	$	3,000	  	  	$	867	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities	  				  				  				  				
Warrant liabilities	  	$	6,119	  	  	$	—  	  	  	$	—  	  	  	$	6,119	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	6,119	  	  	$	—  	  	  	$	—  	  	  	$	6,119	  	

F-17

Table of Contents
A roll forward of activity in investments valued using Level 3 inputs is as follows:

 	  	WARRANT
LIABILITIES	 	  	FORWARD
CONTRACT	 	
Balance at January 1, 2012	  	$	333	  	  	$	      52	  	
Issued warrant liability awards	  	 	18	  	  	 	—  	  	
Settlement of forward contract	  	 	—  	  	  	 	(52	) 	
Change in fair value upon remeasurement	  	 	200	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	
Balance at December 31, 2012	  	 	551	  	  	 	—  	  	
Issued warrant liability awards (1)	  	 	3,806	  	  	 	—  	  	
Change in fair value upon remeasurement (1)	  	 	543	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	
Balance at December 31, 2013	  	$	4,900	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	
Change in fair value upon remeasurement (unaudited)	  	$	1,219	  	  	$	—  	  	
	  	 	 	 	  	 	 	 	
Balance at March 31, 2014 (unaudited)	  	$	6,119	  	  	$	—  	  	

 	(1)  	Includes $44 in issued liability awards and a $98 change in fair value upon remeasurement for the three months ended March 31, 2013 (unaudited).	
Changes in fair value upon remeasurement are recorded in other expense on the consolidated statement of operations.
The Company estimates fair value for its long-term debt based upon rates currently available to the Company for debt with similar terms and remaining maturities and this is a Level 3 measurement. Based upon the terms of the debt, the carrying amount of the $3,000 term loan approximates fair value at December 31, 2013 and March 31, 2014 (unaudited). The fair value of the $12,000 term loan was $12,000 and $11,746 at December 31, 2013 and March 31, 2014 (unaudited), respectively.
The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers between levels for the years ended December 31, 2012 or 2013, or the three months ended March 31, 2014 (unaudited).
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
 
 	•	 	Investment securities: Debt securities classified as available-for-sale are measured using quoted market prices when quoted market prices are available. If quoted market prices in active markets for identical assets are not available to determine fair value, then the Company uses quoted prices of similar instruments and other significant inputs derived from observable market data obtained from third-party data providers. Held-to-maturity securities are carried at amortized cost and the fair value is disclosed in Note 5. Fair value is determined in the same manner as available-for-sale securities and are considered Level 2 measurements.	
 
 	•	 	Warrant liabilities: These liabilities are valued using the Black-Scholes-Merton option-pricing model using certain unobservable inputs that are estimated by the Company. These inputs include a measure of volatility using an average of peer companies’ publicly traded stock volatility, expected dividend payments based on management’s assertion that no dividends will be paid in the near term, the remaining contractual term, and a discount rate using an average equivalent bond yield calculation. The range of inputs used is as follows:	

 	  	YEARS ENDED DECEMBER 31,	  	THREE MONTHS ENDED
MARCH 31,	
 	  	2012	  	2013	  	2013	  	2014	
 	  	 	  	 	  	(unaudited)	
Expected volatility	  	43%–60%	  	35%–43%	  	40%–46%	  	34%–45%	
Expected dividends	  	0%	  	0%	  	0%	  	0%	
Risk-free rate	  	0.2%–1.2%	  	0.1%–2.1%	  	0.1%–1.2%	  	0.0%–2.0%	
Term	  	1.3–6.7 years	  	0.3–6.3 years	  	1.0–7.0 years	  	0.1–6.0 years	
 
F-18

Table of Contents
An increase or decrease in any of these unobservable inputs would result in a change in the fair value measurement, which may be significant. The liabilities are revalued each period-end until exercised or expired. Gains and losses on revaluation of the liabilities are recorded in other expense, net in the Company’s consolidated financial statements.
7. Equity Method Investments
In 2012, the Company invested $500 in the common stock of a software development company, Vet Data Services, for a 25% equity interest. The Company’s equity interest was accounted for under the equity method because the ownership interest exceeded 20% and the Company had the ability to exert significant influence. The difference between the Company’s cost and the underlying equity in net asset, totaling $388, was identified as an intangible asset, which was being amortized over the estimated useful life of ten years.
In May 2013, the Company and the investee came to an agreement to exchange the Company’s investment for shares of the Company’s common stock held by the investee. In addition, the Company obtained an exclusivity agreement which was recorded as an intangible asset. Per the terms of the contract, any intellectual property developed as a part of this relationship is the property of the Company. A loss of $52 was recognized on this transaction.
8. Commitments and Contingencies
The Company has operating leases, related to equipment and office facilities, which expire over the next three years with various renewal options. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. Rental expense for operating leases was $169, $567, and $848 during 2011, 2012 and 2013, respectively.
Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2013, are as follows:

Year ending December 31:	  				
2014	  	$	737	  	
2015	  	 	603	  	
2016	  	 	421	  	
	  	 	 	 	
Total minimum lease payments	  	$	1,761	  	
	  	 	 	 	
The Company entered into a license agreement in 2011 for the use of a comprehensive breed guide developed by a veterinarian. The guide is to be further developed on a monthly basis over the course of the 10-year agreement. There is an option to purchase the guide for $118 at the end of the agreement. Future commitments related to this contract are as follows:

Year ending December 31:	  				
2014	  	$	51	  	
2015	  	 	51	  	
2016	  	 	51	  	
2017	  	 	51	  	
2018—2021	  	 	168	  	
	  	 	 	 	
Total minimum commitment	  	$	372	  	
	  	 	 	 	
During 2013, the Company determined that it owes goods and services tax (GST) and harmonized sales tax (HST) in Canada for certain intercompany fees charged to its Canadian entities from 2007 through 2013. The
 
F-19

Table of Contents
Company began a voluntary self-disclosure with the Canadian Revenue Agency for these unpaid taxes in 2014 under the Canada Revenue Agency Voluntary Disclosures Program, which would, if successful, avoid the imposition of penalties for late payment. Interest will be due on the amounts owed. The Company expects to complete the voluntary self-disclosure during the second quarter of 2014. The Company estimated GST/HST expense, including 5% interest per year, to be $190, $361 and $591 for the periods ended December 31, 2011, 2012 and 2013, respectively. This is included in general and administrative expenses in the consolidated statement of operations.
The Company’s subsidiary, American Pet Insurance Company (APIC), a New York corporation, received an inquiry from the California Department of Insurance (CDOI) in 2011 alleging APIC’s trial insurance policies issued in California are in violation of California law. The Company has disputed this assertion. In January 2013, in response to a request from the CDOI, APIC submitted certain additional information to the CDOI. The Company’s legal counsel has also spoken with the CDOI concerning the status of this investigation, and sent correspondence dated June 3, 2013, reaffirming APIC’s position that it is not in violation of California law. The CDOI has recently sent a draft of a notice of non-compliance regarding this issue, stating that the notice will be filed to the extent APIC and the CDOI cannot come to a resolution of this issue. To the extent the parties are not able to agree on a resolution and a notice of non-compliance is filed, APIC would have the opportunity to request a hearing to contest the notice. As of December 31, 2012 and 2013 and March 31, 2014 (unaudited), the Company had accrued liabilities of $100 for this matter. While the Company intends to defend this matter vigorously, adverse outcomes beyond recorded amounts are reasonably possible. At this stage in the matter, however, the Company does not believe that a material loss is probable and it is unable to estimate a possible loss or range of possible loss beyond amounts previously accrued.
The Company received an inquiry from the Washington State Office of the Insurance Commissioner in December 2012 (the OIC) concerning whether a subsidiary of the Company was properly licensed, and whether certain of its employees were properly licensed, under Washington law. The Company responded to this letter in January of 2013, stating that the Subsidiary is licensed, and its employees are not required to be licensed under Washington law. On October 16, 2013, the OIC sent correspondence to APIC indicating that, following recent conclusion of a market conduct examination, the OIC has concluded that APIC is in violation of Washington laws relating to producer licensing and appointments. The letter also stated that the file has been referred to the OIC’s legal department for review, but that no decision has been made as to any potential enforcement action by the OIC. Because of the inherent uncertainties of such matter, including the early stage and lack of specific claims, the Company currently believes the likelihood of a material loss is remote and cannot predict the impact (if any) that the matter may have on the Company’s business, results of operations, financial position or cash flows.
The Company also is subject to a variety of other claims and suits that arise from time to time in the ordinary course of its business.
The Company makes a provision for a liability relating to legal matters when it is both probable that a liability beyond previously accrued amounts has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Although management currently believes that resolving outstanding matters, individually or in aggregate, will not have a material adverse impact on the Company’s financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
 
F-20

Table of Contents
9. Claims Reserve
Activity in the claims reserve is summarized as follows:

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	2011	 	  	2012	 	  	2013	 	
Claims reserve at beginning of year	  	$	1,100	  	  	$	1,637	  	  	$	2,582	  	
Claims incurred during the year related to:	  				  				  				
Current year	  	 	24,950	  	  	 	37,779	  	  	 	56,702	  	
Prior years	  	 	45	  	  	 	77	  	  	 	(65	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total claims incurred	  	 	24,995	  	  	 	37,856	  	  	 	56,637	  	
Claims paid during year related to:	  				  				  				
Current year	  	 	23,298	  	  	 	35,250	  	  	 	50,907	  	
Prior years	  	 	1,117	  	  	 	1,584	  	  	 	2,516	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total claims paid	  	 	24,415	  	  	 	36,834	  	  	 	53,423	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Non-cash claims expense	  	 	43	  	  	 	77	  	  	 	184	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Claims reserve at end of year	  	$	1,637	  	  	$	2,582	  	  	$	5,612	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
For the years ended December 31, 2011 and 2012, the increased in incurred claims for prior years is primarily due to unanticipated claims development in those years from prior year claims and the corresponding change in the estimates of ultimate liabilities for incurred claims. The decrease in incurred claims for prior years in the year ended December 31, 2013 is primarily due to less claims than expected for 2012 claims.
10. Debt Financing
The Company’s outstanding debt at December 31, 2013 was as follows:

 	  	PRINCIPAL	 	  	DISCOUNT	 	  	BALANCE	 	  	INTEREST RATE	  	MATURITY	
Line of credit	  	$	14,900	  	  	$	—  	  	  	$	14,900	  	  	5.0% or 1.5% plus prime	  	July 23, 2015	
Term loan	  	 	3,000	  	  	 	—  	  	  	 	3,000	  	  	5.5% or 2.0% plus prime	  	September 28, 2016	
Term loan	  	 	12,000	  	  	 	3,801	  	  	 	8,199	  	  	11.0%	  	December 23, 2016	
	  	 	 	 	  	 	 	 	  	 	 	 	  		  		
	  	$	29,900	  	  	$	3,801	  	  	$	26,099	  	  		  		
The Company has a revolving line of credit with a bank, which is secured by any and all interest the Company has in assets that are not otherwise restricted. The revolving line of credit bears a variable interest rate as of December 31, 2012 and 2013, equal to the greater of 5.0% or 1.5% plus the prime rate. Interest expense is due monthly on the outstanding principal amount with all amounts outstanding under the revolving line of credit due upon maturity in July 2015.
On March 28, 2013, the Company obtained a term loan from the same bank amounting to $3,000 in aggregate principal. The interest rate on the term loan is the greater of 5.5% or 2.0% plus the prime rate. Beginning in March 2014, all amounts outstanding under the term loan, including principal and accrued interest, will be payable in 30 equal monthly installments. The term loan matures in September 2016, at which time all amounts outstanding under it become immediately due and payable.
Borrowings on the credit facility with the bank, inclusive of amounts under the revolving line of credit and the term loan, are limited to the lesser of $12,000 and $15,000 in 2012 and 2013, respectively, and the total amount of cash and securities held by APIC, less up to $500 for obligations the Company may have outstanding for other ancillary services.
 
F-21

Table of Contents
On December 23, 2013, the Company obtained a term loan in aggregate principal amount of $12,000. This note was entered into at a discount of $3,801 related to the issuance of warrants from the principal amount at maturity of $12,000. The term loan bears a fixed interest rate of 11.0% per year and is due on the earlier of three years from the issue date or certain triggering events, including an initial public offering. A member of the Company’s board of directors is affiliated with the lender, which is a stockholder of the Company, and is considered a related party.
In February 2014, the Company’s $12,000 term loan agreement was amended to reallocate $2,000 to an additional party. A member of the Company’s board of directors is affiliated with the newly participating lender, which is a stockholder of the Company. The material terms and conditions of the term loan agreement were not altered as a result of this change.
The credit agreements require the Company to comply with various financial and non-financial covenants. As of December 31, 2013, the Company was in compliance with these covenants. The credit facility with the bank also has a compensating balance requirement of $500. Substantially all of the Company’s assets are pledged as collateral for the three outstanding loan facilities.
Interest expense during 2011, 2012 and 2013 related to all loans was $690, $535 and $609, respectively. Total maturities of debt in 2014, 2015 and 2016 are $900, $16,100 and $12,900, respectively.
11. Stock-Based Compensation
In 2007, the Company adopted the 2007 Equity Compensation Plan (the Equity Compensation Plan) pursuant to which the Company’s Board of Directors may grant stock options or shares to directors, officers, employees, and non-employees. All awards have 10-year contractual terms. At December 31, 2013, there were 893,408 additional shares available for the Company to grant under the Equity Compensation Plan. The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The range of assumptions for the years ended December 31, 2011, 2012, and 2013 and the three months ended March 31, 2013 and 2014 are provided in the following table.

 	 	YEARS ENDED
DECEMBER 31,	 	THREE MONTHS ENDED
MARCH 31,	
 	 	2011	 	2012	 	2013	 	2013	 	2014	
 	 	 	 	 	 	 	 	(unaudited)	
Value assumptions:	 		 		 		 		 		
Expected term (in years)	 	6.25	 	6.25	 	6.25	 	6.25	 	6.25	
Expected volatility	 	60%	 	60%	 	54.9%–57.4%	 	57.3%–57.4%	 	55.9%–58.2%	
Risk-free interest rate	 	1.1%–2.5%	 	0.9%–1.3%	 	1.0%–2.0%	 	1.1%	 	1.8%–1.9%	
Expected dividend yield	 	0%	 	0%	 	0%	 	0%	 	0%	
Expected term: The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock-based awards granted, the Company has based its expected term for awards issued to employees on the simplified method, which represents the average period from vesting to the expiration of the stock option.
Expected volatility: As the Company does not have a significant trading history for common stock, the expected stock price volatility for common stock was estimated by taking the average historic price volatility for identified peers based on daily price observations over a period equivalent to the expected term of the stock option grants. The Company did not rely on implied volatilities of traded options in identified peers’ common stock because the volume of activity was relatively low. The Company intends to continue to consistently apply this process using these or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s common stock price becomes available.
Risk-free interest rate: The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.
 
F-22

Table of Contents
Expected dividend yield: The Company does not expect to pay any dividends in the foreseeable future.
The following table presents information regarding options granted, exercised and forfeited for the periods presented:

 	  	NUMBER
OF
OPTIONS	 	 	WEIGHTED-
AVERAGE
EXERCISE
PRICE	 	  	AGGREGATE
INTRINSIC
VALUE	 	
 	  	 	 	 	 	 	  	(in thousands)	 	
January 1, 2011	  	 	3,812,877	  	 	$	0.97	  	  	$	—  	  	
Granted	  	 	1,583,852	  	 	 	1.26	  	  	 	—  	  	
Exercised	  	 	(29,000	) 	 	 	0.97	  	  	 	89	  	
Forfeited	  	 	(861,021	) 	 	 	1.02	  	  	 	—  	  	
	  	 	 	 	 				  				
December 31, 2011	  	 	4,506,708	  	 	 	1.06	  	  	 	—  	  	
Granted	  	 	352,146	  	 	 	4.05	  	  	 	—  	  	
Exercised	  	 	(502,874	) 	 	 	0.91	  	  	 	1,579	  	
Forfeited	  	 	(129,097	) 	 	 	1.28	  	  	 	—  	  	
	  	 	 	 	 				  				
December 31, 2012	  	 	4,226,883	  	 	 	1.32	  	  	 	—  	  	
Granted	  	 	1,294,150	  	 	 	4.40	  	  	 	—  	  	
Exercised	  	 	(547,981	) 	 	 	1.11	  	  	 	2,285	  	
Forfeited	  	 	(309,607	) 	 	 	2.48	  	  	 	—  	  	
	  	 	 	 	 				  				
December 31, 2013	  	 	4,663,445	  	 	 	2.12	  	  	 	30,406	  	
Granted (unaudited)	  	 	207,350	  	 	 	9.07	  	  	 	—  	  	
Exercised (unaudited)	  	 	(5,000	) 	 	 	4.05	  	  	 	25	  	
Forfeited (unaudited)	  	 	(32,395	) 	 	 	6.10	  	  	 	—  	  	
	  	 	 	 	 				  				
March 31, 2014 (unaudited)	  	 	4,833,400	  	 	 	2.39	  	  	 	37,932	  	
	  	 	 	 	 				  				
As of December 31, 2013, the stock options outstanding had a remaining contractual life of 7.30 years.

 	  	NUMBER
OF
OPTIONS	 	  	WEIGHTED-
AVERAGE
FAIR VALUE	 	  	WEIGHTED-
AVERAGE
EXERCISE
PRICE	 	  	WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL
TERM
(IN YEARS)	 	  	AGGREGATE
INTRINSIC
VALUE	 	
Vested and exercisable at December 31, 2013	  	 	2,719,609	  	  	$	1.32	  	  	$	1.38	  	  	 	6.03	  	  	$	19,908	  	
Vested and exercisable at March 31, 2014 (unaudited)	  	 	3,014,118	  	  	$	1.33	  	  	$	1.42	  	  	 	6.32	  	  	$	26,873	  	
Information with respect to stock options outstanding at December 31, 2013 and March 31, 2014, is as follows:

   	 	 	  	SHARES	 	
 	 	EXERCISE PRICE	  	DECEMBER 31, 2013	 	  	MARCH 31, 2014	 	
 	 	 	  	 	 	  	(unaudited)	 	
	 	$0.90  	  	 	954,067	  	  	 	954,067	  	
	 	1.04	  	 	2,131,195	  	  	 	2,131,195	  	
	 	4.05	  	 	975,283	  	  	 	956,588	  	
	 	4.55	  	 	14,250	  	  	 	13,750	  	
	 	4.77	  	 	354,000	  	  	 	354,000	  	
	 	4.81	  	 	234,650	  	  	 	229,450	  	
	 	9.07	  	 	—  	  	  	 	194,350	  	
	 		  	 	 	 	  	 	 	 	
	 		  	 	4,663,445	  	  	 	4,833,400	  	

F-23

Table of Contents
The weighted-average grant date fair value of options granted and fair value of shares vested is as follows:

 	  	WEIGHTED-
AVERAGE
GRANT DATE
FAIR VALUE
OF SHARES	 	  	FAIR VALUE
OF SHARES
VESTED	 	
 	  	(per share)	 	  	 	 	
Year:	  				  				
2011	  	$	2.73	  	  	$	747	  	
2012	  	$	2.26	  	  	$	1,296	  	
2013	  	$	2.97	  	  	$	1,675	  	
The following provides a summary of the Company’s restricted stock activity:

 	  	NUMBER OF SHARES
UNDERLYING
OUTSTANDING
RESTRICTED STOCK	 	 	WEIGHTED-AVERAGE
GRANT DATE FAIR
VALUE PER
RESTRICTED STOCK	 	
Nonvested stock award balance at December 31, 2012	  	 	—  	  	 	$	—  	  	
Restricted stock awards granted	  	 	732,708	  	 	 	4.77	  	
Awards upon which restrictions lapsed	  	 	(10,482	) 	 	 	4.77	  	
Restricted stock awards forfeited	  	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Nonvested stock award balance at December 31, 2013	  	 	722,226	  	 	$	4.77	  	
	  	 	 	 	 	 	 	 	
Awards upon which restrictions lapsed (unaudited)	  	 	(7,861	) 	 	$	4.77	  	
	  	 	 	 	 	 	 	 	
Nonvested stock award balance at March 31, 2014 (unaudited)	  	 	714,365	  	 	$	4.77	  	
	  	 	 	 	 	 	 	 	
On August 2, 2013, the Company granted two members of the management team a total of 732,708 shares of restricted stock. 31,446 of the shares vest monthly over the course of one year beginning one month after the grant date. 701,262 shares vest annually over a six year period contingent upon the successful completion of a qualified initial public offering by a specified date at which point the Company will begin recognizing stock-based compensation expense. As of December 31, 2013, there was $3,433 of unrecognized compensation expense related to unvested stock awards. As of March 31, 2014, there was $3,396 (unaudited) of unrecognized compensation expense related to unvested stock awards.
Non-Employee Stock-Based Compensation
Between 2008 and 2013, the Company granted options to purchase 86,390 shares of its common stock to various independent contractors under the plan in exchange for services. During the three months ended March 31, 2014, the Company granted options to purchase an additional 9,850 (unaudited) shares of its common stock to various non-employees. The options vest over four years and have a 10-year contractual term. The associated expense is included in the Company’s sale and marketing expenses. At the end of each financial reporting period prior to vesting, the value of these options, as calculated using the Black-Scholes-Merton option-pricing model, is remeasured and the stock-based compensation recognized during the period is adjusted accordingly.
 
F-24

Table of Contents
The Company recognized $17, $23 and $26 of expense in 2011, 2012 and 2013, respectively, related to these options. Expense related to these options will be recognized until 2017 when the remainder of the options granted become fully vested.
During 2007, the Company entered into an agreement with an independent management consultant to provide six years of consulting services in exchange for 266,288 shares of Series A preferred stock, to be delivered quarterly over the term of the agreement. The Company recognized $201, $126 and $0 in 2011, 2012 and 2013, respectively, in relation to this agreement.
Stock-based compensation expense includes stock options and restricted stock granted to employees and non-employees and has been reported in the Company’s statements of operations in claims expenses, other cost of revenue, sales and marketing, technology and development, and general and administrative expenses depending on the function performed by the employee or non-employee. As of December 31, 2013, the Company had unrecognized stock-based compensation of $4,463 related to stock options held by employees and non-employees, which is expected to vest over a weighted-average period of 1.90 years. As of December 31, 2013, the Company had 1,943,836 unvested stock options that are expected to vest. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s inception. The expense recognized in each category is provided in the table below:

 	  	YEARS ENDED
DECEMBER  31,	 	  	THREE MONTHS ENDED
MARCH  31,	 	
 	  	    2011    	 	  	    2012    	 	  	    2013    	 	  	    2013    	 	  	    2014    	 	
 	  	 	 	  	 	 	  	 	 	  	(unaudited)	 	
Claims expense	  	$	43	  	  	$	77	  	  	$	184	  	  	$	33	  	  	$	57	  	
Other cost of revenue	  	 	22	  	  	 	32	  	  	 	46	  	  	 	7	  	  	 	24	  	
Sales and marketing	  	 	288	  	  	 	428	  	  	 	677	  	  	 	143	  	  	 	149	  	
Technology and development	  	 	165	  	  	 	268	  	  	 	351	  	  	 	71	  	  	 	98	  	
General and administrative	  	 	464	  	  	 	629	  	  	 	680	  	  	 	147	  	  	 	239	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation	  	$	982	  	  	$	1,434	  	  	$	1,938	  	  	$	401	  	  	$	567	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
12. Preferred Stock and Stockholders’ Deficit
The following is the composition of the Company’s authorized and outstanding capital stock as of the dates indicated:

 	 	AUTHORIZED	 	 	OUTSTANDING	 	
 	 	2012	 	 	2013	 	 	2012	 	 	2013	 	
Shares:	 				 				 				 				
Common stock	 	 	26,000,000	  	 	 	26,000,000	  	 	 	1,010,346	  	 	 	2,236,641	  	
Preferred stock:	 				 				 				 				
Special voting shares	 	 	2,500,030	  	 	 	2,500,030	  	 	 	2,247,130	  	 	 	2,247,130	  	
Series A convertible preferred stock	 	 	8,215,370	  	 	 	8,215,370	  	 	 	7,466,283	  	 	 	7,466,283	  	
Series B convertible preferred stock	 	 	3,588,031	  	 	 	3,588,031	  	 	 	3,546,384	  	 	 	3,546,384	  	
Series C convertible preferred stock	 	 	3,845,322	  	 	 	3,845,322	  	 	 	3,845,322	  	 	 	3,845,322	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total preferred stock	 	 	18,148,753	  	 	 	18,148,753	  	 	 	17,105,119	  	 	 	17,105,119	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	44,148,753	  	 	 	44,148,753	  	 	 	18,115,465	  	 	 	19,341,760	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Series A convertible preferred stock was issued at $1.50 per share, Series B convertible preferred stock was issued at $1.70 per share, and Series C convertible preferred stock was issued at $4.16 per share.
Holders of special voting shares of the Company also hold one exchangeable share of the Company’s Canadian subsidiary, Trupanion Canadian Shareholders Ltd., for every ten special voting shares held. These exchangeable shares are contractually tied to the special voting shares held and do not carry a par value. Upon redemption,
 
F-25

Table of Contents
retirement or transfer of the special voting shares, the applicable exchangeable share is also redeemed, retired or transferred.
Voting
Each holder of outstanding shares of convertible preferred stock and special voting shares has the right to one vote for each share of common stock into which such share could then be converted. The holders of shares of convertible preferred stock and special voting shares have full voting rights and powers equal to the voting rights and powers of shares of common stock and are entitled to notice of any stockholders’ meeting and vote together with the holders of common stock, with respect to any question upon which holders of shares of common stock have the right to vote along with the holders of special voting shares as a single class, including, without limitation, actions to increase or decrease the aggregate number of authorized shares of common stock, special voting shares, or Series A, B or C convertible preferred stock.
Dividends
The holders of each share of Series A, Series B and Series C convertible preferred stock are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors in the following order of preference: (i) Series C convertible preferred stockholders are entitled to receive a noncumulative 8.0% return on the original issue price of the applicable shares before any other class is able to receive a dividend; (ii) Series A, B and C convertible preferred stock participate equally in all other dividends declared on convertible preferred stock; and (iii) no dividend shall be declared or paid on common stock unless an equivalent dividend is declared and paid to the exchangeable shareholders. In effect, the common stock stockholder and exchangeable shareholders participate equally in any further dividends declared. The Company is unable to pay dividends to stockholders as of December 31, 2013, due to restrictions in its credit agreements.
Liquidation
Immediately upon liquidation, each exchangeable share will automatically be exchanged for ten shares of common stock, which will trigger a mandatory redemption of each special voting share at $0.00001 per special voting share. The assets of the Company legally available for distribution to stockholders will be distributed in the following order of priority: (i) the holders of the shares of Series C convertible preferred stock will first receive an amount equal to the original issue price of the shares of Series C convertible preferred stock plus any declared and unpaid dividends; (ii) the holders of the shares of Series A and Series B convertible preferred stock will then receive an amount equal to the original issue price of the applicable shares plus any declared and unpaid dividends; and (iii) the holders of the shares of common stock and Series A convertible preferred stock will participate on an as-converted basis in the remaining assets available for distribution after the redemption of the special voting shares and the preferential payments to the holders of the Series C convertible preferred stock and the Series A and B convertible preferred stock.
Conversion
Each issued and outstanding share of convertible preferred stock is convertible into common stock at the holder’s option at any time after the date of issuance or automatically upon the occurrence of certain events as defined in the Company’s amended and restated certificate of incorporation, at a defined conversion rate. The number of shares of common stock into which one share of each series of convertible preferred stock was convertible was based on a ratio of the original issue price compared to the conversion price. At December 31, 2013, conversion prices for Series A, B and C convertible preferred stock were $1.50, $1.70 and $4.16, respectively, which result in a one-for-one conversion into common stock.
The conversion price for each share of convertible preferred stock is subject to adjustment upon the occurrence of certain events. The conversion price of each share of a series of convertible preferred stock is adjusted if the
 
F-26

Table of Contents
Company issues additional shares, subject to specified exceptions, at a price lower than the current conversion price for such series, which is measured and recognized if the contingency occurs.
Shares of Series A, B and C convertible preferred stock are subject to mandatory conversion after certain triggering events, which include an initial public offering of shares of the Company that results in proceeds of at least $50,000 of gross proceeds to the Company or an event voted by holders of at least (i) two-thirds of the shares of Series A and Series B convertible preferred stock, voting together as a single class and (ii) a majority of Series C convertible preferred stock shares, voting as a separate class.
Exchangeable shares can be converted to shares of common stock at a ratio of 1:10 at the request of the exchangeable shareholder. In addition, upon certain triggering events, which include an initial public offering of shares of the Company and certain Canadian tax law changes, each exchangeable share will be automatically converted to ten shares of common stock of the Company plus all previously declared and unpaid dividends on such exchangeable shares.
Redemption
To the extent it is then lawfully able to do so and if certain conditions are met, the Company is required at any time after the fifth anniversary of the Series C convertible preferred stock issue date, upon the election of holders of at least two-thirds of the then-outstanding Series A, B and C convertible preferred stock voting together as a single class on an as-converted to common stock basis, to redeem the requested number of outstanding shares at either (i) a rate of the applicable original issue price per share plus an amount equal to 8% of the applicable original issue price of each share per year outstanding, without compounding, plus all declared but unpaid dividends as of the redemption date, or (ii) the amount each stockholder would receive upon liquidation as of the redemption date, as determined by the mutual agreement of the Board of Directors and holders of at least two-thirds of the outstanding convertible preferred stock.
As of December 31, 2013, no convertible preferred stock was redeemable and it was considered not probable that the stock would become redeemable.
Tender Offer
During 2011, the Company commenced a tender offer to holders of common stock, Series A and B convertible preferred stock, and special voting shares to repurchase shares at $4.15 per share. The tender offer closed in 2012, and the Company repurchased 560,739 shares of common stock (which includes 252,900 shares of common stock issued upon the exchange of 25,290 exchangeable shares of Trupanion Canadian Shareholders, Ltd.) and 657,337 shares of convertible preferred stock and redeemed 252,900 special voting shares associated with the 252,900 shares of common stock issued upon the exchange of the 25,290 exchangeable shares. The common stock was recorded on the consolidated balance sheets as “treasury stock” using the cost method. Redemption of the convertible preferred stock was recorded as a reduction in stock at the redemption value, and amounts exceeding par value reduced additional paid-in capital on the consolidated balance sheets.
 
F-27

Table of Contents
The following is the activity of convertible preferred stock for the years ended December 31, 2012 and 2013:

 	  	JANUARY 1,
2012	 	  	REDEMPTION
OF CONVERTIBLE
PREFERRED
STOCK	 	 	ISSUANCE OF
CONVERTIBLE
PREFERRED
STOCK	 	  	DECEMBER 31,
2012	 	
Series A convertible preferred stock:	  				  				 				  				
Shares	  	 	7,975,350	  	  	 	(633,337	) 	 	 	124,270	  	  	 	7,466,283	  	
Amounts	  	$	11,174	  	  	$	(950	) 	 	$	—  	  	  	$	10,224	  	
Series B convertible preferred stock:	  				  				 				  				
Shares	  	 	3,570,384	  	  	 	(24,000	) 	 	 	—  	  	  	 	3,546,384	  	
Amounts	  	$	5,887	  	  	$	(40	) 	 	$	—  	  	  	$	5,847	  	
Series C convertible preferred stock:	  				  				 				  				
Shares	  	 	2,185,825	  	  	 	—  	  	 	 	1,659,497	  	  	 	3,845,322	  	
Amounts	  	$	8,731	  	  	$	—  	  	 	$	6,922	  	  	$	15,653	  	
Total:	  				  				 				  				
Shares	  	 	13,731,559	  	  	 	(657,337	) 	 	 	1,783,767	  	  	 	14,857,989	  	
Amounts	  	$	25,792	  	  	$	(990	) 	 	$	6,922	  	  	$	31,724	  	

 	  	JANUARY 1,
2013	 	  	REDEMPTION
OF CONVERTIBLE
PREFERRED
STOCK	 	  	ISSUANCE OF
CONVERTIBLE
PREFERRED
STOCK	 	  	DECEMBER 31,
2013	 	
Series A convertible preferred stock:	  				  				  				
Shares	  	 	7,466,283	  	  	 	—  	  	  	 	—  	  	  	 	7,466,283	  	
Amounts	  	$	10,224	  	  	$	 	  	  	$	 	  	  	$	10,224	  	
Series B convertible preferred stock:	  				  				  				
Shares	  	 	3,546,384	  	  	 	—  	  	  	 	—  	  	  	 	3,546,384	  	
Amounts	  	$	5,847	  	  	$	 	  	  	$	 	  	  	$	5,847	  	
Series C convertible preferred stock:	  				  				  				
Shares	  	 	3,845,322	  	  	 	—  	  	  	 	—  	  	  	 	3,845,322	  	
Amounts	  	$	15,653	  	  	$	 	  	  	$	 	  	  	$	15,653	  	
Total:	  				  				  				
Shares	  	 	14,857,989	  	  	 	—  	  	  	 	—  	  	  	 	14,857,989	  	
Amounts	  	$	31,724	  	  	$	            	  	  	$	                	  	  	$	31,724	  	
Warrants
The Company has the following warrants outstanding and exercisable as of December 31, 2013, issued in connection with various financing agreements:
 
 	•	 	Warrant to purchase 100,000 shares of Series A convertible preferred stock at $1.50 per share.	
 
 	•	 	Warrant to purchase 17,647 shares of Series B convertible preferred stock at $1.70 per share.	
 
 	•	 	Warrants to purchase 18,025 shares of Series C convertible preferred stock at $4.16 per share.	
 
 	•	 	Warrant to purchase up to 748,440 shares of common stock at $4.81 per share.	
 
 	•	 	Outstanding warrants at December 31, 2013 had a weighted-average remaining contractual life of 4.45 years.	
 
F-28

Table of Contents
The fair value of the warrants was determined using the Black-Scholes-Merton option-pricing model and recorded as a deferred financing cost and amortized over the term of the financing agreement. The Series A, B, and C convertible preferred stock warrants are warrants for redeemable shares, and they have down round provisions causing the warrant to not be indexed to the Company stock, thus requiring liability classification in the consolidated balance sheet. In addition, the common stock warrants have provisions modifying both the strike price and the number of shares issuable upon exercise of the warrants upon certain events, which also result in liability classification in the consolidated balance sheet. At the end of each reporting period, the Company adjusts the fair value of the warrants (see Note 6). There is significant judgment used in determining the unobservable inputs used in valuing these instruments. A change in the inputs used, particularly related to the fair value of the underlying shares, could result in a significantly higher or lower fair value estimate.
In December 2013, the Company issued a warrant to purchase up to 748,440 shares of common stock in connection with a debt financing agreement. The shares subject to this warrant had an exercise price of $4.81 per share at December 31, 2013. Both the exercise price and number of shares issuable upon exercise of the warrant are subject to adjustment upon a qualified initial public offering (IPO). Upon IPO, the exercise price of the warrants adjusts to the price of common stock offered in the IPO. The number of warrants adjusts to an amount equal to $3,600 divided by the adjusted price.
Forward Contract
During 2011, the Company entered into a financing agreement giving a third party rights to a set number of Series C convertible preferred stock shares and a forward contract to purchase up to 1,359,000 shares of additional stock at a future date. The forward contract was recorded as a liability at the estimated fair value of the obligation on the date of issuance and adjusted to fair value at each reporting date. The change in fair value of the Series C convertible preferred stock forward contract is recorded as other income (expense) in the statements of operations. The fair value was determined using an option valuation model that considers the entity’s cost of capital, the estimated time period the forward contract was outstanding, consideration received for the instrument with the forward contract, the number of shares to be issued to satisfy the forward contract, and the price and any changes in the fair value of the underlying instrument to the forward contract. The forward contract related to the financing agreement was settled in January 2012.
13. Segments
The Company has two segments, subscription business and other business. The subscription business segment includes monthly subscriptions related to the Company’s medical insurance plan, while the other business segment includes all other business, including policies written for third parties and policies written under a federal government program. Prior to December 2012, the Company did not have any operations in the other business segment and therefore segment results are not presented for 2011. The chief operating decision maker uses two measures to evaluate segment performance: revenue and gross profit. Corporate operating expenses, interest and other expenses, and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets.
 
F-29

Table of Contents
Revenue and gross profit of the Company’s segments were as follows:

 	  	YEARS ENDED
DECEMBER  31,	 	 	THREE MONTHS ENDED
MARCH  31,	 	
 	  	      2012      	 	 	      2013      	 	 	      2013      	 	 	      2014      	 	
 	  	 	 	 	 	 	 	(unaudited)	 	
Revenue:	  				 				 				 				
Subscription business	  	$	55,352	  	 	$	76,818	  	 	$	17,017	  	 	$	23,089	  	
Other business	  	 	178	  	 	 	7,011	  	 	 	825	  	 	 	2,551	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	  	 	55,530	  	 	 	83,829	  	 	 	17,842	  	 	 	25,640	  	
Claims expense:	  				 				 				 				
Subscription business	  	 	37,773	  	 	 	53,787	  	 	 	11,744	  	 	 	16,104	  	
Other business	  	 	83	  	 	 	2,850	  	 	 	379	  	 	 	930	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	  	 	37,856	  	 	 	56,637	  	 	 	12,123	  	 	 	17,034	  	
Other cost of revenue:	  				 				 				 				
Subscription business	  	 	6,412	  	 	 	8,118	  	 	 	1,729	  	 	 	2,498	  	
Other business	  	 	51	  	 	 	3,430	  	 	 	382	  	 	 	1,352	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	  	 	6,463	  	 	 	11,548	  	 	 	2,111	  	 	 	3,850	  	
Gross profit:	  				 				 				 				
Subscription business	  	 	11,167	  	 	 	14,913	  	 	 	3,544	  	 	 	4,487	  	
Other business	  	 	44	  	 	 	731	  	 	 	64	  	 	 	269	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	  	 	11,211	  	 	 	15,644	  	 	 	3,608	  	 	 	4,756	  	
Sales and marketing	  	 	7,149	  	 	 	9,091	  	 	 	2,572	  	 	 	2,646	  	
Technology and development	  	 	3,406	  	 	 	4,888	  	 	 	883	  	 	 	2,200	  	
General and administrative	  	 	6,195	  	 	 	8,652	  	 	 	1,927	  	 	 	2,786	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	  	$	(5,539	) 	 	$	(6,987	) 	 	$	(1,774	) 	 	$	(2,876	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table presents the Company’s revenue by geographic region of the member:

 	  	YEARS ENDED
DECEMBER  31,	 	  	THREE MONTHS ENDED
MARCH  31,	 	
 	  	      2011      	 	  	      2012      	 	  	      2013      	 	  	      2013      	 	  	      2014      	 	
 	  	 	 	  	 	 	  	 	 	  	(unaudited)	 	
United States	  	$	19,456	  	  	$	34,611	  	  	$	58,847	  	  	$	11,955	  	  	$	18,896	  	
Canada	  	 	17,589	  	  	 	20,919	  	  	 	24,982	  	  	 	5,887	  	  	 	6,744	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total revenue	  	$	37,045	  	  	$	55,530	  	  	$	83,829	  	  	$	17,842	  	  	$	25,640	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Substantially all of the Company’s long-lived assets were located in the United States as of December 31, 2012 and 2013 and March 31, 2014 (unaudited).
14. Dividend Restrictions and Statutory Surplus
The Company’s business operations are conducted through subsidiaries, one of which is an insurance company domiciled in New York. In addition to general state law restrictions on payments of dividends and other distributions to stockholders applicable to all corporations, insurance companies are subject to further regulations that, among other things, may require such companies to maintain certain levels of equity and restrict the amount of dividends and other distributions that may be paid to their parent corporations.
Under regulatory requirements at December 31, 2013, the amount of dividends that may be paid by the Company’s insurance subsidiary to the Company without prior approval by regulatory authorities is approximately $66. During 2011, 2012 and 2013, the Company’s insurance subsidiary did not pay any dividends to the Company.
 
F-30

Table of Contents
The statutory net income for 2011, 2012 and 2013 and statutory capital and surplus at December 31, 2011, 2012 and 2013, for the Company’s insurance subsidiary was as follows:

 	  	AS OF DECEMBER 31,	 	
 	  	2011	 	  	2012	 	  	2013	 	
Statutory net income	  	$	1,497	  	  	$	1,266	  	  	$	1,126	  	
Statutory capital and surplus	  	 	10,190	  	  	 	11,794	  	  	 	16,875	  	
Required statutory capital and surplus	  	 	1,500	  	  	 	4,000	  	  	 	4,000	  	
As of December 31, 2012 and 2013, the Company had $6,734 and $6,478, respectively, on deposit with various states in which it writes policies.
15. Related Parties
In March 2012, the Company issued a mortgage loan to an employee in the amount of $770. In November 2013, the loan was repaid in full.
The Company is party to an arrangement with the father of the Company’s Chief Executive Officer, who serves as an independent contractor, to develop veterinary relationships and build referrals. The terms of the independent contractor agreement are consistent with the terms of other similar independent contractors that do business with the Company. Total amounts paid to the related party in 2011, 2012 and 2013 were $235, $268 and $310, respectively. As of December 31, 2012 and 2013, the Company owed the independent contractor $22 and $26, respectively, in earned contractor fees.
16. Income Taxes
Income (loss) before income taxes consists of the following:

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	2011	 	 	2012	 	 	2013	 	
United States	  	$	(4,096	) 	 	$	(6,522	) 	 	$	(8,256	) 	
Foreign	  	 	269	  	 	 	196	  	 	 	(11	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
	  	$	(3,827	) 	 	$	(6,326	) 	 	$	(8,267	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
The components of income tax expense (benefit) are as follows:

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	2011	 	  	2012	 	  	2013	 	
Current:	  				  				  				
U.S. federal & state	  	$	13	  	  	$	24	  	  	$	30	  	
Foreign	  	 	79	  	  	 	60	  	  	 	(122	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	
	  	 	92	  	  	 	84	  	  	 	(92	) 	
Deferred:	  				  				  				
U.S. federal & state	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Foreign	  	 	—  	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
	  	 	—  	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Income tax expense (benefit)	  	$	92	  	  	$	84	  	  	$	(92	) 	

F-31

Table of Contents
A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

 	  	    YEARS ENDED DECEMBER 31,    	 	
 	  	2011	 	 	2012	 	 	2013	 	
Federal income taxes at statutory rate	  	 	34.0	% 	 	 	34.0	% 	 	 	34.0	% 	
Equity compensation	  	 	(10.2	) 	 	 	(8.5	) 	 	 	(8.6	) 	
Change in valuation allowance	  	 	(27.2	) 	 	 	(26.5	) 	 	 	(25.1	) 	
Other, net	  	 	1.2	  	 	 	0.1	  	 	 	0.8	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Effective income tax rate	  	 	(2.2	)% 	 	 	(0.9	)% 	 	 	1.1	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	
The principal components of the Company’s deferred tax assets and liabilities are as follows:

 	  	        YEARS ENDED DECEMBER 31,         	 	
 	  	2012	 	 	2013	 	
Deferred tax assets:	  				 				
Current:	  				 				
Loss reserves	  	$	524	  	 	$	1,033	  	
Other	  	 	99	  	 	 	575	  	
Noncurrent:	  				 				
Net operating loss carryforwards	  	 	7,129	  	 	 	8,322	  	
Depreciation and amortization	  	 	406	  	 	 	322	  	
Other	  	 	57	  	 	 	118	  	
Equity compensation	  	 	238	  	 	 	229	  	
	  	 	 	 	 	 	 	 	
Total deferred tax assets	  	 	8,453	  	 	 	10,599	  	
Deferred tax liabilities:	  				 				
Current:	  				 				
Deferred costs	  	 	(83	) 	 	 	(114	) 	
Noncurrent:	  				 				
Intangible assets	  	 	(1,622	) 	 	 	(1,622	) 	
	  	 	 	 	 	 	 	 	
Total deferred tax liabilities	  	 	(1,705	) 	 	 	(1,736	) 	
	  	 	 	 	 	 	 	 	
Total deferred taxes	  	 	6,748	  	 	 	8,863	  	
Less deferred tax asset valuation allowance	  	 	(8,370	) 	 	 	(10,485	) 	
	  	 	 	 	 	 	 	 	
Net deferred taxes	  	$	(1,622	) 	 	$	(1,622	) 	
	  	 	 	 	 	 	 	 	
The Company has net operating loss carryforwards of approximately $24.4 million that will begin to expire in 2027. A valuation allowance is required to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of the Company’s net operating loss carryforwards and credit carryforwards may be limited as a result of any future changes in ownership. After consideration of all the evidence, both positive and negative, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2012 and 2013, because the Company’s management has determined that it is more likely than not that these assets will not be fully realized.
The Company is open to examination by the U.S. federal tax jurisdiction for the years ended December 31, 2010 through 2013. The Company is also open to examination for 2006 and forward with respect to net operating loss carryforwards generated and carried forward from those years in the United States. The Company is open to examination by the Canadian Revenue Agency for the years ended December 31, 2006 through 2013.
 
F-32

Table of Contents
The Company accounts for uncertain tax positions based on a two-step process of evaluating recognition and measurement criteria. The first step assesses whether the tax position is more likely than not to be sustained upon examination by the taxing authority, including resolution of any appeals or litigation, on the basis of the technical merits of the position. If the tax position meets the more-likely-than-not criteria, the portion of the tax benefit greater than 50% likely to be realized upon settlement with the relevant tax authority is recognized in the financial statements. Net unrecognized tax benefits, interest, and penalties not expected to be settled within one year are included in other long-term liabilities on the consolidated balance sheets.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

   	  	YEARS ENDED
DECEMBER 31,	 	
 	  	2011	 	  	2012	 	  	2013	 	
Balance, beginning of year	  	$	308	  	  	$	348	  	  	$	526	  	
Increases (decreases) to tax positions related to the current year	  	 	40	  	  	 	178	  	  	 	(136	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	
Balance, end of year	  	$	348	  	  	$	526	  	  	$	390	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
As of December 31, 2012 and 2013, total interest and penalties accrued were $14 and $23, respectively. In connection with unrecognized tax benefits, the Company recognized interest expense in 2011, 2012 and 2013 of $0, $14 and $9, respectively.
The Company believes its annual tax provisions have included amounts considered sufficient to pay assessments that may result from tax authority examinations. However, the final settlement of tax authority examinations is uncertain, and tax provisions may have to be adjusted in the period the examinations, if any, are concluded. The Company believes it is reasonably possible its liabilities related to unrecognized tax benefits could decrease by approximately $390 within twelve months of the current reporting date due to settlements with the various tax authorities.
17. Retirement Plan
The Company has a 401(k) plan for its U.S. employees. The plan allows employees to contribute a percentage of their pretax earnings annually, subject to limitations imposed by the Internal Revenue Service. The plan also allows the Company to make a matching contribution, subject to certain limitations. To date, the Company has made no contributions to the 401(k) plan.
18. Subsequent Events
On February 26, 2014, the board of directors voted to increase total authorized capital stock to 44,166,778. This included an 18,025 increase in authorized Series C convertible preferred stock.
From January 1, 2014 through February 28, 2014, the Company issued 168,500 stock options to employees and 9,650 stock options to non-employees.
During February 2014, the Company’s $12,000 term loan agreement was amended to include $2,000 participation from an additional party. A member of the Company’s board of directors is affiliated with the newly participating lender, which is a stockholder of the Company. The material terms and conditions of the term loan agreement were not altered as a result of this change.
In March, April and May 2014, the Company, its board of directors, its stockholders and certain other third parties took a number of actions to remediate certain historical corporate actions taken in 2008.
 
F-33

Table of Contents
Subsequent events were evaluated from the balance sheet date of December 31, 2013 through the audited consolidated financial statements issuance date of February 28, 2014 and, with respect to the actions described in the preceding paragraph, through May 1, 2014.
19. Subsequent Events (unaudited)
For the three months ended March 31, 2014, the Company evaluated subsequent events through June 16, 2014, the date the unaudited interim financial statements were issued.
On April 29, 2014, the Company issued 86,956 shares of Series A convertible preferred stock upon the net exercise of a warrant to purchase 100,000 shares of Series A convertible preferred stock, after which exercise the warrant was no longer outstanding.
On May 1, 2014, the Company modified the vesting period for 157,616 outstanding stock options in connection with the negotiation of an employee separation and consulting agreement. These options fully vest at the earlier of July 1, 2014 or the death or disability of the holder.
 
F-34

Table of Contents

Table of Contents

Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by the Registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee:

 	  	AMOUNT PAID OR
TO BE PAID	 	
SEC registration fee	  	$	9,660	  	
FINRA filing fee	  	 	11,750	  	
New York Stock Exchange listing fee	  	 	*    	  	
Blue sky qualification fees and expenses	  	 	*    	  	
Printing and engraving expenses	  	 	*    	  	
Legal fees and expenses	  	 	*    	  	
Accounting fees and expenses	  	 	*    	  	
Transfer agent and registrar fees and expenses	  	 	*    	  	
Miscellaneous expenses	  	 	*    	  	
	  	 	 	 	
Total	  	 	*    	  	

*	To be completed by amendment.	
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the Delaware General Corporation Law are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
As permitted by the Delaware General Corporation Law, the Registrant’s restated certificate of incorporation to be effective upon the completion of this offering contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:
 
 	•	 	any breach of the director’s duty of loyalty to the Registrant or its stockholders;	
 
 	•	 	acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;	
 
 	•	 	under Section 174 of the Delaware General Corporation Law (regarding unlawful dividends and stock purchases); or	
 
 	•	 	any transaction from which the director derived an improper personal benefit.	
As permitted by the Delaware General Corporation Law, the Registrant’s restated bylaws to be effective upon the completion of this offering provide that:
 
 	•	 	the Registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the Delaware General Corporation Law, subject to very limited exceptions;	
 
 	•	 	the Registrant may indemnify its other employees and agents as set forth in the Delaware General Corporation Law;	
 
II-1

Table of Contents

 	•	 	the Registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to very limited exceptions; and	
 
 	•	 	the rights conferred in the restated bylaws are not exclusive.	
The Registrant has entered into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding indemnification. There is no pending litigation or proceeding involving a director or executive officer of the Registrant for which indemnification is sought. Reference is also made to the underwriting agreement to be filed as Exhibit 1.1 to this registration statement, which provides for the indemnification of executive officers, directors and controlling persons of the Registrant against certain liabilities. The indemnification provisions in the Registrant’s restated certificate of incorporation, restated bylaws and the indemnification agreements entered into between the Registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the Registrant’s directors and executive officers for liabilities arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
Since June 16, 2011 and through June 16, 2014, the Registrant has issued and sold the following securities:
 
1.	Since June 16, 2011 and through June 16, 2014, the Registrant has granted to its directors, officers, employees and consultants (i) options to purchase 3,333,102 shares of common stock under its 2007 Equity Compensation Plan with per share exercise prices ranging from $1.04 to $12.27, and has issued 1,096,146 shares of common stock upon exercise of such options, and (ii) 739,700 shares of restricted common stock under it 2007 Equity Compensation Plan. These transactions were exempt from the registration requirements of the Securities Act in reliance upon Rule 701 promulgated under the Securities Act or Section 4(a)(2) of the Securities Act.	
 
2.	In October 2011, January 2012 and April 2012, the Registrant sold an aggregate of 3,845,322 shares of Series C convertible preferred stock at a purchase price of $4.1609 per share for an aggregate purchase price of $16.0 million to purchasers that represented to the Registrant that they were accredited investors or qualified institutional buyers. These transactions were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.	
 
3.	In September 2012 and March 2013, the Registrant issued warrants to purchase an aggregate of 18,025 shares of Series C convertible preferred stock at an exercise price of $4.1609 per share to purchasers that represented to the Registrant that they were accredited investors. These transactions were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.	
 
4.	In December 2013, the Registrant issued a warrant to purchase 748,440 shares of its common stock at an exercise price of $4.81 per share to a purchaser that represented to the Registrant that it was an accredited investor. This transaction was exempt from the registration requirements of the Securities Act in reliance upon Regulation D promulgated under the Securities Act.	
 
5.	In April 2014, the Registrant issued 86,956 shares of Series A convertible preferred stock upon the net exercise of a warrant and withheld 13,044 shares to cover the exercise price of $1.88 per share. The purchaser represented to the Registrant that it was an accredited investor. This transaction was exempt from the registration requirements of the Securities Act in reliance upon Regulation D promulgated under the Securities Act.	
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any general solicitation or advertising. All recipients had adequate access, through their relationships with the Registrant, to information about the Registrant. Furthermore, the Registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered under the Securities Act and the applicable restrictions on transfer.
 
II-2

Table of Contents
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.

Exhibit
Number	 	Description of Document	
		
  1.1*	 	Form of Underwriting Agreement.	
		
  3.1	 	Amended and Restated Certificate of Incorporation, as amended to date.	
		
  3.2	 	Form of Restated Certificate of Incorporation to be effective upon completion of this offering.	
		
  3.3	 	Bylaws, as currently in effect.	
		
  3.4	 	Form of Restated Bylaws to be effective upon completion of this offering.	
		
  4.1	 	Form of Common Stock Certificate.	
		
  4.2	 	Form of Warrant to purchase convertible preferred stock.	
		
  4.3	 	Form of Warrant to Purchase Common Stock.	
		
  4.4	 	Third Amended and Restated Registration Rights Agreement, dated October 25, 2011, by and among the Registrant and certain of its stockholders, as amended.	
		
  5.1*	 	Opinion of Fenwick & West LLP.	
		
10.1	 	Form of Indemnity Agreement.	
		
10.2	 	2007 Equity Compensation Plan and forms of stock option agreements and exercise notices, restricted stock notice agreement and restricted stock agreement thereunder.	
		
10.3	 	2014 Equity Incentive Plan, to become effective upon the completion of this offering, and forms of stock option award agreement, restricted stock agreement and restricted stock unit award agreement thereunder.	
		
10.4	 	2014 Employee Stock Purchase Plan, to become effective upon the completion of this offering.	
		
10.5	 	Reserved.	
		
10.6	 	Amended and Restated Employment Agreement, dated April 20, 2007, by and between the Registrant and Darryl Rawlings.	
		
10.7	 	Employment Agreement, dated June 13, 2012, by and between the Registrant and Michael Banks.	
		
10.8	 	Consulting Agreement, dated May 5, 2014, by and between the Registrant and Howard Rubin.	
		
10.9	 	Independent Contractor Agreement, effective as of March 7, 2014, by and between the Registrant and Peter R. Beaumont.	
		
10.10	 	Amended and Restated Loan and Security Agreement, dated August 24, 2012, by and among the Registrant, Trupanion Managers USA, Inc. and Square 1 Bank, as amended.	
		
10.11	 	Amended and Restated Credit Agreement, effective as of December 23, 2013, by and between the Registrant, Trupanion Managers USA, Inc., PEPI Capital, L.P., Highland Consumer Fund I Limited Partnership, Highland Consumer Fund 1-B Limited Partnership and Highland Consumer Entrepreneurs Fund I.	
		
10.12†	 	Fronting and Administration Agreement, dated November 18, 2009, by and between American Pet Insurance Company and Omega General Insurance Company.	
		
10.12(a)†	 	Stop Loss Reinsurance Agreement by and between Omega General Insurance Company and American Pet Insurance Company.	
		
10.12(b)†	 	Agency Agreement by and between Omega General Insurance Company and Vetinsurance Brokers Canada Inc., as amended.	
 
II-3

Table of Contents

Exhibit
Number	  	Description of Document	
		
10.13	  	Lease Agreement, dated June 14, 2012, by and between American Pet Insurance Company and the Housing Authority of the City of Seattle, as amended.	
		
10.14	  	Lease, dated August 29, 2011, by and between C.D. Stimson Company and American Pet Insurance Company.	
		
21.1	  	Subsidiaries of the Registrant.	
		
23.1	  	Consent of independent registered public accounting firm.	
		
23.2*	  	Consent of Fenwick & West LLP (included in Exhibit 5.1).	
		
24.1	  	Power of Attorney (reference is made to the signature page hereto).	

*	To be filed by amendment.	
†	Registrant has omitted portions of the referenced exhibit pursuant to a request for confidential treatment under Rule 406 promulgated under the Securities Act.	
(b) Financial Statement Schedules.
Schedule  I    Condensed Financial Information of Registrant
No other financial statement schedules have been provided because the information called for is not required or is shown either in the financial statements or notes thereto.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
 
(a)	for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective; and	
 
(b)	for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.	
 
II-4

Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Seattle, Washington, on the 16th day of June 2014.

TRUPANION, INC.	
		
By:        	 	/ S /     D ARRYL R AWLINGS	
	 	Darryl Rawlings	
	 	Chief Executive Officer and President	
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS , that each person whose signature appears below hereby constitutes and appoints Darryl Rawlings, Michael Banks and Asher Bearman, and each of them, as his true and lawful attorneys-in-fact, proxies and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxies and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.

Signature	  	Title	 	Date	
			
/ S /    D ARRYL R AWLINGS        
Darryl Rawlings	  	Chief Executive Officer, President and Director
(Principal Executive Officer)	 	June 16, 2014	
			
/ S /    M ICHAEL B ANKS        
Michael Banks	  	Chief Financial Officer
(Principal Financial and Accounting Officer)	 	June 16, 2014	
			
/ S /    P ETER R. B EAUMONT        
Peter R. Beaumont	  	Director	 	June 16, 2014	
			
/ S /    M ICHAEL D OAK        
Michael Doak	  	Director	 	June 16, 2014	
			
/ S /    D AN L EVITAN        
Dan Levitan	  	Director	 	June 16, 2014	
 
II-5

Table of Contents

Signature	  	Title	 	Date	
			
/ S /    H. H AYS L INDSLEY        
H. Hays Lindsley	  	Director	 	June 16, 2014	
			
/ S /    M URRAY L OW        
Murray Low	  	Director	 	June 16, 2014	
			
/ S /    G LENN N OVOTNY        
Glenn Novotny	  	Director	 	June 16, 2014	
			
/ S /    E DWARD P HILIP        
Edward Philip	  	Director	 	June 16, 2014	
			
/ S /    H OWARD R UBIN        
Howard Rubin	  	Director	 	June 16, 2014	
 
II-6

Table of Contents
EXHIBIT INDEX

Exhibit
Number	 	Description of Document	
		
  1.1*	 	Form of Underwriting Agreement.	
		
  3.1	 	Amended and Restated Certificate of Incorporation, as amended to date.	
		
  3.2	 	Form of Restated Certificate of Incorporation to be effective upon completion of this offering.	
		
  3.3	 	Bylaws, as currently in effect.	
		
  3.4	 	Form of Restated Bylaws to be effective upon completion of this offering.	
		
  4.1	 	Form of Common Stock Certificate.	
		
  4.2	 	Form of Warrant to purchase convertible preferred stock.	
		
  4.3	 	Form of Warrant to Purchase Common Stock.	
		
  4.4	 	Third Amended and Restated Registration Rights Agreement, dated October 25, 2011, by and among the Registrant and certain of its stockholders, as amended.	
		
  5.1*	 	Opinion of Fenwick & West LLP.	
		
10.1	 	Form of Indemnity Agreement.	
		
10.2	 	2007 Equity Compensation Plan and forms of stock option agreements and exercise notices, restricted stock notice agreement and restricted stock agreement thereunder.	
		
10.3	 	2014 Equity Incentive Plan, to become effective upon the completion of this offering, and forms of stock option award agreement, restricted stock agreement and restricted stock unit award agreement thereunder.	
		
10.4	 	2014 Employee Stock Purchase Plan, to become effective upon the completion of this offering.	
		
10.5	 	Reserved.	
		
10.6	 	Amended and Restated Employment Agreement, dated April 20, 2007, by and between the Registrant and Darryl Rawlings.	
		
10.7	 	Employment Agreement, dated June 13, 2012, by and between the Registrant and Michael Banks.	
		
10.8	 	Consulting Agreement, dated May 5, 2014, by and between the Registrant and Howard Rubin.	
		
10.9	 	Independent Contractor Agreement, effective as of March 7, 2014, by and between the Registrant and Peter R. Beaumont.	
		
10.10	 	Amended and Restated Loan and Security Agreement, dated August 24, 2012, by and among the Registrant, Trupanion Managers USA, Inc. and Square 1 Bank, as amended.	
		
10.11	 	Amended and Restated Credit Agreement, effective as of December 23, 2013, by and between the Registrant, Trupanion Managers USA, Inc., PEPI Capital, L.P., Highland Consumer Fund I Limited Partnership, Highland Consumer Fund 1-B Limited Partnership and Highland Consumer Entrepreneurs Fund I.	
		
10.12†	 	Fronting and Administration Agreement, dated November 18, 2009, by and between American Pet Insurance Company and Omega General Insurance Company.	
		
10.12(a)†	 	Stop Loss Reinsurance Agreement by and between Omega General Insurance Company and American Pet Insurance Company.	
		
10.12(b)†	 	Agency Agreement by and between Omega General Insurance Company and Vetinsurance Brokers Canada Inc., as amended.	
		
10.13	 	Lease Agreement, dated June 14, 2012, by and between American Pet Insurance Company and the Housing Authority of the City of Seattle, as amended.	
		
10.14	 	Lease, dated August 29, 2011, by and between C.D. Stimson Company and American Pet Insurance Company.	
		
21.1	 	Subsidiaries of the Registrant.	
		
23.1	 	Consent of independent registered public accounting firm.	
		
23.2*	 	Consent of Fenwick & West LLP (included in Exhibit 5.1).	
		
24.1	 	Power of Attorney (reference is made to the signature page hereto).	

*	To be filed by amendment.	
†	Registrant has omitted portions of the referenced exhibit pursuant to a request for confidential treatment under Rule 406 promulgated under the Securities Act.	

Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors
Trupanion, Inc.
We have audited the consolidated financial statements of Trupanion, Inc. as of December 31, 2012 and 2013, and for each of the three years in the period ended December 31, 2013, and have issued our report thereon dated February 28, 2014 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(b) of Form S-1 of this Registration Statement. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on these schedules based on our audits.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Seattle, Washington
February 28, 2014,
except as to
the fourth paragraph of Note 18,
as to which the date is
May 1, 2014
 
S-1

Table of Contents
Schedule I — Condensed Financial Information of Registrant
Trupanion, Inc.
Condensed Balance Sheets
(Parent Company Only)
(in thousands, except for share and per share data)

 	  	AS OF DECEMBER 31,	 	
 	  	2012	 	 	2013	 	
Assets	  				 				
Current assets:	  				 				
Cash and cash equivalents	  	$	113	  	 	$	9,039	  	
Prepaid expenses and other assets	  	 	32	  	 	 	118	  	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	145	  	 	 	9,157	  	
			
Restricted cash	  	 	—  	  	 	 	3,000	  	
Equity method investment	  	 	500	  	 	 	—  	  	
Property and equipment, net	  	 	33	  	 	 	97	  	
Intangible assets, net	  	 	4,773	  	 	 	4,910	  	
Investments in and advances to subsidiaries	  	 	11,305	  	 	 	14,411	  	
	  	 	 	 	 	 	 	 	
Total assets	  	$	16,756	  	 	$	31,575	  	
	  	 	 	 	 	 	 	 	
Liabilities, redeemable convertible preferred stock, and stockholders’ deficit	  				 				
Current liabilities:	  				 				
Accounts payable	  	 	32	  	 	 	23	  	
Accrued liabilities	  	 	—  	  	 	 	206	  	
Short-term debt	  	 	—  	  	 	 	900	  	
Warrant liabilities	  	 	551	  	 	 	4,900	  	
Deferred tax liabilities	  	 	76	  	 	 	82	  	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	659	  	 	 	6,111	  	
			
Long-term debt	  	 	9,900	  	 	 	25,199	  	
Deferred tax liabilities	  	 	1,546	  	 	 	1,540	  	
	  	 	 	 	 	 	 	 	
Total liabilities	  	 	12,105	  	 	 	32,850	  	
			
Redeemable convertible preferred stock: $0.00001 par value per share, 15,648,723 shares authorized at December 31, 2012 and 2013 and 15,648,723 and 14,857,989 shares issued and outstanding at December 31, 2012 and 2013; Aggregate liquidation preference of $33,225	  	 	31,724	  	 	 	31,724	  	
			
Stockholders’ deficit:	  				 				
Common stock, $0.00001 par value per share, 26,000,000 shares authorized at December 31, 2012 and 2013, and 1,571,085 and 1,010,346 shares issued at December 31, 2012, 2,857,620 and 2,236,641 shares issued and outstanding at December 31, 2013	  	 	—  	  	 	 	—  	  	
Special voting shares, $0.00001 par value per share, 2,500,030 shares authorized at December 31, 2012 and 2013, 2,247,130 shares issued and outstanding at December 31, 2012 and 2013	  	 	—  	  	 	 	—  	  	
Additional paid-in capital	  	 	3,224	  	 	 	5,769	  	
Accumulated other comprehensive loss	  	 	(142	) 	 	 	(164	) 	
Accumulated deficit	  	 	(27,828	) 	 	 	(36,003	) 	
Treasury stock, at cost: 560,739 and 620,979 at December 31, 2012 and 2013, respectively	  	 	(2,327	) 	 	 	(2,601	) 	
	  	 	 	 	 	 	 	 	
Total stockholders’ deficit	  	 	(27,073	) 	 	 	(32,999	) 	
	  	 	 	 	 	 	 	 	
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit	  	$	16,756	  	 	$	31,575	  	

S-2

Table of Contents
Trupanion, Inc.
Condensed Statements of Comprehensive Loss
(Parent Company Only)
(in thousands)

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	
Expenses:	  				 				 				
Claims expenses	  	$	43	  	 	$	77	  	 	$	187	  	
Other costs of revenue	  	 	21	  	 	 	31	  	 	 	46	  	
Sales and marketing	  	 	288	  	 	 	428	  	 	 	677	  	
Technology and development	  	 	165	  	 	 	268	  	 	 	391	  	
General and administrative	  	 	667	  	 	 	887	  	 	 	1,131	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	  	 	1,184	  	 	 	1,691	  	 	 	2,432	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	  	 	(1,184	) 	 	 	(1,691	) 	 	 	(2,432	) 	
				
Interest expense	  	 	690	  	 	 	535	  	 	 	609	  	
Other loss	  	 	607	  	 	 	208	  	 	 	630	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Loss before equity in undistributed earnings of subsidiaries	  	 	(2,481	) 	 	 	(2,434	) 	 	 	(3,671	) 	
Equity in undistributed earnings of subsidiaries	  	 	(1,438	) 	 	 	(3,976	) 	 	 	(4,504	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net loss	  	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive loss, net of taxes:	  				 				 				
Other comprehensive loss of subsidiaries	  	$	(143	) 	 	$	(69	) 	 	$	(22	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive loss	  	 	(143	) 	 	 	(69	) 	 	 	(22	) 	
Comprehensive loss	  	$	(4,062	) 	 	$	(6,479	) 	 	$	(8,197	) 	

S-3

Table of Contents
Trupanion, Inc.
Condensed Statements of Cash Flows
(Parent Company Only)
(in thousands)

 	  	YEARS ENDED DECEMBER 31,	 	
 	  	    2011    	 	 	    2012    	 	 	    2013    	 	
Operating activities	  				 				 				
Net loss	  	$	(3,919	) 	 	$	(6,410	) 	 	$	(8,175	) 	
Adjustments to reconcile net loss to cash used in operating activities:	  				 				 				
Loss attributable to equity method investments	  	 	1,438	  	 	 	3,976	  	 	 	4,504	  	
Depreciation and amortization	  	 	—  	  	 	 	—  	  	 	 	37	  	
Amortization of debt discount	  	 	9	  	 	 	11	  	 	 	36	  	
Stock-based compensation expense	  	 	982	  	 	 	1,434	  	 	 	1,938	  	
Loss on disposal of equipment	  	 	—  	  	 	 	—  	  	 	 	52	  	
Warrant expense	  	 	200	  	 	 	200	  	 	 	543	  	
Changes in operating assets and liabilities:	  				 				 				
Prepaid expenses and other assets	  	 	—  	  	 	 	(11	) 	 	 	(64	) 	
Account payable	  	 	847	  	 	 	538	  	 	 	1,840	  	
Accrued liabilities	  	 	—  	  	 	 	—  	  	 	 	206	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	  	 	(443	) 	 	 	(262	) 	 	 	917	  	

Investing activities	  				 				 				
Purchases of property and equipment	  	 	—  	  	 	 	(33	) 	 	 	(65	) 	
Advances to subsidiaries	  	 	(2,572	) 	 	 	(6,910	) 	 	 	(9,455	) 	
Equity method investment	  	 	—  	  	 	 	(249	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(2,572	) 	 	 	(7,192	) 	 	 	(9,520	) 	

Financing activities	  				 				 				
Restricted cash	  	 	—  	  	 	 	—  	  	 	 	(3,000	) 	
Issuance of preferred stock	  	 	8,731	  	 	 	6,922	  	 	 	—  	  	
Issuance (settlement) of forward contract	  	 	52	  	 	 	(52	) 	 	 	—  	  	
Purchase of treasury stock	  	 	—  	  	 	 	(2,327	) 	 	 	—  	  	
Deferred financing costs	  	 	—  	  	 	 	—  	  	 	 	(56	) 	
Redemption of preferred stock	  	 	—  	  	 	 	(2,727	) 	 	 	—  	  	
Proceeds from exercise of stock options	  	 	28	  	 	 	458	  	 	 	607	  	
Proceeds from debt financing	  	 	—  	  	 	 	—  	  	 	 	15,000	  	
(Payment) draw on outstanding line of credit	  	 	(483	) 	 	 	—  	  	 	 	5,000	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	  	 	8,328	  	 	 	2,274	  	 	 	17,551	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Effect of foreign exchange rates on cash, net	  	 	44	  	 	 	(69	) 	 	 	(22	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	5,357	  	 	 	(5,249	) 	 	 	8,926	  	
Cash and cash equivalents at beginning of year	  	 	5	  	 	 	5,362	  	 	 	113	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	  	$	5,362	  	 	$	113	  	 	$	9,039	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosures	  				 				 				
Noncash investing and financing activities:	  				 				 				
Interest paid	  	 	(692	) 	 	 	(570	) 	 	 	(642	) 	
Warrants issued in conjunction with debt issuance	  	 	—  	  	 	 	18	  	 	 	3,806	  	
Exchange of stock and intangible asset for equity method investment	  	 	—  	  	 	 	(250	) 	 	 	448	  	
1. Organization and Presentation
The accompanying condensed financial statements present the financial position, results of operations and cash flows for Trupanion, Inc. These condensed unconsolidated financial statements should be read in conjunction with the consolidated financial statements of Trupanion, Inc. and its subsidiaries and the notes thereto (the Consolidated Financial Statements). Investments in subsidiaries are accounted for using the equity method of accounting.
Additional information about Trupanion, Inc.’s accounting policies pertaining to intangible assets, commitments and contingencies, debt financing, stock-based compensation, preferred stock and stockholders’ deficit are set forth in Notes 4, 8, 10, 11 and 12, respectively, to the Consolidated Financial Statements.
 
S-4

Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VETINSURANCE INTERNATIONAL, INC.
Vetinsurance International, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “ General Corporation Law ”),
DOES HEREBY CERTIFY:
1. That the name of this corporation is Vetinsurance International, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on November 26, 2008.
2. Pursuant to Sections 242 and 245 of the General Corporation Law, this Amended and Restated Certificate of Incorporation was adopted by the Corporation’s Board of Directors (the “ Board of Directors ”) and stockholders. This Amended and Restated Certificate of Incorporation restates, integrates and amends the provisions of the Certificate of Incorporation of the Corporation, as previously amended.
3. The text of the Corporation’s Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows:
FIRST: The name of this corporation is Vetinsurance International, Inc. (the “ Corporation ”).
SECOND: The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is Corporation Service Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 44,148,753 shares, consisting of (i) 26,000,000 shares of Common Stock, $0.00001 par value per share (“ Common Stock ”), and (ii) 18,148,753 shares of Preferred Stock, par value per share as set forth below or $0.00001 (“ Preferred Stock ”).
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A.	COMMON STOCK	
1. General . The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein and as may be designated by resolution of the Board of Directors with respect to any series of Preferred Stock as authorized herein.
2. Voting . The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
 
B.	PREFERRED STOCK	
1. Issuance and Reissuance .
Preferred Stock may be issued from time to time in one or more series, each of such series to consist of such number of shares and to have such terms, rights, powers and preferences, and the qualifications and limitations with respect thereto, as stated or expressed herein.
 
C.	SPECIAL VOTING SHARES	
2,500,030 shares, $0.00001 par value per share, of the Preferred Stock are hereby designated “ Special Voting Shares ” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations.
1. Dividends or Distributions . No dividends or distributions shall be declared on the Special Voting Shares.
2. Liquidation .
(a) Subject to the rights of holders of the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock, upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Special Voting Shares then outstanding shall be entitled to receive and to be paid out of the assets of the Corporation legally available for distribution to its shareholders, and before any payment shall be made to the holders of Common Stock or any other class or series of capital stock ranking on liquidation junior to the Special Voting Shares by reason of their ownership thereof, a liquidating distribution of $0.00001 per Special Voting Share.
(b) After the payment to the holders of the Special Voting Shares of the full preferential amount provided for in this Subparagraph 2 , the holders of Special Voting Shares as such shall have no right or claim to any of the remaining assets of the Corporation.
 
2

3. Mandatory Redemption by the Corporation .
(a) Upon each acquisition of an Exchangeable Share of Vetinsurance Ltd., an Alberta corporation (“ CanCo ”) by the Corporation or any of its affiliates, including without limitation Vetinsurance Holding Company, ULC, an Alberta unlimited liability corporation (each such acquisition, a “ Transaction ”) in accordance with the terms of that certain Fifth Amended and Restated Shareholders Agreement dated as of the Series C Original Issue Date (as defined herein) among the Company, the holders of Series A Preferred Stock, the holders of Series B Preferred Stock and the other parties named therein, as may be amended from time to time (the “ Shareholders Agreement ”), the Corporation shall redeem a Special Voting Share from the holder of the Exchangeable Share so acquired at a redemption price of $0.00001 per Special Voting Share (the “ Special Voting Share Redemption Price ”).
(b) Notice will be mailed, not less than 10 nor more than 60 days prior to the date fixed by the Board of Directors for redemption (the “ Special Voting Share Redemption Date ”), to the holders of record of the Special Voting Shares to be redeemed, notifying such holder of the redemption resulting from the Transaction, the Special Voting Share Redemption Date, the Special Voting Share Redemption Price, the Special Voting Share(s) to be redeemed and the place where the certificates representing the Special Voting Share, if any, are to be surrendered for payment.
(c) On or after the Special Voting Share Redemption Date, each holder of a Special Voting Share to be redeemed must present and surrender its certificates, if any, issued by the Corporation evidencing the Special Voting Share(s) to be redeemed to the Corporation at the place designated in such notice and thereupon the Special Voting Share Redemption Price will be paid to or on the order of the Person whose name appears on such certificate as the owner thereof and each such certificate shall be canceled. In the event that the Special Voting Share is uncertificated, then the Special Voting Share shall be redeemed as set forth in the notice described above. From and after the Special Voting Share Redemption Date, all rights of the holders of the redeemed Special Voting Share(s), except the right to receive the Special Voting Share Redemption Price, will cease and terminate and such shares will not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever.
4. Share to be Retired by the Corporation .
Upon reacquisition by the Corporation of a Special Voting Share, such Special Voting Share shall be restored to the status of authorized but unissued Preferred Stock, without designation as to series.
5. Voting Rights .
Except as otherwise required by law or the Certificate of Incorporation, the holders of the Special Voting Shares shall have one vote in respect of each Special Voting Share on any matter,
 
3

question or proposition whatsoever that may properly come before the holders of Common Stock, at any meeting of the holders of Common Stock at which holders of Common Stock are entitled to vote or in connection with any written consent sought by the Corporation from the holders of Common Stock, and shall vote with the holders of Common Stock as a single class.
 
D.	SERIES A, SERIES B, and SERIES C PREFERRED STOCK	
8,215,370 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series A Preferred Stock ”, 3,588,031 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series B Preferred Stock ” and 3,845,322 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series C Preferred Stock ” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations.
1. Dividends .
1.1 The holders of the Series C Preferred Stock shall be entitled to receive dividends at the rate of 8% of the Series C Original Issue Price (as hereinafter defined) per share per annum (the “ Senior 8% Non-Cumulative Dividend ”). Such dividends shall be payable only when, as, and if declared by the Board of Directors, shall not accrue from year to year and shall be non-cumulative. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series C Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series C Preferred Stock, as applicable, in an amount at least equal to (i) the amount of the then outstanding Senior 8% Non-Cumulative Dividend (to the extent not previously declared and paid) plus (ii) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series C Preferred Stock, as applicable, as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series C Preferred Stock, as applicable, in each case calculated on the record date for determination of holders entitled to receive such dividend; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series C Preferred Stock pursuant to this clause (ii) shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series C Preferred Stock dividend, as applicable.
1.2 The holders of the Series A Preferred Stock and the Series B Preferred Stock shall be entitled to receive dividends at the rate of 8% of the Series A Original Issue Price (as hereinafter defined) per share per annum (the “ Junior 8% Non-Cumulative Dividend ”). Such dividends shall be payable only when, as, and if declared by the Board of Directors, shall not accrue from year to year and shall be non-cumulative. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the
 
4

Corporation (other than Senior 8% Non-Cumulative Dividends or dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series A Preferred Stock and the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Stock and Series B Preferred Stock, as applicable, in an amount at least equal to (i) the amount of the then outstanding Junior 8% Non-Cumulative Dividend (to the extent not previously declared and paid) plus (ii) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock or of Series B Preferred Stock, as applicable, as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock or Series B Preferred Stock, as applicable, in each case calculated on the record date for determination of holders entitled to receive such dividend; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock and Series B Preferred Stock pursuant to this clause (ii) shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend or Series B Preferred Stock dividend, as applicable.
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .
2.1 Preferential Payments to Holders of Series C Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, and before any payment shall be made to the holders of Common Stock, Series A Preferred Stock or the Series B Preferred Stock or any other class or series of capital stock ranking on liquidation junior to the Series C Preferred Stock (including, without limitation, the Special Voting Shares) by reason of their ownership thereof, an amount per share equal to the greater of (i) one (1) times the Series C Original Issue Price, as applicable, plus any dividends declared but unpaid thereon and (ii) the amount to which such holder would be entitled to receive upon such liquidation, dissolution or winding up if all of such holder’s Series C Preferred Stock was converted into Conversion Stock immediately prior to such event. If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series C Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1 , the holders of shares of Series C Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The “ Series C Original Issue Price ” shall mean $4.1609 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Preferred Stock.
 
5

2.2 Preferential Payments to Holders of Series A Preferred Stock and Series B Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock and Series B Preferred Stock then outstanding shall be entitled, on a pari passu basis, to be paid out of the assets of the Corporation available for distribution to its stockholders, after payments pursuant to Section 2.1 and before any payment shall be made to the holders of Common Stock or any other class or series of capital stock ranking on liquidation junior to the Series A Preferred Stock and the Series B Preferred Stock (including, without limitation, the Special Voting Shares) by reason of their ownership thereof, an amount per share equal to one (1) times the Series A Original Issue Price or the Series B Original Issue Price, as applicable, plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock and the holders of shares of Series B Preferred Stock the full amount to which they shall be entitled under this Subsection 2.2 , the holders of shares of Series A Preferred Stock and the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The “ Series A Original Issue Price ” shall mean $1.50 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. The “ Series B Original Issue Price ” shall mean $1.70 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock.
2.3 Distribution of Remaining Assets . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock pursuant to Subsections 2.1 and 2.2 and to the holders of the Special Voting Shares pursuant to Section C(2) of Article Fourth, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of the shares of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of the Certificate of Incorporation immediately prior to such dissolution, liquidation or winding up of the Corporation. The aggregate amount which a holder of a share of Series A Preferred Stock is entitled to receive under Subsections 2.2 and 2.3 is hereinafter referred to as the “ Series A Liquidation Amount .” The aggregate amount that a holder of a share of Series B Preferred Stock is entitled to receive under Subsection 2.2 is hereinafter referred to as the “ Series B Liquidation Amount .” The aggregate amount that a holder of a share of Series C Preferred Stock is entitled to receive under Subsection 2.1 is hereinafter referred to as the “ Series C Liquidation Amount .”
2.4 Deemed Liquidation Events .
2.4.1 Definition . Each of the following events shall be considered a “ Deemed Liquidation Event ” unless both (i) the holders of a majority of the outstanding shares of Series C Preferred Stock, voting together as a separate and (ii) the holders of at least two
 
6

thirds (2/3) of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, elect otherwise by written notice sent to the Corporation at least 15 days prior to the effective date of any such event:
(a) a merger or consolidation in which
(i) the Corporation is a constituent party or
(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,
except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation ( provided that , for the purpose of this Subsection 2.4.1 , all shares of Common Stock issuable upon exercise of Options (as defined below) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined below) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged);
(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as, a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation;
(c) the sale, transfer, or other disposition, in a single transaction or series of related transactions, of shares of the Corporation’s capital stock representing a majority of the voting power of the capital stock of the Corporation.
2.4.2 Effecting a Deemed Liquidation Event .
(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.4.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 , 2.2 and 2.3 .
 
7

(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.4.1(a)(ii), 2.4.1(b) , or 2.4.1(c) if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within 90 days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock no later than the 90th day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii)  to require the redemption of such shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, and (ii) if the holders of either (i) a majority of the then outstanding shares of Series C Preferred Stock or (ii) at least two-thirds (213) of the then outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as- converted to Common Stock basis, so request in a written instrument delivered to the Corporation not later than 120 days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders (the “ Available Proceeds ”), to the extent legally available therefor, on the 150th day after such Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount, all outstanding shares of Series B Preferred Stock at a price per share equal to the Series B Liquidation Amount and all outstanding shares of Series C Preferred Stock at a price per share equal to the Series C Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the Corporation shall (i) first redeem all of the outstanding shares of Series C Preferred Stock, provided if the Available Proceeds are not sufficient to redeem all outstanding shares of Series C Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Series C Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares of Series C Preferred Stock to have been redeemed as soon as practicable after the Corporation has funds legally available therefor and (ii) after all of the shares of Series C Preferred Stock have been redeemed, the Corporation shall redeem all of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, provided if the remaining Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock and Series B Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Series A Preferred Stock and Series B Preferred Stock to the fullest extent of such remaining Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the remaining Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. The provisions of Subsections 6.2 through 6.4 shall apply, with such necessary changes in the details thereof as are necessitated by the context, to the redemption of the Series A Preferred Stock and Series B Preferred Stock pursuant to this Subsection 2.4.2(b) . Prior to the distribution or redemption provided for in this Subsection 2.4.2(b) , the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.
 
8

2.4.3 Amount Deemed Paid or Distributed . The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.
2.4.4 Allocation of Escrow . In the event of a Deemed Liquidation Event pursuant to Subsection 2.4.1(a)(i) , if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow, the Merger Agreement shall provide that (a) the portion of such consideration that is placed in escrow shall be allocated among the holders of capital stock of the Corporation pro rata based on the amount of such consideration payable to each stockholder in accordance with Subsections 2.1, 2.2 and 2.3 and (b) the portion of such consideration that is not placed in escrow shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 as if the total consideration payable to the stockholders of the Corporation, without deduction for the escrowed amount, were being paid to the stockholders of the Corporation. In the event of a Deemed Liquidation Event pursuant to Subsection 2.4.1(a)(i) , if any portion of the consideration payable to the stockholders of the Corporation is payable to the stockholders of the Corporation subject to contingencies, the Merger Agreement shall provide that (a) the portion of such consideration that is not subject to any contingencies (the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and (b) any additional consideration which becomes payable to the stockholders of the Corporation upon satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 after taking into account the previous payment of the Initial Consideration as part of the same transaction.
3. Voting .
3.1 General . On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock, shares of Series B Preferred Stock and shares of Series C Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter; provided, however, that each holder of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock that has filed and maintains a Section 1501(c) Application with the New York Superintendent, Department of Financial Services (the “ Restricted Holders ”) may not, in any event, with respect to matters requiring a vote under the General Corporation Law, cast more votes in the aggregate than 9.99% of the total outstanding voting power of the Corporation in accordance with, and subject to the proxy granted pursuant to the Shareholders Agreement. Except as provided by law or by
 
9

the other provisions of the Certificate of Incorporation, holders of Series A Preferred Stock, the Series B Preferred Stock and Series C Preferred Stock shall vote together with the holders of Common Stock and the holders of the Special Voting Shares as a single class.
3.2 Election of Directors . The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series A Preferred Stock, the Series B Preferred Stock and the Special Voting Shares), exclusively and voting together as a single class, shall, subject to the rights of any additional series of Preferred Stock that may be established from time to time, be entitled to elect the directors of the Corporation. So long as any shares of Series A Preferred Stock or Series B Preferred Stock remain outstanding, the holders a majority of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect three (3) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. So long as any shares of Series C Preferred Stock remain outstanding, the holders a majority of the outstanding shares of Series C Preferred Stock, voting as a separate class, shall be entitled to elect one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors.
3.3 Preferred Voting Rights .
3.3.1 Preferred Stock Protective Provisions . At any time when at least 200,000 shares of Series A Preferred Stock, 200,000 shares of Series B Preferred Stock or 500,000 shares of Series C Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as- converted to Common Stock basis, given in writing or by vote at a meeting, consenting or voting (as the case may be):
(a) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing;
(b) alter or change, whether by merger, amendment of the Certificate of Incorporation or Bylaws of the Corporation or in any other manner, the rights, preferences or privileges of the Series A Preferred Stock or the Series B Preferred Stock;
(c) increase or decrease the authorized capital stock of the Corporation;
(d) except for the Square 1 Warrants, the PETCO Warrants, the Prescient Warrants (each as hereinafter defined) and the shares of Series A Preferred Stock or Common Stock issuable upon exercise thereof, as applicable, and except for the RCK Stock,
 
10

create (by reclassification or otherwise), authorize the creation of, or issue or obligate itself to issue shares of any equity security, including any other security convertible into or exercisable for any equity security, unless such equity security ranks junior to the Series A Preferred Stock, the Series B Preferred Stock and Series C Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and redemption rights;
(e) except for the Square 1 Warrants and the shares of Series A Preferred Stock issuable upon exercise thereof, and except for the RCK Stock, issue, authorize the issuance of or obligate itself to issue any additional shares of Series A Preferred Stock or Series B Preferred Stock other than in accordance with the stock purchase agreement executed in connection with the initial issuance thereof, as such agreement may be amended from time to time;
(f) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service (except if at a price greater than the original purchase price (as adjusted for any stock split, stock dividend, combination or other recapitalization)) pursuant to an option agreement or restricted stock purchase agreement approved by a majority of the Board of Directors,(iv) redemption or retirement of Special Voting Shares as provided in the Certificate of Incorporation and (v) purchases by the Corporation of outstanding shares of capital stock as contemplated by Section 1.3 of the purchase agreement executed in connection with the issuance of the Series C Preferred Stock, as such agreement may be amended from time to time, other than, in the case of redemptions, retirements or repurchases pursuant to clauses (i), (iii), (iv) and (v) any redemptions, retirements or repurchases that would require, based on the advice of counsel, Highland Consumer Fund I Limited Partnership to make any filing with or obtain approvals under Section 1501(c) of the New York Insurance Law (or any successor or similar law);
(g) increase the number of shares of Common Stock issuable pursuant to the Corporation’s stock option or any similar plan, amend the Corporation’s stock option or any similar plan or adopt any new employee stock purchase plan, stock incentive compensation or similar stock option plan, in each case absent approval of the Board of Directors;
(h) increase or decrease the authorized number of directors constituting the Board of Directors;
(i) initiate or effect an initial public offering of the Common Stock;
 
11

(j) lease, transfer, assign, sell or grant an exclusive license to use any of the intellectual property of the Corporation or its subsidiaries, which intellectual property is material to the Corporation or any of its subsidiaries;
(k) incur new indebtedness (or modify the terms of existing indebtedness to increase the amount of such indebtedness) individually or in the aggregate in excess of $500,000 (USD) unless approved by at least two (2) of the directors designated by the holders of a majority of the Series A Preferred Stock and the Series B Preferred Stock and by the holders of a majority of the Series C Preferred Stock (the “ Series Directors ”) in accordance with the Shareholders Agreement if then in office; or
(l) absent approval of a majority of the disinterested members of the Board, enter into any related party transactions with any officer, director or greater than 5% stockholders of the Corporation (other than the purchase of Series C Preferred Stock); provided, however, that this restriction shall not apply to the issuance of shares of capital stock, or options therefor, to officers, employees or directors of the Corporation with the approval of the Board of Directors or a compensation committee thereof pursuant to a duly authorized and approved equity incentive plan or the entry into an employment agreement or employment arrangement approved by the Board of Directors or a compensation committee thereof.
3.3.2 Series C Preferred Stock Protective Provisions . At any time when at least 500,000 shares of Series C Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, voting as a separate class, given in writing or by vote at a meeting, consenting or voting (as the case may be):
(a) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, if the proceeds of such event are distributed other than in accordance with the provisions of Section 2 above;
(b) amend, alter or repeal any provision of the Certificate of Incorporation or the Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series C Preferred Stock;
(c) increase or decrease the authorized shares of Series C Preferred Stock; or
(d) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of
 
12

additional shares of Common Stock, (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service (except if at a price greater than the original purchase price (as adjusted for any stock split, stock dividend, combination or other recapitalization)) pursuant to an option agreement or restricted stock purchase agreement approved by a majority of the Board of Directors, (iv) redemption or retirement of Special Voting Shares as provided in the Certificate of Incorporation and (v) purchases by the Corporation of outstanding shares of capital stock as contemplated by Section 1.3 of the purchase agreement executed in connection with the issuance of the Series C Preferred Stock, as such agreement may be amended from time to time.
4. Optional Conversion .
The holders of the Series A Preferred Stock, the holders of the Series B Preferred Stock and the holders of the Series C Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):
4.1 Right to Convert .
4.1.1 Conversion Ratio .
(a) Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion. The “ Series A Conversion Price ” shall initially be equal to $1.50. Such initial Series A Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
(b) Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series B Original Issue Price by the Series B Conversion Price (as defined below) in effect at the time of conversion. The “ Series B Conversion Price ” shall initially be equal to $1.70. Such initial Series B Conversion Price, and the rate at which shares of Series B Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
(c) Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series C Original Issue Price by the Series C Conversion Price (as defined below) in effect at the time of conversion. The “ Series C Conversion Price ” shall initially be equal to $4.1609. Such initial Series C Conversion Price, and the rate at which shares of Series C Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
 
13

4.1.2 Termination of Conversion Rights . In the event of a notice of redemption of any shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares not redeemed shall continue until such price is paid in full.
4.2 Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion .
4.3.1 Notice of Conversion . In order for a holder of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock to voluntarily convert shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, issue and deliver to such holder of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, or to his, her or its nominees, a certificate or
 
14

certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, a certificate for the number (if any) of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and payment of any declared but unpaid dividends on the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock converted.
4.3.2 Reservation of Shares . The Corporation shall at all times when the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Series A Conversion Price, the Series B Conversion Price or Series C Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of such shares of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Series A Conversion Price, Series B Conversion Price or Series C Conversion Price, as applicable.
4.3.3 Effect of Conversion . All shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and canceled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, accordingly.
4.3.4 No Further Adjustment . Upon any such conversion, no adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price shall be made for any declared but unpaid dividends on the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
 
15

4.3.5 Taxes . The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to this Section 4 . The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
4.4 Adjustments to Conversion Prices for Diluting Issues .
4.4.1 Special Definitions . For purposes of this Article Fourth, the following definitions shall apply:
(a) “ Option ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “ Series A Original Issue Date ” shall mean April 20, 2007.
(c) “ Series B Original Issue Date ” shall mean December 15, 2008.
(d) “ Series C Original Issue Date ” shall mean the date on which the first share of Series C Preferred Stock was issued.
(e) “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock (including without limitation the Exchangeable Shares of Vetinsurance Ltd. which are exchangeable for shares of Common Stock pursuant to the Shareholders Agreement), but excluding Options.
(f) “ Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.4 below, deemed to be issued) by the Corporation after the Series C Original Issue Date other than the following shares of Common Stock, and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively “ Exempted Securities ”):
(i) With respect to any adjustment to the Series A Preferred Stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock; with respect to any adjustment to the Series B Preferred Stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series B Preferred Stock; and with respect to any adjustment to the Series C Preferred Stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series C Preferred Stock;
 
16

(ii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5 , 4.6 , 4.7 or 4.8 ;
(iii) shares of Common Stock, including Options therefor (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement (provided that any Options for such shares that expire or terminate unexercised or any restricted stock repurchased by the Corporation at cost shall not be counted toward such maximum number unless and until such shares are regranted as new stock grants (or as new Options) pursuant to the terms of any such plan, agreement or arrangement), as approved by the Board of Directors of the Corporation, including at least two (2) of the Series Directors if then in office;
(iv) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;
(v) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation including at least two (2) of the Series Directors if then in office;
(vi) up to 100,000 shares of Series A Preferred Stock and up to 17,647 shares of Series B Preferred Stock issued pursuant to one or more warrants issued prior to the Series C Original Issue Date (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting the Series A Preferred Stock and/or Series B Preferred Stock, as applicable) to Square 1 Bank and/or any affiliates thereof (the “ Square 1 Warrants ”) and the shares of Common Stock issued or issuable upon the conversion of such shares of Series A Preferred Stock;
(vii) up to 1,400,000 shares of Common Stock issued pursuant to one or more warrants issued prior to the date hereof (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting the Common Stock) to PETCO Animal Supplies Stores, Inc., a Delaware corporation and/or any affiliates thereof (the “ PETCO Warrants ”);
(viii) up to 31,618 shares of Common Stock issued pursuant to one or more warrants that may be issued to Prescient Advisors, L.L.C. or its affiliate(s) pursuant to that certain Letter Agreement between the Corporation and Prescient Advisors, L.L.C. dated September 9, 2008 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting the Common Stock), as amended (the “ Prescient Warrants ”); and
(ix) up to 140,020 shares of Series A Preferred Stock that may be issued to RCK Management Inc. or its affiliate(s) or other affiliates of John Kramer pursuant to that certain Letter Agreement between the Corporation and RCK Management Inc. dated August 23, 2007, as amended (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting the Common Stock) (the “ RCK Stock ”);
 
17

4.4.2 No Adjustment of Conversion Prices . No adjustment in the Series A Conversion Price or Series B Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as- converted to Common Stock basis, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. No adjustment in the Series C Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series C Preferred Stock, voting as a separate class, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
4.4.3 Deemed Issue of Additional Shares of Common Stock .
(a) If the Corporation at any time or from time to time after the Series C Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price pursuant to the terms of Subsection 4.4.4 , are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A Conversion Price, the Series B Conversion Price and/or the Series C Conversion Price, as applicable, computed upon the original issue of such Option or
 
18

Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b)  shall have the effect of (A) increasing the Series A Conversion Price to an amount that exceeds the lower of (i) the Series A Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series A Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date, (B) increasing the Series B Conversion Price to an amount that exceeds the lower of (i) the Series B Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series B Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date or (C) increasing the Series C Conversion Price to an amount that exceeds the lower of (i) the Series C Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series C Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5 ) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series C Original Issue Date), are revised after the Series C Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (I) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) ) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price pursuant to the
 
19

terms of Subsection 4.4.4 , the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3 ). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Series A Conversion Price or Series B Conversion Price Upon Issuance of Additional Shares of Common Stock . In the event the Corporation shall at any time after the Series C Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3 ), without consideration or for a consideration per share less than the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, in effect immediately prior to such issue, then the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP 2 = CP 1 * [(A + B) ÷ (A + C)].
For purposes of the foregoing formula, the following definitions shall apply:
(a) “CP 2 ” shall mean the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, in effect immediately after such issue of Additional Shares of Common Stock;
(b) “CP 1 ” shall mean the Series A Conversion Price, the Series B Conversion Price or the Series C Conversion Price, as applicable, in effect immediately prior to such issue of Additional Shares of Common Stock;
 
20

(c) “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(d) “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP 1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP 1 ); and
(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination of Consideration . For purposes of this Subsection 4.4 , the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property : Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and
(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.
(b) Options and Convertible Securities . The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3 , relating to Options and Convertible Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
 
21

4.5 Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the Series C Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series C Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6 Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series C Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying each of the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price shall be
 
22

recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Series A Preferred Stock, holders of Series B Preferred Stock and holders of Series C Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock had been converted into Common Stock on the date of such event.
4.7 Adjustments for Other Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series C Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock had been converted into Common Stock on the date of such event.
4.8 Adjustment for Merger or Reorganization, etc . Subject to the provisions of Subsections 2.4 and 3.3 , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4 , 4.6 or 4.7 ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, the holders of Series B Preferred Stock and the holders of the Series C Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price, the Series B Conversion Price and the Series C Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable.
 
23

4.9 Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price, Series B Conversion Price or the Series C Conversion Price pursuant to this Section 4 , the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price, as applicable, then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such Preferred Stock.
4.10 Notice of Record Date . In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.
 
24

5. Mandatory Conversion .
5.1 Trigger Events . Upon either (a) the closing of the sale of shares of Common Stock to the public at a price per share of at least three times the Series C Original Issue Price in an underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50,000,000 (USD) of gross proceeds to the Corporation and with respect to which such Common Stock is listed for trading on either the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market (a “ Qualified IPO ”) or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of both (A) at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis and (B) a majority of the then outstanding shares of Series C Preferred Stock, voting as a separate class (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “ Mandatory Conversion Time ”), (i) all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Corporation.
5.2 Procedural Requirements . All holders of record of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock pursuant to this Section 5 . Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock converted pursuant to Section 5.1 , including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2 . As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any
 
25

declared but unpaid dividends on the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock converted. Such converted Preferred Stock shall be retired and canceled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock accordingly.
6. Redemption .
6.1 Redemption . At the election, any time after the fifth anniversary of the Series C Issue Date, of the holders of at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, as provided in this Subsection 6.1, shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price (the “ Redemption Price ”) equal to:
(a) in the event that at the time the Redemption Election (as hereinafter defined) is given, the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, taken together, both (i) constitute at least a majority by voting power of the outstanding shares of capital stock and (ii) entitle the holders thereof to designate a majority of the members of the Board of Directors pursuant to the Shareholders Agreement, a price per share equal to the sum of the Series A Original Issue Price per share, the Series B Original Issue Price per share or the Series C Original Issue Price per share, as applicable, plus an amount equal to 8% of the Series A Original Issue Price, Series B Original Issue Price or the Series C Original Issue Price, as applicable, per year, without compounding from the date of issuance of the Series A Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock, as applicable, until the initial Redemption Date (as hereinafter defined), plus all declared but unpaid dividends thereon; or
(b) otherwise, a price per share equal to the greater of (i) the Series A Original Issue Price per share, the Series B Original Issue Price per share or the Series C Original Issue Price per share, as applicable, plus an amount equal to 8% of the Series A Original Issue Price, the Series B Original Issue Price per share or the Series C Original Issue Price, as applicable, per year without compounding from the date of issuance of the Series A Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock, as applicable, until the initial Redemption Date or (ii) the Valuation Amount (as defined below). The “ Valuation Amount ” shall be equal to the amount that would be the Series A Liquidation Amount, the Series B Liquidation Amount or the Series C Liquidation Amount, as applicable, in the event of a Deemed Liquidation Event for all-cash consideration at the fair market value of the Corporation at the time of the Redemption Election, as determined by the mutual agreement of the Board of Directors and holders of two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.
If the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an
 
26

as-converted to Common Stock basis, on the one hand, and the Board of Directors, on the other hand, are not able to agree on the Valuation Amount within a reasonable period of time (not to exceed twenty (20) days from the date of the Redemption Election), the Valuation Amount shall be determined by a business appraisal and valuation firm of national recognition (the “ Firm ”), which Firm shall be reasonably acceptable to the Board of Directors and the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, it being acknowledged that Duff & Phelps would constitute such a Firm.
If the Board of Directors and the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, are unable to agree upon an acceptable Firm within ten (10) days after the date either party proposed that one be selected, the Firm will be selected by an arbitrator located in New York City, selected by the American Arbitration Association (or if such organization ceases to exist, the arbitrator shall be chosen by a court of competent jurisdiction). The arbitrator shall select the Firm (within ten (10) days of the arbitrator’s appointment) from a list jointly prepared by the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, on the one hand, and the Board of Directors, on the other hand, of not more than six firms of national standing in the United States, of which no more than three may be named by the Board of Directors and no more than three may be named by the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis. The arbitrator may consider, within the ten-day period allotted, arguments from the parties regarding which Firm to choose, but the selection by the arbitrator shall be made in its sole discretion from the list of up to six.
The Board of Directors and the holders of two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall submit their respective proposed valuations and other relevant data to the Finn. The final Valuation Amount shall be determined by the Firm as soon as practicable, provided that the final Valuation Amount shall be either (a) the Valuation Amount proposed by the Board of Directors or (b) the Valuation Amount proposed by the holders of two-thirds (2/3) of the outstanding Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, whichever valuation the Firm determines is closest in value to the Valuation Amount calculated by the Firm.
The Firm’s determination of the Valuation Amount shall be final and binding upon the parties. The party whose proposed Valuation Amount is not selected by the Firm as the final Valuation Amount will pay all of the fees and expenses of the arbitrator (if any) and the Firm used to determine the Valuation Amount. If required by any such firm or arbitrator, the Corporation and the holders of the Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock seeking redemption shall execute a retainer and engagement letter containing reasonable terms and conditions, including, without limitation, customary provisions concerning the rights of indemnification and contribution by the Corporation and such holders (on a pro rata and several, not joint, basis) in favor of such firm or arbitrator and its officers, directors, partners, employees, agents and affiliates.
 
27

The Redemption Price shall be paid in three (3) equal installments, the first of which installments shall be paid on the date (each, an “ Initial Redemption Date ”) which is the later of (A) 90 days after receipt by the Corporation, at any time on or after the fifth anniversary of the Series C Original Issue Date, and in each case prior to a Redemption Termination Event (as hereinafter defined), from the holders of at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice (the “ Redemption Election ”) requesting redemption of all shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (the date of each such installment being referred to as a “ Redemption Date ”), and (B) 90 days after the determination of the Valuation Amount pursuant to this Subsection 6.1 . The second and third Redemption Dates shall be the first and second anniversaries, respectively, of the Initial Redemption Date. On each Redemption Date, the Corporation shall apply one third of the aggregate Redemption Prices of all the Preferred Stock (the “ Installment Amount ”) (i) first to redeem all of the Series C Preferred Stock at the applicable Redemption Price of the Series C Preferred Stock and (ii) after all of the Series C Preferred Stock has been redeemed, to redeem, on a pro rata basis in accordance with the number of shares of Series A Preferred Stock or Series B Preferred Stock owned by each holder the maximum number of outstanding shares of Series A Preferred Stock and Series B Preferred Stock that may be redeemed with the remaining portion of the Installment Amount. If the Corporation does not have sufficient funds legally available to redeem on any Redemption Date all shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and of any other class or series of capital stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor, provided that all available proceeds will be applied first to redeem the Series C Preferred Stock until all such shares are redeemed. On each Redemption Date subsequent to the initial Redemption Date, the Corporation shall pay, in addition to the Redemption Price, interest on each installment measured from the initial Redemption Date until paid at the greater of (i) the rate of 8.0% per year, or (ii) the U.S. rate of prime as quoted by the Wall Street Journal plus 3.5% per year, in each case non-compounding.
6.2 Redemption Notice . Written notice of the mandatory redemption (the “ Redemption Notice ”) shall be sent to each holder of record of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption Notice shall state:
(a) the number of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;
(b) the Redemption Date and the Redemption Price;
 
28

(c) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1 ); and
(d) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock to be redeemed.
6.3 Surrender of Certificates; Payment . On or before the applicable Redemption Date, each holder of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, shall promptly be issued to such holder, bearing the rights set forth in this Certificate of Incorporation to the Redemption Price and interest amounts.
6.4 Rights Subsequent to Redemption . If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor, then notwithstanding that the certificates evidencing any of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.
6.5 Termination of Redemption Rights . The right to elect to redeem set forth in Subsection 6.1 shall terminate upon conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as applicable, into Common Stock with respect to any shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock once they are converted into Common Stock, a Qualified IPO, a Deemed Liquidation Event, a dissolution, liquidation or winding up of the Corporation or with the consent of holders of two- thirds (2/3) of the outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis (each a “ Redemption Termination Event ”).
 
29

7. Redeemed or Otherwise Acquired Shares . Any shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately canceled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series A Preferred Stock, holders of Series B Preferred Stock and holders of the Series C Preferred Stock following redemption.
8. Waiver . Any of the rights, powers, preferences and other terms of the Series A Preferred Stock and Series B Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock and Series B Preferred Stock by the affirmative written consent or vote of the holders of at least two-thirds (2/3) of the shares of Series A Preferred Stock and the Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, then outstanding. Any of the rights, powers, preferences and other terms of the Series C Preferred Stock set forth herein may be waived on behalf of all holders of Series C Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series C Preferred Stock, voting separately as a single class, then outstanding.
9. Notices . Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Series A Preferred Stock, Series B Preferred Stock and Series B Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
FIFTH: Subject to any additional vote required by the Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.
SIXTH: Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.
 
30

Any repeal or modification of the foregoing provisions of this Article Ninth shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
TENTH: The following indemnification provisions shall apply to the persons enumerated below to the extent permitted by applicable law as it presently exists or hereafter may be amended, provided that in each case, to the extent a change in the General Corporation Law permits greater indemnification, indemnification shall be provided to the extent of such change.
1. Right to Indemnification of Directors and Officers . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “ Indemnified Person ”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article Tenth, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.
2. Prepayment of Expenses of Directors and Officers . To the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, the Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article Tenth or otherwise.
3. Claims by Directors and Officers . If a claim for indemnification or advancement of expenses under this Article Tenth is not paid in full within 30 days after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
 
31

4. Indemnification of Employees and Agents . The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorney’s fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.
5. Advancement of Expenses of Employees and Agents . The Corporation may pay the expenses (including attorney’s fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.
6. Non-Exclusivity of Rights . The rights conferred on any person by this Article Tenth shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.
7. Other Indemnification . The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.
8. Insurance . The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article Tenth; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article Tenth.
9. No Right of Contribution . With the intent that the Corporation shall be the primary source of funds for any advancement or indemnification obligation hereunder, the Corporation shall have no right to seek contribution or other reimbursement from any other party (other than pursuant to insurance policies procured by the Corporation and indemnity arrangements entered into in writing with the Corporation) with an obligation (under contract, law or otherwise) to indemnify a director of the Corporation.
 
32

10. Amendment or Repeal . Any repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.
ELEVENTH: If a director of the Corporation is also a partner, member or employee of a stockholder (an “ Investor ”), and in his or her capacity solely as an Investor, and not as a director or employee of the Corporation, acquires knowledge of a potential transaction or matter that may be a corporate opportunity both for the Investor and the Corporation (a “ Corporate Opportunity ”), then (i) such Corporate Opportunity shall belong to the Investor and not to the Corporation; (ii) the Corporation, to the extent allowed by law, waives any claim that the Investor should have presented the Corporate Opportunity to the Corporation or any of its affiliates; and (iii) such director shall, to the extent permitted by law, have no fiduciary or other duty or obligation to the Corporation and its stockholders with respect to such Corporate Opportunity, provided, such director acts in good faith.
*             *              *
4. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
5. That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 25 th day of October, 2011.

By:	 	/s/ Darryl Rawlings	
	 	Darryl Rawlings, President and CEO	
 
33

VETINSURANCE INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Vetinsurance International, Inc. (the “ Corporation ”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify that:
1. Article FIRST of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:
“The name of this corporation is Trupanion, Inc. (the “ Corporation ”).”
2. The foregoing amendments to the Amended and Restated Certificate of Incorporation of the Corporation have been duly approved by the Corporation’s Board of Directors in accordance with Sections 141 and 242 of the DGCL.
3. The foregoing amendments to Amended and Restated Certificate of Incorporation of the Corporation have been duly approved by the Corporation’s stockholders in accordance with Sections 228 and 242 of the DGCL.
4. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer as of this 29 th day of March, 2013.

Vetinsurance International, Inc.	
		
By:	 	/s/ Darryl Rawlings	
	 	Darryl Rawlings	
	 	Chief Executive Officer	

TRUPANION, INC.
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Trupanion, Inc. (the “ Corporation ”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify that:
1. Article FOURTH(D) Section 3.2 of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:
“Election of Directors. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series A Preferred Stock, the Series B Preferred Stock and the Special Voting Shares), exclusively and voting together as a single class, shall, subject to the rights of any additional series of Preferred Stock that may be established from time to time, be entitled to elect the directors of the Corporation. So long as any shares of Series A Preferred Stock or Series B Preferred Stock remain outstanding, the holders a majority of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect five (5) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. So long as any shares of Series C Preferred Stock remain outstanding, the holders a majority of the outstanding shares of Series C Preferred Stock, voting as a separate class, shall be entitled to elect one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors.”
2. The foregoing amendments to the Amended and Restated Certificate of Incorporation of the Corporation have been duly approved by the Corporation’s Board of Directors in accordance with Sections 141 and 242 of the DGCL.
3. The foregoing amendments to Amended and Restated Certificate of Incorporation of the Corporation have been duly approved by the Corporation’s stockholders in accordance with Sections 228 and 242 of the DGCL.
4. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer as of this 22nd day of April, 2013.

TRUPANION, INC.	
		
By:	 	/s/ Darryl Rawlings	
	 	Darryl Rawlings	
	 	Chief Executive Officer	

TRUPANION, INC.
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Trupanion, Inc. (the “ Corporation ”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify that:
1. The first paragraph of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “ Certificate ”), is hereby amended and restated in its entirety to read as follows:
“ FOURTH : The total number of shares of all classes of stock which the Corporation shall have authority to issue is 44,166,778 shares, consisting of (i) 26,000,000 shares of Common Stock, $0.00001 par value per share (“ Common Stock ”), and (ii) 18,166,778 shares of Preferred Stock, par value per share as set forth below or $0.00001 (“ Preferred Stock ”).”
2. The first paragraph of Article FOURTH(D) of the Certificate is hereby amended and restated in its entirety to read as follows:
“8,215,370 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series A Preferred Stock ”, 3,588,031 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series B Preferred Stock ” and 3,863,347 shares, $0.00001 par value per share, of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series C Preferred Stock ” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations.”
3. Article FOURTH(D) Section 3.2 of the Certificate is hereby amended and restated in its entirety to read as follows:
“ Election of Directors . The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series A Preferred Stock, the Series B Preferred Stock and the Special Voting Shares), exclusively and voting together as a single class, shall, subject to the rights of any additional series of Preferred Stock that may be established from time to time, be entitled to elect the directors of the Corporation. So long as any shares of Series A Preferred Stock or Series B Preferred Stock remain outstanding, the holders a majority of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect six (6) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. So long as any shares of Series C Preferred Stock remain outstanding, the holders of a majority of the outstanding shares of Series C Preferred Stock, voting as a separate class, shall be entitled to elect one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors.”

4. The foregoing amendments to the Certificate have been duly approved by the Corporation’s Board of Directors in accordance with Sections 141 and 242 of the DGCL.
5. The foregoing amendments to Certificate have been duly approved by the Corporation’s stockholders in accordance with Sections 228 and 242 of the DGCL.
6. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer as of this 26th day of February, 2014.

TRUPANION, INC.	
		
By:	 	/s/ Darryl Rawlings	
	 	Darryl Rawlings	
	 	Chief Executive Officer	
 
2

Exhibit 3.2
TRUPANION, INC.
RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME
The name of the corporation is Trupanion, Inc. (the “ Corporation ”).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware 19808. The name of the registered agent of the Corporation at that address is Corporation Service Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV: AUTHORIZED STOCK
1. Total Authorized . The total number of shares of all classes of stock that the Corporation has authority to issue is Two Hundred and Ten Million (210,000,000) shares, consisting of two classes: Two Hundred Million (200,000,000) shares of Common Stock, $0.00001 par value per share (“ Common Stock ”), and Ten Million (10,000,000) shares of Preferred Stock, $0.00001 par value per share (“ Preferred Stock ”).
2. Designation of Additional Series.
2.1. The Board of Directors of the Corporation (the “ Board ”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers, preferences and relative, participating, optional or other rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, unless a vote of any such holders is required pursuant to the terms of any certificate or certificates establishing a series of Preferred Stock.
 
1

2.2 Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock or any future class or series of Preferred Stock or Common Stock.
2.3 Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided , however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).
ARTICLE V: AMENDMENT OF BYLAWS
The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board shall require the approval of a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “ Whole Board ” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided , however , that in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation), the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation.
ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS
1. Director Powers . The conduct of the affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
2. Number of Directors . Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.
 
2

3. Classified Board . Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the “ Classified Board ”). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board, with the number of directors in each class to be divided as nearly equal as reasonably possible. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the “ Initial Public Offering ”), the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the closing of the Initial Public Offering and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the closing of the Initial Public Offering. At each annual meeting of stockholders following the closing of the Initial Public Offering, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.
4. Term and Removal . Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted in the Corporation’s Bylaws. Subject to the rights of the holders of any series of Preferred Stock, no director may be removed except for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors voting together as a single class. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director.
5. Board Vacancies . Subject to the rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires or until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation or removal.
6. Vote by Ballot . Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
 
3

ARTICLE VII: DIRECTOR LIABILITY
1. Limitation of Liability . To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
2. Change in Rights . Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS
1. No Action by Written Consent of Stockholders . Subject to the rights of any series of Preferred Stock, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders by written consent.
2. Special Meeting of Stockholders . Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, the President or the Board acting pursuant to a resolution adopted by a majority of the Whole Board.
3. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings . Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.
ARTICLE IX: CHOICE OF FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law, this Certificate of Incorporation or the Bylaws; (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws; or (e) any action asserting a claim against the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
 
4

ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION
If any provision of this Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Certificate of Incorporation shall be enforceable in accordance with its terms.
The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided , however , that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X or Article V, Article VI, Article VII or Article VIII.
* * * * * * * * * * *
 
5

Exhibit 3.3
BY-LAWS
OF
VETINSURANCE INTERNATIONAL, INC.
(the “Corporation”)
(adopted as of April 4, 2006)
ARTICLE I
Stockholders
Section 1.1. Annual Meetings . An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings . Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the Chief Executive Officer, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority in voting power of the outstanding shares of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the notice of any meeting shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.
Section 1.4. Adjournments . Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 1.5. Quorum . At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority in voting power of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority in voting power of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class on a matter at the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these by-laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization . Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the Chief Executive Officer, if any, or in the absence of the Chief Executive Officer by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.
The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.
Section 1.7. Inspectors . If required by application law, prior to any meeting of stockholders, the Board of Directors or the President shall appoint one or more inspectors to act at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at the meeting of stockholders, the person presiding at the meeting shall, if required by application law, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The
 
2

inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by telegram, cablegram or other electronic transmission from which it can be determined that the proxy was authorized by the stockholder, ballots and the regular books and records of the Corporation, and they may also consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.8. Voting; Proxies . Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Subject to the provisions of the Corporation’s Certificate of incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority in voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the certificate of incorporation or these by-laws.
 
3

Section 1.9. Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 1.10. List of Stockholders Entitled to Vote . The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the
 
4

stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, as required by applicable law.
Section 1.11. Consent of Stockholders in Lieu of Meeting . Unless otherwise provided in the certificate of incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this by-law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (i) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (ii) its principal place of business, or (iii) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing as may be required by applicable law.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board of Directors shall consist of one or more members, the number thereof to be determined in accordance with the Corporation’s certificate of incorporation or, in the absence of a specific requirement therein, then by resolution adopt by the Board of Directors. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation: Removal; Vacancies . Each director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Subject to the Corporation’s certificate of incorporation, any director or the entire Board of Directors may be removed, with or without
 
5

cause, by the holders of a majority in voting power of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Any director elected or appointed to fill a vacancy shall hold office until the next annual meeting of the stockholders and his or her successor is elected and qualified or until his or her earlier resignation or removal.
Section 2.3. Regular Meetings . Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given.
Section 2.4. Special Meetings . Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, the Chief Executive Officer, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference Telephone Permitted . Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action . At all meetings of the Board of Directors a majority of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless, applicable law, the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.
Section 2.7. Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the Chief Executive Officer (if he is a director), if any, or in the absence of the Chief Executive
 
6

Officer, by the President (if he is a director), or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting . Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in accordance with applicable law.
Section 2.9. Compensation of Directors . Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1. Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law (or any successor statute) to be submitted to stockholders for approval, or (b) adopting, amending or repealing any by-laws.
Section 3.2. Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in all other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws.
 
7

ARTICLE IV
Officers
Section 4.1. Officers; Election . As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the certificate of incorporation or these by-laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal; Vacancies . Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Subject to the Corporation’s certificate of incorporation, the Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting.
Section 4.3. Chairman of the Board . The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.
Section 4.4. Vice Chairman of the Board . In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.
Section 4.5. Chief Executive Officer . The Chief Executive Officer shall, subject to the direction of the Board, have general charge and supervision of the business of the Corporation. Unless the Board has designated a Chairman of the Board or a Vice Chairman of the Board or as otherwise provided by the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and, if he is a director, at all meetings of the Board. The Chief Executive Officer shall perform such other duties and shall have such other powers as the Board may from time to time prescribe.
 
8

Section 4.6. President . Unless the Board of Directors has designated the Chairman of the Board or another officer as Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation. The President shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe.
Section 4.7. Vice Presidents . The Vice President or Vice Presidents, at the request or in the absence of the President or during the President’s inability to act, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law.
Section 4.8. Secretary . The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law.
Section 4.9. Treasurer . The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law.
Section 4.10. Other Officers . The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.
 
9

ARTICLE V
Stock
Section 5.1. Stock Certificates and Uncertificated Shares . The shares of stock in the Corporation shall be represented by certificates, provided, that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate theretofore issued until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock registered in certificate form owned by such holder. Any signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
If the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided, that , except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing the information required by law to be set forth or stated on certificates or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates . The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such
 
10

owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year . The fiscal year of the Corporation shall be determined by the Board of Directors.
Section 6.2. Seal . The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees . Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a waiver thereof, by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice unless so required by the certificate of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and Employees . The Corporation shall indemnify to the full extent permitted by law any director or officer of the Corporation, and in the discretion of the Board of Directors, any employee of the Corporation, made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person’s testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys’ fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this by-law, the term “other enterprise” shall include any corporation, partnership, joint venture, trust or employee benefit plan; service “at the request of the Corporation” shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan
 
11

shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.
Section 6.5. Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
—End—
 
12

Exhibit 3.4

 
TRUPANION, INC.
a Delaware Corporation
AMENDED AND RESTATED BYLAWS
As Adopted             , 2014

 

TRUPANION, INC.
a Delaware Corporation
AMENDED AND RESTATED BYLAWS
TABLE OF CONTENTS

Article I - STOCKHOLDERS	
		
Section 1.1:	 	Annual Meetings	
Section 1.2:	 	Special Meetings	
Section 1.3:	 	Notice of Meetings	
Section 1.4:	 	Adjournments	
Section 1.5:	 	Quorum	
Section 1.6:	 	Organization	
Section 1.7:	 	Voting; Proxies	
Section 1.8:	 	Fixing Date for Determination of Stockholders of Record	
Section 1.9:	 	List of Stockholders Entitled to Vote	
Section 1.10:	 	Inspectors of Elections	
Section 1.11:	 	Notice of Stockholder Business; Nominations	
	
Article II - BOARD OF DIRECTORS	
		
Section 2.1:	 	Number; Qualifications	
Section 2.2:	 	Election; Resignation; Removal; Vacancies	
Section 2.3:	 	Regular Meetings	
Section 2.4:	 	Special Meetings	
Section 2.5:	 	Remote Meetings Permitted	
Section 2.6:	 	Quorum; Vote Required for Action	
Section 2.7:	 	Organization	
Section 2.8:	 	Written Action by Directors	
Section 2.9:	 	Powers	
Section 2.10:	 	Compensation of Directors	
	
Article III - COMMITTEES	
		
Section 3.1:	 	Committees	
Section 3.2:	 	Committee Rules	
	
Article IV - OFFICERS	
		
Section 4.1:	 	Generally	
Section 4.2:	 	Chief Executive Officer	
Section 4.3:	 	Chairperson of the Board	
Section 4.4:	 	President	
Section 4.5:	 	Vice President	
 
- i -

			
Section 4.6:	 	Chief Financial Officer	
Section 4.7:	 	Treasurer	
Section 4.8:	 	Secretary	
Section 4.9:	 	Delegation of Authority	
Section 4.10:	 	Removal	
	
Article V - STOCK	
		
Section 5.l:	 	Certificates	
Section 5.2:	 	Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares	
Section 5.3:	 	Other Regulations	
	
Article VI - INDEMNIFICATION	
		
Section 6.1:	 	Right to Indemnification of Directors and Officers	
Section 6.2:	 	Advancement of Expenses of Directors	
Section 6.3:	 	Claims by Directors and Officers	
Section 6.4:	 	Indemnification of Employees and Agents	
Section 6.5:	 	Advancement of Expenses of Employees and Agents	
Section 6.6:	 	Non-Exclusivity of Rights	
Section 6.7:	 	Insurance	
Section 6.8:	 	Amendment or Repeal	
	
Article VII - EXCULPATION	
		
Section 7.1:	 	Exculpation of Directors	
Section 7.2:	 	Amendment or Repeal	
	
Article VIII - NOTICES	
		
Section 8.l:	 	Notice	
Section 8.2:	 	Waiver of Notice	
	
Article IX - INTERESTED DIRECTORS	
		
Section 9.1:	 	Interested Directors	
Section 9.2:	 	Quorum	
	
Article X - MISCELLANEOUS	
		
Section 10.1:	 	Fiscal Year	
Section 10.2:	 	Seal	
Section 10.3:	 	Form of Records	
Section 10.4:	 	Reliance Upon Books and Records	
Section 10.5:	 	Certificate of Incorporation Governs	
Section 10.6:	 	Severability	
	
Article XI - AMENDMENT	
 
- ii -

TRUPANION, INC.
a Delaware Corporation
AMENDED AND RESTATED BYLAWS
As Adopted             , 2014
ARTICLE I: STOCKHOLDERS
Section 1.1 : Annual Meetings . An annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors of the Corporation (the “ Board ”) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware as permitted by the Delaware General Corporation Law (the “ DGCL ”), or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.
Section 1.2 : Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President or the Board acting pursuant to a resolution adopted by a majority of the “ Whole Board ,” which shall mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Special meetings may not be called by any other person or persons. The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine.
Section 1.3 : Notice of Meetings . Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including, without limitation, as set forth in Section 8.1.1 of these Bylaws) stating the date, time and place, if any, of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation (the “ Certificate of Incorporation ”), such notice shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting.
Section 1.4 : Adjournments . The chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any). Any meeting of stockholders may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided , however , that if the adjournment is for more than thirty (30) days, or if a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone or reschedule any previously scheduled special or annual meeting of stockholders before it is to be held, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.

Section 1.5 : Quorum . At each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, unless otherwise required by applicable law. Where a separate vote by a class or classes or series is required, a majority of the voting power of the shares of such class or classes or series present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided , however , that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.
Section 1.6 : Organization . Meetings of stockholders shall be presided over by such person as the Board may designate, or, in the absence of such a person, the Chairperson of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 1.10 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7 : Voting; Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast. Unless otherwise provided by applicable law, the rules of any stock exchange upon which the Corporation’s securities are listed, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by a majority of the votes cast for or against the matter.
Section 1.8 : Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, unless otherwise required by law, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board, then the record date shall be as provided by applicable law. To the fullest extent permitted by law, a determination of

stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.
Section 1.9 : List of Stockholders Entitled to Vote . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting.
Section 1.10 : Inspectors of Elections .
1.10.1 Applicability . Unless otherwise required by the Certificate of Incorporation or by the DGCL, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.
1.10.2 Appointment . The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.10.3 Inspector’s Oath . Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
1.10.4 Duties of Inspectors . At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

1.10.5 Opening and Closing of Polls . The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.10.6 Determinations . In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with any information provided pursuant to Section 211(a)(2)(b)(i) or (iii) of the DGCL, or Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.11: Notice of Stockholder Business; Nominations .
1.11.1 Annual Meeting of Stockholders .
(a) Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders shall be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of such meeting, (ii) by or at the direction of the Board or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.11, who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.11. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “ Exchange Act ”)), at an annual meeting of stockholders.
(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 1.11.1(a):
(i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation;
(ii) such other business must otherwise be a proper matter for stockholder action;
(iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in this Section, such stockholder or beneficial owner must, in the case of

a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice; and
(iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section.
To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the seventy-fifth (75th) day nor earlier than the close of business on the one hundred and fifth (105th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following its initial public offering, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.11.2); provided , however , that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered (A) no earlier than the close of business on the one hundred and fifth (105th) day prior to currently proposed annual meeting and (B) no later than the close of business on the later of the seventy-fifth (75th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. Such stockholder’s notice shall set forth:
(x) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or would be otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;
(y) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and
(z) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (aa) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (bb) the class and number of shares of the Corporation that are owned beneficially and held of record by such stockholder and such beneficial owner, (cc) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, (dd) a description of any agreement, arrangement or understanding (including any derivative or

short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and such beneficial owners, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Corporation, (ee) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination and (ff) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent being a “ Solicitation Notice ”). If requested by the Corporation, the information required under clauses (bb), (cc) and (dd) of this subparagraph (z) shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such information as of the record date.
(c) Notwithstanding anything in the second sentence of Section 1.11.1(b) to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no Public Announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least seventy five (75) days prior to the first anniversary of the preceding year’s annual meeting (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after such anniversary date, at least seventy five (75) days prior to such annual meeting), a stockholder’s notice required by this Section 1.11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation no later than the close of business on the tenth (10th) day following the day on which such Public Announcement is first made by the Corporation.
1.11.2 Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.11.1(b) shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred fifth (105th) day prior to such special meeting and (ii) no later than the close of business on the later of the seventy fifth (75th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

1.11.3 General .
(a) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.11. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.11 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded.
(b) For purposes of this Section 1.11, the term “ Public Announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this Section 1.11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.11 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1 : Number; Qualifications . The Board shall consist of one or more members. The initial number of directors shall be fixed from time to time as set forth in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2 : Election; Resignation; Removal; Vacancies . The directors shall be divided, with respect to the time for which they severally hold office, into classes as provided in the Certificate of Incorporation, and vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled, as provided in the Certificate of Incorporation.
Section 2.3 : Regular Meetings . Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4 : Special Meetings . Special meetings of the Board may be called by the Chairperson of the Board, the President or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

Section 2.5 : Remote Meetings Permitted . Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6 : Quorum; Vote Required for Action . Subject to the Certificate of Incorporation regarding the ability of members of the Board to fill a vacancy occurring in the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7 : Organization . Meetings of the Board shall be presided over by the Chairperson of the Board, or in such person’s absence by the President, or in such person’s absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8 : Written Action by Directors . Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively, in the minute books of the Corporation. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9 : Powers . The Board may, except as otherwise required by law or the Certificate of Incorporation, exercise all such powers and manage and direct all such acts and things as may be exercised or done by the Corporation.
Section 2.10 : Compensation of Directors . Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
ARTICLE III: COMMITTEES
Section 3.1 : Committees . The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent

provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2 : Committee Rules . Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV: OFFICERS
Section 4.1 : Generally . The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a Secretary and a Treasurer and may consist of such other officers, including a Chief Financial Officer and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board;  provided , however , that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chairperson of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until such person’s successor is appointed or until such person’s earlier resignation, death or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board.
Section 4.2 : Chief Executive Officer . Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) Subject to Article I, Section 1.6, to preside at all meetings of the stockholders;
(c) Subject to Article I, Section 1.2, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper;
(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation; and

(e) To vote and otherwise act on, or to authorize any officer to vote or otherwise act on, on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise, or authorize any officer otherwise to exercise, any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.
The President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board has not designated any other officer to be the Chief Executive Officer, then the Chairperson of the Board shall be the Chief Executive Officer.
Section 4.3 : Chairperson of the Board . The Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe.
Section 4.4 : President . The Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.5 : Vice President . Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer’s absence or disability.
Section 4.6 : Chief Financial Officer . The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer.
Section 4.7 : Treasurer . The Treasurer shall have custody of all moneys and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8 : Secretary . The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and

the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.9 : Delegation of Authority . The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
Section 4.10 : Removal . Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any Vice Presidents of the Corporation, then such Vice Presidents may be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
ARTICLE V: STOCK
Section 5.1 :  Certificates .  The shares of capital stock of the Corporation shall be represented by certificates; provided, however, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the adoption of such resolution by the Board, each holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairperson or Vice-Chairperson of the Board, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Section 5.2 : Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares . The Corporation may issue a new certificate of stock, or uncertificated shares, in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 5.3 : Other Regulations . The issue, transfer, conversion and registration of stock certificates and uncertificated securities shall be governed by such other regulations as the Board may establish.

ARTICLE VI: INDEMNIFICATION
Section 6.1 : Right to Indemnification of Directors and Officers . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “ Indemnified Person ”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans (collectively, “ Another Enterprise ”), against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in this Article VI, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board.
Section 6.2 : Advancement of Expenses of Directors . The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided , however , that such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should ultimately be determined that the Indemnified Person is not entitled to be indemnified under this Article VI or otherwise.
Section 6.3 : Claims by Directors and Officers . If a claim for indemnification or advancement of expenses under this Article VI is not paid in full within a reasonable time after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
Section 6.4 : Indemnification of Employees and Agents . The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board.

Section 6.5 : Advancement of Expenses of Employees and Agents . The Corporation may pay the expenses (including attorneys’ fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board; provided, however, that such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the employee or agent to repay all amounts advanced if it should ultimately be determined that the employee or agent is not entitled to be indemnified under this Article VI or otherwise.
Section 6.6 : Non-Exclusivity of Rights . The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation or Bylaws of the Corporation, agreement, vote of stockholders or disinterested directors or otherwise.
Section 6.7 : Insurance . The Board may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers, agents and employees under the provisions of this Article VI; and (b) to indemnify or insure directors, officers, agents and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article VI.
Section 6.8 : Amendment or Repeal . The rights to indemnification and advancement of expenses conferred upon any current or former director or officer of the Corporation pursuant to this Article VI (whether by reason of the fact that such person is or was a director or officer of the Corporation, or while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of Another Enterprise) shall be contract rights, shall vest when such person becomes a director or officer of the Corporation, and shall continue as vested contract rights even if such person ceases to be a director or officer of the Corporation. Any amendment, repeal or modification of, or adoption of any provision inconsistent with, this Article VI (or any provision hereof) shall not adversely affect any right to indemnification or advancement of expenses granted to any person pursuant hereto with respect to any act or omission of such person occurring prior to the time of such amendment, repeal, modification or adoption (regardless of whether the Proceeding relating to such acts or omissions, or any proceeding relating to such person’s rights to indemnification or to advancement of expenses, is commenced before or after the time of such amendment, repeal, modification or adoption), and any such amendment, repeal, modification or adoption that would adversely affect such person’s rights to indemnification or advancement of expenses hereunder shall be ineffective as to such person, except with respect to any threatened, pending or completed Proceeding that relates to or arises from (and only to the extent such Proceeding relates to or arises from) any act or omission of such person occurring after the effective time of such amendment, repeal, modification or adoption. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.

ARTICLE VII: EXCULPATION
Section 7.1 : Exculpation of Directors . To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL or any other applicable law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended or such other applicable laws.
Section 7.2 : Amendment or Repeal . Any amendment, repeal or modification of the foregoing provisions of this Article VII, or the adoption of any provision of the Certificate of Incorporation of the Corporation inconsistent with this Article VII, by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such amendment, repeal, modification or adoption.
ARTICLE VIII: NOTICES
Section 8.1 : Notice .
8.1.1 Form and Delivery . Except as otherwise specifically required in these Bylaws (including, without limitation, Section 8.1.2 below) or by law, all notices required to be given pursuant to these Bylaws shall be in writing and may, (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, cablegram, overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 8.1.2 of this Article VIII by sending such notice by telegram, cablegram, facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via telegram, cablegram, facsimile, electronic mail or other form of electronic transmission, when dispatched.
8.1.2 Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such

inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided , however , the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 8.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
8.1.3 Affidavit of Giving Notice . An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 8.2 : Waiver of Notice . Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
ARTICLE IX: INTERESTED DIRECTORS
Section 9.1 : Interested Directors . No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 9.2 : Quorum . Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

ARTICLE X: MISCELLANEOUS
Section 10.1 : Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 10.2 : Seal . The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 10.3 : Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, diskettes, CDs, or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 10.4 : Reliance upon Books and Records . A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 10.5 : Certificate of Incorporation Governs . In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 10.6 : Severability . If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
ARTICLE XI: AMENDMENT
Notwithstanding any other provision of these Bylaws, any amendment or repeal of these Bylaws, or adoption of Bylaws, shall require the approval of the Board or the stockholders of the Corporation as provided in the Certificate of Incorporation.

Exhibit 4.1

NUMBER
TP
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
trupanion®
Medical insurance for your pet
SHARES
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 898202 10 6
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.00001 PAR VALUE PER SHARE, OF
Trupanion, Inc.
transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of the Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile signatures of the Corporation’s duly authorized officers.
Dated:
SECRETARY PRESIDENT
AMERICAN BANK NOTE COMPANY.
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC.
(Brooklyn, NY)
By
Transfer Agent and Registrar
Authorized Officer

The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM—as tenants in common
TEN ENT —as tenants by the entireties
JT TEN —as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT — Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares represented by the within Certificate, and does hereby irrevocably constitute and appoint , attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises.
Dated
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

Exhibit 4.2
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
WARRANT TO PURCHASE STOCK

Corporation:	  	VETINSURANCE INTERNATIONAL, INC., a Delaware corporation	
Number of Shares:	  		
Class of Stock:	  	Series          Preferred Stock	
Initial Exercise Price:	  	$	
Issue Date:	  		
Expiration Date:	  		
T HIS W ARRANT C ERTIFIES T HAT , for good and valuable consideration, the receipt of which is hereby acknowledged, SQUARE 1 BANK or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “ Shares ”) of VETINSURANCE INTERNATIONAL, INC. (the “ Company ”) at the initial exercise price per Share (the “ Warrant Price ”) all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this warrant (the “ Warrant ”).
ARTICLE 1
EXERCISE
1.1. Method of Exercise. Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.
 
1.2. Conversion Right . In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.4.
 
1.3. Intentionally Omitted.
 
1.4. Fair Market Value. If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.
 
1.5. Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.
1.6. Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new Warrant of like tenor.

1.7. Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1 “ Acquisition. ” For the purpose of this Warrant, “Acquisition” means (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, (b) any sale or disposition of all or substantially all of the capital stock of the Company, or (c) any reorganization, consolidation, merger or sale of the voting securities of the Company or any other transaction where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations of this Warrant, then this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly. The Company shall use reasonable efforts to cause the surviving corporation to assume the obligations of this Warrant.
1.7.3 Non assumption. If upon the closing of any Acquisition the successor entity does not assume the obligations of this Warrant and Holder has not otherwise exercised this Warrant in full, then [ this Warrant shall be deemed to have been automatically converted pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition on the same terms as other holders of the same class of securities of the Company. ] [ Holder shall have the option either to (a) deem this Warrant to have been automatically converted pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition of the same terms as other holders of the same class of securities of the Company; or (b) require the Company to purchase this Warrant for cash upon the closing of the Acquisition for an amount per Share equal to one (1) times the Warrant Price. ]
ARTICLE 2
ADJUSTMENTS TO THE SHARES
2.1. Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, or subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.
2.2. Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.
2.3. Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.
2.4. Adjustments for Diluting Issuances. In the event of the issuance (a “Diluting Issuance”) by the Company after the Issue Date of securities at a price per share Jess than the Warrant Price, then the number of shares of common stock issuable upon conversion of the Shares shall be adjusted in accordance with those provisions of the Company’s Certificate of Incorporation that apply to Diluting Issuances.
 
2

2.5. Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.
2.6. Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of this Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is the per share price paid in Company’s most recent equity financing.
(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (other than those created by Holder) except for restrictions on transfer provided for herein or under applicable federal and state securities Laws.
(c) The Company’s capitalization table attached to this Warrant is true and complete as of the Issue Date.
3.2. Notice of Certain Events . The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of common stock; or (d) the merger or consolidation with or into any other corporation, or sale, lease, license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.
3.3. Information Rights. So long as the Holder holds this Warrant, the Company shall deliver to the Holder (a) within one hundred fifty (150) days after the end of each fiscal year of the Company (beginning with the 2007 fiscal year), the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (b) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements.
3.4. Registration Under Securities Act of 1933, as amended. The Company and Holder shall enter into that certain Amendment No. 1 to Registration Rights Agreement dated as of even date with the Warrant so that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be “Registrable Securities’’, and Holder shall be a “Holder” under that certain Registration Rights Agreement between the Company and certain investors dated as of April 20, 2007 (the “Rights Agreement”).
3.5. Holder Investment Representations. Holder makes the representations to the Company set forth in Exhibit A hereof in connection with the issuance of this Warrant and the Shares (collectively, the “Securities”).
 
3

3.6. Lock-Up Agreement. Holder shall be subject to Section 1.14 of the Rights Agreement (captioned “Lock-Up Agreement”), as the same may be amended from time to time; provided that, without the prior written consent of Holder, no amendment to such Section 1.14 will be effective as to Holder if such amendment would treat Holder differently than other holders of the Shares, generally.
ARTICLE 4
MISCELLANEOUS
4.1. Term: Exercise Upon Expiration. This Warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above. If this warrant has not been exercised prior to the Expiration Date, this Warrant shall be deemed to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.
4.2. Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form as well as any additional legends that the Company and Holder mutually agree upon with respect to such Shares:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
4.3. Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without; (a) compliance with applicable federal and state securities laws by the transferor and the transferee; (b) the transferee making the representations of Holder set forth in this Warrant; and (c) the transferee’s agreement to be bound by all of the obligations of Holder set forth in this Warrant. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has compiled with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.
4.4. Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.
4.5. Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.
All notices to the Holder shall be addressed as follows:
Square 1 Bank
Attention: Warrant Administrator
406 Blackwell Street, Suite 240
Crowe Building
Durham, NC 27701
 
4

All notices to the Company shall be addressed as follows:
VetInsurance International, Inc.
Attention: Chief Financial Officer
505 Fifth Ave S, Suite 600
Seattle, WA 98104
With a copy, which shall not serve as notice, to:
Christine Osvald-Mruz
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
4.6. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
4.7. No Voting or Dividend Rights. Nothing contained in this Warrant shall be construed as conferring upon Holder hereof the right to vote or to consent as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised.
4.8. Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

5

4.9. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

VETINSURANCE INTERNATIONAL, INC.	
		
By:	 	 	
		
Name:	 	 	
		
Title:	 	 	
	
SQUARE 1 BANK	
		
By:	 	 	
		
Name:	 	 	
		
Title:	 	 	
 
6

A PPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______________ shares of the _____________ stock of VETINSURANCE INTERNATIONAL, INC., (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into shares in the manner specified in the Warrant. This conversion is exercised with respect to ___________ of the shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
Square 1 Bank
Attention: Warrant Administrator
406 Blackwell Street, Suite 240
Crowe Building
Durham, NC 27701
3. The undersigned makes the representations to the Company set forth in Exhibit A hereof in connection with the issuance of the Securities.

	
SQUARE 1 BANK or Registered Assignee	

(Signature)	

(Date)	

EXHIBIT A
INVESTMENT REPRESENTATIONS
(a) The undersigned is aware of the Company’s business affairs and financial condition, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing the Securities for its own account for investment purposes only, not as a nominee or agent, and not with a view towards, or for resale in connection with, any “distribution” thereof for purposes of the Securities Act of 1933, as amended (the “Securities Act”). The undersigned has such knowledge and experience in financial business matters and the undersigned is capable of evaluating the merits and risks of the purchase of the Securities and of protecting its interests in connection therewith.
(b) The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the undersigned’s investment intent as expressed herein.
(c) The undersigned further understands that the Securities must be held indefinitely, and the undersigned must therefore bear the economic risk therewith, unless the Securities are subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, the undersigned understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required.
(d) The undersigned is familiar with the provisions of Rule 144, promulgated pursuant to the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions.
(e) The Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires, among other things, the existence of a public market for the Securities, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sales being effected through a “broker’s transaction” or in transactions directly with a “market maker” and the number of securities being sold during any three-month period not exceeding specified limitations.
(f) The undersigned further understands that in the event that all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required.
(g) The undersigned is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

Exhibit 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
WARRANT TO PURCHASE COMMON STOCK

Corporation:	  	Trupanion, Inc., a Delaware corporation	
Class of Stock:	  	Common Stock	
Initial Exercise Price:	  	$4.81 per share (adjustable as set forth herein)	
Issue Date:	  	December 23, 2013	
Expiration Date:	  	5 th Anniversary of the Issue Date	
This WARRANT CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, PEPI CAPITAL, L.P. or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of Common Stock (the “ Shares ”) of Trupanion, Inc. (the “ Company ”) at the exercise price per Share (the “ Exercise Price ”) all as set forth herein and as adjusted set forth herein, at any time, and from time to time, following the earlier to occur of (i) a Qualified IPO (as defined in the Company’s Certificate of Incorporation, as amended from time to time) and (ii) December 31, 2014 until the fifth anniversary of the Issue Date (such fifth anniversary, the “ Expiration Date ”), subject to the provisions and upon the terms and conditions set forth in this Warrant (this “ Warrant ”).
ARTICLE 1. EXERCISE
1.1. Exercise . Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Exhibit A to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.3 , Holder shall also deliver to the Company a check for the aggregate Exercise Price for the Shares being purchased. Upon Exercise of this Warrant, Holder will receive that number of Shares equal to [                ] divided by the then current Exercise Price.
1.2. Exercise Price . The initial exercise price for this Warrant shall be $4.81 per Share and is subject to adjustment pursuant to Article 2 ; provided that, if a Qualified IPO (as defined in the Company’s Certificate of Incorporation, as amended from time to time) occurs prior to December 31, 2014, then the Exercise Price shall be equal to the per share price at which the Company’s Common Stock was sold to the public in connection with such Qualified IPO.
1.3. Conversion Right . In lieu of exercising this Warrant as specified in Section 1.1 , Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Exercise Price for such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.4 .

1.4. Fair Market Value . If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.
1.5. Delivery of Certificate and New Warrant . Promptly after Holder exercises or converts this Warrant, and, if applicable, the Company receives payment of the Exercise Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.
1.6. Replacement of Warrants . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new Warrant of like tenor.
1.7. Repurchase on Sale, Merger, or Consolidation of the Company .
(i) Definition of Acquisition . For purposes of this Warrant, “ Acquisition ” means: (a) any direct or indirect sale, license. or other disposition of all, or substantially all, of the assets (including intellectual property) of the Company; (b) any direct or indirect sale or disposition of all, or substantially all, of the capital stock of the Company; or (c) any direct or indirect reorganization, consolidation, merger or sale of the voting securities of the Company or any other direct or indirect transaction, or series of transactions, where the holders of the Company’s voting securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity following any such transaction or series of transactions.
(ii) Assumption of Warrant . If upon the closing of any Acquisition the successor entity assumes the obligations of this Warrant, then this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date of the Acquisition and subsequent closing. The Warrant Price shall be adjusted appropriately. The Company shall use commercially reasonable efforts to cause the surviving corporation to assume the obligations of this Warrant.
(iii) Non-Assumption . If upon the closing of any Acquisition the successor entity does not assume the obligations of this Warrant and Holder has not otherwise exercised this Warrant in full, then this Warrant will be deemed to have been automatically converted pursuant to Section 1.3 , and thereafter, Holder shall participate in the Acquisition on the same terms as other holders of the same class of securities of the Company.

ARTICLE 2. ADJUSTMENTS TO THE SHARES
2.1. Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on its Common Stock payable in common stock, or other securities, or subdivides the outstanding Common Stock into a greater amount of Common Stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.
2.2. Reclassification, Exchange or Substitution . Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.
2.3. Adjustments for Combinations. Etc . If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.
2.4. Adjustments for Diluting Issuances . In the event of the issuance (a “ Diluting Issuance ”) by the Company after the Issue Date of securities but before a Qualified IPO, at a price per share less than the then current Exercise Price, then the Exercise Price shall be adjusted in accordance with those provisions of the Company’s Certificate of Incorporation that apply to Diluting Issuances as if the Shares were shares issuable upon conversion of Series A Preferred Stock and using the Exercise Price as the “Conversion Price” to be adjusted.
2.5. Certificate as to Adjustments . Upon each adjustment of the Exercise Price or the number of Shares issuable upon exercise of this Warrant, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Exercise Price and the applicable number of Shares issuable in effect upon the date thereof and the series of adjustments leading to such Exercise Price and number of Shares.
2.6. Fractional Shares . No fractional shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the

nearest whole Share. If a fractional share interest arises upon any exercise or conversion of this Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1. Representations and Warranties of the Company . The Company hereby represents and warrants to the Holder as follows:
(i) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens or encumbrances (other than those created by Holder) except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
3.2. Notice of Certain Events . The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding any of the following events: (a) declaration of any dividend or distribution upon its Common Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of Common Stock; or (d) the, direct or indirect, merger or consolidation with or into any other corporation, or sale, lease, license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.
3.3. Information Rights . So long as the Holder holds this Warrant, the Company shall deliver to the Holder: (a) within one hundred fifty (150) days after the end of each fiscal year of the Company (beginning with the 2013 fiscal year), the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (b) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements; provided that if the Company includes its annual audited financial statements and quarterly unaudited financial statements in periodic reports it files with the Securities and Exchange Commission pursuant to the Exchange Act of 1934, as amended, the filing of such reports shall satisfy the Company’s delivery obligations under this Section 3.3 .
3.4. Registration Under Securities Act . The Company hereby represents and warrants that it has caused that certain Third Amended and Restated Registration Rights Agreement, between the Company and certain investors dated as of October 25, 2011 (the “ Rights Agreement ”) to be validly amended on or before the date hereof, such that the Shares shall be deemed Registrable Securities (as defined in such Rights Agreement).
3.5. “Market Stand-off” Agreement . Holder shall be subject to Section 2.11 of the Rights Agreement, as the same may be amended from time to time.
3.6. Holder Investment Representations . Holder makes the representations to the Company set forth in Exhibit B hereof in connection with the issuance of this Warrant and the Shares (collectively, the “ Securities ”).

ARTICLE 4. MISCELLANEOUS
4.1. Exercise Upon Expiration . If this Warrant has not been exercised prior to the Expiration Date, this Warrant shall be deemed to have been automatically exercised on the Expiration Date by conversion pursuant to Section 1.3 .
4.2. Legends . This Warrant and the Shares shall be imprinted with a legend in substantially the following form as well as any additional legends that the Company and Holder mutually agree upon with respect to such Shares:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
4.3. Compliance with Securities Laws on Transfer . This Warrant and the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part without: (a) compliance with applicable federal and state securities laws by the transferor and the transferee; (b) the transferee making the representations of Holder set forth in this Warrant; and (c) the transferee’s agreement to be bound by all of the obligations of Holder set forth in this Warrant. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has compiled with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.
4.4. Transfer Procedure . Subject to the provisions of Section 4.3 , Holder may transfer all or part of this Warrant or the Shares by giving the Company notice of the portion of the Warrant being transferred that sets forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.
4.5. Notices . All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.
All notices to the Holder shall be addressed as follows:
[Name]
[Address]
All notices to the Company shall be addressed as follows:

Trupanion, Inc.
Attn: General Counsel
907 NW Ballard Way
Seattle, WA 98107
With a copy, which shall not serve as notice, to:
Fenwick & West LLP
Attn: James D. Evans
1191 Second Ave., Floor 10
Seattle, WA 98101
4.6. Amendments . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
4.7. No Voting or Dividend Rights . Nothing contained in this Warrant shall be construed as conferring upon Holder the right to vote or to consent as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised.
4.8. Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party substantially prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
4.9. Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles regarding conflicts of law.
[SIGNATURE PAGE FOLLOWS]

			
	
TRUPANION, INC.	
		
By:	 	 	
		
Name:	 	 	
		
Title:	 	 	
	
[HOLDER]	
		
By:	 	 	
		
Name:	 	 	
		
Title:	 	 	
[Signature page to Warrant to Purchase Common Stock]

EXHIBIT A
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase                                          shares of the Common Stock of Trupanion, Inc. pursuant to the terms of the attached Warrant and tenders herewith payment of the current Exercise Price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into shares in the manner specified in the Warrant. This conversion is exercised with respect to                                      of the shares of Common Stock covered by the Warrant.
[Strike the paragraph that does not apply]
Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
[Name]
[Address]
3. The undersigned makes the representations to the Company set forth in Exhibit B hereof in connection with the issuance of the Securities.
[Holder] or Assignee

	
 	
[Signature]	
		
Date:	 	 	

EXHIBIT B
INVESTMENT REPRESENTATIONS
1. The undersigned is aware of the Company’s business affairs and financial condition, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing the Securities for its own account for investment purposes only, not as a nominee or agent, and not with a view towards, or for resale in connection with, any “distribution” thereof for purposes of the Securities Act. The undersigned has such knowledge and experience in financial business matters and the undersigned is capable of evaluation the merits and risks of the purchase of the Securities and of protecting its interests in connection therewith.
2. The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the undersigned’s investment intent as expressed herein.
3. The undersigned further understands that the Securities must be held indefinitely, and the undersigned must therefore bear the economic risk therewith, unless the Securities are subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, the undersigned understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required.
4. The undersigned is an “accredited investor” as defined in Rule 50l(a) of Regulation D promulgated under the Securities Act.

Exhibit 4.4
THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (“ Agreement ”) is made as of October 25, 2011, by and among Vetinsurance International, Inc., a Delaware corporation (the “ Company ”), each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “ Investor ,” and each of the stockholders listed on Schedule B hereto, each of whom is referred to herein as a “ Key Holder ”. This Agreement amends, restates and supersedes, in its entirety, the Second Amended and Restated Registration Rights Agreement dated May 14, 2010, as previously amended (the “ Prior Agreement ”).
RECITALS
WHEREAS , the Company, certain of the Investors and the Key Holders previously entered into the Prior Agreement.
WHEREAS , the Company and certain of the Investors (the “ Purchasers ”) are parties to the Series C Preferred Stock Purchase Agreement dated on or around the date hereof (the “ Series C Purchase Agreement ”).
WHEREAS , the Company and the undersigned holders of a majority of the Registrable Securities, as required to amend the Prior Agreement pursuant to Section 3.6 thereof, now desire to amend and restate the Prior Agreement to, among other things, add additional parties as Investors and induce the Purchasers to purchase shares of the Company’s Series C Preferred Stock pursuant to the Series C Purchase Agreement and hereby agree that this Agreement shall govern the rights of the Investors and the Key Holders to cause the Company to register shares of Common Stock issued or issuable to the Investors and the Key Holders, and shall govern certain other matters as set forth in this Agreement.
NOW, THEREFORE , in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Prior Agreement shall be amended and restated in its entirety by this Agreement and further agree as follows:
1. Definitions . For purposes of this Agreement:
1.1 “ Affiliate ” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including without limitation any general partner, officer, director, or manager of such Person and any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
1.2 “ Common Stock ” means shares of the Company’s common stock, par value USD $0.00001 per share.

1.3 “ Damages ” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.4 “ Demand Notice ” means written notice from the Company of a request for registration pursuant to Section 2.1 .
1.5 “ Exchangeable Shares ” means the Exchangeable Shares of Vetinsurance Ltd., a corporation existing under the laws of the Province of Alberta.
1.6 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.7 “ Excluded Registration ” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
1.8 “ Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.9 “ Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.10 “ Holder ” means any holder of Registrable Securities who is a party to this Agreement.
1.11 “ Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.12 “ Initiating Holders ” means, collectively, Holders who properly initiate a registration request under this Agreement.
 
2

1.13 “ IPO ” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.
1.14 “ Key Holder Registrable Securities ” means (i) the 130,620 shares of Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) held (or beneficially owned through a trust or retirement account) by the Key Holders, (ii) the shares of Common Stock issuable upon exchange of the 1,146,040 Exchangeable Shares (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Exchangeable Shares) held (or beneficially owned through a trust or retirement account) by the Key Holders, and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clauses (i)  and (ii) above.
1.15 “ Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.16 “ Qualified IPO ” has the meaning set forth in the Company’s Amended and Restated Certificate of Incorporation, as may be amended from time to time.
1.17 “ Registrable Securities ” means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or the Warrant Stock; (ii) the Key Holder Registrable Securities, provided , however , that such Key Holder Registrable Securities shall not be deemed Registrable Securities and the Key Holders shall not be deemed Holders for the purposes of Sections 2.1 and 2.10 , and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above; excluding in all cases, however, (a) any such securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to this Agreement, (b) any such securities for which registration rights have terminated pursuant to Section 2.13 of this Agreement, (c) any such securities which are registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them, and (d) any such securities which are sold pursuant to SEC Rule 144.
1.18 “ Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable, exchangeable and/or convertible securities that are Registrable Securities.
1.19 “ Restricted Securities ” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.
1.20 “ SEC ” means the Securities and Exchange Commission.
1.21 “ SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.
 
3

1.22 “ SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.
1.23 “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.24 “ Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6 .
1.25 “ Series A Preferred Stock ” means shares of the Company’s Series A Preferred Stock, par value $0.00001 per share.
1.26 “ Series B Preferred Stock ” means shares of the Company’s Series B Preferred Stock, par value $0.00001 per share.
1.27 “ Series C Preferred Stock ” means shares of the Company’s Series C Preferred Stock, par value $0.00001 per share.
1.28 “ Warrant Stock ” means (i) the shares of Series A Preferred Stock issuable upon exercise of that certain Warrant to Purchase Stock dated April 24, 2007 issued to Square 1 Bank, (ii) the shares of Common Stock issuable upon exercise of that certain Warrant to Purchase Common Stock dated March 12, 2009 issued to PETCO Animal Supplies Stores, Inc., and (iii) the shares of Common Stock issuable upon exercise of any Warrant to Purchase Common Stock issued to Prescient Advisors, L.L.C. or its affiliate(s) pursuant to that certain Letter Agreement between the Company and Prescient Advisors, L.L.C. dated September 9, 2008.
2. Registration Rights .
2.1 Demand Registration .
(a) Form S-1 Demand .
(1) IPO . If at any time after the fifth anniversary of the date of this Agreement, and prior to any IPO, the Company receives a request from Holders holding at least two-thirds (2/3) of then outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, that the Company file a Form S-1 registration statement with respect to outstanding Registrable Securities of such Holders which registration shall be an IPO having an anticipated aggregate offering price of at least USD $10,000,000, then the Company shall (i) within ten (10) days after the date such request is given, give Demand Notice with respect thereto to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within one hundred twenty (120) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by
 
4

notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations set forth in this Section 2 . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2.1(a)(1) after the Company has effected one such registration pursuant hereto. A registration shall not be counted as “effected” for purposes of this Section 2.1(a)(1) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration (other than as a result of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request), do not pay the registration expenses therefor, and, pursuant to Section 2.6 , forfeit their right to demand registration pursuant to this Section 2.1(a)(1) .
(2) Secondary Public Offering . If at any time after one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders holding at least two-thirds (2/3) of then outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, that the Company file a Form S-1 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price of at least USD $2,500,000, then the Company shall (i) within ten (10) days after the date such request is given, give Demand Notice with respect thereto to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations set forth in this Section 2 . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2.1(a)(2) after the Company has effected one such registration pursuant hereto. A registration shall not be counted as “effected” for purposes of this Section 2.1(a)(2) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration (other than as a result of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request), do not pay the registration expenses therefor, and, pursuant to Section 2.6 , forfeit their right to demand registration pursuant to this Section 2.1(a)(2) .
(b) Form S-3 Demand . If at any time after six (6) months following the closing of an IPO and when it is eligible to use a Form S-3 registration statement, the Company receives a request from one or more Holders of Registrable Securities that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price of at least USD $1,000,000, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice with respect thereto to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any
 
5

additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations set forth in this Section 2 .
(c) Notwithstanding the foregoing obligations, if the Company furnishes to holders of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock requesting a registration pursuant to this Section 2.1 a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided , however , that the Company may not invoke this right more than once in any twelve (12) month period; and provided , further that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period other than an Excluded Registration.
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) : (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b) . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two (2) registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, do not pay the registration expenses therefor, and, pursuant to Section 2.6 , forfeit their right to one demand registration statement, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d) .
2.2 Company Registration . If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders)
 
6

any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions and limitations set forth in this Section 2 , cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such terminated or withdrawn registration shall be borne by the Company in accordance with Section 2.6 .
2.3 Underwriting Requirements .
(a) If, pursuant to Section 2.1 , the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1 , and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e) ) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3 , if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided , however , that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.
(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2 , the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in
 
7

their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, (ii) the number of Registrable Securities (excluding Key Holder Registrable Securities) included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering or (iii) notwithstanding (ii) above, any Registrable Securities which are not Key Holder Registrable Securities be excluded from such underwriting unless all Key Holder Registrable Securities are first excluded from such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
2.4 Obligations of the Company . Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided , however , that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
 
8

(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly make available for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
2.5 Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
 
9

2.6 Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed USD $50,000, of one counsel for the selling Holders (“ Selling Holder Counsel ”), shall be borne and paid by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless: (a) at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, or (b) the Holders of a majority of the Registrable Securities agree to forfeit their right (i) in the case of a withdrawn request for registration pursuant to Section 2.1(a)(1) or 2.1(a)(2) , to any registration pursuant to such Section 2.1(a)(1) or 2.1(a)(2) , as applicable, or (ii) in the case of a withdrawn request for registration pursuant to Section 2.1(b) , to one registration pursuant to such Section  2.1(b) . All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
2.7 Delay of Registration . No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2 .
2.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2 :
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
 
10

(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall any indemnity under this Section 2.8(b) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8 , give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8 , to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8 .
(d) Notwithstanding anything else herein to the contrary, the foregoing indemnity agreements of the Company and the selling Holders are subject to the condition that, insofar as they relate to any Damages arising from any untrue statement or alleged untrue statement of a material fact contained in, or omission or alleged omission of a material fact from, a preliminary prospectus (or necessary to make the statements therein not misleading) that has
 
11

been corrected in the form of prospectus included in the registration statement at the time it becomes effective, or any amendment or supplement thereto filed with the SEC pursuant to Rule 424(b) under the Securities Act (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and such indemnified party failed to deliver, at or before the confirmation of the sale of the shares registered in such offering, a copy of the Final Prospectus to the Person asserting the loss, liability, claim, or damage in any case in which such delivery was required by the Securities Act.
(e) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8 , then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided , however , that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(e) , when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b) , exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.
(f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(g) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2 , and otherwise shall survive the termination of this Agreement.
 
12

2.9 Reports Under Exchange Act . With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish or make available to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.10 Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (i) to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (ii) to demand registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 3.8 .
2.11 “ Market Stand-off” Agreement . Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the IPO, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred
 
13

eighty (180) days, which period may be extended upon the request of the managing underwriter for an additional period of up to twenty (20) days if the Company issues or proposes to issue an earnings or other public release within twenty (20) days of the expiration of the 180-day lockup period), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers, directors, and stockholders individually owning more than five percent (5%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Series A Preferred Stock and Series B Preferred Stock) are subject to the same restrictions. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. Any discretionary waiver of termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply to all holders of the Company’s capital stock subject to such agreements pro rata based on the number of shares subject to such agreements.
2.12 Restrictions on Transfer .
(a) The Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
(b) Each certificate or instrument representing (i) the Series A Preferred Stock, (ii) the Series B Preferred Stock, (iii) the Series C Preferred Stock, (iv) the Registrable Securities, and (v) any other securities issued in respect of the securities referenced in clauses (i), (ii), (iii) and (iv), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c) ) be stamped or otherwise imprinted with legends substantially in the following form:
“THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE
 
14

BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE ACT, OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, OR (III) SUCH SECURITIES ARE SOLD IN CANADA PURSUANT TO RULE 904 OF REGULATION S UNDER THE ACT.
FURTHER, THESE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE ACT) (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL THE EXPIRATION OF THE APPLICABLE RESTRICTED PERIOD AS DETERMINED IN ACCORDANCE WITH REGULATION S, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S UNDER THE ACT. IN ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SHARES UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE ACT.”
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12 .
(c) (c) The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2 . Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter pursuant to this Section 2.12 (x) in any transaction in compliance with SEC Rule 144 or (y)
 
15

in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12 . Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legends set forth in Section 2.12(b) , except that such certificate shall not bear such restrictive legends if, in the opinion of counsel for such Holder and the Company, such legends are not required in order to establish compliance with any provisions of the Securities Act.
(d) The restrictions set forth in this Section 2.12 shall not be deemed to be exclusive of any other restrictions to which the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or the Registrable Securities may be subject, whether pursuant to this Agreement or otherwise.
2.13 Termination of Registration Rights . The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earlier to occur of:
(a) at such time as all of such Holder’s Registrable Securities may be sold under SEC Rule 144 during any ninety (90) day period; and
(b) the fifth (5 th ) anniversary of a Qualified IPO.
2.14 Rule 10b5-1 Trading Plans . Following any IPO, the Company’s insider trading policy shall provide that directors may implement Rule 10b5-1 trading plans.
3. Miscellaneous .
3.1 Successors and Assigns . The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned by any Holder: (A) to a transferee of Registrable Securities that is (i) an Affiliate, partner, member, limited partner, retired partner, retired member, or stockholder of a Holder, (ii) a member of Holder’s Immediate Family Member or trust for the benefit of an individual Holder and/or one or more of such Holder’s Immediate Family Members, (iii) a trust in respect of which such Holder serves as trustee, provided , however , that the trust instrument governing such trust shall provide that such Holder, as trustee, shall retain sole and exclusive control over the voting and disposition of such rights until the termination of this Agreement, or (iv) a limited partnership or limited liability company, all partners or members of which are Holder and/or members of such Holder’s Immediate Family; or (B) in connection with the sale or other transfer of not less than an aggregate of ten (10%) of the number of shares of Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock held by such Holder as of the date such Holder became a party to this Agreement; provided , however , that the rights of a Key Holder to cause the Company to register Registrable Securities pursuant to this Agreement may only be assigned by bequest or inheritance or in connection with a transfer of Registrable Securities as set forth above which is for bona fide estate planning purposes; and provided , further , however, that, in each instance, with respect to any assignment by a Holder hereunder (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such
 
16

transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11 . The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
3.2 Governing Law . This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters and all matters arising directly therefrom shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to principles of conflicts of law.
3.3 Counterparts; Facsimile . This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
3.4 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
3.5 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed duly given, delivered and received: (i) upon personal delivery to the party to be notified, (ii) when sent by electronic mail if sent during normal business hours of the recipient or, if sent after normal business hours, on the next business day; provided that , in either case, the sender did not receive an “undeliverable” message or other message indicating that the electronic mail message did not reach its intended recipient, (iii) on the day sent by facsimile (if sent during normal business hours of the recipient) with automatic confirmation by the transmitting machine showing the proper number of pages were transmitted without error or, if sent after normal business hours of the recipient, on the next business day, (iv) five days after having been sent by certified U.S. mail, return receipt requested, postage prepaid or by registered Canadian mail, or (v) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A or Schedule B , or to the principal office of the Company and to the attention of the Chief Executive Officer in the case of the Company, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 3.5 . If notice is given to the Company, a copy, which shall not be deemed to constitute notice hereunder, shall also be sent to DLA Piper LLP (US), 701 Fifth Avenue, Suite 7000, Seattle, Washington 98104-7044, Attention: Asher Bearman, Esq., Facsimile: (206) 839-4801.
3.6 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided
 
17

that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived (i) with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion, or (ii) with respect to the Key Holders, in a manner which is adverse to the Key Holders and which treats the Key Holders adversely and disproportionately than the Investors without the consent of the Key Holders holding a majority of the outstanding Registrable Securities held by all Key Holders. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 3.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
3.7 Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.
3.8 Additional Investors . Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock after the date hereof, whether pursuant to the Series C Purchase Agreement or otherwise, any purchaser of such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock may become a party to this Agreement, with the written consent of the Company, by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. In such event, Schedule A hereto shall be updated by the Company to reflect the addition of such Investor as an “Investor” hereunder. No action or consent by the Investors or the Key Holders shall be required for such joinder to this Agreement by such additional Investor or to so update Schedule A pursuant hereto, so long as the Company has consented thereto and such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.
3.9 Entire Agreement . This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
 
18

3.10 Nonexclusive Jurisdiction . The parties hereby submit to the nonexclusive jurisdiction of the state courts of the state of Washington and to the jurisdiction of the United States District Court for the Western District of Washington (and of the appropriate appellate courts therefrom) for the purpose of any suit, action or other proceeding which directly or indirectly arises out of or is based upon this Agreement.
3.11 Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
 
19

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
COMPANY :

VETINSURANCE INTERNATIONAL, INC. ,	
a Delaware corporation	
		
By:	 	/s/ Darryl Rawlings	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	President and Chief Executive Officer	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

HIGHLAND CONSUMER FUND I LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited Partnership, its General Partner	
By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Illegible	
	 	By:	 		
	 	Its:	 	Authorized Manager	
	
HIGHLAND CONSUMER FUND I-B LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited Partnership, its General Partner	
By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Illegible	
	 	By:	 		
	 	Its:	 	Authorized Manager	
	
HIGHLAND CONSUMER ENTREPRENEURS FUND I LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited Partnership, its General Partner	
By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Illegible	
	 	By:	 		
	 	Its:	 	Authorized Manager	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

MAVERON EQUITY PARTNERS III, L.P. ,	
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ Pete McCormick	
	 		 	Name:	 	Pete McCormick	
	 		 	Title:	 	Managing Partner	
	
MAVERON III ENTREPRENEURS’ FUND, L.P. ,
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ Pete McCormick	
	 		 	Name:	 	Pete McCormick	
	 		 	Title:	 	Managing Partner	
	
MAVERON III ASSOCIATES, L.P. ,
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ Pete McCormick	
	 		 	Name:	 	Pete McCormick	
	 		 	Title:	 	Managing Partner	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

RENAISSANCERE VENTURES LTD. ,	
a Bermuda corporation	
		
	 	/s/ Michael J. Doak	
	 	By: Michael J. Doak	
	 	Its: Vice President	
	
PEPI CAPITAL, L.P. ,
a Delaware limited partnership	
		
By:	 	PETRUS CAPITAL MANAGEMENT, LLC,	
	 	a Texas limited liability company,	
	 	its general partner	
			
	 	By:	 	/s/ Illegible	
	 		 	Name:	 		
	 		 	Title:	 		
	
LINDSLEY PARTNERS, LP ,
a Texas limited partnership	
		
By:	 	ZOIDA, LLC,	
	 	a Texas limited liability company,	
	 	its general partner	
			
	 	By:	 	/s/ H. Hays Lindsley	
	 		 	Name:	 	H. Hays Lindsley	
	 		 	Title:	 	Member	
	
CENTENARY INVESTMENTS, L.P. ,
a Texas limited partnership	
		
By:	 	CENTENARY MANAGEMENT COMPANY, INC.,	
	 	a Texas corporation,	
	 	its general partner	
			
	 	By:	 	/s/ Jeff Walter	
	 		 	Name:	 	Jeff Walter	
	 		 	Title:	 	President	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

PRESCIENT PARTNERS VII, LLC	
		
By:	 	/s/ Illegible	
	 	Name:	 		
	 	Title:	 	Authorized Signatory	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	

Name:	 	 	
	
INVESTOR (if corporate entity)	
	
17 Capital Corp.	
		
By:	 	/s/ Mark Sandercombe	
Name:	 	Mark Sandercombe	
Title:	 	President & Sole Shareholder	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ P.R. Beaumont	
Name:	 	P.R. Beaumont	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Darrell Cavens	
Name:	 	Darrell Cavens	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Jason Claridge	
Name:	 	Jason Claridge	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ KATHLEEN COOGAN	
Name:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Michael J. Cucciola	
Name:	 	Michael J. Cucciola	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Michael Doumani ttee	
Name:	 	Michael P. Doumani ttee	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ R. Wayne Randolph	
Name:	 	R. Wayne Randolph	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	 		
		
/s/ R Scott	 	/s/ N Scott	
Name:	 	Richard Scott    /	 	Noelene Scott	

INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

KEY HOLDERS :

/s/ Darryl Rawlings	
Darryl Rawlings	
	
/s/ Murray Low	
Murray Low	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	

Name:	 	 	
	
INVESTOR (if corporate entity)	
	
Millennium Trust Company, LLC
FBO Murray B. Low ROTH IRA
#90GK49015	
		
By:	 	/s/ Murray Low	
Name:	 	Murray Low	
Title:	 	Authorized Signatory	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Barry Johnson	
Name:	 	Barry Johnson	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ John H. Kramer	
Name:	 	John H. Kramer	
	
INVESTOR (if corporate entity)	
	
RCK Management Inc.	
		
By:	 	/s/ John H. Kramer	
Name:	 	John H. Kramer	
Title:	 	Director	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ P.R. Beaumont	
Name:	 	P.R. Beaumont	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

INVESTORS :

INVESTOR (if individual)	
	
/s/ Glenn W. Novotny - Trustee	
Name:	 	Glenn & Linda Novotny 1996 Living Trust	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

TRUPANION, INC.
Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement
This Amendment is entered into as of December 23, 2013 by and among Trupanion, Inc., a Delaware corporation (the “ Company ”) and the undersigned stockholders of the Company, each of which is an “ Investor ” or “ Key Holder ” pursuant to that certain Third Amended and Registration Rights Agreement, dated as of October 25, 2011, by and among the Company and the investors and stockholders identified therein (the “ Agreement ”).
WHEREAS, in connection with a debt financing with PEPI Capital, L.P. (the “ Lender ”), the Company’s Board of Directors has approved the issuance of a Warrant to purchase shares of the Company’s Common Stock (the “ Warrant ”) to the Lender; and
WHEREAS, the Company has agreed to grant the Lender the rights provided under the Agreement with respect to shares of the Company’s Common Stock issuable upon the exercise of the Warrant, and undersigned stockholders of the Company agree to amend the Agreement to provide the Lender with the rights thereunder; and
WHEREAS, in anticipation of future financing transactions, the Company’s Board of Directors has approved, and the undersigned stockholders of the Company agree to, an amendment to the Agreement to permit holders of warrants to purchase capital stock of the Company to join as an Investor (as defined in the Agreement) to the Agreement and to permit such shares of capital stock issuable upon exercise of such warrant to be Registrable Securities (as defined in the Agreement), without further amendment to the Agreement, provided that the issuance of such warrant with the rights contemplated in the Agreement has been approved by the Company’s Board of Directors and, if required under the Company’s Amended and Restated Certificate of Incorporation, as may be amended from time to time, the Company’s stockholders.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
 
 	1.	Amendment to Agreement .	
 
 	a.	Section 1.28 of the Agreement is hereby amended and restated in its entirety to read as follows:	
“1.28 “ Warrant Stock ” means any shares of capital stock of the Company issuable upon the exercise of a warrant to purchase capital stock of the Company, provided that the issuance of such warrant was approved by the Company’s Board of Directors and, if required under the Company’s Amended and Restated Certificate of Incorporation, as may be amended from time to time, the Company’s stockholders.”

 	b.	Section 3.8 of the Agreement is hereby amended and restated in its entirety to read as follows:	
3.8 Additional Investors . Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Warrants to purchase Warrant Stock after the date hereof, whether pursuant to the Series C Purchase Agreement or otherwise, any purchaser of such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock or holder of such Warrant to purchase Warrant Stock may become a party to this Agreement, with the written consent of the Company, by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. In such event, Schedule A hereto shall be updated by the Company to reflect the addition of such Investor as an “Investor” hereunder. No action or consent by the Investors or the Key Holders shall be required for such joinder to this Agreement by such additional Investor or to so update Schedule A pursuant hereto, so long as the Company has consented thereto and such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.
 
 	2.	Ratification . Except as expressly amended by this Amendment, the Agreement is in all respects ratified and confirmed, and all of the terms of thereof shall remain in full force and effect.	
 
 	3.	Effectiveness . The provisions of this Amendment shall be effective upon the execution hereof by sufficient parties to amend the Agreement.	
 
 	4.	Severability . If one or more provisions of this Amendment are held to be unenforceable under applicable law, such provision shall be excluded from this Amendment, and the balance of the Amendment shall be interpreted as if such provision were so excluded, and shall be enforceable in accordance with its terms.	
 
 	5.	Counterparts . This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.	
 
 	6.	Facsimile and Electronic Signatures . This Amendment may be executed and delivered by facsimile, or electronically in portable document format (.pdf) and upon such delivery, the facsimile or electronic signature will be deemed to have the same effect as if the original signature had been delivered to the other party.	
 
 	7.	Entire Agreement . This Amendment, the Agreement and the other documents referred to herein and therein constitute the entire agreement and understanding of the parties with respect to the subject matter of this Amendment, and supersede any and all prior	

 	understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.	
 
 	8.	Governing Law . This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters and all matters arising directly therefrom shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to principles of conflicts of law.	
[Signature Pages Follow]

IN WITNESS WHEREOF , the parties hereto have executed this Amendment as of the date and year first written above.
THE COMPANY:

Trupanion, Inc.	
		
By:	 	/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
Title:	 	CEO	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

IN WITNESS WHEREOF , the parties hereto have executed this Amendment as of the date and year first written above.
INVESTORS:

HIGHLAND CONSUMER FUND I LIMITED	
PARTNERSHIP	
		
By:	 	High Consumer GP Limited Partnership, its General Partner	
By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Peter F. Cornetta	
	 	By:	 	Peter F. Cornetta	
	 	Its:	 	Managing General Partner	

HIGHLAND CONSUMER FUND I-B LIMITED	
PARTNERSHIP	
		
By:	 	High Consumer GP Limited Partnership, its General Partner	
By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Peter F. Cornetta	
	 	By:	 	Peter F. Cornetta	
	 	Its:	 	Managing General Partner	
	
HIGHLAND CONSUMER ENTREPRENEURS FUND I LIMITED PARTNERSHIP	
		
    By:	 	High Consumer GP Limited Partnership, its General Partner	
    By:	 	Highland Consumer GP GP LLC, its General Partner	
		
	 	/s/ Peter F. Cornetta	
	 	By:	 	Peter F. Cornetta	
	 	Its:	 	Managing General Partner	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

INVESTORS:

MAVERON EQUITY PARTNERS III, L.P.,	
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ illegible	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
	
MAVERON III ENTREPRENEURS’ FUND L.P.,
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ illegible	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
	
MEP III ASSOCIATES, L.P.,
a Delaware limited partnership	
		
By:	 	MAVERON GENERAL PARTNERS III LLC,	
	 	a Delaware limited liability company	
			
	 	By:	 	/s/ illegible	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

INVESTORS:

PRESCIENT PARTNERS VII, LLC	
A Delaware corporation	
		
By:	 	 	
	 	Name:	 	 	
	 	    Title:	 	 	
	
PEPI CAPITAL, L.P.,
a Delaware limited partnership	
		
By:	 	PETRUS CAPITAL MANAGEMENT, LLC,	
	 	a Texas limited liability company,	
	 	its general partner	
			
	 	By:	 	/s/ David Radunsky	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
	
LINDSLEY PARTNERS, LP
a Texas limited partnership	
		
By:	 	ZOIDA, LLC,	
	 	a Texas limited liability company,	
	 	its general partner	
			
	 	By:	 	/s/ H. Hays Lindsley	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

INVESTORS:

CENTENARY INVESTMENTS, L.P.,	
a Texas limited partnership	
		
By:	 	CENTENARY MANAGEMENT COMPANY, INC.,	
	 	a Texas corporation,	
	 	its general partner	
			
	 	By:	 	 	
	 		 	Name:	 	 	
	 		 	    Title:	 	 	
	
RENAISSANCERE VENTURES LTD.,
a Bermuda corporation	
	 		 	 	
	 	By:	 	 	
	 	Its:	 	 	
	
INVESTOR (if individual)	
	
/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
	
INVESTOR (if individual)	
	
/s/ Peter Beaumont	
Name:	 	Peter Beaumont	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

INVESTORS:

INVESTOR	
	
Glenn & Linda Novotny 1996 Living Trust	
		
By:	 	/s/ Glenn W Novotny	
Name:	 	 	
Title:	 	 	
	
INVESTOR (if individual)	

Name:	 	 	
	
INVESTOR (if individual)	

Name:	 	 	
	
INVESTOR (if corporate entity)	

		
By:	 	 	
Name:	 	 	
Title:	 	 	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

KEY HOLDERS:

/s/ Darryl Rawlings	
Darryl Rawlings	

/s/ Murray Low	
Murray Low	
[Signature page to Amendment No. 1 to
Third Amended and Restated Registration Rights Agreement]

Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of                  , 2014 is made by and between Trupanion, Inc., a Delaware corporation (the “ Company ”), and                     , a director, officer or key employee of the Company or one of the Company’s subsidiaries or other service provider who satisfies the definition of Indemnifiable Person set forth below (“ Indemnitee ”).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no relationship to the compensation of such representatives;
B. The members of the Board of Directors of the Company (the “ Board ”) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;
C. Section 145 of the Delaware General Corporation Law (“ Section 145 ”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations, partnerships, joint ventures, trusts or other enterprises, and expressly provides that the indemnification provided thereby is not exclusive; and
D. The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about inappropriate claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions .
(a) Affiliate . For purposes of this Agreement, “ Affiliate ” of the Company means any corporation, partnership, limited liability company, joint venture, trust or other enterprise in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.

(b) Change in Control . For purposes of this Agreement, “ Change in Control ” means (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding capital stock, or (ii) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) ceasing for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination for election of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 50% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.
(c) Expenses . For purposes of this Agreement, “ Expenses ” means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, and other out-of-pocket costs), paid or incurred by Indemnitee in connection with a Proceeding, or establishing or enforcing an interpretation or a right under this Agreement, including indemnification under Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a Proceeding.
(d) Indemnifiable Event . For purposes of this Agreement, “ Indemnifiable Event ” means any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or Affiliate as an Indemnifiable Person, or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity.
(e) Indemnifiable Person . For the purposes of this Agreement, “ Indemnifiable Person ” means the Indemnitee, any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise) or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.
(f) Independent Counsel . For purposes of this Agreement, “ Independent Counsel ” means legal counsel that has not performed services for the Company, or any other party to the Proceeding giving rise to a claim for indemnification hereunder, or Indemnitee in the five years preceding the time in question and that would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee.

(g) Other Liabilities . For purposes of this Agreement, “ Other Liabilities ” means any and all liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, ERISA (or other benefit plan related) excise taxes or penalties, and amounts paid in settlement and all interest, taxes, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA (or other benefit plan related) excise taxes or penalties, or amounts paid in settlement).
(h) Proceeding . For the purposes of this Agreement, “ Proceeding ” means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.
(i) Subsidiary . For purposes of this Agreement, “ Subsidiary ” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.
3. Mandatory Indemnification .
(a) Agreement to Indemnify . The Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) a Proceeding related to an Indemnifiable Event to the fullest extent not prohibited by the provisions of the Company’s Bylaws and the Delaware General Corporation Law (“ GCL ”), as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the Bylaws or the GCL permitted prior to the adoption of such amendment).
(b) Exception for Amounts Covered by Insurance and Other Sources . Notwithstanding the foregoing, except as provided in Section 3(c), the Company shall not be obligated to make payments to Indemnitee for Expenses or Other Liabilities to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitee’s behalf) by any directors and officers, or other type, of insurance maintained by the Company (except to the extent that Indemnitee is required (by court order or otherwise) to return or surrender to the Company amounts that are otherwise indemnifiable hereunder).
(c) Company Obligations Primary . The Company hereby acknowledges that Indemnitee may have rights to indemnification for Expenses and Other Liabilities provided by [name of VC or other sponsoring organization] (“ Other Indemnitor ”). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which indemnification is provided under this Agreement and that the Company will be obligated to make all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. The Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to Indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to indemnify Indemnitee for such Expenses or Other Liabilities hereunder.

4. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled under the terms of this Agreement, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by the provisions of the Company’s Bylaws or the GCL. In any review or Proceeding to determine the extent of indemnification, the Company shall bear the burden to establish, by clear and convincing evidence, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues or matters which were not successfully resolved. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
5. Liability Insurance . So long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (i) liability insurance issued by one or more reputable insurers with an A.M. Best rating of at least “A” and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage to the Indemnitee to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary of the Company under such policy or policies and (ii) any replacement or substitute policies issued by one or more reputable insurers providing in all respects coverage to the Indemnitee to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary of the Company under such policy or policies. The purchase, establishment and maintenance of any such insurance or other arrangements shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement.
6. Mandatory Advancement of Expenses .
(a) Advancement . The Company shall advance prior to the final disposition of the Proceeding all Expenses reasonably incurred by Indemnitee in connection with (including in preparation for) a Proceeding related to an Indemnifiable Event. Indemnitee hereby undertakes to repay such amounts advanced if, and only if and to the extent that, it shall ultimately be determined by a court of final competent jurisdiction that Indemnitee is not entitled to be indemnified for such specific Expenses by the Company under the provisions of this Agreement. The advances to be made hereunder shall be paid by the Company to Indemnitee or directly to a third party designated by Indemnitee within thirty (30) days following delivery of a written request therefor by Indemnitee to the Company. Indemnitee’s undertaking to repay any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon.
7. Notice and Other Indemnification Procedures .
(a) Notification . Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding regarding an Indemnifiable Event to which

the Indemnitee is a named party or a declared participant, Indemnitee shall, if Indemnitee believes that indemnification or advancement of Expenses with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. However, a failure so to notify the Company promptly following Indemnitee’s receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure.
(b) Insurance and Other Matters . If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above and at the time the Company becomes aware of the Proceeding, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the issuers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all best efforts to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies.
(c) Assumption of Defense . In the event the Company shall be obligated to advance the Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein, unless Indemnitee is a director of the Company, in which case the Company shall not be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there is likely to be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company fails to employ counsel to assume the defense of such Proceeding, the fees and expenses of Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitee’s expense.
(d) Settlement . The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent which consent shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent from any settlement of any Proceeding.

8. Determination of Right to Indemnification .
(a) Success on the Merits or Otherwise . To the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred in connection therewith.
(b) Indemnification in Other Situations . In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has not failed to meet the applicable standard of conduct for indemnification.
(c) Forum . Indemnitee shall be entitled to select the forum in which determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:
(1) Those members of the Board who are Independent Directors even though less than a quorum;
(2) A committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or
(3) Independent Counsel selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, which counsel shall make such determination in a written opinion.
If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the forum, then Indemnitee shall not select Independent Counsel as such forum unless there are no Independent Directors or unless the Independent Directors agree to the selection of independent counsel as the forum.
The selected forum shall be referred to herein as the “Reviewing Party”. Notwithstanding the foregoing, following any Change in Control, the Reviewing Party shall be Independent Counsel selected in the manner provided in (3) above.
(d) As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitee’s choice of forum pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.
(e) Delaware Court of Chancery . Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the Court of Chancery, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.
(f) Expenses . The Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any hearing or Proceeding under this Section 8 involving

Indemnitee and against all Expenses and Other Liabilities incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of final competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.
(g) Determination of “Good Faith” . For purposes of any determination of whether Indemnitee acted in “good faith” or acted in “bad faith,” Indemnitee shall be deemed to have acted in good faith or not acted in bad faith if in taking or failing to take the action in question Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate. In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, or to advancement of expenses, the Reviewing Party or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. The provisions of this Section 8(g) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.
(h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Proceeding to which Indemnitee is or becomes a party is resolved in any manner other than by adverse judgment against Indemnitee (including without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burden of proof to establish such circumstance by clear and convincing evidence.
9. Exceptions . Any other provision herein to the contrary notwithstanding,
(a) Claims Initiated by Indemnitee . In the event that the Indemnitee commences a proceeding seeking (1) to establish or enforce a right to indemnification or advancement pursuant to this Agreement, (2) to otherwise enforce Indemnitee’s rights under or to interpret the terms of this Agreement, (3) to recover damages for breach of this Agreement, (4) to establish or enforce Indemnitee’s entitlement to indemnification or advancement pursuant to the Company’s Certificate of Incorporation or Bylaws, (5) resolution of a matter where the Board has consented to the initiation of such Proceeding, or (6) to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, then the Indemnitee shall be entitled to recover from the

Company and shall be indemnified by the Company against any and all Expenses actually and reasonably incurred by or on behalf of such Indemnitee in connection with such Proceeding, provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding on which Indemnitee does not prevail, unless (and only to the extent that) the Court of Chancery of the State of Delaware or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication in respect of such claim, issue or matter but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses that the Court of Chancery or other such court shall deem proper.
(b) Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments . The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of (i) any suit in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of l934 and amendments thereto or similar provisions of any federal, state or local statutory law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or
(c) Unlawful Indemnification . The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law.
10. Non-exclusivity . No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee as an Indemnified person or otherwise prior to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity, under the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to acts or omissions in his or her official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of the heirs, executors and administrators of Indemnitee. The assertion of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. Regardless of any investigation made by or on behalf of Indemnitee or any of Indemnitee’s agents, the indemnification and contribution provided for in this Agreement will remain in full force and effect, subject to any limitations or exclusions otherwise set forth herein.
11. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and

enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
12. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.
13. Successors and Assigns . The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. Neither party hereto may assign this Agreement without the prior written consent of the other party; provided, however, that the Company may assign this Agreement upon a Change in Control.
14. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) upon receipt if delivered by hand, (ii) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) upon personal service by a process server, or (iv) upon delivery to the recipient’s address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice complying with the provisions of this Section 14. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Company’s General Counsel.
15. No Presumptions . For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company or a Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company or a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under Section 8(e) of this Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or did not have any particular belief or is not entitled to indemnification under applicable law or otherwise.
16. Survival of Rights . The rights conferred on Indemnitee by this Agreement shall continue after Indemnitee has ceased to serve the Company or a Subsidiary or Affiliate of the Company as an officer, director or key employee and shall inure to the benefit of Indemnitee’s heirs, executors and administrators.

17. Subrogation . Except as expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents reasonably required and shall do all acts that may be reasonably necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.
19. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.
20. Counterparts . This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
21. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
22. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.
23. Consent to Jurisdiction . The Company and Indemnitee each hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of any summons and complaint and any other process that may be served in any action, suit or proceeding arising out of or relating to this Agreement by mailing by certified or registered mail, with postage prepaid, copies of such process to such party at its address for receiving notice pursuant to Section 14 hereof, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum. Nothing herein shall preclude service of process by any other means permitted by applicable law.
[ Remainder of Page Intentionally Left Blank ]

The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.

TRUPANION, INC.	
		
By:	 	 	
		
Name:	 	 	
		
Its:	 	 	
	
INDEMNITEE:	
		
By:	 	 	
		
Name:	 	 	
	
Address:	

 	

Exhibit 10.2
TRUPANION, INC.
2007 EQUITY COMPENSATION PLAN
1. Purposes of the Plan. The purposes of this Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”) are: to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to Employees, Directors and Consultants, and to promote the success of the Company and any Parent or Subsidiary. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights, Stock Awards and Unrestricted Shares may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
“ Administrator ” means a Committee which has been delegated the responsibility of administering the Plan in accordance with Section 4 of the Plan or, if there is no such Committee, the Board.
“ Applicable Laws ” means the requirements relating to the administration of equity compensation plans under the applicable corporate and securities laws of any of the states in the United States, U.S. federal securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
“ Award ” means an Option, a Stock Purchase Right, a Stock Award and/or the grant of Unrestricted Shares.
“ Board ” means the Board of Directors of the Company.
“ Cause ”, with respect to any Service Provider, means (unless otherwise determined by the Administrator) such Service Provider’s (i) conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company; (iii) personal dishonesty, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses) or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with the Service Provider’s duties; (v) chronic use of alcohol, drugs or other similar substances which affects the Service Provider’s work performance; or (vi) material breach of any provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by the Service Provider for the benefit of the Company, all as reasonably determined by the Committee, which determination will be conclusive.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Committee ” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.
“ Common Stock ” means the common stock, par value $0.0001 per share, of the Company.

“ Company ” means Trupanion, Inc., a Delaware corporation.
“ Consultant ” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity, other than an Employee or a Director.
“ Director ” means a member of the Board.
“ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code.
“ Employee ” means any person, including officers and Directors, serving as an employee of the Company or any Parent or Subsidiary. An individual shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary or any successor. The term “Employee” also includes a person who was a former employee of the Company or any Parent or Subsidiary who receives or holds an Award in consideration of providing service as an Employee. For purposes of an Option initially granted as an Incentive Stock Option, if a leave of absence of more than three months precludes such Option from being treated as an Incentive Stock Option under the Code, such Option thereafter shall be treated as a Nonstatutory Stock Option for purposes of this Plan. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
“ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:
(i) if the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, the Fair Market Value of a Share of Common Stock shall be the closing sales price of a Share of Common Stock as quoted on such exchange or system for such date (or the most recent trading day preceding such date if there were no trades on such date), as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(ii) if the Common Stock is regularly quoted by a recognized securities dealer but is not listed in the manner contemplated by clause (i) above, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock for such date (or the most recent trading day preceding such date if there were no trades on such date), as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(iii) if neither clause (i) above nor clause (ii) above applies, the Fair Market Value shall be determined in good faith by the Administrator based on the reasonable application of a reasonable valuation method.
 
2

“ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
“ Nonstatutory Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.
“ Notice of Grant ” means a written or electronic notice evidencing certain terms and conditions of an individual Option grant, Stock Purchase Right grant, Stock Award grant or grant of Unrestricted Shares. The Notice of Grant applicable to Stock Options shall be part of the Option Agreement.
“ Option ” means a stock option granted pursuant to the Plan.
“ Option Agreement ” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
“ Optioned Stock ” means the Common Stock subject to an Option or Stock Purchase Right.
“ Optionee ” means the holder of an outstanding Option and/or Stock Purchase Right granted under the Plan.
“ Parent ” means a “parent corporation” of the Company (or, in the context of Section 16(c) of the Plan, of a successor corporation), whether now or hereafter existing, as defined in Section 424(e) of the Code.
“ Participant ” shall mean any Service Provider who holds an Option, a Stock Purchase Right, Restricted Stock, a Stock Award or Unrestricted Shares granted or issued pursuant to the Plan.
“ Restricted Stock ” means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
“ Restricted Stock Purchase Agreement ” means a written agreement between the Company and an Optionee evidencing the terms and restrictions applicable to stock purchased under a Stock Purchase Right. Each Restricted Stock Purchase Agreement shall be subject to the terms and conditions of the Plan and the applicable Notice of Grant.
“ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to such Rule 16b-3, as such rule is in effect when discretion is being exercised with respect to the Plan.
“ Section 16(b) ” means Section 16(b) of the Exchange Act.
“ Service Provider ” means an Employee, Director or Consultant.
 
3

“ Share ” means a share of the Common Stock, as adjusted in accordance with Section 16 of the Plan.
“ Stock Award ” means an Award of Shares pursuant to Section 12 of the Plan or an award of Restricted Stock Units pursuant to Section 13 of the Plan.
“ Stock Award Agreement ” means an agreement, approved by the Administrator, providing the terms and conditions of a Stock Award.
“ Stock Award Shares ” means Shares subject to a Stock Award.
“ Stock Awardee ” means the holder of an outstanding Stock Award granted under the Plan.
“ Stock Purchase Right ” means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
“ Subsidiary ” means a “subsidiary corporation” of the Company (or, in the context of Section 16(c) of the Plan, of a successor corporation), whether now or hereafter existing, as defined in Section 424(f) of the Code.
“ Unrestricted Shares ” means a grant of Shares made on an unrestricted basis pursuant to Section 13 of the Plan.
3. Stock Subject to the Plan. Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is 7,373,362 Shares. The Shares may be authorized but unissued, or reacquired, shares of Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full or is canceled or terminated, or if any Shares of Restricted Stock or Shares underlying a Stock Award are forfeited or reacquired by the Company, the Shares that were subject thereto shall be added back to the Shares available for issuance under the Plan.
4. Administration of the Plan .
(a) Procedure .
(i) Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.
(iii) Rule 16b-3 . If the Company is subject to Section 16(b), the transactions contemplated hereunder shall (from the date that the Company is first subject to Section 16(b)), be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration . Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.
 
4

(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options, Stock Purchase Rights, Stock Awards and Unrestricted Shares may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by each Award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder and of any Restricted Stock Purchase Agreement. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting, acceleration or waiver of forfeiture provisions, and any restriction or limitation regarding any Option, Stock Purchase Right or Stock Award, or the Shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vi) to construe and interpret the terms of the Plan, Awards granted pursuant to the Plan and agreements entered into pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;
(viii) to modify or amend each Award (subject to Section 19(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;
(ix) to allow grantees to satisfy withholding tax obligations by having the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the amount required to be withheld, provided that withholding is calculated at the minimum statutory withholding level. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All determinations to have Shares withheld for this purpose shall be made by the Administrator in its discretion;
(x) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted;
 
5

(xi) to authorize any person to execute on behalf of the Company any agreement entered into pursuant to the Plan and any instrument required to effect the grant of an Award previously granted by the Administrator; and
(xii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations and interpretations shall be final and binding on all holders of Awards and Restricted Stock. None of the Board, the Committee or the Administrator, nor any member or delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and each of the foregoing shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including without limitation reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability insurance coverage which may be in effect from time to time.
5. Eligibility . Nonstatutory Stock Options, Stock Purchase Rights, Stock Awards and Unrestricted Shares may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. Notwithstanding anything contained herein to the contrary, an Award may be granted to a person who is not then a Service Provider; provided, however, that the grant of such Award shall be conditioned upon such person becoming a Service Provider at or prior to the time of the execution of the agreement evidencing such Award.
6. Limitations .
(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, if a single Employee becomes eligible in any given year to exercise Incentive Stock Options for Shares having a Fair Market Value in excess of $100,000, those Options representing the excess shall be treated as Nonstatutory Stock Options. In the previous sentence, “Incentive Stock Options” include Incentive Stock Options granted under any plan of the Company or any Parent or any Subsidiary. For the purpose of deciding which Options apply to Shares that “exceed” the $100,000 limit, Incentive Stock Options shall be taken into account in the same order as granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Award nor any agreement entered into pursuant to the Plan shall confer upon a Participant any right with respect to continuing the grantee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause.
 
6

7. Term of the Plan. Subject to Section 23 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 19 of the Plan.
8. Term of Options. The term of each Option shall be stated in the applicable Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the applicable Option Agreement. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns, directly or indirectly, stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the applicable Option Agreement.
9. Option Exercise Price; Exercisability.
(a) Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant, or
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator; provided, however, that the per Share exercise price of a Nonstatutory Stock Option shall be no less than 100% of the Fair Market Value per Share on the date of grant as (determined by the Administrator in good faith) in the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% (or 110%, if clause (i)(A) above applies) of the Fair Market Value per Share on the date of grant pursuant to a merger or other comparable corporate transaction.
(b) Exercise Period and Conditions . At the time that an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.
 
7

10. Exercise of Options; Consideration.
(a) Procedure for Exercise; Rights as a Shareholder . Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement; provided, however, that unless otherwise determined by the Administrator, each Option shall vest and become exercisable as to 25% of the Shares subject to such Option on the first anniversary of its date of grant, and as to 1/36 th of the remaining Shares subject to such Option each full month thereafter. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and Section 10(e) of the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 16 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider . If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability or upon a termination of such Optionee’s employment with Cause, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement and except as otherwise provided in Sections 10(c), 10(d) and 10(e) of this Plan, the Option shall remain exercisable for three months following the Optionee’s termination (but in no event later than the expiration of the term of such Option). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option in full within the time specified by the Administrator, the unexercised portion of the Option shall terminate, and the Shares covered by such unexercised portion of the Option shall revert to the Plan. An Optionee who changes his or her status as a Service Provider (e.g., from being an Employee to being a Consultant) shall not be deemed to have ceased being a Service Provider for purposes of this Section 10(b), nor shall a transfer of employment among the Company and any Subsidiary be considered a termination of employment; however, if an Optionee owning Incentive Stock Options ceases being an Employee but continues as a Service Provider, such Incentive Stock Options shall be deemed to be Nonstatutory Options three months after the date of such cessation.
 
8

(c) Disability of an Optionee . If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination (but in no event later than the expiration of the term of such Option). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option in full within the time specified herein, the unexercised portion of the Option shall terminate, and the Shares covered by such unexercised portion of the Option shall revert to the Plan.
(d) Death of an Optionee . If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s death ((but in no event later than the expiration of the term of such Option). If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If the Option is not so exercised in full within the time specified herein, the unexercised portion of the Option shall terminate, and the Shares covered by the unexercised portion of such Option shall revert to the Plan.
(e) Termination for Cause . If a Service Provider’s relationship with the Company is terminated for Cause, then, unless otherwise provided in such Service Provider’s Option Agreement, such Service Provider shall have no right to exercise any of such Service Provider’s Options at any time on or after the effective date of such termination.
(f) Form of Consideration . The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares acquired upon exercise of an option at a time when the Company is subject to Section 16(b), have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;
 
9

(iv) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;
(v) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
11. Stock Purchase Rights.
(a) Rights to Purchase . Stock Purchase Rights may be issued either alone, in addition to, or in tandem with Options or other Awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant and/or a Restricted Stock Purchase Agreement in the form determined by the Administrator, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase and the price to be paid for such Shares. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option . Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator; provided, however, that unless otherwise determined by the Administrator, the restrictions shall lapse as to 25% of the Shares subject to the Restricted Stock Purchase Agreement on the first anniversary of its date of grant, and as to 1/36 th of the remaining Shares subject to the Restricted Stock Purchase Agreement each full month thereafter.
(c) Other Provisions . The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder . Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 16 of the Plan.
 
10

12. Stock Awards. The Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price as it determines) Shares to any Service Provider subject to such terms and conditions as the Administrator sets forth in a Stock Award Agreement evidencing such grant. Stock Awards may be granted or sold in respect of past services or other valid consideration or in lieu of any cash compensation otherwise payable to such individual. The grant of Stock Awards under this Section 12 shall be subject to the following provisions:
(a) At the time a Stock Award under this Section 12 is made, the Administrator shall establish a vesting period (the “ Restricted Period ”) applicable to the Stock Award Shares subject to such Stock Award. Subject to the right of the Administrator to establish a Restricted Period that extends vesting dates to later dates than the dates provided in this sentence, the Restricted Period of a Stock Award shall lapse as follows: the restrictions shall lapse as to 25% of the Stock Award Shares on the first anniversary of its date of grant, and as to 1/36 th of the remaining Stock Award Shares each full month thereafter. The Administrator may, in its sole discretion, at the time a grant is made, prescribe restrictions in addition to the expiration of the Restricted Period, including the satisfaction of corporate or individual performance objectives. None of the Stock Award Shares may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period applicable to such Stock Award Shares or prior to the satisfaction of any other restrictions prescribed by the Administrator with respect to such Stock Award Shares.
(b) The Company shall issue, in the name of each Service Provider to whom Stock Award Shares have been granted, stock certificates representing the total number of Stock Award Shares granted to such person, as soon as reasonably practicable after the grant. The Company, at the direction of the Administrator, shall hold such certificates, properly endorsed for transfer, for the Stock Awardee’s benefit until such time as the Stock Award Shares are forfeited to the Company, or the restrictions lapse.
(c) Unless otherwise provided by the Administrator, holders of Stock Award Shares shall have the right to vote such Shares and have the right to receive any cash dividends with respect to such Shares. All distributions, if any, received by a Stock Awardee with respect to Stock Award Shares as a result of any stock split, stock distribution, combination of shares, or other similar transaction shall be subject to the restrictions of this Section 12.
(d) Any Stock Award Shares granted to a Service Provider pursuant to the Plan shall be forfeited if the Stock Awardee voluntarily terminates employment with the Company or its subsidiaries or resigns or voluntarily terminates his consultancy arrangement or directorship with the Company or its subsidiaries, or if the Stock Awardee’s employment or the consultant’s consultancy arrangement or directorship is terminated for Cause prior to the expiration or termination of the applicable Restricted Period and the satisfaction of any other conditions applicable to such Stock Award Shares. Upon such forfeiture, the Stock Award Shares that are forfeited shall be retained in the treasury of the Company and be available for subsequent awards under the Plan. If the Stock Awardee’s employment, consultancy arrangement or directorship terminates for any other reason, the Stock Award Shares held by such person shall be forfeited, unless the Administrator, in its sole discretion, shall determine otherwise.
(e) Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to the Stock Award Shares shall lapse and, at the Stock Awardee’s request, a stock certificate for the number of Stock Award Shares with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions, to the Stock Awardee or his beneficiary or estate, as the case may be.
 
11

13. Restricted Stock Units. The Committee may, in its sole discretion, grant Restricted Stock Units to a Service Provider subject to such terms and conditions as the Committee sets forth in a Stock Award Agreement evidencing such grant. “Restricted Stock Units” are Awards denominated in units evidencing the right to receive Shares of Common Stock, which may vest over such period of time and/or upon satisfaction of such performance criteria or objectives as is determined by the Committee at the time of grant and set forth in the applicable Stock Award Agreement, without payment of any amounts by the Stock Awardee thereof (except to the extent required by law). Prior to delivery of shares of Common Stock with respect to an award of Restricted Stock Units, the Stock Awardee shall have no rights as a stockholder of the Company.
Upon satisfaction and/or achievement of the applicable vesting requirements relating to an award of Restricted Stock Units, the Stock Awardee shall be entitled to receive a number of shares of Common Stock that are equal to the number of Restricted Stock Units that became vested. To the extent, if any, set forth in the applicable Stock Award Agreement, cash dividend equivalents may be paid during, or may be accumulated and paid at the end of, the applicable vesting period, as determined by the Committee.
Unless otherwise provided by the Stock Award Agreement, any Restricted Stock Units granted to a Service Provider pursuant to the Plan shall be forfeited if the Stock Awardee terminates employment or his or her consultancy arrangement with the Company or its subsidiaries terminates for any reason prior to the expiration or termination of the applicable vesting period and/or the achievement of such other vesting conditions applicable to the award.
Prior to the delivery of any shares of Common Stock in connection with an award of Restricted Stock Units, the Stock Awardee shall pay or make adequate provision acceptable to the Company for the satisfaction of the statutory minimum prescribed amount of federal and state income tax and other withholding obligations of the Company, including by having the Company withhold from the number of shares of Common Stock otherwise deliverable in connection with an award of Restricted Stock Units, a number of shares of Common Stock having a Fair Market Value equal to an amount sufficient to satisfy such tax withholding obligations.
14. Unrestricted Shares. The Administrator may grant Unrestricted Shares in accordance with the following provisions:
(a) The Administrator may cause the Company to grant Unrestricted Shares to Service Providers at such time or times, in such amounts and for such reasons as the Administrator, in its sole discretion, shall determine. No payment shall be required for Unrestricted Shares.
(b) The Company shall issue, in the name of each Service Provider to whom Unrestricted Shares have been granted, stock certificates representing the total number of Unrestricted Shares granted to such individual, and shall deliver such certificates to such Service Provider as soon as reasonably practicable after the date of grant or on such later date as the Administrator shall determine at the time of grant.
 
12

15. Non-Transferability. Unless determined otherwise by the Administrator, an Option and Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate. Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide in the Option Agreement regarding a given Option that the Optionee may transfer, without consideration for the transfer, his or her Nonstatutory Stock Options to members of his or her immediate family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option. During the period when Shares of Restricted Stock and Stock Award Shares are restricted (by virtue of vesting schedules or otherwise), such Shares may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution.
16. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization . Subject to any required action by the shareholders of the Company, the number of Shares of Common Stock covered by each outstanding Option, Stock Purchase Right and Stock Award, the number of Shares of Restricted Stock outstanding and the number of Shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options, Stock Purchase Rights or Stock Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, Stock Purchase Right, Restricted Stock Purchase Agreement or Stock Award, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares of Common Stock subject to an Award hereunder.
 
13

(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee and holder of Stock Purchase Rights as soon as practicable prior to the effective date of such proposed dissolution or liquidation. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option and for a holder of a Stock Purchase Right to exercise his or her Stock Purchase Right until ten (10) days prior to such transaction as to all of the Shares covered thereby, including Shares as to which an applicable Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right or applicable to any Stock Award shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale . In the event of a merger or consolidation of the Company with or into another corporation or any other entity or the exchange of substantially all of the outstanding stock of the Company for shares of another entity or other property in which, after any such transaction the prior shareholders of the Company own less than fifty percent (50%) of the voting shares of the continuing or surviving entity or of the Parent, or in the event of the sale of all or substantially all of the assets of the Company, (any such event, a “ Change of Control ”), then, absent a provision to the contrary in any particular Option Agreement or Stock Award (in which case the terms of such Option Agreement or Stock Award shall supercede each of the provisions of this Section 15(c) which are inconsistent with such Option Agreement or Stock Award), each outstanding Option, Stock Purchase Right and Stock Award shall be assumed or an equivalent option, right or award substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the Administrator determines that the successor corporation or a Parent or a Subsidiary of the successor corporation has refused to assume or substitute an equivalent option, right or award for each outstanding Option, Stock Purchase Right and Stock Award, the Optionees shall fully vest in and have the right to exercise each outstanding Option and Stock Purchase Right as to all of the Optioned Stock covered thereby, including Shares which would not otherwise be vested or exercisable, and all vesting periods under Stock Awards shall be deemed to have been satisfied. In the event of a Change of Control, then, absent a provision to the contrary in any particular Restricted Stock Purchase Agreement (in which case the terms of such Restricted Stock Purchase Agreement shall supercede each of the provisions of this Section 16(c) which are inconsistent with such Restricted Stock Purchase Agreement), all vesting periods under Restricted Stock Purchase Agreements shall be deemed to have been satisfied. If an Option and/or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator shall notify all Optionees that all outstanding Options and Stock Purchase Rights shall be fully exercisable for a period of fifteen (15) days from the date of such notice and that any Options and Stock Purchase Rights that are not exercised within such period shall terminate upon the expiration of such period. For the purposes of this paragraph, all outstanding Options and Stock Purchase Rights shall be considered assumed if, following the consummation of the Change of Control, the Option and Stock Purchase Right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the consummation of the Change of Control, the consideration (whether stock, cash, or other property) received in the Change of Control by holders of
 
14

Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent or Subsidiary equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.
17. Substitute Options. In the event that the Company, directly or indirectly, acquires another entity, the Board may authorize the issuance of stock options (“ Substitute Options ”) to the individuals performing services for the acquired entity in substitution of stock options previously granted to those individuals in connection with their performance of services for such entity upon such terms and conditions as the Board shall determine, taking into account the conditions of Code Section 424(a), as from time to time amended or superceded, in the case of a Substitute Option that is intended to be an Incentive Stock Option. Shares of capital stock underlying Substitute Stock Options shall not constitute Shares issued pursuant to the Plan for any purpose.
18. Date of Grant. The date of grant of an Option, Stock Purchase Right, Stock Award or Unrestricted Share shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, Stock Purchase Right, Stock Award or Unrestricted Share, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each grantee within a reasonable time after the date of such grant.
19. Amendment and Termination of the Plan.
(a) Amendment and Termination . The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval . The Company shall obtain shareholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
(c) Effect of Amendment or Termination . No amendment, alteration, suspension or termination of the Plan shall impair the rights of any grantee, unless mutually agreed otherwise between the grantee and the Administrator, which agreement must be in writing and signed by the grantee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
20. Conditions Upon Issuance of Shares.
(a) Legal Compliance . Shares shall not be issued in connection with the grant of any Stock Award or Unrestricted Share or the exercise of any Option or Stock Purchase Right unless such grant or the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
 
15

(b) Investment Representations . As a condition to the grant of any Stock Award or Unrestricted Share or the exercise of any Option or Stock Purchase Right, the Company may require the person receiving such Award or exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise or grant that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
(c) Additional Conditions . The Administrator shall have the authority to condition the grant of any Award or rights under any Restricted Stock Purchase Agreement in such other manner that the Administrator determines to be appropriate, provided that such condition is not inconsistent with the terms of the Plan. Such conditions may include, among other things, obligations of recipients to execute lock-up agreements and shareholder agreements in the future.
(d) Trading Policy Restrictions . Option and Stock Purchase Right exercises and other Awards under the Plan shall be subject to the terms and conditions of any insider trading policy established by the Company or the Administrator.
21. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
22. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
23. Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws. Notwithstanding any provision in the Plan to the contrary, any exercise of an Option or Stock Purchase Right granted before the Company has obtained shareholder approval of the Plan in accordance with this Section 23 shall be conditioned upon obtaining such shareholder approval of the Plan in accordance with this Section 23.
24. Withholding; Notice of Sale. The Company shall be entitled to withhold from any amounts payable to an Employee any amounts which the Company determines, in its discretion, are required to be withheld under any Applicable Law as a result of any action taken by a holder of an Award.
25. Governing Law. This Plan shall be governed by the laws of the state of Delaware, without regard to conflict of law principles.
 
16

STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this “ Agreement ”) is made by and between TRUPANION, INC., a Delaware corporation, having its principal place of business at 907 NW Ballard Way, Seattle, Washington 98107 (the “ Company ”), and the following individual:

Name:	  	[                    ] (the “ Optionee ”)	  		
			
Address:	  	 	  		

This Agreement is made pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (as amended, modified or replaced from time to time, the “ Plan ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Plan. The Optionee agrees to be bound by the terms and conditions of the Plan, which are incorporated herein by reference in their entirety. In case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control unless otherwise specifically provided therein.
The Optionee is hereby granted an Option (this “ Option ”) to purchase Common Stock, subject in all events to the terms and conditions of the Plan and this Agreement, as follows:
1. Date of Grant and Vesting Commencement Date . This Option is granted on                      (the “ Grant Date ”) and will be deemed to have commenced vesting on                      (the “ Vesting Commencement Date ”).
2. Type of Option . ( please check all that apply )

¨	  	Nonstatutory Stock Option	  	¨	  	Incentive Stock Option	
To the extent designated as an Incentive Stock Option, this Option is intended to qualify as an “incentive stock option” under Section 422 of the Code. Notwithstanding the foregoing, as more particularly described in Appendix I attached hereto, the Optionee hereby acknowledges that there is no assurance that this Option will, in fact, be treated (in whole or in part) as an “incentive stock option” under Section 422 of the Code.
3. Shares Covered by this Option . Subject to the Exercise Schedule, this Option is exercisable for [            ] total Shares (the “ Shares ”), of which [            ] Shares shall be treated as covered by an Incentive Stock Option, and [            ] Shares shall be treated as covered by a Nonstatutory Stock Option.
4. Exercise Price . The exercise price of this Option is $[        ] per Share (the “ Exercise Price ”).
5. Expiration Date . This Option expires on [                    ] (the “ Expiration Date ”).

6. Exercise Schedule . This Option is exercisable in whole or in part for Shares in accordance with the following exercise schedule (the “ Exercise Schedule ”):
[                             ]
As used herein, “ Exercisable Shares ” means Shares for which this Option may be exercised, and “ Non-Exercisable Shares ” means Shares for which this Option may not be exercised.
In the event this Option is both a Nonstatutory Stock Option and an Incentive Stock Option, then upon exercise, this Option shall be exercised ratably as to Exercisable Shares covered by the Nonstatutory Stock Option and Exercisable Shares covered by the Incentive Stock Option.
Notwithstanding anything to the contrary contained above, in the event that the application of any of the foregoing provisions of this Section 6 would result in the exercisability of this Option for a fraction of a Share, then, in lieu of exercising this Option for any such fraction of a Share, the number of Shares that shall become Exercisable Shares shall be rounded up to the nearest whole number of Shares.
Notwithstanding anything to the contrary contained herein, this Option may not be exercised with respect to any Shares on or after the earlier of (i) the date the Option terminates and is canceled and (ii) the Expiration Date.
7. Exercise of Option Following Termination of Service . This Option shall terminate and be canceled to the extent not exercised within ninety (90) days after the Optionee ceases to be a Service Provider, except that if such cessation is due to the death or Disability of the Optionee, this Option shall terminate and be canceled twelve (12) months after the Optionee ceases to be a Service Provider. Notwithstanding anything to the contrary contained herein, this Option may not be exercised for more Shares than the Shares which shall have become exercisable as of the date the Optionee ceases to be a Service Provider.
8. Breach of Existing Covenants . This Option shall be forfeited, terminated and canceled in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
 
2

9. Method of Exercise . This Option is exercisable by delivery to the Company of an exercise notice in the form attached hereto as Exhibit A (the “ Exercise Notice ”) or such other form as the Administrator may require, which notice shall state the election to exercise this Option, the number of Shares with respect to which this Option is being exercised (the “ Exercised Shares ”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be accompanied by payment (the “ Exercise Payment ”) of an amount equal to the product of the Exercise Price and the number of Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of the Exercise Notice, as executed by the Optionee, and the Exercise Payment. Notwithstanding the foregoing, no Exercised Shares shall be issued unless the exercise of this Option and the issuance of the Exercised Shares complies with the requirements relating to the administration of stock option plans and other applicable equity plans under Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date this Option is exercised with respect to the Exercised Shares.
10. Conditions to Exercise . It shall be a condition precedent to the exercise of this Option that the Optionee execute an Instrument of Accession in which the Optionee shall agree to become a party to that certain Amended and Restated Shareholders Agreement, dated as of April 20, 2007 and as further amended from time to time, among the Company and the other parties thereto. The exercise of this Option may also be conditioned upon the Optionee’s execution of a restricted stock agreement or such other agreement(s) as the Administrator may require.
11. Method of Payment . The payment of the aggregate Exercise Price shall be made by any of the following means, or a combination thereof:
(a) cash;
(b) check; or
(c) such other form of consideration as the Administrator shall determine in its discretion, provided that such form of consideration is permitted by the Plan and by Applicable Laws.
Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to remit to the Company cash in an amount sufficient to satisfy applicable federal and state tax withholding requirements.
12. Tax Consequences of Option . The Optionee understands that there may be U.S. and foreign income tax consequences to Optionee relating to the grant and exercise of this Option, some of which are more particularly described on Appendix I attached hereto. The Optionee acknowledges that Optionee has been advised to consult with a tax advisor prior to Optionee’s execution and delivery of this Agreement.
13. Restrictions on Transfer of Option . Unless otherwise consented to in advance in writing by the Administrator, this Option may not be transferred in any manner other than by devise or descent and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
 
3

14. Securities Matters . All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by Applicable Laws. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended, and all applicable state securities laws, or are exempt from registration thereunder.
15. Other Plans . No amounts of income received by the Optionee pursuant to this Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise provided in such plan.
16. NO GUARANTEE OF CONTINUED SERVICE . THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE RIGHT TO EXERCISE THIS OPTION PURSUANT TO THE EXERCISE SCHEDULE IS EARNED ONLY BY CONTINUING SERVICE WITH THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR ENGAGED OR AS A RESULT OF BEING GRANTED THIS OPTION OR PURCHASING SHARES PURSUANT HERETO). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE EXERCISE SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE SERVICE RELATIONSHIP WITH THE OTHER PARTY AT ANY TIME, WITH OR WITHOUT CAUSE.
17. Entire Agreement . The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof. No modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless done in writing and signed by the Company and the Optionee.
18. Governing Law; Jurisdiction . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict or choice of laws. Any and all actions arising out of this Agreement shall be brought and heard in the state courts of the State of Delaware and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of these courts.
19. Counterparts; Facsimile . This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
4

20. Headings and Captions . The headings and captions of various sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
21. Administrator Decision Binding; Notice . The Optionee shall accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Agreement. The Optionee shall notify the Company upon any change in the Optionee’s residence address as provided herein.
22. ADVICE OF COUNSEL . THE OPTIONEE ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, THE OPTIONEE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND THE OPTIONEE HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
 
5

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

COMPANY:	
	
TRUPANION, INC.,
a Delaware corporation	
		
By:	 	 	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	President	
	
OPTIONEE:	

[                    ]	

APPENDIX I
TAX CONSEQUENCES OF OPTION
Some of the U.S. federal income tax consequences relating to the grant and exercise of this Option, as of the date of this Option, are set forth below. THE FOLLOWING DESCRIPTION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS NECESSARILY INCOMPLETE (AS THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE), AND ASSUMES THAT THE EXERCISE PRICE OF THIS OPTION IS NO LESS THAN THE FAIR MARKET VALUE OF THE COMMON STOCK UNDERLYING THE OPTION ON THE GRANT DATE. MOREOVER, THIS SUMMARY ONLY ADDRESSES THE FEDERAL INCOME TAX CONSEQUENCES UNDER THE LAWS OF THE UNITED STATES, AND DOES NOT ADDRESS WHETHER AND HOW THE TAX LAWS OF ANY OTHER JURISDICTION MAY APPLY TO THIS OPTION OR TO THE OPTIONEE. ACCORDINGLY, THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE ACCEPTING THIS OPTION, EXERCISING THIS OPTION OR DISPOSING OF ANY EXERCISED SHARES.
Circular 230 Disclaimer : Nothing contained in this discussion of certain federal income tax considerations is intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transactions or tax-related matters addressed herein.
Designation as Incentive Stock Option :
Notwithstanding the designation of the whole or any portion of this Option as an Incentive Stock Option, if the Optionee becomes eligible in any given year to exercise incentive stock options granted under any plan of the Company or any Parent or Subsidiary for Shares having a Fair Market Value in excess of $100,000, those incentive stock options representing the excess shall be treated as nonstatutory stock options. For purposes of deciding which options apply to Shares that “exceed” the $100,000 limit, the options shall be considered in chronological order based on grant date, beginning with the earliest granted options. The Fair Market Value of the Shares shall be determined as of the time the options with respect to such Shares is granted.
Grant of the Option :
The grant of an Option generally will not result in the imposition of a tax under the federal income tax laws.
Exercising the Option :
Nonstatutory Stock Option . The Optionee may incur regular federal income tax liability upon exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Payment. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from the Optionee and pay to the applicable taxing

authorities an amount in cash equal to a specified percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
Incentive Stock Option . If this Option qualifies as an Incentive Stock Option, the Optionee will have no regular federal income tax liability upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Payment will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date that is three (3) months and one (1) day following such change of status.
Disposition of Shares :
NSO Shares . Upon disposition of the Shares acquired pursuant to a Nonstatutory Stock Option (“ NSO Shares ”), the Optionee will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for the NSO Shares plus any amount recognized as ordinary income upon exercise of the Nonstatutory Stock Option. If the Optionee holds NSO Shares for at least one year, any gain (or loss) realized on disposition of the NSO Shares will be treated as long-term capital gain (or loss) for federal income tax purposes.
ISO Shares . If the Optionee holds Shares acquired pursuant to an Incentive Stock Option (“ ISO Shares ”) for at least one year after exercise and two years after the grant date, any gain realized on disposition of the ISO Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or within two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the ISO Shares acquired on the date of exercise and the Exercise Payment, and (B) the difference between the sale price of such ISO Shares and the Exercise Payment. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.
 
2

EXHIBIT A
EXERCISE NOTICE
TRUPANION, INC.
2007 EQUITY COMPENSATION PLAN
EXERCISE NOTICE

Date:	 	 	
Trupanion, Inc.
[Address]
Attention: Plan Administrator
Dear Sir/Madam:
Reference is hereby made to that certain Stock Option Agreement dated             ,          (the “ Option Agreement ”) between the Company and the undersigned (“ Purchaser ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Option Agreement. Purchaser hereby delivers this notice (this “ Exercise Notice ”) to the Company pursuant to the Option Agreement, with the following terms and conditions:
1. Exercise of Option . Effective as of the date first above written, Purchaser hereby elects to purchase              shares (the “ Shares ”) of the Common Stock of Trupanion, Inc. (the “ Company ”) under and pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”) and the Option Agreement. The purchase price for the Shares shall be $        , as provided in the Option Agreement.              of the Shares shall represent Shares acquired by reason of the exercise of an Incentive Stock Option and              of the Shares to be shall represent Shares to be acquired by reason of the exercise of a Nonstatutory Stock Option.
2. Delivery of Payment and Shareholder Agreement . Purchaser herewith delivers to the Company the Exercise Payment for the Shares and the applicable shareholder agreement and any other documents required by the Administrator, duly executed by Purchaser.
3. Shareholders Agreement . Purchaser hereby agrees, as a condition to receiving the Shares, to execute and deliver an Instrument of Accession in which the Purchaser shall agree to become a party to that certain Amended and Restated Shareholders Agreement, dated as of April 20, 2007 and as further amended from time to time, among the Company and the other parties thereto (the “ Shareholders Agreement ”). Purchaser acknowledges it has received and reviewed a copy of the Shareholders Agreement.
4. Representations of Purchaser . Purchaser hereby represents and warrants to the Company as follows:
(a) Purchaser has read and understands the Plan and the Option Agreement and agrees to abide by and be bound by their respective terms and conditions.

(b) Purchaser is acquiring the Shares for Purchaser’s own account and the Shares are being acquired by Purchaser for the purpose of investment and not with a view to distribution or resale thereof in violation of the Securities Act of 1933 (the “ Securities Act ”). Purchaser understands the Shares have not been registered under the Securities Act or any other applicable securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and other applicable securities laws or unless an exemption from such registration is available. Purchaser shall not resell or otherwise dispose of all or any part of the Shares except as permitted by law, including, without limitation, any regulations under the Securities Act and other applicable securities laws. Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and other applicable securities laws. Purchaser understands that all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.”
(c) Purchaser is able to bear the economic risk of this investment including a complete loss of the investment.
Notwithstanding the foregoing, the representations and warranties contained in this paragraph 4 shall be applicable only if the Company does not have an effective registration statement on Form S-8 covering the Plan on file with the Securities and Exchange Commission on the date hereof.
5. Rights as Shareholder . Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or right to receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance, unless otherwise provided by the Plan.
6. Tax Consultation . Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with a tax advisor, prior to Purchaser’s delivery of this Exercise Notice, with respect to the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
 
2

7. Notice of Disqualifying Disposition of ISO Shares . If Purchaser sells or otherwise disposes of any of the Shares acquired pursuant to an Incentive Stock Option (“ ISO Shares ”) on or before the later of (i) two (2) years after the Grant Date, or (ii) one year after the Exercise Date, Purchaser shall promptly notify the Company in writing of such disposition. Purchaser agrees that Purchaser may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to Purchaser.
8. Counterparts; Facsimile . This Exercise Notice may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Sincerely,

PURCHASER:	

Name:	 	 	
		
Address:	 		

	

 Accepted by:	
	
COMPANY:	
	
TRUPANION, INC.,
a Delaware corporation	

By:	 	 	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	President	
		
Date:	 	 	
 
3

STOCK OPTION AGREEMENT
(IMMEDIATELY EXERCISABLE)
THIS STOCK OPTION AGREEMENT (this “ Agreement ”) is made by and between TRUPANION, INC., a Delaware corporation, having its principal place of business at 907 NW Ballard Way, Seattle, Washington 98107 (the “ Company ”), and the following individual:

Name:	  	[                    ] (the “ Optionee ”)	  		
			
Address:	  	 	  		

This Agreement is made pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (as amended, modified or replaced from time to time, the “ Plan ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Plan. The Optionee agrees to be bound by the terms and conditions of the Plan, which are incorporated herein by reference in their entirety. In case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control unless otherwise specifically provided therein.
The Optionee is hereby granted an Option (this “ Option ”) to purchase Common Stock, subject in all events to the terms and conditions of the Plan and this Agreement, as follows:
1. Date of Grant and Vesting Commencement Date . This Option is granted on                      (the “ Grant Date ”) and will be deemed to have commenced vesting on                      (the “ Vesting Commencement Date ”).
2. Type of Option . This Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.
3. Shares Covered by this Option . Subject to Section 6 below, this Option is exercisable for [            ] total Shares (the “ Shares ”).
4. Exercise Price . The exercise price of this Option is $[        ] per Share (the “ Exercise Price ”).
5. Expiration Date . This Option expires on [                    ] (the “ Expiration Date ”).
6. Right to Exercise . Except as otherwise provided herein, this Option shall be exercisable during the period beginning on the later of the Grant Date and the date on which the Optionee first becomes a Service Provider and ending on the earlier of the date the Option terminates and is canceled and the Expiration Date (the “ Exercise Period ”). During the Exercise Period, this Option shall be exercisable in an amount not to exceed the number of Shares less the number of shares previously acquired upon exercise of this Option, subject to the Unvested Share Repurchase Option set forth in Section 14.

7. Vesting Schedule . The number of Vested Shares (as defined below), disregarding any resulting fractional share, shall be determined in accordance with the following schedule:
(a) Until the first (1 st ) anniversary of the Vesting Commencement Date, none of the Shares shall be Vested Shares;
(b) On the first (1 st ) anniversary of the Vesting Commencement Date, twenty-five percent (25%) of the Shares shall become Vested Shares; and
(c) On the last day of each full calendar month occurring after the first (1 st ) anniversary of the Vesting Commencement Date, until all Shares shall have become Vested Shares, one forty-eighth (1/48 th ) of the Shares shall become Vested Shares.
As used herein, “ Vested Shares ” means, on any given date, the number of Shares that are not subject to the Unvested Share Repurchase Option set forth in Section 14, and “ Unvested Shares ” means, on any given date, the number of Shares acquired upon exercise of this Option which exceed the Vested Shares determined as of such date.
Notwithstanding anything to the contrary contained above, in the event that the application of any of the foregoing provisions of this Section 7 would result in the number of Vested Shares including a fraction of a Share, then, the number of Shares that shall become Vested Shares shall be rounded up to the nearest whole number of Shares.
8. Exercise of Option Following Termination of Service . This Option shall terminate and be canceled to the extent not exercised within ninety (90) days after the Optionee ceases to be a Service Provider, except that if such cessation is due to the death or Disability of the Optionee, this Option shall terminate and be canceled twelve (12) months after the Optionee ceases to be a Service Provider. Notwithstanding anything to the contrary contained herein, this Option may not be exercised after the date the Optionee ceases to be a Service Provider to the extent that the Shares to be acquired upon such exercise would be subject to the Unvested Share Repurchase Option set forth in Section 14.
9. Breach of Existing Covenants . This Option shall be forfeited, terminated and canceled in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
10. Method of Exercise . This Option is exercisable by delivery to the Company of an exercise notice in the form attached hereto as Exhibit A (the “ Exercise Notice ”) or such other form as the Administrator may require, which notice shall state the election to exercise this Option, the number of Shares with respect to which this Option is being exercised (the “ Exercised Shares ”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be accompanied by payment (the “ Exercise Payment ”) of an amount equal to the product of the Exercise Price and the number of Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of the Exercise Notice, as executed by the Optionee, and the Exercise Payment. Notwithstanding the foregoing, no Exercised Shares shall be issued unless the exercise of this Option and the issuance of the Exercised Shares complies with the requirements relating to the
 
2

administration of stock option plans and other applicable equity plans under Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date this Option is exercised with respect to the Exercised Shares.
11. Conditions to Exercise . It shall be a condition precedent to the exercise of this Option that the Optionee execute an Instrument of Accession in which the Optionee shall agree to become a party to that certain Amended and Restated Shareholders Agreement, dated as of April 20, 2007 and as further amended from time to time, among the Company and the other parties thereto. The exercise of this Option may also be conditioned upon the Optionee’s execution of a restricted stock agreement or such other agreement(s) as the Administrator may require.
12. Method of Payment . The payment of the aggregate Exercise Price shall be made by any of the following means, or a combination thereof:
(a) cash;
(b) check; or
(c) such other form of consideration as the Administrator shall determine in its discretion, provided that such form of consideration is permitted by the Plan and by Applicable Laws.
Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to remit to the Company cash in an amount sufficient to satisfy applicable federal and state tax withholding requirements.
13. Tax Consequences of Option . The Optionee understands that there may be U.S. and foreign income tax consequences to Optionee relating to the grant and exercise of this Option, some of which are more particularly described on Appendix I attached hereto. The Optionee acknowledges that Optionee has been advised to consult with a tax advisor prior to Optionee’s execution and delivery of this Agreement.
14. Unvested Share Repurchase Option .
(a) Grant of Unvested Share Repurchase Option . In the event the Optionee ceases to be a Service Provider for any reason or no reason, with or without Cause, or, if the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of any Unvested Shares, the Company shall have the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth in this Section 14 (the “ Unvested Share Repurchase Option ”).
(b) Exercise of Unvested Share Repurchase Option . The Company may exercise the Unvested Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a) the Optionee ceases to be a Service Provider (or exercise of the Option, if later); or (b) the Company has received notice of the attempted disposition of Unvested Shares. If the Company fails to give notice within such sixty (60) day period, the Unvested Share Repurchase Option
 
3

shall terminate unless the Company and the Optionee have extended the time for the exercise of the Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at all, for all of the Unvested Shares, except as the Company and the Optionee otherwise agree.
(c) Payment for Shares and Return of Shares to Company . The purchase price per share being repurchased by the Company shall be an amount equal to the Optionee’s original cost per share, as adjusted pursuant to Section 16 of the Plan (the “ Repurchase Price ”). The Company shall pay the aggregate Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written notice to the Optionee of the Company’s exercise of the Unvested Share Repurchase Option. For purposes of the foregoing, cancellation of any purchase money indebtedness of the Optionee to the Company, or any Parent or Subsidiary, for the shares shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest cancelled. The shares being repurchased shall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee.
(d) Assignment of Unvested Share Repurchase Option . The Company shall have the right to assign the Unvested Share Repurchase Option at any time, whether or not such option is then exercisable, to one or more persons as may be selected by the Company.
(e) Change of Control or Stock Distribution . Upon the occurrence of a Change of Control or any stock dividend, stock split or other change in the character or amount of any of the outstanding stock of the Company the stock of which is subject to the provisions of this Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee’s ownership of Unvested Shares shall be immediately subject to the Unvested Share Repurchase Option and included in the terms “Shares” and “Unvested Shares” for all purposes of the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares immediately prior to the Change of Control or stock dividend, stock split or other change. While the aggregate Repurchase Price shall remain the same after such Change of Control or stock dividend, stock split or other change, the Repurchase Price per Unvested Share upon exercise of the Unvested Share Repurchase Option following such Change of Control or stock dividend, stock split or other change shall be adjusted as appropriate.
15. Escrow .
(a) Establishment of Escrow . To ensure that Shares subject to the Unvested Share Repurchase Option will be available for repurchase, the Company may require the Optionee to deposit the certificate evidencing the Shares which the Optionee purchases upon exercise of the Option with an escrow agent designated by the Company under the terms and conditions of escrow and security agreements approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, the Company reserves the right at any time to require the Optionee to so deposit the certificate in escrow. Upon the occurrence of an Change of Control in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee’s ownership of Shares acquired upon exercise of the Option that remain,
 
4

following such Change of Control, subject to the Unvested Share Repurchase Option, or any security interest held by the Company shall be immediately subject to the escrow to the same extent as such Shares immediately before such event. The Company shall bear the expenses of the escrow.
(b) Delivery of Shares to Optionee . As soon as practicable after the expiration of the Unvested Share Repurchase Option and after full repayment of any promissory note secured by the Shares in escrow, but not more frequently than twice each calendar year, the escrow agent shall deliver to the Optionee the shares no longer subject to such restrictions and no longer securing any promissory note.
(c) Notices and Payments . In the event the Shares held in escrow are subject to the Company’s exercise of the Unvested Share Repurchase Option, the notices required to be given to the Optionee shall be given to the escrow agent, and any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the Shares which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee.
16. Legend . The Company may at any time place legends referencing the Unvested Share Repurchase Option on all certificates representing Unvested Shares. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing Unvested Shares in the possession of the Optionee in order to carry out the provisions of this Section 16. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY.”
17. Restrictions on Transfer of Option . Unless otherwise consented to in advance in writing by the Administrator, this Option may not be transferred in any manner other than by devise or descent and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
18. Securities Matters . All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by Applicable Laws. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended, and all applicable state securities laws, or are exempt from registration thereunder.
 
5

19. Other Plans . No amounts of income received by the Optionee pursuant to this Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise provided in such plan.
20. NO GUARANTEE OF CONTINUED SERVICE . THE OPTIONEE ACKNOWLEDGES AND AGREES THAT VESTING OF THE SHARES PURSUANT TO THE VESTING SCHEDULE IS EARNED ONLY BY CONTINUING TO BE A SERVICE PROVIDER (AND NOT THROUGH THE ACT OF BEING HIRED OR ENGAGED OR AS A RESULT OF BEING GRANTED THIS OPTION OR PURCHASING SHARES PURSUANT HERETO). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE SERVICE RELATIONSHIP WITH THE OTHER PARTY AT ANY TIME, WITH OR WITHOUT CAUSE.
21. Entire Agreement . The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof. No modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless done in writing and signed by the Company and the Optionee.
22. Governing Law; Jurisdiction . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict or choice of laws. Any and all actions arising out of this Agreement shall be brought and heard in the state courts of the State of Delaware and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of these courts.
23. Counterparts; Facsimile . This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
24. Headings and Captions . The headings and captions of various sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
25. Administrator Decision Binding; Notice . The Optionee shall accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Agreement. The Optionee shall notify the Company upon any change in the Optionee’s residence address as provided herein.
26. ADVICE OF COUNSEL . THE OPTIONEE ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, THE OPTIONEE HAS HAD THE OPPORTUNITY
 
6

TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND THE OPTIONEE HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
 
7

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

COMPANY:	
	
TRUPANION, INC.,
a Delaware corporation	
		
By:	 	 	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	President	
	
OPTIONEE:	

[                    ]	

APPENDIX I
TAX CONSEQUENCES OF OPTION
Some of the U.S. federal income tax consequences relating to the grant and exercise of this Option, as of the date of this Option, are set forth below. THE FOLLOWING DESCRIPTION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS NECESSARILY INCOMPLETE (AS THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE), AND ASSUMES THAT THE EXERCISE PRICE OF THIS OPTION IS NO LESS THAN THE FAIR MARKET VALUE OF THE COMMON STOCK UNDERLYING THE OPTION ON THE GRANT DATE. MOREOVER, THIS SUMMARY ONLY ADDRESSES THE FEDERAL INCOME TAX CONSEQUENCES UNDER THE LAWS OF THE UNITED STATES, AND DOES NOT ADDRESS WHETHER AND HOW THE TAX LAWS OF ANY OTHER JURISDICTION MAY APPLY TO THIS OPTION OR TO THE OPTIONEE. ACCORDINGLY, THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE ACCEPTING THIS OPTION, EXERCISING THIS OPTION OR DISPOSING OF ANY EXERCISED SHARES.
Circular 230 Disclaimer : Nothing contained in this discussion of certain federal income tax considerations is intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transactions or tax-related matters addressed herein.
Grant of the Option :
The grant of an Option generally will not result in the imposition of a tax under the federal income tax laws.
Exercising the Option :
Nonstatutory Stock Option Generally . The Optionee may incur regular federal income tax liability upon exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Payment. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from the Optionee and pay to the applicable taxing authorities an amount in cash equal to a specified percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
Election Under Section 83(b) of the Code . If the Optionee exercises this Option to purchase Shares that are both nontransferable and subject to a substantial risk of forfeiture, the Optionee understands that the Optionee should consult with the Optionee’s tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which the Optionee exercises the Option. Shares acquired upon exercise of the Option are nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are unvested and are subject to a

right of the Company to repurchase such shares at the Optionee’s original purchase price if the Optionee ceases to be a Service Provider; or (b) the Optionee is an officer or director of the Company, or another person whose transactions in Shares are subject to Section 16 of the Exchange Act, and, under certain circumstances, exercises the Option within six (6) months of the Grant Date (if a class of equity security of the Company is registered under Section 12 of the Exchange Act). Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Optionee. The Optionee acknowledges that the Optionee has been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE’S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
Disposition of Shares :
Upon disposition of the Shares acquired pursuant to a Nonstatutory Stock Option (“ NSO Shares ”), the Optionee will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for the NSO Shares plus any amount recognized as ordinary income upon exercise of the Nonstatutory Stock Option. If the Optionee holds NSO Shares for at least one year, any gain (or loss) realized on disposition of the NSO Shares will be treated as long-term capital gain (or loss) for federal income tax purposes.
 
2

EXHIBIT A
EXERCISE NOTICE
TRUPANION, INC.
2007 EQUITY COMPENSATION PLAN
EXERCISE NOTICE
(IMMEDIATELY EXERCISABLE)

Date:	 	 	
Trupanion, Inc.
[Address]
Attention: Plan Administrator
Dear Sir/Madam:
Reference is hereby made to that certain Stock Option Agreement dated                 ,         (the “ Option Agreement ”) between the Company and the undersigned (“ Purchaser ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Option Agreement. Purchaser hereby delivers this notice (this “ Exercise Notice ”) to the Company pursuant to the Option Agreement, with the following terms and conditions:
1. Exercise of Option . Effective as of the date first above written, Purchaser hereby elects to purchase              shares (the “ Shares ”) of the Common Stock of Trupanion, Inc. (the “ Company ”) under and pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”) and the Option Agreement. The purchase price for the Shares shall be $        , as provided in the Option Agreement.              of the Shares are Vested Shares, and              of the Shares are Unvested Shares.
2. Delivery of Payment and Shareholder Agreement . Purchaser herewith delivers to the Company the Exercise Payment for the Shares and the applicable shareholder agreement and any other documents required by the Administrator, duly executed by Purchaser.
3. Shareholders Agreement . Purchaser hereby agrees, as a condition to receiving the Shares, to execute and deliver an Instrument of Accession in which the Purchaser shall agree to become a party to that certain Amended and Restated Shareholders Agreement, dated as of April 20, 2007 and as further amended from time to time, among the Company and the other parties thereto (the “ Shareholders Agreement ”). Purchaser acknowledges it has received and reviewed a copy of the Shareholders Agreement.
4. Representations of Purchaser . Purchaser hereby represents and warrants to the Company as follows:
(a) Purchaser has read and understands the Plan and the Option Agreement and agrees to abide by and be bound by their respective terms and conditions, including the Unvested Share Repurchase Option set forth therein. If required by the Company, Purchaser agrees to

deposit the certificate(s) evidencing the Shares, along with a blank stock assignment separate from certificate executed by Purchaser, with an escrow agent designated by the Company, to be held pursuant to the Company’s standard Joint Escrow Instructions.
(b) Purchaser is acquiring the Shares for Purchaser’s own account and the Shares are being acquired by Purchaser for the purpose of investment and not with a view to distribution or resale thereof in violation of the Securities Act of 1933 (the “ Securities Act ”). Purchaser understands the Shares have not been registered under the Securities Act or any other applicable securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and other applicable securities laws or unless an exemption from such registration is available. Purchaser shall not resell or otherwise dispose of all or any part of the Shares except as permitted by law, including, without limitation, any regulations under the Securities Act and other applicable securities laws. Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and other applicable securities laws. Purchaser understands that all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.”
(c) Purchaser is able to bear the economic risk of this investment including a complete loss of the investment.
Notwithstanding the foregoing, the representations and warranties contained in this paragraph 4 shall be applicable only if the Company does not have an effective registration statement on Form S-8 covering the Plan on file with the Securities and Exchange Commission on the date hereof.
5. Rights as Shareholder . Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or right to receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance, unless otherwise provided by the Plan.
 
2

6. Tax Consultation . Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with a tax advisor, prior to Purchaser’s delivery of this Exercise Notice, with respect to the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
7. Election Under Section 83(b) of the Code . Purchaser understands and acknowledges that if Purchaser is exercising the Option to purchase Unvested Shares (i.e., shares that remain subject to the Company’s Unvested Share Repurchase Option), that Purchaser should consult with Purchaser’s tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which Purchaser exercises the Option. Purchaser acknowledges that Purchaser has been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to Purchaser of exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH PURCHASER PURCHASE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. PURCHASER ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS PURCHASER’S SOLE RESPONSIBILITY, EVEN IF PURCHASER REQUESTS THAT THE COMPANY OR ITS REPRESENTATIVES FILE SUCH ELECTION ON PURCHASER’S BEHALF.
8. Counterparts; Facsimile . This Exercise Notice may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Sincerely,	
	
PURCHASER:	

		
Name:	 	 	
	
Address:	

	

3

					
 Accepted by:	
	
COMPANY:	
	
TRUPANION, INC.,
a Delaware corporation	
		
By:	 	 	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	President	
		
Date:	 	 	
 
4

TRUPANION, INC.
NOTICE OF GRANT OF RESTRICTED STOCK
The Participant has been granted an award (the “ Award ”) of certain shares of Stock (the “ Shares ”) of Trupanion, Inc. (the “ Company ”) pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”), as follows:

Participant:	  		
		
Date of Grant:	  		
		
Total Number of Shares:	  	            , subject to adjustment as provided by the Restricted Stock Agreement.	
		
Fair Market Value per Share on Date of Grant:	  	$        	
		
Initial Vesting Date:	  	The date one (1) year after the Date of Grant.	
		
Vested Shares:	  	Except as provided in the Restricted Stock Agreement, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Total Number of Shares by the “ Vested Ratio ” determined as of such date as follows:	
			
 	  	 	  	Vested Ratio	
			
	  	Prior to Initial Vesting Date	  	0	
			
	  	On Initial Vesting Date, provided the Participant’s service has not terminated prior to such date, and provided further that the closing of an initial public offering of the Shares (an “ IPO Closing ”) occurs on or before the Initial Vesting Date	  	1/6	
			
	  	Plus	  		
			
	  	For each full year of the Participant’s continuous service from Initial Vesting Date until the Vested Ratio equals 1/1, provided that an IPO Closing occurs on or before the applicable anniversary of the Initial Vesting Date, an additional	  	1/6	
		
	  	If an IPO Closing occurs after the Initial Vesting Date, but on or prior to a subsequent anniversary of the Initial Vesting Date, the Vested Ratio on that subsequent anniversary date shall include the portion of the Award that would have vested if the IPO Closing occurred on or before the Initial Vesting Date, For example, if an IPO Closing occurs on the fourth anniversary of the Initial Vesting Date, the Vested Ratio on the date of the IPO Closing shall be 5/6.	
		
	  	If the closing of an initial public offering of the Shares occurs on or after the fifth anniversary of the Initial Vesting Date, the Total Number of Shares shall become Vested Shares on the closing date.	
		
	  	Before the date of an IPO Closing, the Vested Ratio shall be zero.	

Other Terms and Conditions:
 
 	1.	2007 Equity Compensation Plan . By their signatures below, the Company and the Participant agree that the Award is governed by this Notice and by the provisions of the Plan and the Restricted Stock Agreement, both of which are attached to and made a part of this document. The Participant acknowledges receipt of copies of the Plan and the Restricted Stock Agreement, represents that the Participant has read and is familiar with their provisions, and hereby accepts the Award subject to all of their terms and conditions.	
 
 	2.	Electronic Transmission for Stockholder Notices . By providing Participant’s email address below, Participant hereby consents to receive electronically transmitted notices for any and all purposes under the Delaware General Corporate Law at the email address provided or as subsequently modified by written notice. Unless otherwise required by law, such electronic notice, if sent during normal business hours of the recipient, will be effective on the next business day.	
 
 	3.	Section 409A . The Fair Market Value per Share represents an amount the Company believes to be no less than the fair market value of a share of Stock as of the Date of Grant, determined in good faith in compliance with the requirements of Section 409A of the Internal Revenue Code. There is no guarantee that the Internal Revenue Service (“ IRS ”) will agree with the Company’s determination. A subsequent IRS determination that the Fair Market Value per Share is less than such fair market value could result in adverse tax consequences to Participant. By signing below, Participant agrees that the Company, its directors, officers and shareholders shall not be held liable for any tax, penalty, interest or cost incurred by Participant as a result of such determination by the IRS. Participant is urged to consult with his or her own tax adviser regarding the tax consequences of the Participant, including the application of Section 409A.	

 TRUPANION, INC.	 		 	PARTICIPANT	
				
By:	 	 	 		 	 	
	 		 		 	Signature	
Its:	 	 	 		 	 	
	 		 		 	Date	
Address:	 	 	 		 	 	
	 		 		 	Address	

	 		 		 	Email:	 	 	

ATTACHMENTS:	 	2007 Equity Compensation Plan, as amended to the Date of Grant; Restricted Stock Agreement, Assignment Separate from Certificate and form of Section 83(b) Election	

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
TRUPANION, INC.
RESTRICTED STOCK AGREEMENT
Trupanion, Inc. has granted to the Participant named in the Notice of Grant of Restricted Stock (the “ Grant Notice ”) to which this Restricted Stock Agreement (the “ Agreement ”) is attached an Award consisting of Shares subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Agreement and the Plan, (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, this Agreement or the Plan.
1. D EFINITIONS AND C ONSTRUCTION .
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
2. T AX M ATTERS .
2.1 Election under Section 83(b) of the Code. The Participant understands that Section 83 of the Code taxes as ordinary income the difference between the amount paid for the Shares, if anything, and the fair market value of the Shares as of the date on which the Shares are “substantially vested,” within the meaning of Section 83. In this context, “substantially vested” means that the right of the Company to reacquire the Shares pursuant to the Company Reacquisition Right has lapsed. The Participant understands that he or she may elect to have his or her taxable income determined at the time he or she acquires the Shares rather than when and as the Company Reacquisition Right lapses by filing an election under Section 83(b) of the Code with the Internal Revenue Service no later than thirty (30) days after the date of acquisition of the Shares. The Participant understands that failure to make a timely filing under Section 83(b) will result in his or her recognition of ordinary income, as the Company Reacquisition Right lapses, on the difference between the purchase price, if anything, and the fair market value of the Shares at the time such restrictions lapse. The Participant further understands, however, that if Shares with respect to which an election under Section 83(b) has been made are forfeited to the Company pursuant to its Company Reacquisition Right, such forfeiture will be treated as a sale on which there is realized a loss equal to the excess (if any) of the amount paid (if any) by the Participant for the forfeited Shares over the amount realized (if any) upon their forfeiture. If the Participant has paid nothing
 
1

for the forfeited Shares and has received no payment upon their forfeiture, the Participant understands that he or she will be unable to recognize any loss on the forfeiture of the Shares even though the Participant incurred a tax liability by making an election under Section 83(b).
2.2 Notice to Company. The Participant will notify the Company in writing if the Participant files an election pursuant to Section 83(b) of the Code. The Company intends, in the event it does not receive from the Participant evidence of such filing, to claim a tax deduction for any amount which would otherwise be taxable to the Participant in the absence of such an election.
2.3 Valuation of the Shares.
(a) The Shares have been valued by the Company, and the Company believes this valuation represents a fair attempt at reaching an accurate appraisal of their worth. The Participant understands, however, that the Company can give no assurances that such valuation is in fact the fair market value of the Shares and that it is possible that with the benefit of hindsight, the Internal Revenue Service would successfully assert that the value of the Shares on any relevant date is greater than so determined.
(b) If the Internal Revenue Service were to succeed in a tax determination under the Code that the Shares received have a value greater than that determined by the Company, the additional value would constitute ordinary income as of the date of the Participant’s realization of income. The additional taxes (and interest) due would be payable by the Participant, and there is no provision for the Company to reimburse him or her for that tax liability, and the Participant assumes all responsibility for such potential tax liability. Under present law, in the event such additional value would represent more than twenty-five (25%) of the Participant’s gross income for the year in which the value of the Shares were taxable, the Internal Revenue Service would have six (6) years from the due date for filing the return (or the actual filing date of the return if filed thereafter) within which to assess the Participant the additional tax and interest which would then be due. The Company undertakes no obligation to inform the Participant of any change in the tax laws which may effect this Agreement or its consequences.
2.4 Consultation with Tax Advisors. The Participant understands that he or she should consult with his or her tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date of the acquisition of the Shares pursuant to this Agreement. Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Participant. The Participant acknowledges that he or she has been advised to consult with a tax advisor regarding the tax consequences to the Participant of the purchase of Shares hereunder. ANY ELECTION UNDER SECTION 83(b) THE PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS AFTER THE DATE ON WHICH THE PARTICIPANT ACQUIRES THE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
2.5 Tax Withholding.
(a) In General. At the time the Grant Notice is executed, or at any time thereafter as requested by the Company, or its Parent or Subsidiary, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Company, or its Parent or Subsidiary, if any, which arise
 
2

in connection with the Award, including, without limitation, obligations arising upon (a) the transfer of Shares to the Participant, (b) the lapsing of any restriction with respect to any Shares, (c) the filing of an election to recognize tax liability, or (d) the transfer by the Participant of any Shares. The Company shall have no obligation to deliver the Shares or to release any Shares from the Escrow established pursuant to Section 8 until the tax withholding obligations of the Company, or its Parent or Subsidiary, have been satisfied by the Participant.
(b) Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of the tax withholding obligations of the Company, or its Parent or Subsidiary, by withholding a number of whole Vested Shares otherwise deliverable to the Participant or by the Participant’s tender to the Company of a number of whole Vested Shares or vested shares acquired otherwise than pursuant to the Award having, in any such case, a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.
3. A DMINISTRATION .
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Board. All such determinations by the Board shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Board in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any officer of the Company (an “ Officer ”) shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
4. T HE A WARD .
4.1 Grant and Issuance of Shares. On the Date of Grant, the Participant shall acquire and the Company shall issue, subject to the provisions of this Agreement, a number of Shares equal to the Total Number of Shares. As a condition to the issuance of the Shares, the Participant shall execute and deliver the Grant Notice to the Company, accompanied by an Assignment Separate from Certificate duly endorsed (with date and number of shares blank) in the form provided by the Company.
4.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than to satisfy applicable tax withholding, if any, with respect to the issuance or vesting of the Shares) as a condition to receiving the Shares, the consideration for which shall be past services actually rendered or future services to be rendered to the Company, or its Parent or Subsidiary, or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to the Company, or its Parent or Subsidiary, or for its benefit having a value not less than the par value of the Shares issued pursuant to the Award.
4.3 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit the Shares with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form during the term of the Escrow pursuant to Section 8. Furthermore, the Participant hereby authorizes the Company, in its sole discretion, to deposit, following the term of such Escrow, for the benefit of the Participant with any broker with
 
3

which the Participant has an account relationship of which the Company has notice any or all Shares which are no longer subject to such Escrow. Except as provided by the foregoing, a certificate for the Shares shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.4 Issuance of Shares in Compliance with Law. The issuance of Shares shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No Shares shall be issued hereunder if their issuance would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Shares may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any Shares shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained. As a condition to the issuance of the Shares, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
5. V ESTING OF S HARES .
Shares acquired pursuant to this Agreement shall become Vested Shares as provided in the Grant Notice. For purposes of determining the number of Vested Shares following a Change of Control, credited service shall include all service with the Company, or its Parent or Subsidiary, at the time the service is rendered.
6. C OMPANY R EACQUISITION R IGHT .
6.1 Grant of Company Reacquisition Right. In the event that (a) the Participant’s service terminates for any reason or no reason, with or without cause, or, (b) the Participant, the Participant’s legal representative, or other holder of the Shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to a Change of Control), including, without limitation, any transfer to a nominee or agent of the Participant, any Shares which are not Vested Shares (“ Unvested Shares ”), the Participant shall forfeit and the Company shall automatically reacquire the Unvested Shares, and the Participant shall not be entitled to any payment therefor (the “ Company Reacquisition Right ”).
6.2 Change of Control, Dividends, Distributions and Adjustments. Upon the occurrence of a Change of Control, a dividend or distribution to the stockholders of the Company paid in Shares or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 11, any and all new, substituted or additional securities or other property (other than regular, periodic dividends paid on the Shares pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Shares shall be immediately subject to the Company Reacquisition Right and included in the terms “Shares,” “Stock” and “Unvested Shares” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Shares immediately prior to the Change of Control, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Shares following a Change of Control, dividend, distribution or adjustment, credited service shall include all service with the Company, or its Parent or Subsidiary, at the time the service is rendered.
 
4

7. R IGHT OF F IRST R EFUSAL .
7.1 Grant of Right of First Refusal. Except as provided in Section 7.7 and Section 15 below, in the event the Participant, the Participant’s legal representative, or other holder of shares subject to the Award proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested Shares (the “ Transfer Shares ”) to any person or entity, including, without limitation, any stockholder of the Company, or its Parent or Subsidiary, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section (the “ Right of First Refusal ”).
7.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Participant shall deliver written notice (the “ Transfer Notice ”) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “ Proposed Transferee ”) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Participant proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Participant shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Participant and the Proposed Transferee and must constitute a binding commitment of the Participant and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal.
7.3 Bona Fide Transfer. If the Company determines that the information provided by the Participant in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Participant written notice of the Participant’s failure to comply with the procedure described in this Section 7, and the Participant shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 7. The Participant shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide.
7.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Participant otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Participant of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company’s exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Participant or issued by a person other than the Participant with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Participant shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Participant to the Company, or its Parent or Subsidiary, shall be treated as payment to the Participant in cash to the extent of the unpaid principal and any accrued interest canceled. Notwithstanding anything contained in this Section to the contrary, the period during which the Company may exercise the Right of First Refusal and consummate the purchase of the Transfer Shares from the Participant shall terminate no sooner than the completion of a period of eight (8) months following the date on which the Participant acquired the Transfer Shares.
 
5

7.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Participant otherwise agree) within the period specified in Section 7.4, the Participant may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) clays following delivery to the Company of the Transfer Notice or, if applicable, following the end of the period described in the last sentence of Section 7.4. The Company shall have the right to demand further assurances from the Participant and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Participant, shall again be subject to the Right of First Refusal and shall require compliance by the Participant with the procedure described in this Section.
7.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Agreement, including this Section 7 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any Shares shall be void unless the provisions of this Section are met.
7.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to any transfer or exchange of the Shares if such transfer or exchange is in connection with a Change of Control. If the consideration received pursuant to such transfer or exchange consists of stock of the Company, or its Parent or Subsidiary, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 7.9 result in a termination of the Right of First Refusal.
7.8 Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company.
7.9 Early Termination of Right of First Refusal. The other provisions of this Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further, force and effect upon (a) the occurrence of a Change of Control, unless the Acquiror assumes the Company’s rights and obligations under this Agreement, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal. A “ public market ” shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.
 
6

8. V ESTED S HARE R EPURCHASE O PTION .
8.1 Grant of Vested Share Repurchase Option. Except as provided in Section 8.4 below, in the event of the occurrence of any Repurchase Event, as defined below, the Company shall have the right to repurchase the Shares acquired by the Participant pursuant to the Award (the “ Repurchase Shares ”) under the terms and subject to the conditions set forth in this Section (the “ Vested Share Repurchase Option ”). Each of the following events shall constitute a “ Repurchase Event ”:
(a) Termination of the Participant’s service for any reason or no reason, with or without cause, including death or Disability. The Repurchase Period, as defined below, shall commence on the date of termination of the Participant’s service.
(b) The receivership, bankruptcy or other creditor’s proceeding regarding the Participant or the taking of any of the Participant’s Shares by legal process, such as a levy of execution. The Repurchase Period, as defined below, shall commence on the date the Company receives actual notice of the commencement of pendency of the receivership, bankruptcy or other creditor’s proceeding or the date, of such taking, as the case may be. The Fair Market Value of the Repurchase Shares shall be determined as of the last day of the month preceding the month in which the proceeding involved commenced or the taking occurred.
8.2 Exercise of Vested Share Repurchase Option. The Company may exercise the Vested Share Repurchase Option by written notice to the Participant, the Participant’s legal representative, or other holder of the Repurchase Shares, as the case may be, during the Repurchase Period. The “ Repurchase Period ” shall be the period commencing at the time set forth in Section 8.1 above and ending ninety (90) days thereafter. If the Company fails to give notice during the Repurchase Period, the Vested Share Repurchase Option shall terminate (unless the Company and the Participant have extended the time for the exercise of the Vested Share Repurchase Option) unless and until there is a subsequent Repurchase Event. Notwithstanding a termination of the Vested Share Repurchase Option, the remaining provisions of this Agreement shall remain in full force and effect. If there is a subsequent Repurchase Event, the Vested Share Repurchase Option shall again become exercisable as provided in this Section 8. The Vested Share Repurchase Option must be exercised, if at all, for all of the Repurchase Shares, except as the Company and the Participant otherwise agree.
8.3 Payment for Repurchase Shares. The repurchase price per share being repurchased by the Company pursuant to the Vested Share Repurchase Option shall be an amount equal to the Fair Market Value of the shares determined as of the date of the Repurchase Event (except as otherwise provided in Section 8.1(b) by the Board in good faith. Payment by the Company to the Participant shall be made in cash on or before the last day of the Repurchase Period. For purposes of the foregoing, cancellation of any indebtedness of the Participant to the Company, or its Parent or Subsidiary, shall be treated as payment to the Participant in cash to the extent of the unpaid principal and any accrued interest canceled.
8.4 Transfers Not Subject to Vested Share Repurchase Option. The Vested Share Repurchase Option shall not apply to any transfer or exchange of shares acquired upon the Award if such transfer or exchange is in connection with a Change of Control. If the consideration received pursuant to such transfer or exchange consists of securities of the Company, or its Parent or Subsidiary, such consideration will remain subject to the Vested Share Repurchase Option unless the provisions of Section 8.6 result in a termination of the Vested Share Repurchase Option.
8.5 Assignment of Vested Share Repurchase Option. The Company shall have the right to assign the Vested Share Repurchase Option at any time, whether or not such option is then exercisable, to one or more persons as may be selected by the Company.
8.6 Early Termination of Vested Share Repurchase Option. The other provisions of this Agreement notwithstanding, the Vested Share Repurchase Option shall terminate and be of no further force and effect upon the existence of a public market for the class of securities subject to the Vested Share Repurchase Option.
 
7

9. E SCROW .
9.1 Appointment of Agent. To ensure that Shares subject to the Company Reacquisition Right will be available for reacquisition, the Participant and the Company hereby appoint the Secretary of the Company, or any other person designated by the Company, as their agent and as attorney-in-fact for the Participant (the “ Agent ”) to hold any and all Unvested Shares and to sell, assign and transfer to the Company any such Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right. The Participant understands that appointment of the Agent is a material inducement to make this Agreement and that such appointment is coupled with an interest and is irrevocable. The Agent shall not be personally liable for any act the Agent may do or omit to do hereunder as escrow agent, agent for the Company, or attorney in fact for the Participant while acting in good faith and in the exercise of the Agent’s own good judgment, and any act done or omitted by the Agent pursuant to the advice of the Agent’s own attorneys shall be conclusive evidence of such good faith. The Agent may rely upon any letter, notice or other document executed by any signature purporting to be genuine and may resign at any time.
9.2 Establishment of Escrow. The Participant authorizes the Company to deposit the Unvested Shares with the Company’s transfer agent to be held in book entry form, as provided by Section 4.3, and the Participant agrees to deliver to and deposit with the Agent each certificate, if any, evidencing the Shares and an Assignment Separate from Certificate with respect to such book entry shares and each such certificate duly endorsed (with date and number of Shares blank) in the form attached to this Agreement, to be held by the Agent under the terms and conditions of this Section (the “ Escrow ”). Upon the occurrence of a Change of Control, a dividend or distribution to the stockholders of the Company paid in Shares or other property (other than regular, periodic dividends paid on the Shares pursuant to the Company’s dividend policy), or any other adjustment upon a change in the capital structure of the Company, as described in Section 11, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of his or her ownership of the Shares that remain, following such Change of Control, dividend, distribution or change described in Section 11, subject to the Company Reacquisition Right shall be immediately subject to the Escrow to the same extent as the Shares immediately before such event. The Company shall bear the expenses of the Escrow.
9.3 Delivery of Shares to Participant. The Escrow shall continue with respect to any Shares for so long as such Shares remain subject to the Company Reacquisition Right. Upon termination of the Company Reacquisition Right with respect to Shares, the Company shall so notify the Agent and direct the Agent to deliver such number of Shares to the Participant. As soon as practicable after receipt of such notice, the Agent shall cause the Shares specified by such notice to be delivered to the Participant, and the Escrow shall terminate with respect to such Shares.
9.4 Notices and Payments. In the event the Shares and any other property held in escrow are subject to the Company’s exercise of the Company Reacquisition Right or the Right of First Refusal, the notices required to be given to the Participant shall be given to the Agent, and any payment required to be given to the Participant shall be given to the Agent. Within thirty (30) days after payment by the Company, the Agent shall deliver the Shares and any other property which the Company has purchased to the Company and shall deliver the payment received from the Company to the Participant.
10. E FFECT OF C HANGE OF C ONTROL .
In the event of a Change of Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “ Acquiror ”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under the Award or substitute for the Award a substantially equivalent award for the
 
8

Acquiror’s stock. For purposes of this Section, the Award shall be deemed assumed if, following the Change of Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, for each Share subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a Share on the effective date of the Change of Control was entitled. Notwithstanding the foregoing, Shares acquired pursuant to the Award prior to the Change of Control, and any consideration received pursuant to the Change of Control with respect to such shares shall continue to be subject to all applicable provisions of this Agreement except as otherwise provided herein.
11. A DJUSTMENTS FOR C HANGES IN C APITAL S TRUCTURE .
Subject to any required action by the stockholders of the Company, in the event of any change in the Shares effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Shares (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of Shares, appropriate and proportionate adjustments shall be made in the number and kind of shares of stock or other property subject to the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other property to which Participant is entitled by reason of ownership of Shares acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all Shares originally acquired hereunder. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Board, and its determination shall be final, binding and conclusive.
12. R IGHTS AS A S TOCKHOLDER , D IRECTOR , E MPLOYEE OR C ONSULTANT .
The Participant shall have no rights as a stockholder with respect to any Shares subject to the Award until the date of the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the Shares are issued, except as provided in Section 11. Subject to the provisions of this Agreement, the Participant shall exercise all rights and privileges of a stockholder of the Company with respect to Shares deposited in the Escrow pursuant to Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between the Company, or its Parent or Subsidiary, and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the service of the Company, or its Parent or Subsidiary, or interfere in any way with any right of the Company, or its Parent or Subsidiary, to terminate the Participant’s service, as the case may be, at any time.
 
9

13. L EGENDS .
The Company may at any time place legends referencing the Company Reacquisition Right, Right of First Refusal, the Vested Share Repurchase Option, and any applicable federal, state or foreign securities law restrictions on all certificates representing Shares. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing Shares in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND REPURCHASE OPTIONS IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
14. L OCK -U P A GREEMENT .
The Participant hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “ Securities Act ”), the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering; provided, further, however, that such one hundred eighty (180) day period may be extended for an additional period, not to exceed twenty (20) days, upon the request of the Company or the underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including but not limited to, the restrictions contained in NASDAQ Rule 2711(f)(4) or New York Stock Exchange Rule 472(f)(4), or any successor provisions or amendments thereto). The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. The Participant hereby agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing within a reasonable timeframe if so requested by the Company.
15. R ESTRICTIONS ON T RANSFER OF S HARES .
At any time prior to the existence of a public market for the Shares, the Board may prohibit the Participant and any transferee of such Participant from selling, transferring, assigning, pledging, or otherwise disposing of or encumbering any Shares acquired pursuant to the Award (each, a “ Transfer ”) without the prior written consent of the Board. The Board may withhold consent for any reason, including without limitation any Transfer (i) to any individual or entity identified by the Company
 
10

as a potential competitor or considered by the Company to be unfriendly, or (ii) if such Transfer increases the risk of the Company having a class of security held of record by such number of persons as would require the Company to register any class of securities under the Exchange Act; or (iii) if such Transfer would result in the loss of any federal or state securities law exemption relied upon by the Company in connection with the initial issuance of such shares or the issuance of any other securities; or (iv) if such Transfer is facilitated in any manner by any public posting, message board, trading portal, Internet site, or similar method of communication, including without limitation any trading portal or Internet site intended to facilitate secondary transfers of securities; or (v) if such Transfer is to be effected in a brokered transaction; or (vi) if such Transfer would be of less than all of the Shares then held by the stockholder and its affiliates or is to be made to more than a single transferee. No Shares may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement and, except pursuant to a Change of Control, until the date, on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any Shares which will have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares will have been so transferred. In order to enforce its rights under this Section, the Company shall be authorized to give a stop transfer instruction with respect to the Shares to the Company’s transfer agent.
16. M ISCELLANEOUS P ROVISIONS .
16.1 Termination or Amendment. The Board may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant, unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.
16.2 Nontransferability of the Award. The right to acquire Shares pursuant to the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
16.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
16.4 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
16.5 Delivery of Documents and Notices. Any document relating to participation in the Plan, or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by the Company, or its Parent or Subsidiary, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
 
11

(a) Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 16.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and notices in connection with the Escrow, as described in Section 16.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 16.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 16.5(a).
16.6 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with any employment, service or other agreement between the Participant and the Company, or its Parent or Subsidiary, referring to the Award, shall constitute the entire understanding and agreement of the Participant and the Company, or its Parent or Subsidiary, with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Company, or its Parent or Subsidiary, with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
16.7 Applicable Law. The Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.
16.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
12

ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED the undersigned does hereby sell, assign and transfer unto                                                                                                                                                                                                              (                    ) shares of common stock of Trupanion, Inc. standing in the undersigned’s name on the books of said corporation represented by Certificate No.              herewith and does hereby irrevocably constitute and appoint                                          Attorney to transfer the said stock on the books of said corporation with full power of substitution in the premises.

Dated:	 	 	

 	
Signature	

Print Name	
Instructions : Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Company Reacquisition Right set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Participant.
SAMPLE

Exhibit 10.3
TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
1. PURPOSE . The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents and Subsidiaries that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. SHARES SUBJECT TO THE PLAN .
2.1. Number of Shares Available . Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board, is 2,000,000 Shares, plus (a) any reserved shares not issued or subject to outstanding grants under the Company’s 2007 Equity Compensation Plan (the “ Prior Plan ”) on the Effective Date (as defined below), (b) shares that are subject to stock options or other awards granted under the Prior Plan that cease to be subject to such stock options or other awards by forfeiture or otherwise after the Effective Date, (c) shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (d) shares issued under the Prior Plan that are repurchased by the Company at the original issue price and (e) shares that are subject to stock options or other awards under the Prior Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
2.2. Lapsed, Returned Awards . Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 shall not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.
2.3. Minimum Share Reserve . At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4. Automatic Share Reserve Increase . The number of Shares available for grant and issuance under the Plan shall be increased on January 1, of each of the calendar years 2015 through 2024, by the lesser of (a) four (4%) percent of the number of Shares issued and outstanding on each December 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board.
2.5. Limitations . No more than 20,000,000 Shares shall be issued pursuant to the exercise of ISOs.
2.6. Adjustment of Shares . If the number of outstanding Shares is changed by a stock dividend, extraordinary dividends or distributions (whether in cash, shares or other property, other than a regular cash dividend) recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, spin-off or similar change in the capital structure of the Company, without consideration, then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and

number of Shares subject to outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the maximum number of shares that may be issued as ISOs set forth in Section 2.5, (e) the maximum number of Shares that may be issued to an individual or to a new Employee in any one calendar year set forth in Section 3 and (f) the number of Shares that may be granted as Awards to Non-Employee Directors as set forth in Section 12, shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.
3. ELIGIBILITY . ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. No Participant will be eligible to receive an Award or Awards for more than 1,000,000 Shares in any calendar year under this Plan except that new Employees of the Company or of a Parent or Subsidiary of the Company are eligible to be granted up to a maximum of an Award or Awards for 2,000,000 Shares in the calendar year in which they commence their employment.
4. ADMINISTRATION .
4.1. Committee Composition; Authority . This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;
(h) grant waivers of Plan or Award conditions;
(i) determine the vesting, exercisability and payment of Awards;
(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
 
2

(k) determine whether an Award has been earned;
(l) determine the terms and conditions of any, and to institute any Exchange Program;
(m) reduce or waive any criteria with respect to Performance Factors;
(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships provided that such adjustments are consistent with the regulations promulgated under Section 162(m) of the Code with respect to persons whose compensation is subject to Section 162(m) of the Code;
(o) adopt terms and conditions, rules and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States;
(p) make all other determinations necessary or advisable for the administration of this Plan; and
(q) delegate any of the foregoing to a subcommittee consisting of one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2. Committee Interpretation and Discretion . Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.
4.3. Section 162(m) of the Code and Section 16 of the Exchange Act . When necessary or desirable for an Award to qualify as “performance-based compensation” under Section 162(m) of the Code the Committee shall include at least two persons who are “outside directors” (as defined under Section 162(m) of the Code) and at least two (or a majority if more than two then serve on the Committee) such “outside directors” shall approve the grant of such Award and timely determine (as applicable) the Performance Period and any Performance Factors upon which vesting or settlement of any portion of such Award is to be subject. When required by Section 162(m) of the Code, prior to settlement of any such Award at least two (or a majority if more than two then serve on the Committee) such “outside directors” then serving on the Committee shall determine and certify in writing the extent to which such Performance Factors have been timely achieved and the extent to which the Shares subject to such Award have thereby been earned. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act). With respect to Participants whose compensation is subject to Section 162(m) of the Code, and provided that such adjustments are consistent with the regulations promulgated under Section 162(m) of the Code, the Committee may adjust the performance goals to account for changes in law and accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships, including without limitation (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) a change in accounting standards required by generally accepted accounting principles.
 
3

4.4. Documentation . The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5. Foreign Award Recipients . Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries and Affiliates shall be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs and practices; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 2.1 hereof; and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
5. OPTIONS . An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ ISOs ”) or Nonqualified Stock Options (“ NSOs ”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1. Option Grant . Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2. Date of Grant . The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3. Exercise Period . Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided , however , that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“ Ten Percent Stockholder ”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4. Exercise Price . The Exercise Price of an Option will be determined by the Committee when the Option is granted; provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (b) the Exercise
 
4

Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.
5.5. Method of Exercise . Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third party administrator), and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
5.6. Termination of Service . If the Participant’s Service terminates for any reason except for Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s Service terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.
(a) Death . If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.
(b) Disability . If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
5.7. Limitations on Exercise . The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable.
 
5

5.8. Limitations on ISOs . With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.8, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.9. Modification, Extension or Renewal . The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided , however , that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.
5.10. No Disqualification . Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK AWARDS . A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (“ Restricted Stock ”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
6.1. Restricted Stock Purchase Agreement . All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.
6.2. Purchase Price . The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.
6.3. Terms of Restricted Stock Awards . Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
6.4. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
 
6

7. STOCK BONUS AWARDS . A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards shall be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
7.1. Terms of Stock Bonus Awards . The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
7.2. Form of Payment to Participant . Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
7.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
8. STOCK APPRECIATION RIGHTS . A Stock Appreciation Right (“ SAR ”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs shall be made pursuant to an Award Agreement.
8.1. Terms of SARs . The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each SAR; and (y) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
8.2. Exercise Period and Expiration Date . A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance
 
7

goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
8.3. Form of Settlement . Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code.
8.4. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
9. RESTRICTED STOCK UNITS . A Restricted Stock Unit (“ RSU ”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock). All RSUs shall be made pursuant to an Award Agreement.
9.1. Terms of RSUs . The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be settled; (c) the consideration to be distributed on settlement; and (d) the effect of the Participant’s termination of Service on each RSU. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any; and (z) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
9.2. Form and Timing of Settlement . Payment of earned RSUs shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code.
9.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
10. PERFORMANCE AWARDS . A Performance Award is an award to an eligible Employee, Consultant, or Director of a cash bonus or an award of Performance Shares denominated in Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock). Grants of Performance Awards shall be made pursuant to an Award Agreement.
10.1. Terms of Performance Shares . The Committee will determine, and each Award Agreement shall set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares; (c) the Performance Factors and Performance Period that shall determine the time and extent to which each award of Performance Shares shall be settled; (d) the consideration to be distributed on settlement,
 
8

and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (x) determine the nature, length and starting date of any Performance Period; (y) select from among the Performance Factors to be used; and (z) determine the number of Shares deemed subject to the award of Performance Shares. Prior to settlement the Committee shall determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria. No Participant will be eligible to receive more than $5,000,000 in Performance Awards in any calendar year under this Plan.
10.2. Value, Earning and Timing of Performance Shares . Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. After the applicable Performance Period has ended, the holder of Performance Shares will be entitled to receive a payout of the number of Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Factors or other vesting provisions have been achieved. The Committee, in its sole discretion, may pay earned Performance Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Shares at the close of the applicable Performance Period) or in a combination thereof.
10.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
11. PAYMENT FOR SHARE PURCHASES . Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;
(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary of the Company;
(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e) by any combination of the foregoing; or
(f) by any other method of payment as is permitted by applicable law.
12. GRANTS TO NON-EMPLOYEE DIRECTORS . Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. The aggregate number of Shares subject to Awards granted to a Non-Employee Director pursuant to this Section 12 in any calendar year shall not exceed 200,000 Shares; provided, however, that this maximum number can later be increased by the Board effective for the calendar year next commencing thereafter without further stockholder approval.
12.1. Eligibility . Awards pursuant to this Section 12 shall be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.
 
9

12.2. Vesting, Exercisability and Settlement . Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors shall not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
12.3. Election to receive Awards in Lieu of Cash . A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, as determined by the Committee. Such Awards shall be issued under the Plan. An election under this Section 12.3 shall be filed with the Company on the form prescribed by the Company.
13. WITHHOLDING TAXES .
13.1. Withholding Generally . Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or the applicable tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent or Subsidiary employing the Participant, an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax requirements or any other tax or social insurance liability legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax or social insurance requirements or any other tax liability legally due from the Participant. The Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
13.2. Stock Withholding . The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such tax withholding obligation or any other tax liability legally due from the Participant, in whole or in part by (without limitation) (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld or (d) withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company.
14. TRANSFERABILITY .
14.1. Transfer Generally . Unless determined otherwise by the Committee or pursuant to Section 14.2, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards shall be exercisable: (a) during the Participant’s lifetime only by (i) the Participant, or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
14.2. Award Transfer Program . Notwithstanding any contrary provision of the Plan, the Committee shall have all discretion and authority to determine and implement the terms and conditions of any Award Transfer Program instituted pursuant to this Section 14.2 and shall have the authority to amend the terms of any Award participating, or otherwise eligible to participate in, the Award Transfer Program, including (but not limited to) the authority to (a) amend (including to extend) the expiration date, post-termination exercise period and/or forfeiture conditions of any such Award, (b) amend or remove any provisions of the Award relating to the Award holder’s continued service to the Company or its Parent or any Subsidiary, (c) amend the permissible payment methods with respect to the exercise or
 
10

purchase of any such Award, (d) amend the adjustments to be implemented in the event of changes in the capitalization and other similar events with respect to such Award, and (e) make such other changes to the terms of such Award as the Committee deems necessary or appropriate in its sole discretion.
15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES .
15.1. Voting and Dividends . No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights shall be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement shall be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided , that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided , further , that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or Exercise Price, as the case may be, pursuant to Section 15.2.
15.2. Restrictions on Shares . At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “ Right of Repurchase ”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
16. CERTIFICATES . All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
17. ESCROW; PLEDGE OF SHARES . To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided , however , that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS . Without prior stockholder approval the Committee may (a) reprice Options or SARs(and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them
 
11

arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE . An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.
20. NO OBLIGATION TO EMPLOY . Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time.
21. CORPORATE TRANSACTIONS .
21.1. Assumption or Replacement of Awards by Successor . In the event of a Corporate Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other provision in this Plan to the contrary, then unless the Committee otherwise determines, such Awards shall have their vesting accelerate as to all shares subject to such Award (and any applicable right of repurchase fully lapse) immediately prior to the Corporate Transaction and then such Award will terminate. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the earlier of the expiration of such period or immediately prior to the Corporate Transaction. Awards need not be treated similarly in a Corporate Transaction.
21.2. Assumption of Awards by the Company . The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged ( except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of
 
12

any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards shall not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
21.3. Non-Employee Directors’ Awards . Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
22. ADOPTION AND STOCKHOLDER APPROVAL . This Plan shall be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
23. TERM OF PLAN/GOVERNING LAW . Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules).
24. AMENDMENT OR TERMINATION OF PLAN . The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided , however , that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval; provided further , that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award was granted.
25. NONEXCLUSIVITY OF THE PLAN . Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
26. INSIDER TRADING POLICY . Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company.
27. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY . All Awards, subject to applicable law, shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
28. DEFINITIONS . As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
28.1. “ Affiliate ” means (i) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
28.2. “ Award ” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or award of Performance Shares.
 
13

28.3. “ Award Agreement ” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which shall be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
28.4. “ Award Transfer Program ” means any program instituted by the Committee which would permit Participants the opportunity to transfer any outstanding Awards to a financial institution or other person or entity approved by the Committee.
28.5. “ Board ” means the Board of Directors of the Company.
28.6. “ Code ” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
28.7. “ Committee ” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
28.8. “ Common Stock ” means the common stock of the Company.
28.9. “ Company ” means Trupanion, Inc., or any successor corporation.
28.10. “ Consultant ” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.
28.11. “ Corporate Transaction ” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’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 fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company 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 Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company) or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (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 the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. 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 the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount shall become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
 
14

28.12. “ Director ” means a member of the Board.
28.13. “ Disability ” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
28.14. “ Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock or other property dividends in amounts equal equivalent to cash, stock or other property dividends for each Share represented by an Award held by such Participant.
28.15. “ Effective Date ” means the day immediately prior to the date of the underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement that is declared effective by the SEC.
28.16. “ Employee ” means any person, including Officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
28.17. “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.
28.18. “ Exchange Program ” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (b) the exercise price of an outstanding Award is increased or reduced.
28.19. “ Exercise Price ” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
28.20. “ Fair Market Value ” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:
(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(c) in the case of an Option or SAR grant made on the Effective Date, the price per share at which shares of the Company’s Common Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or
(d) if none of the foregoing is applicable, by the Board or the Committee in good faith.
 
15

28.21. “ Insider ” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.
28.22. “ IRS ” means the United States Internal Revenue Service.
28.23. “ Non-Employee Director ” means a Director who is not an Employee of the Company or any Parent or Subsidiary.
28.24. “ Option ” means an award of an option to purchase Shares pursuant to Section 5.
28.25. “ Parent ” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.26. “ Participant ” means a person who holds an Award under this Plan.
28.27. “ Performance Award ” means cash or stock granted pursuant to Section 10 of the Plan.
28.28. “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a) Profit Before Tax;
(b) Billings;
(c) Revenue;
(d) Net revenue;
(e) Earnings (which may include earnings before interest and taxes, earnings before taxes, and net earnings);
(f) Operating income;
(g) Operating margin;
(h) Operating profit;
(i) Controllable operating profit, or net operating profit;
(j) Net Profit;
(k) Gross margin;
(l) Operating expenses or operating expenses as a percentage of revenue;
(m) Net income;
(n) Earnings per share;
 
16

(o) Total stockholder return;
(p) Market share;
(q) Return on assets or net assets;
(r) The Company’s stock price;
(s) Growth in stockholder value relative to a pre-determined index;
(t) Return on equity;
(u) Return on invested capital;
(v) Cash Flow (including free cash flow or operating cash flows)
(w) Cash conversion cycle;
(x) Economic value added;
(y) Individual confidential business objectives;
(z) Contract awards or backlog;
(aa) Overhead or other expense reduction;
(bb) Credit rating;
(cc) Strategic plan development and implementation;
(dd) Succession plan development and implementation;
(ee) Improvement in workforce diversity;
(ff) Customer indicators;
(gg) New product invention or innovation;
(hh) Attainment of research and development milestones;
(ii) Improvements in productivity;
(jj) Bookings;
(kk) Attainment of objective operating goals and employee metrics; and
(ll) (Any other metric that is capable of measurement as determined by the Committee.
The Committee may, in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules, provide for one or more equitable adjustments (based on objective standards) to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
 
17

28.29. “ Performance Period ” means the period of service determined by the Committee, not to exceed five (5) years, during which years of service or performance is to be measured for the Award.
28.30. “ Performance Share ” means an Award granted pursuant to Section 10 of the Plan.
28.31. “ Permitted Transferee ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
28.32. “ Plan ” means this Trupanion, Inc. 2014 Equity Incentive Plan.
28.33. “ Purchase Price ” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
28.34. “ Restricted Stock Award ” means an award of Shares pursuant to Section 6 of the Plan, or issued pursuant to the early exercise of an Option.
28.35. “ Restricted Stock Unit ” means an Award granted pursuant to Section 9 of the Plan.
28.36. “ SEC ” means the United States Securities and Exchange Commission.
28.37. “ Securities Act ” means the United States Securities Act of 1933, as amended.
28.38. “ Service ” shall mean service as an Employee, Consultant, Director or Non-Employee Director, to the Company or a Parent, Subsidiary or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence approved by the Company; provided , that such leave is for a period of not more than 90 days (x) unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or (y) unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification of vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military leave, if required by applicable laws, vesting shall continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide services to the Company throughout the leave on the same terms as he or she was providing services immediately prior to such leave. Except as set forth in this Section 28.39, an employee shall have terminated employment as of the date he or she ceases provide services (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided however , that a change in status from an employee to a consultant or advisor shall not terminate the service provider’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Services and the effective date on which the Participant ceased to provide Services.
28.39. “ Shares ” means shares of Common Stock and the common stock of any successor entity.
 
18

28.40. “ Stock Appreciation Right ” means an Award granted pursuant to Section 8 of the Plan.
28.41. “ Stock Bonus ” means an Award granted pursuant to Section 7 of the Plan.
28.42. “ Subsidiary ” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.43. “ Treasury Regulations ” means regulations promulgated by the United States Treasury Department.
28.44. “ Unvested Shares ” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
 
19

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Trupanion, Inc. (the “ Company ”) 2014 Equity Incentive Plan (the “ Plan ”) will have the same meanings in this Notice of Stock Option Grant and the electronic representation of this Notice of Global Stock Option Grant established and maintained by the Company or a third party designated by the Company (the “ Notice ”).
Name:
Address:
You (the “ Participant ”) have been granted an option to purchase shares of Common Stock of the Company under the Plan subject to the terms and conditions of the Plan, this Notice and the Stock Option Award Agreement (the “ Option Agreement ”), including any applicable country-specific provisions in the appendix attached hereto (the “ Appendix ”) which constitutes part of this Option Agreement.

Grant Number :	
	
Date of Grant :	
	
Vesting Commencement Date :	
	
Exercise Price per Share :	
	
Total Number of Shares :	
		
Type of Option :	  	                 Non-Qualified Stock Option	
		
	  	                 Incentive Stock Option	
		
Expiration Date :	  	                          , 20      ; This Option expires earlier if Participant’s Service terminates earlier, as described in the Stock Option Agreement.	
		
Vesting Schedule :	  	[Insert applicable vesting schedule]	
By accepting (whether in writing, electronically or otherwise) the Option, Participant acknowledges and agrees to the following:
Participant understands that Participant’s employment or consulting relationship or service with the Company or a Parent or Subsidiary is for an unspecified duration, can be terminated at any time ( i.e. , is at will), except where otherwise prohibited by applicable law and that nothing in this Notice, the Option Agreement or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the Options pursuant to this Notice is earned only by continuing service as an Employee, Director or Consultant. Furthermore, the

period during which Participant may exercise the Option after such termination of Service will commence on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s employment agreement. Participant also understands that this Notice is subject to the terms and conditions of both the Option Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Option Agreement and the Plan. By accepting this Option, Participant consents to the electronic delivery as set forth in the Option Agreement.

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN STOCK OPTION AWARD AGREEMENT
Unless otherwise defined in this Stock Option Award Agreement (the “ Option Agreement ”), any capitalized terms used herein will have the meaning ascribed to them in the Trupanion, Inc. 2014 Equity Incentive Plan (the “ Plan ”).
Participant has been granted an option to purchase Shares (the “ Option ”) of Trupanion, Inc. (the “ Company ”), subject to the terms and conditions of the Plan, the Notice of Stock Option Grant (the “ Notice ”) and this Option Agreement, including any applicable country-specific provisions in the appendix attached hereto (the “ Appendix ”) which constitutes part of this Option Agreement.
1. Vesting Rights . Subject to the applicable provisions of the Plan and this Option Agreement, this Option may be exercised, in whole or in part, in accordance with the schedule set forth in the Notice.
2. Grant of Option . Participant has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share in U.S. Dollars set forth in the Notice (the “ Exercise Price ”). In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice as an Incentive Stock Option (“ ISO ”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an ISO, to the extent that it exceeds the U.S. $100,000 rule of Code Section 422(d) it shall be treated as a Nonqualified Stock Option (“ NSO ”).
3. Termination Period .
(a) General Rule . If Participant’s Service terminates for any reason except death or Disability, and other than for Cause, then this Option will expire at the close of business at Company headquarters on the date three months after Participant’s termination date. If Participant’s Service is terminated for Cause, this Option will expire upon the date of such termination. The Company determines when Participant’s Service terminates for all purposes under this Option Agreement.
(b) Death; Disability . If Participant dies before Participant’s Service terminates, then this Option will expire at the close of business at Company headquarters on the date 12 months after the date of death. If Participant’s Service terminates because of Participant’s Disability, then this Option will expire at the close of business at Company headquarters on the date 12 months after Participant’s termination date.
(c) No Notice . Participant is responsible for keeping track of these exercise periods following Participant’s termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this Option be exercised later than the Expiration Date set forth in the Notice.
(d) Termination . For purposes of this Option, Participant’s Service will be considered terminated as of the date Participant is no longer providing services to the Company, its Parent or one of its Subsidiaries (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any) (the “ Termination Date ”). The Committee shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of
 
1

Participant’s Option (including whether Participant may still be considered to be providing services while on an approved leave of absence). Unless otherwise provided in this Option Agreement or determined by the Company, Participant’s right to vest in this Option under the Plan, if any, will terminate as of the Termination Date and will not be extended by any notice period (e.g., Participant’s period of services would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any). Following the Termination Date, Participant may exercise the Option only as set forth in the Notice and this Section, provided that the period (if any) during which Participant may exercise the Option after the Termination Date, if any, will commence on the date Participant ceases to provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s employment agreement, if any. If Participant does not exercise this Option within the termination period set forth in the Notice or the termination periods set forth above, the Option shall terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.
4. Exercise of Option .
(a) Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of the Plan and this Option Agreement. In the event of Participant’s death, Disability, termination for Cause or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice and this Option Agreement. The Vesting Schedule may change prospectively in the event that your service status changes between full and part time status in accordance with Company policies relating to work schedules and vesting of awards. This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise . This Option is exercisable by delivery of an exercise notice in a form specified by the Company (the “ Exercise Notice ”), which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “ Exercised Shares ”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any Tax-Related Items (as defined in Section 8 below). This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price and payment of any Tax-Related Items. No Shares will be issued pursuant to the exercise of this Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.
(c) Exercise by Another . If another person wants to exercise this Option after it has been transferred to him or her, that person must prove to the Company’s satisfaction that he or she is entitled to exercise this Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable tax withholding due upon exercise of the Option (as described below).
5. Method of Payment . Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Participant:
(a) your personal check, wire transfer, or a cashier’s check;
 
2

(b) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by this Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered to you. The directions must be given by signing a special notice of exercise form provided by the Company; or
(c) other method authorized by the Company.
6. Non-Transferability of Option . This Option may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of other than by will or by the laws of descent or distribution or court order and may be exercised during the lifetime of Participant only by Participant or unless otherwise permitted by the Committee on a case-by-case basis. The terms of the Plan and this Option Agreement will be binding upon the executors, administrators, heirs, successors and assigns of Participant.
7. Term of Option . This Option will in any event expire on the expiration date set forth in the Notice, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 5.3 of the Plan applies).
8. Tax Consequences .
(a) Exercising the Option . Participant acknowledges that, regardless of any action taken by the Company or a Parent or Subsidiary employing or retaining Participant (the “ Employer ”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“ Tax-Related Items ”) is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including, but not limited to, the grant, vesting or exercise of this Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH YOU RESIDE OR ARE SUBJECT TO TAXATION BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:
 
 	(i)	withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or	
 
3

 	(ii)	withholding from proceeds of the sale of Shares acquired at exercise of this Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further consent; or	
 
 	(iii)	withholding in Shares to be issued upon exercise of the Option, provided the Company only withholds from the amount of Shares necessary to satisfy the minimum statutory withholding amount; or	
 
 	(iv)	any other arrangement approved by the Committee.	
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full member of Shares issued upon exercise of the Options; notwithstanding that a member of the Shares are held back solely for the purpose of paying the Tax-Related Items. The Fair Market Value of these Shares, determined as of the effective date of the Option exercise, will be applied as a credit against the Tax-Related Items withholding.
Finally, Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. the Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with his or her obligations in connection with the Tax-Related Items.
(b) Notice of Disqualifying Disposition of ISO Shares . For U.S. taxpayers, if Participant sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, Participant will immediately notify the Company in writing of such disposition. Participant agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to Participant.
9. Nature of Grant . By accepting the Option, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c) all decisions with respect to future Option or other grants, if any, will be at the sole discretion of the Company;
(d) the Option grant and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming an employment or service contract with the Company, the Employer or any Parent or Subsidiary;
(e) Participant is voluntarily participating in the Plan;
 
4

(f) the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;
(g) the Option and any Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(h) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;
(i) if the underlying Shares do not increase in value, the Option will have no value;
(j) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;
(k) no claim or entitlement to compensation or damages will arise from forfeiture of the Option resulting from Participant ceasing to provide employment or other services to the Company or the Employer (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, any Parent or Subsidiary or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any Parent or Subsidiary and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(l) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
(m) the following provisions apply only if Participant is providing services outside the United States:
 
 	(i)	the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose;	
 
 	(ii)	Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.	
10. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
11. Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in
 
5

this Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Parent or Subsidiary of for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to [insert broker] or its affiliates or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, [insert broker] and its affiliates, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant options or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
12. Language . If Participant has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
13. Appendix . Notwithstanding any provisions in this Option Agreement, the Option grant will be subject to any special terms and conditions set forth in any appendix to this Option Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Option Agreement.
14. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Option and on any Shares purchased upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
 
6

15. Acknowledgement . The Company and Participant agree that the Option is granted under and governed by the Notice, this Option Agreement and by the provisions of the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
16. Entire Agreement; Enforcement of Rights . This Option Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Option Agreement, nor any waiver of any rights under this Option Agreement, will be effective unless in writing and signed by the parties to this Option Agreement. The failure by either party to enforce any rights under this Option Agreement will not be construed as a waiver of any rights of such party.
17. Compliance with Laws and Regulations . The issuance of Shares and any restriction on the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal and local laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer.
18. Severability . If one or more provisions of this Option Agreement are held to be unenforceable, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Option Agreement, (b) the balance of this Option Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Option Agreement will be enforceable in accordance with its terms.
19. Governing Law and Venue . This Option Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the District of New Delaware or the Delaware Superior Court, New Castle County. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
20. No Rights as Employee, Director or Consultant . Nothing in this Option Agreement will affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary, to terminate Participant’s service, for any reason, with or without Cause.
21. Consent to Electronic Delivery of all Plan Documents and Disclosures . By Participant’s signature and the signature of the Company’s representative on the Notice, Participant and
 
7

the Company agree that this Option is granted under and governed by the terms and conditions of the Plan, the Notice and this Option Agreement. Participant has reviewed the Plan, the Notice and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Notice, and fully understands all provisions of the Plan, the Notice and this Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Option Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated on the Notice. By acceptance of this Option, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Option Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Option and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service or electronic mail to [ Insert stock administration email address ]. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail through Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery.
 
8

APPENDIX
TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Option granted to Participant under the Plan if Participant resides and/or works in one of the countries below. This Appendix forms part of the Option Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Option Agreement or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of [Date]. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant exercises the Option or sells Shares acquired under the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
 
1

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
GRANT NUMBER:                     
Unless otherwise defined herein, the terms defined in the Trupanion, Inc. 2014 Equity Incentive Plan (the “ Plan ”) will have the same meanings in this Notice of Restricted Stock Unit Award and the electronic representation of this Notice of Restricted Stock Unit Award established and maintained by the Company or a third party designated by Trupanion, Inc. (the “ Notice ”).
Name:
Address:
You (“ Participant ”) have been granted an award of Restricted Stock Units (“ RSUs ”) under the Plan subject to the terms and conditions of the Plan, this Notice and the attached Restricted Stock Unit Award Agreement (hereinafter the “ Agreement ”), including any applicable country-specific provisions in the appendix attached hereto (the “ Appendix ”), which constitutes part of this Agreement.

Number of RSUs:	  		
		
Date of Grant:	  		
		
Vesting Commencement Date:	  		
		
Expiration Date:	  	The date on which settlement of all RSUs granted hereunder occurs. This RSU expires earlier if your Service terminates earlier, as described in the Agreement.	
		
Vesting Schedule:	  	Subject to the limitations set forth in this Notice, the Plan and the Agreement, the RSUs will vest in accordance with the following schedule:	
By accepting (whether in writing, electronically or otherwise) the RSUs, Participant acknowledges and agrees to the following:
Participant understands that Participant’s employment or consulting relationship or service with the Company or a Parent or Subsidiary is for an unspecified duration, can be terminated at any time ( i.e. , is at will), except where otherwise prohibited by applicable law and that nothing in this Notice, the Agreement or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice is earned only by continuing service as an Employee, Director or Consultant. Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participant’s service status changes between full and part time status in accordance with Company policies relating to work schedules and vesting of awards. Participant also understands that this Notice is subject to the terms and conditions of both the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Agreement and the Plan. By accepting the RSUs, Participant consents to the electronic delivery as set forth in the Agreement.

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless otherwise defined herein, the terms defined in the Trupanion, Inc. 2014 Equity Incentive Plan (the “ Plan ”) will have the same defined meanings in this Restricted Stock Unit Award Agreement (the “ Agreement ”).
Participant has been granted Restricted Stock Units (“ RSUs ”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Award (the “ Notice ”) and this Agreement, including any applicable country-specific provisions in the appendix attached hereto (the “ Appendix ”), which constitutes part of this Agreement.
1. Settlement . Settlement of RSUs will be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice. Settlement of RSUs will be in Shares. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Agreement.
2. No Stockholder Rights . Unless and until such time as Shares are issued in settlement of vested RSUs, Participant will have no ownership of the Shares allocated to the RSUs and will have no right dividends or to vote such Shares.
3. Dividend Equivalents . Dividends, if any (whether in cash or Shares), will not be credited to Participant.
4. Non-Transferability of RSUs . The RSUs and any interest therein will not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.
5. Termination . If Participant’s Service terminates for any reason, all unvested RSUs will be forfeited to the Company forthwith, and all rights of Participant to such RSUs will immediately terminate. Participant’s Service will be considered terminated as of the date Participant is no longer providing services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any). In case of any dispute as to whether termination of Service has occurred, the Committee will have sole discretion to determine whether such termination of Service has occurred and the effective date of such termination. The Committee shall have the exclusive discretion to determine whether you may still be considered to be providing services while on an approved leave of absence.
6. Withholding Taxes . Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer (the “ Employer ”) the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“ Tax-Related Items ”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs and the subsequent sale of Shares acquired pursuant to such settlement; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction between the date of grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
 
1

Prior to any relevant taxable or tax withholding event, as applicable, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:
 
 	(i)	withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or	
 
 	(ii)	withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization); or	
 
 	(iii)	withholding in Shares to be issued upon settlement of the RSUs, provided the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amounts; or	
 
 	(iv)	any other arrangement approved by the Committee.	
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the Tax-Related Items withholding.
Finally, Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. the Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.
7. Nature of Grant . By accepting the RSUs, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(c) all decisions with respect to future RSU or other grants, if any, will be at the sole discretion of the Company;
(d) the RSU grant and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming an employment or services contract with the Company, the Employer or any Parent or Subsidiary;
 
2

(e) Participant is voluntarily participating in the Plan;
(f) the RSUs and the Shares subject to the RSUs are not intended to replace any pension rights or compensation;
(g) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(h) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i) no claim or entitlement to compensation or damages will arise from forfeiture of the RSUs resulting from Participant’s termination of Service, and in consideration of the grant of the RSUs to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, or any Parent or Subsidiary or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any Parent or Subsidiary and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(j) unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(k) the following provisions apply only if Participant is providing services outside the United States:
 
 	(i)	the RSUs and the Shares subject to the RSUs are not part of normal or expected compensation or salary for any purpose;	
 
 	(ii)	Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement.	
8. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
9. Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Employer, the Company and any Parent or Subsidiary for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
 
3

Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to [broker name] or its affiliates or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, [broker name] and its affiliates, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
10. Language . If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
11. Appendix . Notwithstanding any provisions in this Agreement, the RSU grant will be subject to any special terms and conditions set forth in any appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
12. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
13. Acknowledgement . The Company and Participant agree that the RSUs are granted under and governed by the Notice, this Agreement and the provisions of the Plan. Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
 
4

14. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
15. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.
16. Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Agreement, (b) the balance of this Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Agreement will be enforceable in accordance with its terms.
17. Governing Law and Venue . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.
Any and all disputes relating to, concerning or arising from this Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Agreement, will be brought and heard exclusively in the United States District Court for the District of New Delaware or the Delaware Superior Court, New Castle County. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
18. No Rights as Employee, Director or Consultant . Nothing in this Agreement will affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to terminate Participant ’ s service, for any reason, with or without Cause.
19. Consent to Electronic Delivery of All Plan Documents and Disclosures . By Participant’s acceptance (whether in writing, electronically or otherwise) of the Notice, Participant and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, the Notice and this Agreement. Participant has reviewed the Plan, the Notice and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of the RSUs, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents
 
5

that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the RSUs and current or future participation in the Plan. Electronic delivery may include the delivery of a link to a the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service or electronic mail at Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail through Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery.
 
6

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the RSUs granted to Participant under the Plan if Participant resides and/or works in one of the countries below. This Appendix forms part of the Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Agreement or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of [Date]. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant vests in the RSUs or sells Shares acquired under the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
 
7

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
GRANT NUMBER:
Unless otherwise defined herein, the terms defined in the Trupanion, Inc. (the “ Company ”) 2014 Equity Incentive Plan (the “ Plan ”) will have the same meanings in this Notice of Restricted Stock Award and the electronic representation of this Notice of Restricted Stock Award established and maintained by the Company or a third party designated by Trupanion, Inc. (the “ Notice ”).
Name:
Address:
You (“ Participant ”) have been granted an the opportunity to purchase Shares of Common Stock of Trupanion, Inc. (the “ Company ”) that are subject to restrictions (the “ Restricted Shares ”) and the terms and conditions of the Plan, this Notice and the attached Restricted Stock Purchase Agreement (the “ Restricted Stock Purchase Agreement ”).

Total Number of Restricted Shares Awarded :	  		
		
Fair Market Value per Restricted Share :	  	$	
		
Total Fair Market Value of Award :	  	$	
		
Purchase Price per Restricted Share :	  	$	
		
Total Purchase Price for all Restricted Shares :	  	$	
		
Date of Grant :	  		
		
Vesting Commencement Date :	  		
		
Vesting Schedule :	  	Subject to the limitations set forth in this Notice, the Plan and the Restricted Stock Purchase Agreement, the Restricted Shares will vest and the right of repurchase will lapse, in whole or in part, in accordance with the following schedule:	
By accepting (whether in writing, electronically or otherwise) the opportunity to purchase the Restricted Shares, Participant acknowledges and agrees to the following:
Participant understands that Participant’s employment or consulting relationship or service with the Company or a Parent or Subsidiary is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Notice, the Restricted Stock Purchase Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the Restricted Shares pursuant to this Notice is earned only by continuing service as an Employee, Director or Consultant. Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event that Participant’s service status changes between full and part time status in accordance with Company policies relating to work schedules and vesting of awards. Participant also understands that this Notice is subject to the terms and conditions of both the Restricted Stock Purchase Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Restricted Stock Purchase Agreement and the Plan. By acceptance of this opportunity to purchase the Restricted Shares, Participant consents to the electronic delivery of the Notice, the Restricted Stock Purchase Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Restricted Shares. Electronic delivery may

include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. If the Restricted Stock Purchase Agreement is not executed by Participant within thirty (30) days of the Date of Grant above, then this grant will be void.

TRUPANION, INC.
2014 EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made by and between Trupanion, Inc., a Delaware corporation (the “ Company ”), and Participant pursuant to the Company’s 2014 Equity Incentive Plan (the “ Plan ”). Unless otherwise defined herein, the terms defined in the Plan will have the same meanings in this Agreement.
1. Sale of Stock . Subject to the terms and conditions of this Agreement, on the Purchase Date (as defined below) the Company will issue and sell to Participant, and Participant agrees to purchase from the Company the number of Shares shown on the Notice of Restricted Stock Award (the “ Notice ”) at the purchase price per Share set forth in the Notice. The per Share purchase price of the Shares will be not less than the par value of the Shares as of the date of the offer of such Shares to the Participant. The term “Shares” refers to the purchased Shares and all securities received in replacement of or in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which Participant is entitled by reason of Participant’s ownership of the Shares.
2. Time and Place of Purchase . The purchase and sale of the Shares under this Agreement will occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties, or on such other date as the Company and Participant will agree (the “ Purchase Date ”). On the Purchase Date, the Company will issue a stock certificate registered in Participant’s name, or uncertificated shares designated for the Participant in book entry form on the records of the Company’s transfer agent, representing the Shares to be purchased by Participant against payment of the purchase price therefor by Participant by (a) check made payable to the Company, (b) Participant’s personal services that the Committee has determined have already been rendered to the Company and have a value not less than aggregate par value of the Shares to be issued Participant, or (c) a combination of the foregoing.
3. Restrictions on Resale . By signing this Agreement, Participant agrees not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or the Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as Participant is providing service to the Company or a Subsidiary of the Company.
3.1 Repurchase Right on Termination Other Than for Cause . For the purposes of this Agreement, a “ Repurchase Event ” will mean an occurrence of one of the following:
(i) termination of Participant’s service, whether voluntary or involuntary and with or without cause;
(ii) resignation, retirement or death of Participant; or
(iii) any attempted transfer by Participant of the Shares, or any interest therein, in violation of this Agreement.
Upon the occurrence of a Repurchase Event, the Company will have the right (but not an obligation) to purchase the Shares of Participant at a price equal to the Purchase Price per Share (the “ Repurchase Right ”). The Repurchase Right will lapse in accordance with the vesting schedule set forth in the Notice. For purposes of this Agreement, “ Unvested Shares ” means Stock pursuant to which the Company’s Repurchase Right has not lapsed.

3.2 Exercise of Repurchase Right . Unless the Company provides written notice to Participant within 90 days from the date of termination of Participant’s service to the Company that the Company does not intend to exercise its Repurchase Right with respect to some or all of the Unvested Shares, the Repurchase Right will be deemed automatically exercised by the Company as of the 90th day following such termination, provided that the Company may notify Participant that it is exercising its Repurchase Right as of a date prior to such 90th day. Unless Participant is otherwise notified by the Company pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase Right as to some or all of the Unvested Shares, execution of this Agreement by Participant constitutes written notice to Participant of the Company’s intention to exercise its Repurchase Right with respect to all Unvested Shares to which such Repurchase Right applies at the time of termination of Participant’s Service. The Company, at its choice, may satisfy its payment obligation to Participant with respect to exercise of the Repurchase Right by (i) delivering a check to Participant in the amount of the purchase price for the Unvested Shares being repurchased, (ii) in the event Participant is indebted to the Company, canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, (ii) in the event Participant purchased Unvested Shares pursuant to Section 2(b), at the time of termination of Participant’s Service, Participant will forfeit all of Participant’s Unvested Shares or (iv) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such purchase price. In the event of any deemed automatic exercise of the Repurchase Right by canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, such cancellation of indebtedness will be deemed automatically to occur as of the 90th day following termination of Participant’s employment or consulting relationship unless the Company otherwise satisfies its payment obligations. As a result of any repurchase of Unvested Shares pursuant to the Repurchase Right, the Company will become the legal and beneficial owner of the Unvested Shares being repurchased and will have all rights and interest therein or related thereto, and the Company will have the right to transfer to its own name the number of Unvested Shares being repurchased by the Company, without further action by Participant.
3.3 Acceptance of Restrictions . Acceptance of the Shares will constitute Participant’s agreement to such restrictions and the legending of his or her certificates or the notation in the Company’s direct registration system for stock issuance and transfer of such restrictions and accompanying legends set forth in Section 4.1 with respect thereto. Notwithstanding such restrictions, however, so long as Participant is the holder of the Shares, or any portion thereof, he or she will be entitled to receive all dividends declared on and to vote the Shares and to all other rights of a stockholder with respect thereto.
3.4 Non-Transferability of Unvested Shares . In addition to any other limitation on transfer created by applicable securities laws or any other agreement between the Company and Participant, Participant may not transfer any Unvested Shares, or any interest therein, unless consented to in writing by a duly authorized representative of the Company. Any purported transfer is void and of no effect, and no purported transferee thereof will be recognized as a holder of the Unvested Shares for any purpose whatsoever. Should such a transfer purport to occur, the Company may refuse to carry out the transfer on its books, set aside the transfer, or exercise any other legal or equitable remedy. In the event the Company consents to a transfer of Unvested Shares, all transferees of Shares or any interest therein will receive and hold such Shares or interest subject to the provisions of this Agreement, including, insofar as applicable, the Repurchase Right. In the event of any purchase by the Company hereunder where the Shares or interest are held by a transferee, the transferee will be obligated, if requested by the Company, to transfer the Shares or interest to the Participant for consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase Right is deemed exercised by the Company, the Company may deem any transferee to have transferred the Shares or interest to Participant

prior to their purchase by the Company, and payment of the purchase price by the Company to such transferee will be deemed to satisfy Participant’s obligation to pay such transferee for such Shares or interest, and also to satisfy the Company’s obligation to pay Participant for such Shares or interest.
3.5 Assignment . The Repurchase Right may be assigned by the Company in whole or in part to any persons or organization.
4. Restrictive Legends and Stop Transfer Orders .
4.1 Legends . The certificate or certificates or book entry or book entries representing the Shares will bear or be noted by the Company’s transfer agent with the following legend (as well as any legends required by applicable state and federal corporate and securities laws):
THE SHARES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
4.2 Stop-Transfer Notices . Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
4.3 Refusal to Transfer . The Company will not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares will have been so transferred.
5. No Rights as Employee, Director or Consultant . Nothing in this Agreement will affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to terminate Participant ’ s service, for any reason, with or without cause.
6. Section 83(b) Election . Participant hereby acknowledges that he or she has been informed that, with respect to the purchase of the Shares, an election may be filed by the Participant with the Internal Revenue Service, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase (the “ Election ”). Making the Election will result in recognition of taxable income to the Participant on the date of purchase, measured by the excess, if any, of the Fair Market Value of the Shares over the purchase price for the Shares. Absent such an Election, taxable income will be measured and recognized by Participant at the time or times on which the Company’s Repurchase Right lapses. Participant is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election. PARTICIPANT ACKNOWLEDGES THAT IT IS SOLELY PARTICIPANT’S RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PARTICIPANT REQUESTS THE COMPANY, OR ITS REPRESENTATIVE, TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.
7. Miscellaneous .
7.1 Acknowledgement . The Company and Participant agree that the Restricted Shares are granted under and governed by the Notice, this Agreement and by the provisions of the Plan

(incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the Restricted Shares subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
7.2 Notices . Any notice to be given under the terms of the Plan will be addressed to the Company in care of its principal office, and any notice to be given to the Participant will be addressed to such Participant at the address maintained by the Company for such person or at such other address as the Participant may specify in writing to the Company.
7.3 U.S. Tax Consequences . Upon vesting of Shares, Participant will include in taxable income the difference between the fair market value of the vesting Shares, as determined on the date of their vesting, and the price paid for the Shares. This will be treated as ordinary income by Participant and will be subject to withholding by the Company when required by applicable law. In the absence of an Election (defined below), the Company will withhold a number of vesting Shares with a fair market value (determined on the date of their vesting) equal to the minimum amount the Company is required to withhold for income and employment taxes. If Participant makes an Election, then Participant must, prior to making the Election, pay in cash (or check) to the Company an amount equal to the amount the Company is required to withhold for income and employment taxes.
7.4 Consent to Electronic Delivery of All Plan Documents and Disclosures . By Participant’s acceptance (whether in writing, electronically or otherwise) of the Notice, Participant and the Company agree that this opportunity to purchase Restricted Shares is granted under and governed by the terms and conditions of the Plan, the Notice and this Agreement. Participant has reviewed the Plan, the Notice and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of this opportunity to purchase Restricted Shares, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Restricted Shares and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service or electronic mail at Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail through Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery.

7.5 Counterparts . This Agreement may be executed in two or more counterparts, each of which will he deemed an original and all of which together will constitute one instrument.
7.6 Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
7.7 Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.
7.8 Governing Law and Venue; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision will be excluded from this Agreement, (ii) the balance of this Agreement will be interpreted as if such provision were so excluded and (iii) the balance of this Agreement will be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. Any and all disputes relating to, concerning or arising from this Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Agreement, will be brought and heard exclusively in the United States District Court for the District of New Delaware or the Delaware Superior Court, New Castle County. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
7.9 Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement will be deemed to be the product of all of the parties hereto, and no ambiguity will be construed in favor of or against any one of the parties hereto.

Exhibit 10.4
T RUPANION , I NC .
2014 E MPLOYEE S TOCK P URCHASE P LAN
1. Establishment of Plan . Trupanion, Inc. proposes to grant options to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Code Section 423 (including any amendments to or replacements of such Section), and this Plan shall be so construed. Any term not expressly defined in this Plan but defined for purposes of Code Section 423 shall have the same definition herein. However, with regard to offers of options for purchase of the Common Stock under the Plan to employees outside the United States working for a Subsidiary or an affiliate of the Company that is not a Subsidiary, the Board may offer a subplan or an option that is not intended to meet the Code Section 423 requirements, provided, if necessary under Code Section 423, that the other terms and conditions of the Plan are met. Subject to Section 14, a total of 2,000,000 shares of Common Stock is reserved for issuance under this Plan. In addition, on each January 1 for the first nine (9) calendar years after the first Offering Date, the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of outstanding shares of the Company Common Stock on the immediately preceding December 31 ( rounded down to the nearest whole share ); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year; and, provided further , that the aggregate number of shares issued over the term of this Plan shall not exceed 20,000,000 shares of Common Stock. The number of shares reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14 of this Plan. Capitalized terms not defined elsewhere in the text are defined in Section 27.
2. Purpose . The purpose of this Plan is to provide eligible employees of the Company and Participating Corporations with a means of acquiring an equity interest in the Company, through payroll deductions or other methods for contributions, to enhance such employees’ sense of participation in the affairs of the Company and Participating Corporations, and to provide an incentive for continued employment.
3. Administration . The Plan will be administered by the Compensation Committee of the Board or by the Board (either referred to herein as the “ Committee ”). Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules and/or procedures relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States. The Committee will have the authority to determine the Fair Market Value of
 
1

the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on the Board or its committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, even if the dates of the applicable Offering Periods of each such offering are identical.
4. Eligibility . Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan except the following (other than where prohibited by applicable law):
(a) employees who are not employed by the Company or a Participating Corporation three (3) months prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;
(b) employees who are customarily employed for twenty (20) or less hours per week;
(c) employees who are customarily employed for five (5) months or less in a calendar year;
(d) employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Corporations or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Corporations;
(e) employees who do not meet any other eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code); and
(f) individuals who provide services to the Company or any of its Participating Corporations as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
5. Offering Periods and Purchase Periods . While the Plan is in effect, the Committee shall determine the duration and commencement date of each Offering Period,
 
2

provided that an Offering Period shall in no event be longer than twenty-seven (27) months, except as otherwise provided by an applicable subplan. Offering Periods may be consecutive or overlapping. Each Offering Period may consist of one or more Purchase Periods during which contributions of Participants are accumulated under this Plan. While the Plan is in effect, the Committee shall determine the duration and commencement date of each Offering Period and Purchase Period, provided that a Purchase Period shall in no event end later than the close of the Offering Period in which it begins. Purchase Periods shall be consecutive. The initial Offering Period shall commence on a date determined by the Committee. The Committee shall have the power to change these terms as provided in Section 25 below.
6. Participation in this Plan .
(a) With respect to Offering Periods, an eligible employee determined in accordance with Section 4 may elect to become a Participant by submitting a subscription agreement, or electronic representation thereof, to the Company and/or via the authorized third party administrator (the “ Third Party Administrator ”), prior to the commencement of the Offering Period to which such agreement relates in accordance with such rules as the Committee may determine.
(b) Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in the Offering Period commencing immediately following the last day of such prior Offering Period at the same contribution level unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in the Offering Period as set forth in Section 11 below or otherwise notifies the Company of a change in the Participant’s contribution letter by filing an additional subscription agreement or electronic representation thereof with the Company and/or the Third Party Administrator, prior to the next Offering Period. A Participant that is automatically enrolled in a subsequent Offering Period pursuant to this section is not required to file any additional subscription agreement in order to continue participation in this Plan.
7. Grant of Option on Enrollment . Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount of the contribution level for such Participant multiplied by such Participant’s Compensation (as defined in Section 9 below) during such Purchase Period and the denominator of which is the lower of (a) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Offering Date (but in no event less than the par value of a share of the Company’s Common Stock), or (b) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date (but in no event less than the par value of a share of the Common Stock) provided, however , that for the Purchase Period within the initial Offering Period the numerator shall be fifteen percent (15%) of the Participant’s Compensation for such Purchase Period, or such lower percentage as determined by the Committee prior to the Effective Date or pursuant to a Participant’s election to lower the amount as set forth in Section 6(a) above, and provided , further , that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (i) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (ii) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
 
3

8. Purchase Price . The Purchase Price in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a) The Fair Market Value on the Offering Date; or
(b) The Fair Market Value on the Purchase Date.
9. Payment of Purchase Price; Contribution Changes; Share Issuances .
(a) The Purchase Price of the shares is accumulated by contributions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including payment by check or otherwise at the end of a Purchase Period). The deductions are made as a percentage of the Participant’s Compensation in one percent (1%) increments not less than one percent (1%), nor greater than ten percent (10%) or such higher or lower limit set by the Committee. “ Compensation ” shall mean base salary and regular hourly wages (or in foreign jurisdictions, equivalent cash compensation) and/or bonuses, or incentive compensation, commissions, overtime, shift premiums, plus draws against commissions (or in foreign jurisdictions, equivalent cash compensation) as determined by the Committee at any time prior to the beginning of an Offering Period. For purposes of determining a Participant’s Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent salary deductions) shall be treated as if the Participant did not make such election. Contributions may be made by payroll deductions or otherwise as determined by the Committee. Notwithstanding the foregoing, the terms of any subplan may permit matching shares without the payment of any purchase price.
(b) Subject to Section 25 below and to the rules of the Committee, a Participant may make changes in contributions during an Offering Period or any Purchase Period by filing with the Company a new authorization.
(c) Subject to Section 25 below and to the rules of the Committee, a Participant may reduce his or her contributions to zero during an Offering Period by filing with the Company a request for cessation of contributions, and after such reduction becomes effective no further contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Section (e) below. A reduction of the contributions to zero shall be treated as such Participant’s withdrawal from such Offering Period, and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.
(d) All contributions made for a Participant are credited to his or her account under this Plan and are deposited with the general funds of the Company, and the Company shall not be obligated to segregate such contributions, except to the extent required to be segregated due to local legal restrictions outside the United States. No interest accrues on the contributions. All contributions received or held by the Company may be used by the Company for any corporate purpose.
 
4

(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company and/or the Third Party Administrator that the Participant wishes to withdraw from that Offering Period under this Plan and have all contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of Common Stock shall be carried forward into the next Purchase Period or Offering Period, as the case may be (except to the extent required due to local legal requirements outside the United States), as otherwise determined by the Committee. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.
(g) During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
(h) To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10. Limitations on Shares to be Purchased .
(a) No Participant shall be entitled to purchase stock under any Offering Period at a rate which, when aggregated with such Participant’s rights to purchase stock, that are also outstanding in the same calendar year(s) (whether under other Offering Periods or other employee stock purchase plans of the Company, its Parent and its Subsidiaries), exceeds $25,000 in Fair Market Value, determined as of the Offering Date, (or such other limit as may be imposed by the Code) for each calendar year in which such Offering Period is in effect (hereinafter the “ Maximum Share Amount ”). The Company may automatically suspend the contributions of any Participant as necessary to enforce such limit provided that when the Company automatically resumes such contributions, the Company must apply the rate in effect immediately prior to such suspension.
 
5

(b) The Committee may, in its sole discretion, set a lower maximum number of shares which may be purchased by any Participant during any Offering Period than that determined under Section 10(a) above, which shall then be the Maximum Share Amount for subsequent Offering Periods; provided, however, in no event shall a Participant be permitted to purchase more 2,000 Shares during any one Purchase Period, irrespective of the Maximum Share Amount set forth in (a) and (b) hereof. If a new Maximum Share Amount is set, then all Participants will be notified of such Maximum Share Amount prior to the commencement of the next Offering Period for which it is to be effective. The Maximum Share Amount shall continue to apply with respect to all succeeding Offering Periods unless revised by the Committee as set forth above.
(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give written notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.
(d) Any contributions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as administratively practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11. Withdrawal .
(a) Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated contributions shall be returned to the withdrawn Participant, without interest, and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c) To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company will automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a participant’s account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.
 
6

12. Termination of Employment . Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan. In such event, contributions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
13. Return of Contributions . In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated contributions credited to such Participant’s account. No interest shall accrue on the contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14. Capital Changes . If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 1 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.
15. Nonassignability . Neither contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16. Use of Participant Funds and Reports . The Company may use all contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant contributions (except to the extent required due to local legal requirements outside the United States). Until Shares are issued, Participants will only have the rights of an unsecured creditor. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a report of his or her account setting forth the total contributions
 
7

accumulated, the number of shares purchased, the Purchase Price thereof and the remaining cash balance, if any, carried forward or refunded, as determined by the Committee in conformance with Section 9 of the Plan, to the next Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition . Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “ Notice Period ”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18. No Rights to Continued Employment . Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation, or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.
19. Equal Rights And Privileges . All eligible employees granted an option under this Plan that is intended to meet the Code Section 423 requirements shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company or the Committee, be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
20. Notices . All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21. Term; Stockholder Approval . This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than twenty-four (24) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the first Purchase Date under the Plan.
 
8

22. Designation of Beneficiary.
(a) If provided in the subscription agreement, a Participant may file a written or electronic designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under this Plan in the event of such Participant’s death subsequent to the end of a Purchase Period but prior to delivery to him of such shares and cash. In addition, a Participant may file a written or electronic designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company and/or the Third Party Administrator at the prescribed location before the Participant’s death.
(b) Such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or, if no spouse is known to the Company, then to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares . Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.
24. Applicable Law . The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
25. Amendment or Termination . The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to
 
9

purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to establish rules to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount withheld during a Purchase Period or an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit contributions in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s base salary or regular hourly wages, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of Compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committee action; (iv) reducing the maximum percentage of compensation a participant may elect to set aside as contributions; and (v) reducing the maximum number of shares of Common Stock a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.
26. Corporate Transactions . In the event of a Corporate Transaction (as defined below), each outstanding right to purchase Common Stock will be assumed or an equivalent option substituted by the successor corporation or a parent or a subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the purchase right, the Offering Period with respect to which such purchase right relates will be shortened by setting a new Purchase Date (the “ New Purchase Date ”) and will end on the New Purchase Date. The New Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, and the Plan shall terminate on the consummation of the Corporate Transaction.
27. Definitions.
(a) “ Board ” shall mean the Board of Directors of the Company.
(b) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.
 
10

(c) “ Common Stock ” shall mean the common stock of the Company.
(d) “ Company ” shall mean Trupanion, Inc., a Delaware corporation.
(e) “ Corporate Transaction ” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
(f) “ Effective Date ” shall mean the date on which the Registration Statement covering the initial public offering of the shares of Common Stock is declared effective by the U.S. Securities and Exchange Commission.
(g) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(h) “ Fair Market Value ” shall mean, as of any date, the value of a share of Common Stock determined as follows:
(i) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(ii) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(iii) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(iv) with respect to the initial Offering Period, Fair Market Value on the Offering Date shall be the price at which shares of Common Stock are offered to the public by the Company’s underwriters pursuant to the Registration Statement covering the initial public offering of shares of Common Stock; and
(v) if none of the foregoing is applicable, by the Committee in good faith.
 
11

(i) “ Offering Date ” shall mean the first business day of each Offering Period. However, for the initial Offering Period the Offering Date shall be the Effective Date.
(j) “ Offering Period ” shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).
(k) “ Parent ” shall have the same meaning as “parent corporation” in Sections 424(e) and 424(f) of the Code.
(l) “ Participant ” shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who is either automatically enrolled in the initial Offering Period or who elects to participate in this Plan pursuant to Section 6(b).
(m) “ Participating Corporation ” shall mean any Parents or Subsidiary that the Board designates from time to time as a corporation that shall participate in this Plan.
(n) “ Plan ” shall mean this Trupanion, Inc. 2014 Employee Stock Purchase Plan.
(o) “ Purchase Date ” shall mean the last U.S. business day of each Purchase Period.
(p) “ Purchase Period ” shall mean a period during which contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).
(q) “ Purchase Price ” shall mean the price at which Participants may purchase a share of Common Stock under the Plan, as determined pursuant to Section 8.
(r) “ Subsidiary ” shall have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.
 
12

Exhibit 10.6
Amended and Restated Employment Agreement
This Amended and Restated Employment Agreement (“ Agreement ”), dated as of April 20, 2007, is entered into between VETINSURANCE LTD., an Alberta corporation, having its principal place of business at 200-889 Harbourside Drive, North Vancouver, BC V7P 3S1 (“ Employer ”), and DARRYL RAWLINGS, an individual residing at                                      (“ Executive ”).
WITNESSETH
WHEREAS , Employer and Executive entered into that certain Employment Agreement dated as of June 30, 2006 (the “ Prior Agreement ” ) providing for the employment of Executive by Employer as its Chief Executive Officer; and
WHEREAS , Employer and Employee desire to amend and restate the Prior Agreement as hereinafter set forth.
NOW, THEREFORE , in consideration of the mutual agreements set forth herein, Employer and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT, POSITION DUTIES AND RESPONSIBILITIES
1.01 Employment . Employer agrees to, and does hereby, continue to employ Executive, and Executive agrees to, and does hereby accept such continued employment, upon the terms and subject to the conditions set forth in this Agreement. Executive represents and warrants to Employer that (A) Executive has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Executive according to its terms, and (C) the execution and performance of this Agreement by Executive does not violate the terms of any existing agreement or understanding to which Executive is a party or by which Executive otherwise may be bound.
1.02 Position, Duties and Authority . During the Term (as defined below), Executive shall serve as Chief Executive Officer of Employer and in such other executive-level position or capacity as Employer shall request (including, without limitation, serving, if elected, as the Chief Executive Officer of any one or more of Employer’s affiliates and subsidiaries) and shall have such responsibilities, duties and authority as may, from time to time, be assigned by Employer’s Board of Directors (the “ Board ”). During the Term, Executive shall serve Employer faithfully and to the best of Executive’s ability, and shall devote substantially all of Executive’s business time, attention, skill and efforts exclusively to the business and affairs of Employer (including its subsidiaries and affiliates) and the promotion of its interests. Notwithstanding the foregoing, Executive may engage in (i) charitable, educational, religious, civic and similar types of activities and (ii) other business ventures not in competition with Employer or its affiliates or subsidiaries to the extent that any such activities set forth in (i) or (ii) do not inhibit or prohibit the performance of Executive’s duties hereunder or inhibit or conflict with the business of

Employer, its subsidiaries and affiliates. Executive’s principal base of operation for the performance of his duties under this Agreement shall be in British Columbia; provided, however, Executive shall perform such duties and responsibilities at such other places as shall from time to time be reasonably necessary to fulfill Executive’s obligations under this Agreement in the discretion of Employer.
ARTICLE II
TERM
2.01 Term of Employment . Subject to earlier termination pursuant to Article IV hereof, Executive’s employment with Employer shall continue until June 30, 2011 (the “ Term ”); provided, however, that unless either party hereto gives written notice to the other at least 90 days prior to the expiration of the then-current Term that such party elects not to renew this Agreement, the then-current Term shall be automatically extended for additional one-year periods. The election of Employer not to extend the then-current Term as provided in this Section 2.01 shall not be deemed to be a termination by Employer under Sections 4.01(B) below and in such event Executive shall only be entitled to receive (i) payment of Base Salary and any bonus to which Executive otherwise would be entitled pursuant to Section 3.01(B), (ii) reimbursement for any expenses incurred by Executive, pursuant to Section 3.02 herein, and (iii) payment and/or provision of any amounts or benefits that are vested amounts or vested benefits or that Executive otherwise is entitled to receive under any plan, program, policy or practice (with the exception of those, if any, relating to severance), all (in the case of (i), (ii) and (iii)) up to the end of the then-current Term.
ARTICLE III
COMPENSATION AND BENEFITS; EXPENSES
3.01 Compensation and Benefits . For all services rendered by Executive in any capacity during the Term, including, without limitation, services as an officer, director or member of any committee of Employer, or any subsidiary, affiliate or division thereof, Executive shall be compensated as follows (subject, in each case, to the provisions of Article IV below):
(A) Base Salary . During the Term, Employer shall pay to Executive a base salary at the rate of US$200,000 on an annualized basis (“ Base Salary ”). Executive’s Base Salary shall be subject to periodic review (which is expected to occur annually) and such periodic adjustments as the Board or the Compensation Committee of the Board (the “ Compensation Committee ”) shall deem appropriate in its discretion. The term “ Base Salary ” as used in this Agreement shall refer to Base Salary as it may be adjusted from time to time. Base Salary shall be payable in accordance with the customary payroll practices of Employer in place from time to time.
(B) Bonus . During the Term, and effective with calendar year 2007, Executive shall be eligible for an annual bonus equal to 60% of Base Salary, provided that Executive has performed at a level of performance satisfactory to the Board or the Compensation Committee, each acting in its sole discretion (the “ Discretionary Bonus ”). The Bonus, if any, shall be payable within sixty days after the last day of each calendar year. To be eligible to receive any Bonus, Executive must be employed by Employer at the time any such Bonus is to be paid.
 
-2-

(C) Stock Options . Subject to Board approval and adoption of an equity incentive plan (the “ Plan ”), Employer shall grant to Employee incentive stock options (the “ Options ”) to purchase 81,564 shares (which option shares, upon the second closing contemplated in the stock purchase agreement to be entered into on the date hereof by and among Employer and certain other investors, will represent approximately 6% of the outstanding equity of Employer on a fully diluted basis) of Employer’s common stock at an exercise price equal to US$9.00 per share (provided that the Board determines that such exercise price per share is equal to the fair market value of one share of Employer’s common stock on the effective date of grant), which Options shall be subject to vesting. The Options shall vest and become exercisable over a four (4) year term as follows, provided Employee remains continuously employed by Employer: one forty-eighth (1/48) of the Options issued in connection with such grant shall vest on the last day of each calendar month beginning with the calendar month in which such grant occurred until all such Options associated with such grant shall have vested. Unvested Options, or any unvested shares of common stock acquired upon exercise of any options (the “ Option Shares ”), shall be subject to repurchase by Employer at Employee’s cost upon the termination of the Employment for any reason. The mechanics of such repurchase shall be provided in the Plan and in the option agreement (the “ Option Agreement ”) entered into by Employer and Employee with respect to the Options. The Options and the Option Shares will be subject to the terms and conditions of the Plan and the Option Agreement, which Employee will be required to sign as a condition of receiving the Options.
(D) Benefits . During the Term, Executive shall be entitled to participate in all Employer’s employee benefit plans and programs (excluding severance plans, if any) as Employer generally maintains from time to time during the Term for the benefit of its executive level employees, in each case subject to the eligibility requirements, enrollment criteria and the other terms and provisions of such plans or programs. Employer may amend, modify or rescind any employee benefit plan or program and/or alter employee contribution amounts to benefit costs without notice in its discretion.
3.02 Expenses . Executive shall be entitled to receive reimbursement from Employer for all reasonable out-of-pocket expenses incurred by Executive during the Term in connection with the performance of Executive’s duties and obligations under this Agreement, according to Employer’s expense account and reimbursement policies in place from time to time and provided that Executive shall submit reasonable documentation with respect to such expenses.
ARTICLE IV
TERMINATION
4.01 Events of Termination . This Agreement and Executive’s employment hereunder shall terminate upon the occurrence of any one or more of the following events:
(A) Termination by Employer for Cause . Employer may, at its option, terminate this Agreement and Executive’s employment hereunder for Cause (as defined herein) immediately upon giving notice of termination to Executive. For purposes hereof, “ Cause ” shall mean Executive’s (i) conviction of an offence that is related to the employment of Executive, (ii) commission of a fraudulent, illegal or dishonest act in respect of Employer or any of its affiliates
 
-3-

or subsidiaries, (iii) willful misconduct or gross negligence that reasonably could be expected to be injurious in the reasonable discretion of Employer to the business, operations or reputation of Employer or any of its affiliates or subsidiaries (monetarily or otherwise), (iv) violation of Employer’s policies or procedures in effect from time to time; provided, however, to the extent that such violation is subject to cure, Executive shall have an opportunity to cure such violation within ten (10) days following written notice of such violation from Employer, (v) after a written warning and a ten (10) day opportunity to cure non-performance, failure to perform Executive’s duties as assigned to Executive from time to time, or (vi) other material breach of this Agreement (including, without limitation, any breach or threatened breach of Executive’s obligations under Article V hereof).
(B) Without Cause by Employer . Employer may, at its option, at any time terminate Executive’s employment for no reason or for any reason whatsoever (other than for Cause or as a result of Executive’s death or Disability) by providing Executive with the minimum statutory notice (or pay in lieu thereof) pursuant to the applicable employment legislation.
(C) Termination By Executive. Executive may terminate this Agreement and Executive’s employment hereunder for any reason or no reason by giving thirty (30) days prior written notice of termination to Employer; provided, however, that Employer reserves the right to accept Executive’s notice of termination and to accelerate such notice and make Executive’s termination effective immediately, or on any other date prior to Executive’s intended last day of work as Employer deems appropriate.
(D) Death . In the event of Executive’s death, this Agreement and Executive’s employment hereunder shall automatically terminate on the date of death.
(E) Disability . To the extent permitted by law, in the event of Executive’s physical or mental disability that prevents Executive from performing Executive’s duties under this Agreement for a period of at least 180 consecutive days in any 12-month period or 270 non-consecutive days in any 12-month period, Employer may terminate this Agreement and Executive’s employment hereunder upon written notice to Executive.
(F) Mutual Agreement . Executive’s employment hereunder may be terminated at any time by the mutual agreement of Employer and Executive.
(G) Expiration of Term . Executive’s employment hereunder shall automatically terminate upon the expiration of the Term.
 
4.02	Employer’s Obligations Upon Termination .	
(A) Termination by Employer for Cause; Termination by Executive; Deat h; Disability; Mutual Agreement; Expiration of Term . In the event of a termination of this Agreement and Executive’s employment hereunder pursuant to Sections 4.01(A), 4.01(C) 4.01(D), 4.01(E), 4.01(F), or 4.01(G) above, then this Agreement and Executive’s employment with Employer shall terminate and Employer’s sole obligation under this Agreement or otherwise shall be to (i) pay to Executive or his estate, as applicable, any Base Salary earned, but not yet paid, prior to the effective date of such termination, (ii) reimburse Executive or his estate, as applicable, for any
 
-4-

expenses incurred by Executive through the effective date of such termination in accordance with Section 3.02 above, and (iii) pay and/or provide any amounts or benefits that are vested amounts or vested benefits or that Executive or his estate, as applicable, otherwise is entitled to receive under any plan, program, policy or practice (with the exception of those, if any, relating to severance) on the date of termination, in accordance with such plan, program, policy, or practice (clauses (i), (ii) and (iii) of this sentence are collectively referred to herein as the “ Accrued Obligations ”). Notwithstanding the foregoing, in the event that Employer terminates Executive’s employment hereunder for Cause pursuant to Section 4.01(A) hereof and Executive disputes that Employer has Cause and Executive ultimately prevails, then, in addition to the Accrued Obligations and any other awards made to Executive with respect to his successful challenge, Employer also shall pay Executive’s reasonable legal fees and expenses directly relating to the dispute.
(B) Without Cause . If, during the Term, Employer shall terminate this Agreement and Executive’s employment hereunder without Cause pursuant to Section 4.01(B) above, then Executive’s employment with Employer shall terminate and Employer’s sole obligation to Executive under this Agreement or otherwise shall be to (i) provide to Executive (a) payment of Base Salary earned but not yet paid and any bonus to which Executive otherwise would be entitled pursuant to Section 3.01(B), (b) reimbursement for any expenses incurred by Executive pursuant to Section 3.02 herein and (c) payment and/or provision of any amounts or benefits that are vested amounts or vested benefits or that Executive otherwise is entitled to receive under any plan, program, policy or practice, (with the exception of those, if any, relating to severance), all through to the end of Executive’s last day of work; (ii) provide the notice or pay in lieu thereof in accordance with Section 4.01(B); and (iii) subject to Executive’s execution, delivery and non-revocation of a general release in a form satisfactory to Employer (the “ Releas e ”) (which Release, among other things, will include a general release of Employer, its affiliates and subsidiaries, and its and their respective officers, directors, managers, members, shareholders, partners, employees and agents from all liability and other terms deemed necessary by Employer for its protection), continue to pay Executive’s Base Salary (at the rate in effect on the date of termination) for a period equal to the lesser of (i) six months, or (ii) through the end of the then-current Term (the “ Severance Period ”), both inclusive of the notice or pay in lieu thereof provided to Executive pursuant to Section 4.01(B).
ARTICLE V
Confidentiality, Assignment of Inventions, Non-Competition,
Non-Solicitation and Other Covenants
5.01 Confidentiality . While working or performing services for Employer, its affiliates, its subsidiaries or otherwise, Executive may have previously developed or acquired, or in the future may develop or acquire, knowledge in Executive’s work or from directors, officers, employees, agents or consultants of Employer, its affiliates, its subsidiaries or otherwise of Confidential Information (as hereinafter defined) relating to Employer, its business, potential business or that of its affiliates and subsidiaries and its and their respective clients and customers. “ Confidential Information ” includes all trade secrets, know-how, show-how, theories, technical, operating, financial, and other business information, whether or not reduced to writing or other medium and whether or not marked or labeled confidential, proprietary or the like, specifically including, but
 
-5-

not limited to, information regarding source codes, software programs, computer systems, algorithms, formulae, apparatus, concepts, creations, costs, plans, materials, enhancements, research, specifications, works of authorship, techniques, documentation, models and systems, sales and pricing techniques, designs, inventions, discoveries, products, improvements, modifications, methodology, processes, concepts, records, files, memoranda, reports, plans, proposals, price lists, client, customer, supplier, collaborator/partner or distributor information, product development and project procedures. Confidential Information does not include general skills, experience or information that is generally available to the public, other than information that has become generally available as a result of Executive’s direct or indirect act or omission.
With respect to Confidential Information of Employer, its affiliates and subsidiaries and its and their respective clients and customers:
(A) Executive will use Confidential Information only in the performance of Executive’s duties for Employer. Executive will not use Confidential Information at any time (during or after Executive’s employment with Employer) for Executive’s personal benefit, for the benefit of any other individual or entity, or in any manner adverse to the interests of Employer, its affiliates and subsidiaries and its and their respective clients and customers;
(B) Executive will not disclose Confidential Information at any time (during or after Executive’s employment with Employer) except to authorized Employer personnel, unless Employer consents in advance in writing or unless the Confidential Information indisputably becomes of public knowledge or enters the public domain (other than through Executive’s direct or indirect act or omission);
(C) Executive will safeguard the Confidential Information by all reasonable steps and abide by all policies and procedures of Employer in effect from time to time regarding storage, copying, destroying, publication or posting, or handling of such Confidential Information, in whatever medium or format that Confidential Information takes;
(D) Executive will execute and abide by all confidentiality agreements that Employer reasonably requests Executive to sign or abide by, whether those agreements are for the benefit of Employer, an affiliate or subsidiary, or an actual or a potential customer or client thereof; and
(E) Executive will return all materials, substances, models, software, prototypes and the like containing and/or relating to Confidential Information, together with all other property of Employer, its affiliates and subsidiaries and its and their respective clients and customers, to Employer when Executive’s employment relationship with Employer terminates or otherwise on demand and, at that time, Executive will certify to Employer in writing that Executive has complied with this Agreement. Executive shall not retain any copies or reproductions of correspondence, memoranda, reports, notebooks, drawings, photographs, databases, diskettes, or other documents or electronically stored information of any kind relating in any way to the business, potential business or affairs of Employer, its affiliates and subsidiaries and its and their respective clients and customers. Employer acknowledges and agrees that Executive may retain his personal journals notwithstanding the fact that he may record business as well as personal matters therein.
 
-6-

5.02 Assignment of Developments . Executive will disclose promptly and fully to Employer and to no one else: (A) all inventions, ideas, improvements, discoveries, works modifications, processes, software programs, works of authorship, documentation, formulae, techniques, designs, methods, trade secrets, technical specifications and technical data, know-how and show-how, concepts, expressions or other developments whatsoever or any interest therein (whether or not patentable or registrable under copyright, trademark or similar statutes or subject to analogous protection) made, authored, devised, developed, discovered, reduced to practice, conceived or otherwise obtained by Executive (“ Developments ”), solely or jointly with others, during the course of Executive’s employment with Employer that (i) are related to the business of Employer or any of its affiliates or subsidiaries or any of the products or services being researched, developed, distributed, manufactured or sold by Employer or any of its affiliates and subsidiaries or which may be used in relation therewith or (ii) result from tasks assigned to Executive by Employer or any of its affiliates or subsidiaries; (B) any Development that is related to the business of Employer or any of its affiliates or subsidiaries and in which Executive had an assignable interest at the time of Executive’s first employment by Employer; and (C) any Development made using the time, materials or facilities of Employer or any of its affiliates or subsidiaries, even if such Development does not relate to the business of the Employer or any of its affiliates or subsidiaries. The determination as to whether a Development is related to the business of Employer or any of its affiliates or subsidiaries shall be made solely by an authorized representative of Employer. Any Development relating to the business of the Employer or any of its affiliates or subsidiaries and disclosed to Employer within one year following the termination of Executive’s employment with Employer shall be deemed to fall within the provisions of this Section 5.02. The “ business of Employer or any of its affiliates or subsidiaries ” as used in this Section 5.02 includes the actual business currently conducted by Employer or any of its affiliates or subsidiaries, as well as any business in which Employer or any of its affiliates or subsidiaries proposes to engage at any time during the period of Executive’s employment. Executive agrees that all such Developments listed above and the benefits thereof are and shall immediately become the sole and absolute property of Employer from conception, as “works made for hire” (as that term is used under the U.S. Copyright Act of 1976, as amended) or otherwise. Executive shall have no interest in any Developments. To the extent that title to any Developments or any materials comprising or including any Developments does not, by operation of law, vest in Employer, Executive hereby irrevocably assigns to Employer all of Executive’s right, title and interest, including, without limitation, tangible and intangible rights such as patent rights, trademarks and copyrights, that Executive may have or may acquire in and to all such Developments, benefits and/or rights resulting therefrom, and agrees promptly to execute any further specific assignments related to such Developments, benefits and/or rights at the request of Employer. Executive also hereby assigns to Employer, or waives if not assignable, all of Executive’s “moral rights” in and to all such Developments, and agrees promptly to execute any further specific assignments or waivers related to moral rights at the request of Employer.
Executive agrees to assist Employer without charge for so long as Executive is an executive of Employer and for as long thereafter as may be necessary (but at Employer’s expense including reasonable compensation to Executive if Executive is no longer an executive of Employer): (1) to apply, obtain, register and renew for, and vest in, Employer’s benefit alone (unless
 
-7-

Employer otherwise directs), patents, trademarks, copyrights, mask works, and other protection for such Developments in all countries, and (2) in any controversy or legal proceeding relating to Developments. In the event that Employer is unable to secure Executive’s signature after reasonable effort in connection with any patent, trademark, copyright, mask work or other similar protection relating to a Development, Executive hereby irrevocably designates and appoints Employer and its duly authorized officers and agents as Executive’s agent and attorney-in-fact, to act for and on Executive’s behalf and stead to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, trademarks, copyrights, mask works or other similar protection thereon with the same legal force and effect as if executed by Executive.
5.03 Obligations to Other Persons . Executive is not a party to or otherwise bound by any non-competition agreements, non-solicitation agreements or other restrictive covenants with any previous employer or other individual or entity that would prohibit, limit or conflict with the performance of Executive’s duties to Employer or any of its affiliates or subsidiaries. Executive shall not disclose to Employer or any of its affiliates or subsidiaries or induce Employer or any of its affiliates or subsidiaries to use any secret or confidential information or material belonging to others, including, without limitation, Executive’s former employers, if any.
5.04 Covenant Against Competition and Solicitation .
(A) Executive acknowledges and understands that, in view of the position that Executive holds or will hold as an employee of Employer, Executive’s relationship with Employer will afford Executive extensive access to Confidential Information of Employer and its affiliates and subsidiaries. Executive therefore agrees that during the course of Executive’s employment with Employer and for a period of twelve (12) months after termination of Executive’s employment with Employer (for any reason or no reason) (collectively, “ Restricted Period ”), Executive shall not: (i) anywhere within the United States of America, Canada or any other country in which Employer or any of its affiliates or subsidiaries then conducts or proposes to conduct business, either directly or indirectly, as an owner, stockholder, member, partner, joint venturer, officer, director, consultant, independent contractor, agent or employee, engage in any business or other commercial activity that is engaged in or is seeking to engage in a “competitive business”. As used in this Agreement, the term “ competitive business ” shall mean (i) the business of pet health insurance, or (ii) or any other business competitive with the type of business conducted by (or actively being contemplated by) Employer or any of its affiliates or subsidiaries on the date of termination. Notwithstanding the foregoing, in the event that Executive’s employment is terminated by Employer without Cause pursuant to Section 4.01(B) above, then, for purposes of this Section 5.04(A) only, the Restricted Period shall end on the later of (i) the last day of Executive’s employment or (ii) the last day for which Executive receives payment from Employer pursuant to Section 4.02(B).
(B) Executive further agrees that, during the Restricted Period, Executive shall not, directly or indirectly, either on Executive’s own behalf or on behalf of any other individual or commercial enterprise: (i) contact, communicate, solicit or transact any business with or assist any third party in contacting, communicating, soliciting or transacting any business with (a) any of the customers or clients of Employer or any of its affiliates or subsidiaries, (b) any prospective
 
-8-

customers or clients of Employer or any of its affiliates or subsidiaries being solicited at the time of Executive’s termination, or (c) any individual or entity who or which was within the twelve (12) month period preceding the termination of Executive’s employment with Employer, a customer or client of Employer or any of its affiliates or subsidiaries, for the purpose of inducing such customer or client or potential customer or client to be connected to or benefit from any competitive business or to terminate its or their business relationship with Employer or any of its affiliates or subsidiaries; (ii) solicit, induce or assist any third party in soliciting or inducing any individual or entity who is then (or was at any time within the preceding 12 months) an employee, consultant, independent contractor or agent of Employer or any affiliates or subsidiary to leave the employment of Employer or its affiliate or subsidiary or cease performing services for Employer or its affiliate or subsidiary; (iii) hire or engage or assist any third party in hiring or engaging, any individual or entity that is or was (at any time within the preceding 12 months) an employee, consultant, independent contractor or agent of Employer or any of its affiliates or subsidiaries; or (iv) solicit, induce or assist any third party in soliciting or inducing any other person or entity (including, without limitation, any third-party service provider or distributor) to modify or terminate its relationship with Employer or any of its affiliates or subsidiaries or otherwise interfere with such relationship.
5.05 Non-Disparagement . Executive will not at any time (during or after Executive’s employment with Employer) disparage the reputation of Employer, its affiliates and subsidiaries, its and their respective clients and customers and its or their respective officers, directors, agents or Executives.
5.06 Cooperation . Executive agrees to cooperate both during and after Executive’s employment with Employer, at Employer’s sole cost and expense, with any investigation by the Employer involving Employer or any of its affiliates or subsidiaries or any employee or agent of Employer or any of its affiliates or subsidiaries.
5.07 Reasonable Restrictions/Damages Inadequate Remedy . Executive acknowledges that the restrictions contained in this Article V are reasonable and necessary to protect the legitimate business interests of Employer and its affiliates and subsidiaries and that any breach by Executive of any provision contained in this Article V will result in immediate irreparable injury to Employer and/or its affiliates and subsidiaries for which a remedy at law would be inadequate. Executive further acknowledges that the restrictions contained in this Article V will not prevent Executive from earning a livelihood during the applicable period of restriction. Accordingly, Executive acknowledges that, in the event of a breach or threatened breach by Executive of any provisions of this Article V, Employer and/or its affiliates and subsidiaries shall be entitled to temporary, preliminary and permanent injunctive or other equitable relief (without being obligated to post security or other collateral) and an equitable accounting of all earnings, profits and other benefits arising, directly or indirectly, from such violation, which rights shall be cumulative and in addition to (rather than instead of) any other rights or remedies to which Employer, its affiliates and/or its subsidiaries may be entitled at law or in equity. In addition (and not instead of those rights), Executive further covenants that Executive shall be responsible for payment of the legal and experts’ fees and expenses of Employer’s and its affiliates’ and subsidiaries’ attorneys and experts, as well as their respective court costs, pertaining to any suit, arbitration, mediation, action or other proceeding (including the costs of any investigation related thereto) arising directly or indirectly out of Executive’s violation or threatened violation of any of the provisions of this Article V.
 
-9-

ARTICLE VI.
MISCELLANEOUS
6.01 Benefit of Agreement and Assignment . This Agreement shall inure to the benefit of Employer, its affiliates and subsidiaries and its and their respective successors and assigns and shall be binding upon Employer and its successors and assigns. This Agreement shall also inure to the benefit of and be binding upon Executive and Executive’s heirs, administrators, executors and assigns. Executive may not assign Executive’s duties under this Agreement, without the prior written consent of Employer.
6.02 Notices . All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given (A) on the date delivered if personally delivered, (B) on the date sent by telecopier with automatic confirmation by the transmitting machine showing the proper number of pages were transmitted without error, (C) upon receipt by the receiving party of any notice sent by registered or certified mail (first-class mail, postage pre-paid, return receipt requested) or (D) on the date targeted for delivery if delivered by nationally recognized overnight courier or similar courier service, in each case addressed to the Employer or Executive, as the case may be, at the respective addresses indicated in the caption of this Agreement or such other address as either party may in the future specify in writing to the other. In addition, a copy (which shall not itself constitute notice) of any notice sent to Employer hereunder shall be sent to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Tel. 973.597.2568, Fax: 973.597.2569, Attention: Edward M. Zimmerman, Esq.
6.03 Entire Agreement . This Agreement contains the entire agreement of the parties hereto with respect to the terms and conditions of Executive’s employment during the Term and any extensions thereof and activities following termination of this Agreement and supersedes any and all prior agreements (including the Prior Agreement) and understandings, whether written or oral, between the parties with respect to the subject matter of this Agreement. This Agreement may not be changed or modified except by an instrument in writing, signed by both an authorized executive officer of Employer (other than Executive) and Executive.
6.04 Severability. In case any one or more of the provisions hereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and such invalid, illegal and unenforceable provision shall be reformed and construed so that it will be valid, legal and enforceable to the maximum extent permitted by law.
6.05 No Waiver . The waiver by other party of a breach of any provision of this Agreement shall not operate or be construed as a continuing waiver or as a consent to or waiver of any subsequent breach hereof.
 
-10-

6.06 Headings . The Article and Section headings in this Agreement are for the convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
6.07 Governing Law; Jurisdiction Any and all actions or controversies arising directly or indirectly out of this Agreement or Executive’s employment, including, without limitation, tort claims, shall be construed and enforced in accordance with the internal laws of the Province of British Columbia, without regard to the choice of law principles thereof. Any and all actions arising out of this Agreement or Executive’s employment by Employer or termination therefrom shall be brought and heard in the Supreme Court of British Columbia and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of this court. Employer and Executive hereby agree to waive their respective rights to a trial by jury.
6.08 Validity . The invalidity or enforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision or provisions of this Agreement, which shall remain in full force and effect.
6.09 Executive Withholdings and Deductions . All payments to Executive hereunder shall be subject to such withholding and other Executive deductions as may be required by law.
6.10 Counterparts . This Agreement may be executed in one more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
6.11 Agreement to Take Actions . Each party to this Agreement shall execute and deliver such documents, certificates, agreements and other instruments, and shall take all other actions, as may be reasonably necessary or desirable in order to perform his/her or its obligations under this Agreement.
6.13 Survival. The provisions of Section 4.02, Article V and Article VI shall survive the termination of this Agreement and Executive’s employment by Employer.
6.13 Legal Counsel . Executive represents that Employer has previously recommended that Executive engage counsel to assist him in reviewing this Agreement and all other matters relating to Executive’s employment relationship with Employer. Executive acknowledges that, prior to executing this Agreement, Executive has been given a reasonable opportunity to review the Agreement and to consult with counsel as to its content and is entering into this Agreement freely and voluntarily. Employer and Executive shall each bear their own costs and expenses in connection with the negotiation and execution of this Agreement.
 
-11-

IN WITNESS WHEREOF, Employer and Executive have duly executed this Agreement as of the date first written above.

EMPLOYER:	
	
VETINSURANCE LTD.	
		
By:	 	/s/ Darryl Rawlings	
	 	Darryl Rawlings	
	
EXECUTIVE:	
	
/s/ Darryl Rawlings	
Darryl Rawlings, individually	
 
-12-

Exhibit 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ( “ Agreement ” ) is made effective as of June 13, 2012 ( “ Effective Date ” ), by and between VETINSURANCE MANAGERS, INC., an Arizona corporation (“ Company ”) and Michael Banks (“ Executive ”).
The parties agree as follows:
1. Employment/Start Date . Company hereby employs Executive, and Executive hereby accepts such employment, upon the terms and conditions set forth herein. Executive’s full-time employment with Company and compensation and benefits provided under this Agreement shall commence on June 13, 2012 ( “ Start Date ” ).
2. Duties .
2.1 Position . Executive will be employed as Chief Financial Officer as of the Start Date. Executive shall have the duties and responsibilities assigned by Company’s Chief Executive Officer ( “ CEO ” ) both upon initial hire and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all duties assigned to Executive. Company reserves the right to modify Executive’s position and duties at any time in its sole and absolute discretion.
2.2 Best Efforts/Full-time . Executive will expend Executive’s best efforts on behalf of Company, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Executive will act in the best interest of Company at all times. Executive shall devote Executive’s full business time and efforts to the performance of Executive’s assigned duties for Company, unless Executive notifies the CEO in advance of Executive’s intent to engage in other paid work and receives the CEO’s express written consent to do so.
2.3 Work Location . Executive’s principal place of work shall be located in Seattle, Washington, or such other location as Company may direct from time to time.
3. At-Will Employment . Executive’s employment with Company is at-will and not for any specified period and may be terminated at any time, with or without cause (as defined below) or advance notice, by either Executive or Company subject to the provisions regarding termination set forth below in section 8. No representative of Company, other than the CEO, has the authority to alter the at-will employment relationship. Any change to the at-will employment relationship must be by specific, written agreement signed by Executive and the Company’s CEO. Nothing in this Agreement is intended to or should be construed to contradict, modify or alter this at-will relationship.
4. Compensation .
4.1 Base Salary . As compensation for Executive’s performance of Executive’s duties hereunder, during Executive’s employment, Company shall pay to Executive an initial base salary of two hundred twenty-five thousand dollars ($225,000.00) per year (the
 
1

“ Base Salary ” ), less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions, payable in accordance with the normal payroll practices of Company. In the event Executive’s employment under this Agreement is terminated by either party, for any reason, Executive will earn the Base Salary prorated to the date of termination.
4.2 Incentive Compensation . Executive will be eligible to earn an annual bonus of one hundred thousand dollars ($100,000) per year based on the achievement of (a) corporate performance goals and (b) individual performance objectives, as follows: 85% of the bonus is based on company’s achievement of its objectives for such period and 15% is based on Executive’s individual achievement of individual performance objectives that may be established by the CEO and/or the Board of Directors at the beginning of each fiscal year.
4.3 Stock Options . Subject to the Board of Directors’ approval, Executive will be granted an incentive stock option to purchase 200,000 of shares of Company’s Common Stock under the Vetinsurance International, Inc. 2007 Equity Compensation Plan (the “ Plan ”) at an exercise price of $4.05 (representing the fair market value of that stock on the Effective Date of the grant) (the “ Option ”). The Option will be subject to the terms and conditions of the Plan and the standard stock option agreement provided pursuant to the Plan, which Executive will be required to sign as a condition of receiving the Option. The Option will begin vesting on the Start Date of this Agreement.
4.4 Performance and Salary Review . The Company will periodically review Executive’s performance on no less than an annual basis. Adjustments to salary or other compensation, if any, will be made by the Company in its sole and absolute discretion.
5. Customary Fringe Benefits . During Executive’s employment, Executive will be eligible for all customary and usual fringe benefits generally available to executives of Company subject to the terms and conditions of Company’s benefit plan documents. Executive will be eligible to accrue up to twenty (20) days of vacation per year, the use of which shall be governed by Company’s vacation policy. Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Executive.
6. Business Expenses . Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation and will be reimbursed in accordance with Company’s policies. Any reimbursement Executive is entitled to receive shall (a) be paid no later than the last day of Executive’s tax year following the tax year in which the expense was incurred, (b) not be affected by any other expenses that are eligible for reimbursement in any tax year and (c) not be subject to liquidation or exchange for another benefit.
7. Relocation Reimbursement . Upon receipt of valid invoices, Company will reimburse (or pay on behalf of) Executive allowable reasonable, documented expenses, including: (i) the packing, transport and related expenses for furniture and personal effects from the Executive’s existing residence to the Seattle, Washington area, and (ii) “house hunting” trips with Executive and his spouse to the such area; provided , however , that the total expenses
 
2

reimbursable to the Executive pursuant to this sentence shall not exceed $45,000. If the Executive has not relocated his permanent residence to the Seattle, Washington area within three (3) months of the Effective Date of this Agreement, the Company shall have the right to terminate this Agreement upon notice to the Executive without the obligation to make any payments (including that Executive will not be entitled to receive the Severance Payment described in subsection 8.2 below) or provide any other benefits; provided , however, that the Board may waive the requirement that Executive relocate to the Seattle, Washington area or extend the twelve-month period described in this sentence, in its sole discretion. Company does not make any representations regarding the tax consequences of this benefit and Executive is advised to obtain Executive’s own tax counsel for such information and guidance.
8. Termination of Executive’s Employment .
8.1 Termination for Cause by Company . Although Company anticipates a mutually rewarding employment relationship with Executive, Company may terminate Executive’s employment immediately at any time for Cause. For purposes of this Agreement, “ Cause ” is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to Executive’s obligations or otherwise relating to the business of Company; (b) any acts or conduct by Executive that are materially adverse to Company’s interests; (c) Executive’s material breach of this Agreement; (d) Executive’s breach of Company’s Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement; (e) Executive’s 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 Executive’s ability to effectively perform Executive’s duties hereunder; (f) Executive’s willful neglect of duties as determined in the sole and exclusive discretion of the Board of Directors; (g) Executive’s inability to perform the essential functions of Executive’s position, with or without reasonable accommodation, due to a mental or physical disability; (h) Executive’s death, or (i) Executive’s failure to relocate Executive’s primary residence to Seattle, Washington within three (3) months of the Effective Date of this Agreement. In the event of termination based on (b) or (f), Executive will have fifteen (15) days from receipt of notice from Company to cure the issue, if curable. In the event Executive’s employment is terminated in accordance with this subsection 8.1, Executive shall be entitled to receive only Executive’s Base Salary then in effect, prorated to the date of termination and all benefits accrued through the date of termination ( “ Standard Entitlements ”). All other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. Executive will not be entitled to receive the Severance Package described in subsection 8.2 below.
8.2 Termination Without Cause by Company/Severance . Company may terminate Executive’s employment under this Agreement without Cause at any time on written notice to Executive. In the event of such termination, Executive will receive Executive’s Base Salary then in effect, prorated to the date of termination, and Standard Entitlements. In addition, the Executive will be entitled to receive a “ Severance Payment ” equivalent to two (2) months of Executive’s then current Base Salary. The Severance Payment shall be payable in equal installments in accordance with Company’s regular payroll cycle beginning on the first regular payday occurring 60 days following the termination date. Executive will only receive the applicable Severance Payment if Executive: (i) complies with all surviving provisions of this
 
3

Agreement as specified in subsection 12.8 below and the Company’s Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement; (ii) executes a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Executive may have against Company arising out of or any way related to Executive’s employment or termination of employment with Company, and such release has become effective in accordance with its terms prior to the 60th day following the termination date, and (iii) agrees not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Company ((i)-(iii) are collectively referred to hereafter as “ Severance Obligations ”) All other Company obligations to Executive will be automatically terminated and completely extinguished.
8.3 Voluntary Resignation by Executive . Executive may voluntarily resign Executive’s position with Company at any time on thirty (30) days’ advance written notice. In the event of Executive’s resignation, Executive will be entitled to receive only Executive’s Base Salary and benefits during the thirty-day notice period and no other amount. All other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, for clarity, Executive will not be entitled to receive any Severance Payment described in subsection 8.2 above upon a voluntary resignation.
8.4 Pay in Lieu of Notice Period . Should Executive resign Executive’s employment upon thirty (30) days’ advance written notice, Company reserves the right to immediately relieve Executive of all job duties, positions and responsibilities and provide Executive with payment of Executive’s then current Base Salary in lieu of any portion of the notice period.
8.5 Resignation of Board or Other Positions . Should Executive’s employment terminate for any reason, Executive agrees to immediately resign all other positions (including any board membership) Executive may hold on behalf of Company.
8.6 Application of Section 409A .
(a) Notwithstanding anything set forth in this Agreement to the contrary, no amount payable pursuant to this Agreement that constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “ Section 409A Regulations ”) shall be paid unless and until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations as of the date of Executive’s separation from service, no amount that constitutes a deferral of compensation that is payable on account of Executive’s separation from service shall be paid to Executive before the date (the “ Delayed Payment Date ” ) that is the first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for this section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
 
4

(b) Company intends that income provided to Executive pursuant to this Agreement will not be subject to taxation under Section 409A of the Code. The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.
(c) Notwithstanding anything herein to the contrary, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year; (2) the reimbursement of eligible expenses or in-kind benefits shall be made promptly, subject to Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
(d) For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
8.7 Termination Upon a Change of Control .
(a) Change of Control Severance Payment . If (i) the Company is subject to a Change of Control (as that term is defined below) “ CIC ”, within the four (4) years immediately following the Effective Date of this Agreement and (ii) Executive’s employment is terminated by Company within twelve (12) months after the Change of Control, other than for Cause (as defined in subsection 8.1 above), Executive shall be entitled to receive a “ CIC Severance Payment ” equivalent to twelve (12) months of Executive’s then current Base Salary. The CIC Severance Payment shall be in lieu of any other severance payments (including the Severance Payment described in subsection 8.2 above) and shall be payable in equal installments in accordance with Company’s regular payroll cycle beginning on the first regular payday occurring 60 days following the termination date. Executive will only receive the applicable CIC Severance Payment if Executive complies with all of the Severance Obligations described in subsection 8.2 above.
(b) 280G . If, due to the benefits provided under subsection 8.7(a) above, Executive is subject to any excise tax due to characterization of any amounts payable under subsection 8.7(a) as excess parachute payments pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ” ), the amounts payable under subsection 8.7(a) will be reduced (to the least extent possible) in order to avoid any “excess parachute payment” under Section 280G(b)(l) of the Code.
 
5

(c) Change of Control . A Change of Control is defined as any one of the following occurrences:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “ Exchange Act ” )), other than a trustee or other fiduciary holding securities of Company under an employee benefit plan of Company, becomes the “beneficial owner” (as defined in Rule 13d 3 promulgated under the Exchange Act), directly or indirectly, of the securities of Company representing more than 50% of (A) the outstanding shares of common stock of Company or (B) the combined voting power of the Company’s then-outstanding securities; or
(ii) the sale or disposition of all or substantially all of Company’s assets (or any transaction having similar effect is consummated); or
(iii) Company is party to a merger or consolidation that results in the holders of voting securities of Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iv) the dissolution or liquidation of Company.
9. No Conflict of Interest . During the term of Executive’s employment with Company, Executive must not engage in any work, paid or unpaid, or other activities that create a conflict of interest. Such work and/or activities shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, advisor, stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Executive’s employment with Company, as may be determined by Company in its sole discretion. If Company believes such a conflict exists during the term of this Agreement, Company may ask Executive to choose to discontinue the other work and/or activities or resign employment with Company.
10. Confidentiality and Proprietary Rights . As a condition of employment, Executive agrees to read, sign and abide by Company’s Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement, which is provided with this Agreement and incorporated herein by reference.
11. Injunctive Relief . Executive acknowledges that Executive’s breach of the covenants contained in Sections 9-10 (collectively “ Covenants ”) would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary or permanent injunctive relief, without the necessity of proving actual damages or posting any bond or other security.
 
6

12. General Provisions .
12.1 Successors and Assigns . The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement.
12.2 Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
12.3 Attorneys’ Fees . Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party.
12.4 Severability . In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
12.5 Interpretation; Construction . The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
12.6 Governing Law . This Agreement will be governed by and construed in accordancc with the laws of the United States and the State of Washington. Each party consents to the exclusive jurisdiction and venue of the state or federal courts in Seattle, Washington, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.
12.7 Notices . Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses as specified by either party in writing.
12.8 Survival . Sections 9 (“No Conflict of Interest”), 10 (“Confidentiality and Proprietary Rights”), 11 (“Injunctive Relief”), 12 (“General Provisions”) and 12.89 (“Entire Agreement”) of this Agreement shall survive Executive’s employment by Company.
 
7

12.9 Entire Agreement . This Agreement, including the Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement, incorporated herein by reference and Company’s Plan and related option documents described in subsection 4.2 of this Agreement, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This agreement may be amended or modified only with the written consent of Executive and the Board of Directors of Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING EXECUTIVE EMPLOYMENT AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

Dated: 6.13.2012	 		 		 	/s/ Michael Banks	
	 		 		 	Michael Banks, Executive	
				
	 		 		 	VETINSURANCE MANAGERS, INC.	
				
Dated: 6.13.12	 		 	By:	 	/s/ Darryl Rawlings	
	 		 		 	Darryl Rawlings, President	
 
8

Exhibit 10.8

	 	May 5, 2014
 	
VIA ELECTRONIC MAIL AND PERSONAL DELIVERY
Howard Rubin
 
 	RE:	Consulting Agreement	
Dear Howard:
This letter agreement (this “ Agreement ”) sets forth the terms and conditions whereby you agree to provide certain services (as described on Schedule 1 ) to Trupanion Managers USA, Inc., an Arizona corporation (the “ Company ”).
 
1.	S ERVICES	
 
1.1	The Company hereby engages you, and you hereby accept such engagement, as an independent contractor, to provide certain services to the Company and its affiliates on the terms and conditions set forth in this Agreement.	
 
1.2	You shall provide to the Company the services set forth on Schedule 1 (the “ Services ”). Schedule 1 may be supplemented and/or amended from time to time by mutual agreement of the parties.	
 
1.3	You will be an independent contractor. The Company will not control the manner or means by which you perform the Services. Unless otherwise set forth in Schedule 1 , you will furnish, at your own expense, the equipment, supplies and other materials used to perform the Services. The Company will provide you with access to its premises and equipment to the extent necessary for the performance of the Services. To the extent you perform any Services on the Company’s premises or using the Company’s equipment, you will comply with all applicable policies of the Company relating to business and office conduct, health and safety and use of the Company’s facilities, supplies, information technology, equipment, networks and other resources.	

907 NW Ballard Way
Seattle, WA 98107	 	800.569.7913	

2.	T ERM	
The term of this Agreement shall commence on the date set forth above and will continue for an initial term through July 1, 2017, unless earlier terminated in accordance with paragraph 10 (the “ Term ”). Any extension of the term will be subject to mutual written agreement between the parties.
 
3.	F EES AND E XPENSES	
 
3.1	As full compensation for the Services and the rights granted to the Company in this Agreement, the Company shall pay you the fees (the “ Fees ”) as set forth on Schedule 1 . You acknowledge that you will receive an IRS Form 1099-MISC from the Company, and that you shall be solely responsible for all federal, state and local taxes, as set out in paragraph 4.2.	
 
3.2	The Company agrees to reimburse you for all reasonable and documented travel and other costs or expenses incurred or paid by you in connection with the performance of the Services in accordance with the general reimbursement policy of the Company then in effect, and in each case that have been approved in writing in advance by the Company and/or are in an amount no greater than $2,000 for each individual expense and $6,000 in the aggregate.	
 
3.3	The Company shall pay all undisputed Fees in accordance with the payment schedule set forth in Schedule 1 .	
 
4.	R ELATIONSHIP OF THE P ARTIES	
 
4.1	You are an independent contractor of the Company, and this Agreement shall not be construed to create any association, partnership, joint venture, employee or agency relationship between you and the Company for any purpose. You have no authority (and shall not hold yourself out as having authority) to bind the Company and you shall not make any agreements or representations on the Company’s behalf without the Company’s prior written consent.	
 
4.2	Without limiting paragraph 4.1, you will not be eligible to participate in any vacation, group medical or life insurance, disability, profit sharing or retirement benefits or any other fringe benefits or benefit plans offered by the Company to its employees, and the Company will not be responsible for withholding or paying any income, payroll, Social Security or other	
 
2

 	federal, state or local taxes, making any insurance contributions, including unemployment or disability, or obtaining worker’s compensation insurance on your behalf. You shall be responsible for, and shall indemnify the Company against, all such taxes or contributions, including penalties and interest. Any persons employed or engaged by you in connection with the performance of the Services shall be your employees or contractors and you shall be fully responsible for them and indemnify the Company against any claims made by or on behalf of any such employee and/or contractor.	
 
5.	I NTELLECTUAL P ROPERTY R IGHTS	
 
5.1	The Company is and shall be, the sole and exclusive owner of all right, title and interest throughout the world in and to all the results and proceeds of the Services performed under this Agreement, including but not limited to any deliverables set out on Schedule 1 (collectively, the “ Deliverables ”), including all patents, copyrights, trademarks, trade secrets and other intellectual property rights (collectively “ Intellectual Property Rights ”) therein. You agree that any Deliverables are hereby deemed a “work made for hire” as defined in 17 U.S.C. § 101 for the Company. If, for any reason, any of the Deliverables do not constitute a “work made for hire,” you hereby irrevocably assign to the Company, in each case without additional consideration, all right, title and interest throughout the world in and to the Deliverables, including all Intellectual Property Rights therein.	
 
5.2	Any assignment of copyrights under this Agreement includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as “moral rights” (collectively, “ Moral Rights ”). You hereby irrevocably waive, to the extent permitted by applicable law, any and all claims you may now or hereafter have in any jurisdiction to any Moral Rights with respect to the Deliverables.	
 
5.3	You will and hereby are obligated make full and prompt disclosure to the Company of any inventions or processes, as such terms are defined in 35 U.S.C. § 100 (the “ Patent Act ”), made or conceived by you alone or with others during the Term, whether or not such inventions or processes are patentable or protected as trade secrets and whether or not such inventions or processes are made or conceived during normal working hours or on the premises of the Company. You shall not disclose to any third party the nature or details of any such inventions or processes without the prior written consent of the Company.	
 
5.4	Upon the request of the Company, you shall promptly take such further actions, including execution and delivery of all appropriate instruments of conveyance, as may be necessary to	
 
3

 	assist the Company to prosecute, register, perfect, record or enforce its rights in any Deliverables. In the event the Company is unable, after reasonable effort, to obtain your signature on any such documents, you hereby irrevocably designate and appoint the Company as your agent and attorney-in-fact, to act for and on your behalf solely to execute and file any such application or other document and do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other intellectual property protected related to the Deliverables with the same legal force and effect as if you had executed them. You agree that this power of attorney is coupled with an interest.	
 
5.5	You have no right or license to use, publish, reproduce, prepare derivative works based upon, distribute, perform, or display any Deliverables. You have no right or license to use the Company’s trademarks, service marks, trade names, trade names, logos, symbols or brand names.	
 
6.	C ONFIDENTIALITY AND R ESTRICTIVE C OVENANTS	
 
6.1	You acknowledge that you will have access to information that is treated as confidential and proprietary by the Company, whether spoken, written, printed, electronic or in any other form or medium (collectively, the “ Confidential Information ”). You agree, consistent with your other obligations to the Company and its affiliates, to treat all Confidential Information as strictly confidential, not to disclose Confidential Information or permit it to be disclosed, in whole or part, to any third party without the prior written consent of the Company in each instance, and not to use any Confidential Information for any purpose except as required in the performance of the Services. You will notify the Company immediately in the event you become aware of any loss or disclosure of any Confidential Information. You understand and acknowledge that your obligations under this Agreement or otherwise with regard to any particular Confidential Information commence immediately and shall continue in perpetuity, notwithstanding the termination of this Agreement, until such time as such Confidential Information has been disclosed publicly by the Company.	
 
6.2	Acknowledgment . You understand and acknowledge that the nature of your position (primarily, as a board member) gives you access to and knowledge of Confidential Information and places you in a position of trust and confidence. You understand and acknowledge that the services you provide to the Company are unique, special or extraordinary because of your extensive background, experience and connections within the pet health industry. You further understand and acknowledge that the Company’s ability to reserve these for the exclusive knowledge and use of the Company and its affiliates is of great competitive importance and commercial value to the Company, and that improper use or disclosure by you is likely to result in unfair or unlawful competitive activity.	
 
4

6.3	Non-competition . Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to you pursuant to this Agreement, during the term of this Agreement and for the thirty-six (36) months following its termination for any reason or no reason and whether the contract is terminated at the option of the Company or by you, you agree and covenant not to engage in Prohibited Activity within any jurisdiction in which the Company, now or in the future, operates or is intending to operate (currently, USA, Canada, Puerto Rico and Brazil), regardless of whether you are aware of such an intention at any time. For purposes of this non-compete clause, “ Prohibited Activity ” is activity in which you contribute your knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, partner, director, stockholder, officer, volunteer, intern or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of acting as a managing general agent and/or an underwriter of any form of medical insurance for companion animals. Prohibited Activity also includes activity that may require or inevitably require disclosure of trade secrets, proprietary information or Confidential Information.	
 
6.4	This Section does not, in any way, restrict or impede you from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. You will promptly provide written notice of any such order to the Company’s General Counsel or equivalent. Furthermore, nothing herein shall prohibit you from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that you are not a controlling person of, or a member of a group that controls, such corporation.	
 
6.5	Remedies . In the event of a breach or threatened breach by you of any of the provisions of this Agreement, you hereby consent and agree that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.	
 
5

7.	R EPRESENTATIONS AND W ARRANTIES	
 
7.1	You represent and warrant to the Company that you have the right to enter into this Agreement, to grant the rights granted herein and to perform fully all of your obligations in this Agreement. Any and all Deliverables are and shall be your original work (except for material in the public domain or provided by the Company) and, to the best of your knowledge, the Company will receive good and valid title to all Deliverables, free and clear of all encumbrances and liens of any kind and the Deliverables do not and will not violate or infringe upon the intellectual property right or any other right whatsoever of any person, firm, corporation or other entity.	
 
7.2	The Company hereby represents and warrants to you that it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder.	
 
8.	I NDEMNIFICATION	
 
8.1	You shall defend, indemnify and hold harmless the Company and its affiliates and their officers, directors, employees, agents, successors and assigns from and against all losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind (including reasonable attorneys’ fees) arising out of or resulting from:	
 
 	(a)	bodily injury, death of any person or damage to real or tangible, personal property resulting from your acts or omissions; and	
 
 	(b)	your breach of this Agreement, including, without limitation, any representation, warranty or obligation.	
 
8.2	The Company may satisfy such indemnity (in whole or in part) by way of deduction from any payment due to you.	
 
9.	P RIOR E MPLOYMENT AND M UTUAL R ELEASE	
 
9.1	Separation from Employment. The parties acknowledge that you were previously employed by the Company as its Chief Operating Officer and that the last day of such employment was	
 
6

 	May 1, 2014 (the “ Separation Date ”). After the Separation Date, you will not represent yourself as being an employee, officer, agent or representative of the Company; however, the parties acknowledge and agree their mutual intention for you to remain as a director on the Company’s Board of Directors, and on the board of directors of American Pet Insurance Company, the Company’s underwriting subsidiary, following the Separation Date and during the remaining term of this Agreement (your “ Board Service ”). In connection with your Board Service following July 1, 2015, the parties acknowledge their intention that you would receive any standard compensation (cash and/or equity) granted to outside directors of the Company’s Board of Directors for your Board Service after July 1, 2015, subject to appropriate approvals by the Company’s Board of Directors and/or any committees of the Company’s Board of Directors.	
 
9.2	COBRA Benefits. From the Separation Date through December 31, 2014, or, if earlier, the date you become eligible for health and/or dental coverage through an employer, the Company will continue to cover the same portion of your health and dental premiums pursuant to COBRA for you and your eligible dependents as was being provided immediately prior to the Separation Date (such coverage, the “ COBRA Benefits ”).	
 
9.3	Acceleration of Stock Options. Your Stock Option Agreement with respect to your nonstatutory stock options granted on March 16, 2010 will be amended and restated in substantially the form attached as Exhibit A (the “ Stock Option Acceleration ”).	
 
9.4	Full Satisfaction of Employment Agreement. You acknowledge and agree that your Employment Agreement dated as of February 1, 2010 (the “ Former Employment Agreement ”) is hereby terminated and of no further force and effect, and that this Agreement reflects any and all of your ongoing rights and obligations with respect to the Company. Accordingly and in furtherance of the foregoing, you understand, acknowledge and agree that these benefits exceed what you would otherwise entitled to receive upon separation from employment and you have no entitlement to any additional payment or consideration not specifically referenced in this Agreement.	
 
9.5	Release of Claims by Company; Representations by You. The Company expressly waives and releases any and all claims against you that may be waived and released by law with the exception of claims arising out of or attributable to (a) events, acts or omissions taking place after the date of this Agreement; or (b) your breach of any terms and conditions of this Agreement. In exchange for the Company’s waiver and release and for Company’s entrance into this Agreement, which you acknowledge to be good and valuable consideration, you	
 
7

 	hereby represents that you intend to fully settle any and all claims you may have against the Company and its subsidiaries and other corporate affiliates and each of their respective employees, officers, directors, owners, shareholders and agents (the “ Company Group ”) as a result of your hiring, employment or separation from employment with the Company. You specifically represent, warrant and confirm that: (a) you have no claims, complaints or actions of any kind filed against the Company Group with any court of law, or local, state or federal government or agency; (b) you have been properly paid for all hours worked for the Company Group, and that all commissions, bonuses and other compensation due to you has been paid, with the exception of your final payroll check for your salary through the Separation Date above, which will be paid on the next regularly scheduled payroll date; and (c) you have not engaged in, and are not aware of, any unlawful conduct in relation to the business of the Company Group.	
 
9.6	Release of Claims by You. In exchange for the consideration provided in this Agreement, you and your heirs, executors, administrators and assigns (collectively the “ Releasors ”) forever waive, release and discharge the Company Group from any and all claims, demands, causes of actions, fees, damages, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, whether known or unknown, that you have ever had against the Company Group by reason of any actual or alleged act, omission, transaction, practice, conduct, occurrence or other matter up to and including the date of your execution of this Agreement, including, but not limited to (i) any claims under Title VII of the Civil Rights Act, as amended, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, as amended, the Fair Labor Standards Act, the Equal Pay Act, as amended, the Employee Retirement Income Security Act, as amended (with respect to unvested benefits), the Civil Rights Act of 1991, as amended, Section 1981 of U.S.C. Title 42, the Sarbanes-Oxley Act of 2002, as amended, the Worker Adjustment and Retraining Notification Act, as amended, the Age Discrimination in Employment Act, as amended, the Uniform Services Employment and Reemployment Rights Act, as amended, ALL STATE AND LOCAL STATUTES THAT MAY BE LEGALLY WAIVED THAT EMPLOYEES COULD BRING EMPLOYMENT CLAIMS UNDER, INCLUDING ANY STATE OR LOCAL ANTI-DISCRIMINATION STATUTE, WAGE AND HOUR STATUTE, LEAVE STATUTE, EQUAL PAY STATUTE AND WHISTLEBLOWER STATUTE and/or any other Federal, state or local law (statutory, regulatory or otherwise) that may be legally waived and released and (ii) any tort and/or contract claims, including any claims of wrongful discharge, defamation, emotional distress, tortious interference with contract, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm. However, this general release of claims excludes the filing of an administrative charge or	
 
8

 	complaint with the Equal Employment Opportunity Commission or other administrative agency, although the Employee waives any right to monetary relief related to such a charge. This general release of claims also excludes any claims made under state workers’ compensation or unemployment laws, and/or any claims that cannot be waived by law.	
 
9.7	Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A.	
 
10.	T ERMINATION	
 
10.1	The Company may terminate this Agreement, effective immediately upon written notice to you, in the event that you breach this Agreement, and such breach is incapable of cure, or with respect to a breach capable of cure, you do not cure such breach within thirty (30) days after receipt of written notice of such breach;	
 
10.2	Upon expiration or termination of this Agreement for any reason, you shall promptly and in no event later than thirty (30) days following such termination:	
 
 	(a)	deliver to the Company all Deliverables (whether complete or incomplete) and all hardware, software, tools, equipment or other materials provided for your use by the Company;	
 
 	(b)	deliver to the Company all tangible documents and materials (and any copies) containing, reflecting, incorporating or based on the Confidential Information;	
 
9

 	(c)	permanently erase all of the Confidential Information from your computer systems; and	
 
 	(d)	certify in writing to the Company that you have complied with the requirements of this paragraph.	
 
10.3	The terms and conditions of this paragraph 10.3 and paragraph 4, paragraph 5, paragraph 6, paragraph 7, paragraph 8, paragraph 9, paragraph 10.2, paragraph 12, paragraph 13 and paragraph 14 shall survive the expiration or termination of this Agreement.	
 
11.	O THER B USINESS A CTIVITIES	
You may be engaged or employed in any other business, trade, profession or other activity that does not place you in a conflict of interest with the Company; provided , that, during the Term, you shall not be engaged in any business activities that do or may compete with the business of the Company without the Company’s prior written consent, to be given or withheld in its sole discretion.
 
12.	K NOWING AND V OLUNTARY A CKNOWLEDGMENT	
 
12.1	You specifically agree and acknowledge that: (a) you have read this Agreement in its entirety and understands all of its terms; (b) you have been advised of and have availed yourself of your right to consult with an attorney prior to executing this Agreement; (c) you knowingly, freely and voluntarily assent to all of the terms and conditions of this Agreement including, without limitation, the waiver, release and covenants contained herein; (d) you are executing this Agreement, including the waiver and release, in exchange for good and valuable consideration in addition to anything of value to which you are otherwise entitled; (d) you are not waiving or releasing rights or claims that may arise after your execution of this Agreement; and that (e) you understand that the waiver and release in this Agreement is being requested in connection with the cessation of your employment with the Company.	
 
12.2	You further acknowledge that you have had at least twenty-one (21) days to consider the terms of this Agreement, although you may sign it sooner if desired. Further, you shall have an additional seven (7) days from the date on which you sign this Agreement to revoke consent to your release of claims under the Age Discrimination Employment Act by delivering notice of revocation to Asher Bearman at the Company, 907 NW Ballard Way, Seattle, WA 98107, before the end of such seven-day period. In the event of such revocation by you, the Company will have the option of treating this Agreement as null and void in its entirety.	
 
10

12.3	This Agreement shall not become effective, until the eighth (8th) day after you and the Company execute this Agreement. Such date shall be the “ Effective Date ” of this Agreement. No payments due to you under this Agreement will be made or begin before the Effective Date.	
 
13.	A SSIGNMENT	
You shall not assign any rights, or delegate or subcontract any obligations, under this Agreement without the Company’s prior written consent. Any assignment in violation of the foregoing shall be deemed null and void. The Company may freely assign its rights and obligations under this Agreement at any time. Subject to the limits on assignment stated above, this Agreement will inure to the benefit of, be binding on, and be enforceable against, each of the parties hereto and their respective successors and assigns.
 
14.	M ISCELLANEOUS	
 
14.1	You shall not export, directly or indirectly, any technical data acquired from the Company, or any products utilizing any such data, to any country in violation of any applicable export laws or regulations.	
 
14.2	All notices, requests, consents, claims, demands, waivers and other communications hereunder (each, a Notice ) shall be in writing and addressed to the parties at the addresses set forth on the first page of this Agreement (or to such other address that may be designated by the receiving party from time to time in accordance with this section). All Notices shall be delivered by personal delivery, nationally recognized overnight courier (with all fees pre-paid), facsimile or e-mail of a PDF document (with confirmation of transmission) or certified or registered mail (in each case, return receipt requested, postage prepaid). Except as otherwise provided in this Agreement, a Notice is effective only if (a) the receiving party has received the Notice and (b) the party giving the Notice has complied with the requirements of this Section.	
 
14.3	This Agreement, together with any other documents incorporated herein by reference, including the Former Employment Agreement, and related exhibits and schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the	
 
11

 	subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.	
 
14.4	This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto, and any of the terms thereof may be waived, only by a written document signed by each party to this Agreement or, in the case of waiver, by the party or parties waiving compliance.	
 
14.5	This Agreement shall be governed by and construed in accordance with the internal laws of the state of Delaware without giving effect to any choice or conflict of law provision or rule. Each party irrevocably submits to the exclusive jurisdiction and venue of the federal and state courts located in King County, Washington in any legal suit, action or proceeding arising out of or based upon this Agreement or the Services provided hereunder.	
 
14.6	If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.	
 
14.7	This Agreement may be executed in multiple counterparts and by facsimile signature, each of which shall be deemed an original and all of which together shall constitute one instrument.	
[ SIGNATURE PAGE FOLLOWS ]
 
12

If this letter accurately sets forth our understanding regarding the terms of your separation and consulting arrangement, kindly execute the enclosed copy of this letter and return it to the undersigned.

Sincerely,	
	
/s/ Darryl Rawlings	
	
Darryl Rawlings	
Chief Executive Officer	
Trupanion, Inc.	

ACCEPTED AND AGREED:	
	
/s/ Howard Rubin	
Howard Rubin	
 
13

SCHEDULE 1
Services
1. SERVICES:
During the term of this Agreement, the Company’s CEO may, from time to time, direct you to attend trade shows and/or conferences as a representative of Trupanion (each such directed activity, a “ Project ”).
You will be paid as follows:
 
 	(a)	From the Separation Date through July 1, 2015 (the “ Initial Period ”), you will be paid a monthly retainer fee of $28,500 for up to 100 Project days during the Initial Period. In the event of your death or Disability (as defined in the Company’s 2007 Stock Option Plan), the Company agrees to pay all Fees that would have been paid to you had you continued to satisfy your Project obligations throughout the remainder of the Initial Period.	
 
 	(b)	After the end of the Initial Period and through July 1, 2017 (the “ Subsequent Period ”), you will be compensated $5,000/day for Projects, but in no event will you be compensated for fewer than 40 Project days during the Subsequent Period.	
2. EQUIPMENT, TOOLS OR MATERIALS PROVIDED BY COMPANY: None.
3. PAYMENT SCHEDULE: During the Initial Period, you will receive the Fee in equal monthly instalments. Payments during the Subsequent Period will be monthly and in an amount equal to the greater of (x) $8,333 or (y) the invoiced and unpaid amount due for all completed Projects during through such date during the Subsequent Period.
4. DELIVERABLES: None.
5. EXPENSE REIMBURSEMENTS: Within thirty (30) days after the Company’s receipt of an invoice submitted by you for a particular Project including your written confirmation of the applicable Project’s completion.
 
14

EXHIBIT A
Amended and Restated Stock Option Agreement
 
15

AMENDED AND RESTATED STOCK OPTION AGREEMENT
THIS AMENDED AND RESTATED STOCK OPTION AGREEMENT (this “ Agreement ”) is made by and between TRUPANION, INC. , a Delaware corporation, having its principal place of business at 907 NW Ballard Way, Seattle, WA 98107 (the “ Company ”), and the following individual:
Name: Howard E. Rubin (the “ Optionee ”)
Address:
This Agreement is made pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (as amended, modified or replaced from time to time, the “ Plan ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Plan. The Optionee agrees to be bound by the terms and conditions of the Plan, which are incorporated herein by reference in their entirety. In case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control unless otherwise specifically provided therein.
The Optionee is hereby granted an Option (this “ Option ”) to purchase Common Stock, subject in all events to the terms and conditions of the Plan and this Agreement, as follows:
1. Date of Grant and Vesting Commencement Date . This Option was granted on March 16, 2010 (the “ Grant Date ”) and will be deemed to have commenced vesting on February 1, 2010 (the “ Vesting Commencement Date ”).
2. Type of Option . ( please check all that apply )
x             Nonstatutory Stock Option                 ¨              Incentive Stock Option
3. Shares Covered by this Option . Subject to the Exercise Schedule, this Option is exercisable for 788,079 total Shares (the “ Shares ”), all of which Shares shall be treated as covered by a Nonstatutory Stock Option, which the Optionee and the Company hereby acknowledge and agree accurately reflects the number of shares to which the Optionee is entitled in full satisfaction of any and all existing oral or written agreements between Optionee and the Company, including, but not limited to, the Optionee’s offer letter or employment agreement, and notwithstanding any prior or existing oral or written agreement to the contrary.
4. Exercise Price . The exercise price of this Option is $1.04 per Share (the “ Exercise Price ”).
5. Expiration Date . This Option expires on March 16, 2020 (the “ Expiration Date ”).

6. Exercise Schedule . This Option is exercisable in whole or in part for Shares beginning on the earliest to occur of (a) July 1, 2014, (b) Optionee’s death, or (c) Optionee’s Disability (the “ Exercise Schedule ”).
As used herein, “ Exercisable Shares ” means Shares for which this Option may be exercised, and “ Non-Exercisable Shares ” means Shares for which this Option may not be exercised.
Notwithstanding anything to the contrary contained herein, this Option may not be exercised with respect to any Shares on or after the earlier of (i) the date the Option terminates and is canceled and (ii) the Expiration Date.
7. Exercise of Option Following Termination of Service . This Option shall terminate and be canceled to the extent not exercised within twelve (12) months after the Optionee ceases to be a Service Provider. Notwithstanding anything to the contrary contained herein, this Option may not be exercised for more Shares than the Shares which shall have become exercisable as of the date the Optionee ceases to be a Service Provider.
8. Breach of Existing Covenants . This Option shall be forfeited, terminated and canceled in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
9. Method of Exercise . This Option is exercisable by delivery to the Company of an exercise notice in the form attached hereto as Exhibit A (the “ Exercise Notice ”) or such other form as the Administrator may require, which notice shall state the election to exercise this Option, the number of Shares with respect to which this Option is being exercised (the “ Exercised Shares ”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be accompanied by payment (the “ Exercise Payment ”) of an amount equal to the product of the Exercise Price and the number of Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of the Exercise Notice, as executed by the Optionee, and the Exercise Payment. Notwithstanding the foregoing, no Exercised Shares shall be issued unless the exercise of this Option and the issuance of the Exercised Shares complies with the requirements relating to the administration of stock option plans and other applicable equity plans under Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date this Option is exercised with respect to the Exercised Shares.
10. Conditions to Exercise . It shall be a condition precedent to the exercise of this Option that the Optionee execute an Instrument of Accession in which the Optionee shall agree to become a party to that certain Amended and Restated Shareholders Agreement among the Company and the other parties thereto. The exercise of this Option may also be conditioned upon the Optionee’s execution of a restricted stock agreement or such other agreement(s) as the Administrator may require.

11. Method of Payment . The payment of the aggregate Exercise Price shall be made by any of the following means, or a combination thereof:
(a) cash;
(b) check; or
(c) such other form of consideration as the Administrator shall determine in its discretion, provided that such form of consideration is permitted by the Plan and by Applicable Laws.
Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to remit to the Company cash in an amount sufficient to satisfy applicable federal and state tax withholding requirements.
12. Tax Consequences of Option . The Optionee understands that there may be U.S. and foreign income tax consequences to Optionee relating to the grant and exercise of this Option, some of which are more particularly described on Appendix I attached hereto. The Optionee acknowledges that Optionee has been advised to consult with a tax advisor prior to Optionee’s execution and delivery of this Agreement.
13. Restrictions on Transfer of Option . Unless otherwise consented to in advance in writing by the Administrator, this Option may not be transferred in any manner other than by devise or descent and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
14. Securities Matters . All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by Applicable Laws. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended, and all applicable state securities laws, or are exempt from registration thereunder.
15. Other Plans . No amounts of income received by the Optionee pursuant to this Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise provided in such plan.
16. NO GUARANTEE OF CONTINUED SERVICE . THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE RIGHT TO EXERCISE THIS OPTION PURSUANT TO THE EXERCISE SCHEDULE IS EARNED ONLY BY CONTINUING SERVICE WITH THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR ENGAGED OR AS A RESULT OF BEING GRANTED THIS OPTION OR PURCHASING SHARES PURSUANT HERETO). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE EXERCISE SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE

FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE SERVICE RELATIONSHIP WITH THE OTHER PARTY AT ANY TIME, WITH OR WITHOUT CAUSE.
17. Entire Agreement . The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof. No modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless done in writing and signed by the Company and the Optionee.
18. Governing Law; Jurisdiction . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict or choice of laws. Any and all actions arising out of this Agreement shall be brought and heard in the state courts of the State of Delaware and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of these courts.
19. Counterparts; Facsimile . This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
20. Headings and Captions . The headings and captions of various sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
21. Administrator Decision Binding; Notice . The Optionee shall accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Agreement. The Optionee shall notify the Company upon any change in the Optionee’s residence address as provided herein.
22. ADVICE OF COUNSEL . THE OPTIONEE ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, THE OPTIONEE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND THE OPTIONEE HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Stock Option Agreement effective as of May     , 2014.

COMPANY:
 
TRUPANION, INC.,	
a Delaware corporation	
		
By:	 	 	
Name:	 	Darryl Rawlings	
Title:	 	President	
 
OPTIONEE:	

	 	Howard E. Rubin	

APPENDIX I
TAX CONSEQUENCES OF OPTION
Some of the U.S. federal income tax consequences relating to the grant and exercise of this Option, as of the date of this Option, are set forth below. THE FOLLOWING DESCRIPTION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS NECESSARILY INCOMPLETE (AS THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE), AND ASSUMES THAT THE EXERCISE PRICE OF THIS OPTION IS NO LESS THAN THE FAIR MARKET VALUE OF THE COMMON STOCK UNDERLYING THE OPTION ON THE GRANT DATE. MOREOVER, THIS SUMMARY ONLY ADDRESSES THE FEDERAL INCOME TAX CONSEQUENCES UNDER THE LAWS OF THE UNITED STATES, AND DOES NOT ADDRESS WHETHER AND HOW THE TAX LAWS OF ANY OTHER JURISDICTION MAY APPLY TO THIS OPTION OR TO THE OPTIONEE. ACCORDINGLY, THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE ACCEPTING THIS OPTION, EXERCISING THIS OPTION OR DISPOSING OF ANY EXERCISED SHARES.
Circular 230 Disclaimer : Nothing contained in this discussion of certain federal income tax considerations is intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transactions or tax-related matters addressed herein.
Designation as Incentive Stock Option :
Notwithstanding the designation of the whole or any portion of this Option as an Incentive Stock Option, if the Optionee becomes eligible in any given year to exercise incentive stock options granted under any plan of the Company or any Parent or Subsidiary for Shares having a Fair Market Value in excess of $100,000, those incentive stock options representing the excess shall be treated as nonstatutory stock options. For purposes of deciding which options apply to Shares that “exceed” the $100,000 limit, the options shall be considered in chronological order based on grant date, beginning with the earliest granted options. The Fair Market Value of the Shares shall be determined as of the time the options with respect to such Shares is granted.
Grant of the Option :
The grant of an Option generally will not result in the imposition of a tax under the federal income tax laws.
Exercising the Option :
Nonstatutory Stock Option . The Optionee may incur regular federal income tax liability upon exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Payment. If the Optionee is an Employee or a former Employee, the Company will be required to withhold

from his or her compensation or collect from the Optionee and pay to the applicable taxing authorities an amount in cash equal to a specified percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
Incentive Stock Option . If this Option qualifies as an Incentive Stock Option, the Optionee will have no regular federal income tax liability upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Payment will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date that is three (3) months and one (1) day following such change of status.
Disposition of Shares :
NSO Shares . Upon disposition of the Shares acquired pursuant to a Nonstatutory Stock Option (“ NSO Shares ”), the Optionee will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for the NSO Shares plus any amount recognized as ordinary income upon exercise of the Nonstatutory Stock Option. If the Optionee holds NSO Shares for at least one year, any gain (or loss) realized on disposition of the NSO Shares will be treated as long-term capital gain (or loss) for federal income tax purposes.
ISO Shares . If the Optionee holds Shares acquired pursuant to an Incentive Stock Option (“ ISO Shares ”) for at least one year after exercise and two years after the grant date, any gain realized on disposition of the ISO Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or within two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the ISO Shares acquired on the date of exercise and the Exercise Payment, and (B) the difference between the sale price of such ISO Shares and the Exercise Payment. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.

EXHIBIT A
EXERCISE NOTICE
TRUPANION, INC.
2007 EQUITY COMPENSATION PLAN
EXERCISE NOTICE
Date:                                 
Trupanion, Inc.
[Address]
Attention: Plan Administrator
Dear Sir/Madam:
Reference is hereby made to that certain Amended and Restated Stock Option Agreement dated May     , 2014 (the “ Option Agreement ”) between the Company and the undersigned (“ Purchaser ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Option Agreement. Purchaser hereby delivers this notice (this “ Exercise Notice ”) to the Company pursuant to the Option Agreement, with the following terms and conditions:
1. Exercise of Option . Effective as of the date first above written, Purchaser hereby elects to purchase                  shares (the “ Shares ”) of the Common Stock of Trupanion, Inc. (the “ Company ”) under and pursuant to the Trupanion, Inc. 2007 Equity Compensation Plan (the “ Plan ”) and the Option Agreement. The purchase price for the Shares shall be $            , as provided in the Option Agreement.              of the Shares shall represent Shares acquired by reason of the exercise of an Incentive Stock Option and                  of the Shares to be shall represent Shares to be acquired by reason of the exercise of a Nonstatutory Stock Option.
2. Delivery of Payment and Shareholder Agreement . Purchaser herewith delivers to the Company the Exercise Payment for the Shares and the applicable shareholder agreement and any other documents required by the Administrator, duly executed by Purchaser.
3. Shareholders Agreement . Purchaser hereby agrees, as a condition to receiving the Shares, to execute and deliver an Instrument of Accession in which the Purchaser shall agree to become a party to that certain Amended and Restated Shareholders Agreement, as further amended from time to time, among the Company and the other parties thereto (the “ Shareholders Agreement ”). Purchaser acknowledges it has received and reviewed a copy of the Shareholders Agreement.

4. Representations of Purchaser . Purchaser hereby represents and warrants to the Company as follows:
(a) Purchaser has read and understands the Plan and the Option Agreement and agrees to abide by and be bound by their respective terms and conditions.
(b) Purchaser is acquiring the Shares for Purchaser’s own account and the Shares are being acquired by Purchaser for the purpose of investment and not with a view to distribution or resale thereof in violation of the Securities Act of 1933 (the “ Securities Act ”). Purchaser understands the Shares have not been registered under the Securities Act or any other applicable securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and other applicable securities laws or unless an exemption from such registration is available. Purchaser shall not resell or otherwise dispose of all or any part of the Shares except as permitted by law, including, without limitation, any regulations under the Securities Act and other applicable securities laws. Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and other applicable securities laws. Purchaser understands that all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.”
(c) Purchaser is able to bear the economic risk of this investment including a complete loss of the investment.
Notwithstanding the foregoing, the representations and warranties contained in this paragraph 4 shall be applicable only if the Company does not have an effective registration statement on Form S-8 covering the Plan on file with the Securities and Exchange Commission on the date hereof.
5. Rights as Shareholder . Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or right to receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance, unless otherwise provided by the Plan.

6. Tax Consultation . Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with a tax advisor, prior to Purchaser’s delivery of this Exercise Notice, with respect to the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
7. Notice of Disqualifying Disposition of ISO Shares . If Purchaser sells or otherwise disposes of any of the Shares acquired pursuant to an Incentive Stock Option (“ ISO Shares ”) on or before the later of (i) two (2) years after the Grant Date, or (ii) one year after the Exercise Date, Purchaser shall promptly notify the Company in writing of such disposition. Purchaser agrees that Purchaser may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to Purchaser.
8. Counterparts; Facsimile . This Exercise Notice may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Sincerely,

PURCHASER:	 		
	 	 
Howard E. Rubin	
Accepted by:

COMPANY:
 
TRUPANION, INC.,	
a Delaware corporation	
		
By:	 	 	
Name:	 	 	
Title:	 	 	

Exhibit 10.9
INDEPENDENT CONTRACTOR AGREEMENT
This Independent Contractor Agreement (this “ Agreement ”) is entered into by American Pet Insurance Company, Inc. (together with its affiliates, the “ Company ”) and Peter R. Beaumont,                      (hereinafter the “ Consultant ”).
In consideration of the promises and mutual covenants and agreements contained herein, the parties agree as follows:
1. Work to be Performed
The Company desires that the Consultant perform, and the Consultant agrees to perform, up to 80 hours per month, the following (the “ Services ”):
 
 	•	 	Chair the Veterinary Advisory Board.	
 
 	•	 	Arrange for and make changes to Veterinary Advisory Board membership as changes in its composition become necessary, appropriate or desirable.	
 
 	•	 	Formulate the agenda for the annual meeting of the Veterinary Advisory Board.	
 
 	•	 	Coordinate collection and consolidation of Veterinary Advisory Board member opinions.	
 
 	•	 	Serve as Veterinary Advisory Board spokesperson to convey the board’s findings and conclusions to Company management.	
 
 	•	 	Manage the Independent Third Party Veterinarian (“ ITPV ”) panel, which provides independent reviews of certain denied claims.	
 
 	•	 	Select ITPV panel member experts to meet particular specialist needs and transact on-boarding and dismissal processes, as appropriate.	
 
 	•	 	Work with the claims department to allocate triage cases to ITPV panelists with the most appropriate expertise for particular claims.	
 
 	•	 	Confirm the independence of ITPV panelists to ensure the process is fair and in the best interests of both the Company and its policy holders.	
 
 	•	 	Engage in formulating opinions, as required.	
 
 	•	 	Address other issues requiring veterinary input that may, from time-to-time, be delegated by Company management.	
 
 	•	 	Support the claims team, on an as needed basis, by way of taking referrals, providing guidance, joining the daily telephone conference and contacting veterinarians as needed, including on escalated and/or complex cases.	
2. Term of Agreement
The services/work called for under this Agreement shall commence effective April 1, 2014, and terminate on December 31, 2014 and will renew for annual periods thereafter unless the Company or Consultant provide a written termination notice prior to any such renewal year (the “ Term ”). The Payment Amount (as defined in Section 3) is calculated based on an expected average of 20 hours of
 
Page 1 of 6

work per week. The actual Payment Amount of work will be reviewed June 30 th of each year and the Payment Amount may be adjusted by the parties up or down, following that review, consistent with the hours to be provided; provided , however , that the Payment Amount will never exceed $8,000 per month without the parties entering into an amendment to this Agreement that has been through any appropriate approval processes.
3. Terms of Payment
Company shall pay Consultant a fee of $6,000.00 per month (the initial “ Payment Amount ”), commencing April 1, 2014 and payable thereafter each month throughout the Term of this Agreement. At the Consultant’s request the company will make checks payable to             .
4. Reimbursement of Expenses
The Company will pay or reimburse Consultant, upon submission of proof of expenses, for all ordinary, reasonable and documented business expenses incurred by Consultant in furtherance of or in connection with performing his obligations under this Agreement.
5. Independent Contractor
Consultant is an independent contractor. The Company will not control the manner or means by which Consultant performs the Services. Consultant has no authority (and shall not hold himself out as having authority) to bind the Company and Consultant shall not make any agreements or representations on the Company’s behalf without the Company’s prior written consent. Except as expressly provided in Section 4, Consultant will furnish, at Consultant’s own expense, the equipment, supplies and other materials used to perform the Services. The Company will provide Consultant with access to its premises and equipment to the extent necessary for the performance of the Services. To the extent Consultant performs any Services on the Company’s premises or using the Company’s equipment, Consultant will comply with all applicable policies of the Company relating to business and office conduct, health and safety and use of the Company’s facilities, supplies, information technology, equipment, networks and other resources.
For the avoidance of doubt, Consultant will not be eligible to participate in any vacation, group medical or life insurance, disability, profit sharing or retirement benefits or any other fringe benefits or benefit plans offered by the Company to its employees, and the Company will not be responsible for withholding or paying any income, payroll, Social Security or other federal, state or local taxes, making any insurance contributions, including unemployment or disability, or obtaining worker’s compensation insurance on Consultant’s behalf. Consultant will be responsible for, and shall indemnify the Company against, all such taxes or contributions, including penalties and interest. Any persons employed or engaged by Consultant in connection with the performance of the Services shall be Consultant’s employees or contractors and Consultant shall be fully responsible for them and indemnify the Company against any claims made by or on behalf of any such employee and/or contractor. By executing this Agreement, Consultant hereby waives his right to claim any such benefits from the Company or any third party, including the right to file a claim for any employee benefits under the Employee Retirement Income Security Act, other applicable federal, state or local law, rules or regulations, or any Company policy, practice, procedure or program, and agrees to indemnify the Company in the event that it incurs any losses associated with such a claim.
 
Page 2 of 6

6. Taxes
As an independent contractor, Consultant shall be responsible to pay, according to all applicable state, federal and local laws, his own income taxes, self-employment or other taxes levied on payments made to the Consultant pursuant to this Agreement. The Company shall neither pay nor withhold federal, state or local income tax or payroll tax of any kind on behalf of the Consultant.
7. Non-Solicitation of Employees and Contractors; Noncompetition
Consultant agrees that during the terms of this Agreement and for one year after the cessation of Consultant’s business relationship, for any reason, Consultant will not recruit, hire or attempt to recruit or hire, directly or by assisting others, any other employee or independent contractor of the Company, or otherwise cause such employee or independent contractor to, in any other way, modify or alter their employment or business relationship with the Company. Because of the Company’s legitimate business interests in protecting its Confidential Information and Trade Secrets and the good and valuable consideration offered to Consultant pursuant to this Agreement, during the Term of this Agreement and for the thirty-six (36) months following its termination for any reason or no reason and whether the Agreement is terminated at the option of the Company or by Consultant, Consultant agrees and covenants not to engage in any Prohibited Activity, directly or indirectly, within any jurisdiction in which the Company, now or in the future, operates or is intending to operate (currently, USA, Canada, Puerto Rico and Brazil), regardless of whether Consultant is aware of such an intention at any time. For purposes of this non-compete clause, “ Prohibited Activity ” is activity in which Consultant contributes knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, partner, director, stockholder, officer, volunteer, intern or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of acting as a managing general agent and/or an underwriter of any form of medical insurance for companion animals. Prohibited Activity also includes activity that may require or inevitably require disclosure of any Confidential Information and Trade Secrets.
8. Non-Disclosure of Confidential Information and Trade Secrets
The Company agrees to provide Consultant with assistance and access to Confidential Information and Trade Secrets necessary to perform Consultant’s services/work with the Company. Consultant agrees, except as specifically required in the performance of Consultant’s Services for the Company, that Consultant will not, during the course of this Agreement, or at any time thereafter, directly or indirectly use, disclose or disseminate to any other person, organization or entity or otherwise employ any Confidential Information and Trade Secrets for competitive purposes. For purposes of this Agreement, “ Confidential Information and Trade Secrets ” shall include proprietary information and trade secrets of the Company and its clients including by way of example, but not limited to, customer lists, business plans, marketing plans, financial information, designs, drawings, drafts, computer models, manuscripts, specifications, software and coding. “ Confidential Information and Trade Secrets ” shall not include any data or information that has been voluntarily disclosed to the public by the Company (except where such public disclosure has been made by Consultant or others without authorization) or that has been independently developed and disclosed by others, or that otherwise enters the public domain through lawful means. Consultant agrees to keep all Confidential Information and Trade Secrets in a secure place and agrees not to publish, communicate, use or disclose any such Confidential Information and Trade Secrets, directly or indirectly, for Consultant’s own benefit or for the benefit of another, either during or
 
Page 3 of 6

after the term of this Agreement. Upon termination of this Agreement, the Consultant will deliver all documents, records, data, information and all other materials, whether on paper or electronically recorded, produced or acquired during the performance of this Agreement, and all copies thereof, to the Company.
9. Intellectual Property Rights
The Company is and shall be, the sole and exclusive owner of all right, title and interest throughout the world in and to all the results and proceeds of the Services performed under or in any way in connection with this Agreement, which are hereby deemed a “work made for hire” as defined in 17 U.S.C. § 101 for the Company. If, for any reason, any of such works do not constitute a “work made for hire,” Consultant hereby irrevocably assigns to the Company, in each case without additional consideration, all right, title and interest throughout the world in and to such works, including all Intellectual Property Rights therein. Consultant will and hereby is obligated make full and prompt disclosure to the Company of any inventions or processes, as such terms are defined in 35 U.S.C. § 100 (the “ Patent Act ”), made or conceived by Consultant, alone or with others, during the Term, whether or not such inventions or processes are patentable or protected as trade secrets and whether or not such inventions or processes are made or conceived during normal working hours or on the premises of the Company. Consultant will not disclose to any third party the nature or details of any such inventions or processes without the prior written consent of the Company.
10. Entire Agreement
This Agreement constitutes the complete and final agreement of the parties with respect to the subject matter hereof and supersedes all prior negotiations, understandings and agreements between the parties, whether written or oral. This Agreement may not be amended except in a writing signed by both parties.
11. Severability
lf any term of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, the remaining terms and provisions will remain in full force and effect as if such invalid or unenforceable term or provision had not been included.
12. Governing Law and Venue of Disputes
This Agreement shall be governed by and construed in accordance with the internal laws of the state of Washington without giving effect to any choice or conflict of law provision or rule. Each party irrevocably submits to the exclusive jurisdiction and venue of the federal and state courts located in King County, Washington in any legal suit, action or proceeding arising out of or based upon this Agreement or the Services provided hereunder.
13. Counterparts
This Agreement may be executed in multiple counterparts and by facsimile signature, each of which shall be deemed an original and all of which together shall constitute one instrument.
 
Page 4 of 6

14. Remedies
In the event of a breach or threatened breach by Consultant of any of the provisions of this Agreement, Consultant hereby consent and agree that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.
[signature page follows]
 
Page 5 of 6

lN WITNESS WHEREOF, the parties hereto have caused this Independent Contractor Agreement to be executed effective March 7, 2014.

	 		 	American Pet Insurance Company, Inc.	
			
/s/ Peter R. Beaumont	 		 	/s/ Darryl Rawlings	
Peter R. Beaumont	 		 	 
Name:	 	Darryl Rawlings	
Dated: May 15, 2014	 		 	 
Title:	 	CEO	
				
	 		 	Dated:	 	May 16, 2014	
 
Page 6 of 6

Exhibit 10.10
VETINSURANCE INTERNATIONAL, INC.
VETINSURANCE MANAGERS, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into as of August 24, 2012, by and between Square 1 Bank (“Bank”) and VETINSURANCE INTERNATIONAL, INC. and VETINSURANCE MANAGERS, INC. (each a “Borrower” and collectively, “Borrowers”) and amends and restates, in its entirety, that certain Loan and Security Agreement by and between Borrowers and Bank dated as of April 24, 2007 (the “Original Agreement”).
RECITALS
Borrowers wish to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrowers. This Agreement sets forth the terms on which Bank will advance credit to Borrowers, and Borrowers will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.
1.2 Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
(a) Promise to Pay. Borrowers promise to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrowers, together with interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.
(b) Advances Under Revolving Line.
(a) Amount. Subject to and upon the terms and conditions of this Agreement (1) Parent may request Advances in an aggregate outstanding principal amount not to exceed the lesser of (i) the Revolving Line or (ii) the total amount of Cash and securities held by the Insurance Company Subsidiary less any amounts outstanding under the Ancillary Services Sublimit and (2) amounts borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed at any time prior to the Revolving Maturity Date, at which time all Advances under this Section 2.1(b) shall be immediately due and payable. Borrowers may prepay any Advances in whole or in part without penalty or premium.
(b) Form of Request. Whenever Borrowers desire an Advance, Parent will notify Bank by facsimile transmission or telephone no later than 5:30 p.m. Eastern time (4:30 p.m. Eastern time for wire transfers), on the Business Day that the Advance is to be made. Each such notification shall be promptly confirmed by a Loan Advance/Paydown Request Form in substantially the form of Exhibit C. Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a
 
2

designee of a Responsible Officer, or without instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to rely on any telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee thereof, and Borrowers shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance (other than damages or losses caused by Bank’s gross negligence or willful misconduct). Bank will credit the amount of Advances made under this Section 2.1(b) to Parents’ deposit account.
(c) Ancillary Services Sublimit. Subject to the availability under the Revolving Line, at any time and from time to time from the date hereof through the Business Day immediately prior to the Revolving Maturity Date, Borrowers may request the provision of Ancillary Services from Bank. The aggregate limit of the Ancillary Services shall not exceed the Ancillary Services Sublimit, provided that availability under the Revolving Line shall be reduced by the aggregate limits of (i) corporate credit card services provided to Borrower, (ii) the total amount of any Automated Clearing House processing reserves, (iii) the applicable Foreign Exchange Reserve Percentage, and (iv) any other reserves taken by Bank in connection with other treasury management services requested by Borrowers and approved by Bank. In addition, Bank may, in its sole discretion, charge as Advances any amounts for which Bank becomes liable to third parties in connection with the provision of the Ancillary Services. The terms and conditions (including repayment and fees) of such Ancillary Services shall be subject to the terms and conditions of the Bank’s standard forms of application and agreement for the applicable Ancillary Services, which Borrowers hereby agree to execute.
(d) Collateralization of Obligations Extending Beyond Maturity. If Borrowers have not secured to Bank’s satisfaction its obligations with respect to any Ancillary Services by the Revolving Maturity Date, then, effective as of such date, the balance in any deposit accounts held by Bank and the certificates of deposit or time deposit accounts issued by Bank in either Borrower’s name (and any interest paid thereon or proceeds thereof, including any amounts payable upon the maturity or liquidation of such certificates or accounts), shall automatically secure such obligations to the extent of the then continuing or outstanding Ancillary Services. Each Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts thereon or any requests by a Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the applicable Ancillary Services are outstanding or continue.
2.2 Overadvances. If the aggregate amount of the outstanding Advances exceeds the lesser of (i) the Revolving Line or (ii) the total amount of Cash and securities held by the Insurance Company Subsidiary at any time, Borrowers shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of (x) 1.50% above the Prime Rate then in effect, or (y) 5.00%.
(b) Late Fee; Default Rate. If any payment is not made within 10 days after the date such payment is due, Borrowers shall pay Bank a late fee equal to the lesser of (i) 5% of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law. All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to 5 percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default.
 
3

(c) Payments. Interest under the Revolving Line shall be due and payable on the 24th calendar day of each month during the term hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrowers’ deposit accounts or, if insufficient funds are contained therein, against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable to Advances hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence and continuance of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Parent specifies. After the occurrence and during the continuance of an Event of Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 5:30 pm Eastern time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.
2.5 Fees. Borrowers shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a fee equal to $6,000, which shall be nonrefundable;
(b) Unused Fee. A fee equal to 0.25% of the difference between the amount then available under the Revolving Line pursuant to Section 2.1(b)(i) and the average outstanding daily balance thereunder during the term hereof, paid quarterly in arrears on an annualized basis, which shall be nonrefundable; and
(c) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the Closing Date, and, after the Closing Date, all Bank Expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date and, subject to Section 12.7, shall continue in full force and effect for so long as any Obligations remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.
 
4

3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) an officer’s certificate of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;
(c) a financing statement (Form UCC-1) for each Borrower;
(d) an amended and restated intellectual property security agreement from each Borrower;
(e) an investor call report from Maveron;
(f) payment of the fees and Bank Expenses then due specified in Section 2.5, which may be debited from any of Borrowers’ accounts with Bank;
(g) current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the Collateral;
(h) current financial statements, including company prepared statements for each Borrower’s most recently ended fiscal year, company prepared consolidated and consolidating balance sheets and income statements for the most recently ended month in accordance with Section 6.2, and such other updated financial information as Bank may reasonably request;
(i) current Compliance Certificate in accordance with Section 6.2;
(j) a Warrant in form and substance reasonably satisfactory to Bank;
(k) a Borrower Information Certificate; and
(l) such other documents or certificates, and completion of such other matters, as Bank may reasonably request.
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Loan Advance/Paydown Request Form as provided in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of the date of such Loan Advance/Paydown Request Form and on the effective date of each Credit Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date). The making of each Credit Extension shall be deemed to be a representation and warranty by Borrowers on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.
 
5

4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower grants, pledges, assigns, mortgages, hypothecates and charges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrowers of each of its covenants and duties under the Loan Documents. Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in later-acquired or after-acquired Collateral. Notwithstanding any termination, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.
4.2 Perfection of Security Interest. Each Borrower authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of such Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code, or, if applicable, the Personal Property Security Act (Ontario) or the Personal Property Security Act (British Columbia) for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether such Borrower is an organization, the type of organization and any organizational identification number issued to such Borrower, if applicable. Each Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third party bailee, each Borrower shall take such steps as Bank reasonably requests for Bank to (i) subject to Section 7.10 below, obtain an acknowledgment, in form and substance satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to Bank. No Borrower will create any chattel paper without placing a legend on the chattel paper acceptable to Bank indicating that Bank has a security interest in the chattel paper. Each Borrower shall take such other actions as Bank requests to perfect its security interests granted under this Agreement.
4.3 Pledge of Collateral. Each Borrower hereby pledges, assigns, grants, mortgages, hypothecates and charges to and in favor of Bank a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. On the Closing Date, the certificate or certificates for the Shares will be delivered to Bank, accompanied by an instrument of assignment duly governing the Shares and the relevant Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and during the continuance of an Event of Default hereunder, Bank may (subject to Section 9.1(g)) effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Bank and cause new certificates representing such securities to be issued in the name of Bank or its transferee. Unless an Event of Default shall have occurred and be continuing, each Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent in any material respect with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.
 
6

5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as to itself and its Subsidiaries as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a corporation duly existing under the laws of the jurisdiction in which it is organized and qualified and licensed to do business in any state or Canadian province in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within each Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s Articles or Certificate of Incorporation (as applicable) or Bylaws, nor will they constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.
5.3 Collateral. Subject to the limitations set forth in Section 9.1(g), Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. Except as set forth in the Schedule, all Collateral other than movable items of personal property such as laptop computers, having an aggregate book value not in excess of $100,000 is located solely in the Collateral Jurisdictions or such other locations as Borrower informs Bank in writing from time to time. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made. Except as set forth in the Schedule, none of Borrowers’ or their Subsidiaries’ Cash is maintained or invested with a Person other than Bank or Bank’s Affiliates.
5.4 Intellectual Property Collateral. Borrower is the sole owner of the Intellectual Property Collateral, except for licenses granted by Borrower to its customers in the ordinary course of business. To the best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrower that any part of the Intellectual Property Collateral violates the rights of any third party except to the extent such claim would not reasonably be expected to cause a Material Adverse Effect. Except as set forth in the Schedule, Borrower’s rights as a licensee of intellectual property do not give rise to more than 5% of its gross revenue in any given month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service.
5.5 Name; Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement. The chief executive office of Borrower is located at the address indicated in Section 10 hereof or such other location as Borrower may notify Bank in writing from time to time in according with Section 7.2 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a Material Adverse Effect.
 
7

5.7 No Material Adverse Change in Financial Statements. All consolidated and consolidating financial statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank fairly present in all material respects Borrower’s consolidated and consolidating financial condition as of the date thereof and Borrower’s consolidated and consolidating results of operations for the period then ended. There has not been a material adverse change in the consolidated or in the consolidating financial condition of Borrower since the date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts (including trade debts) as they mature; the fair saleable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. No event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could reasonably be expected to have a Material Adverse Effect. Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower has not violated any statutes, laws, ordinances or rules applicable to it, the violation of which would reasonably be expected to have a Material Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments.
5.11 Government Consents. Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect. Notwithstanding the foregoing, an application for the Insurance Company Subsidiary is still pending before the New York State Insurance Department.
5.12 Inbound Licenses. Except as disclosed on the Schedule or as otherwise disclosed to Bank in writing, Borrower is not a party to, nor is bound by, any material inbound license or other material agreement important for the conduct of Borrower’s business that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such inbound license or material agreement or any other property important for the conduct of Borrower’s business, other than this Agreement or the other Loan Documents.
5.13 Shares. Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligations exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s knowledge, except as set forth in Section 9.1(g) hereof, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares. The Shares have been and will remain duly authorized and validly issued, and are fully paid and non- assessable. To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.
 
8

5.14 Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank taken together with all such certificates and written statements furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading in light of the circumstances in which they were made, it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make a Credit Extension hereunder, such Borrower shall do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain its and each of its Subsidiaries’ corporate existence and good standing in their respective jurisdictions of formation, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the organizational identification number issued to Borrower by the authorities of the jurisdiction in which Borrower is organized, if applicable. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.
6.2 Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (i) as soon as available, but in any event within 30 days after the end of each calendar month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrowers’ operations during such period, including a net worth reconciliation and accounting for maintenance of minimum, state mandated capital requirements (where required), and including copies of bank account statements for any Cash held outside of Bank, in a form reasonably acceptable to Bank and certified by a Responsible Officer; (ii) as soon as available, but in any event within 150 days after the end of Borrower’s fiscal year, audited consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is either unqualified, qualified only for going concern so long as Borrower’s investors provide additional equity as needed or otherwise consented to in writing by Bank on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank; (iii) if applicable, copies of all statements, reports and notices sent or made available generally by a Borrower to its security holders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against a Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to a Borrower or any Subsidiary of $500,000 or more; (v) promptly upon receipt, each management letter prepared by Borrower’s independent certified public accounting firm regarding Borrower’s management control systems; (vi) such budgets, sales projections, operating plans or other financial information generally prepared by a Borrower in the ordinary course of business as Bank may reasonably request from time to time; (vii) within 30 days of the last day of each fiscal quarter, a report signed by
 
9

Parent, in form reasonably acceptable to Bank, listing any applications or registrations that a Borrower has made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well as any material change in Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of Borrower in or to any Trademark, Patent or Copyright not specified in Exhibits A, B, and C of any Intellectual Property Security Agreement delivered to Bank by such Borrower in connection with this Agreement and (viii) as soon as available, but in any event no later than December 15th of each year, a Board approved, fully-funded operating plan of Borrower for the following year, acceptable to Bank.
(a) Within 45 days after the last day of each calendar quarter, Parent shall deliver to Bank (i) a Compliance Certificate (which shall certify compliance with the covenants contained herein and all state governing body rules and regulations) certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of Exhibit D hereto and (ii) a report of 12 month average claims ratios by state and 12 month average combined claims ratio with respect to Borrowers’ insurance policies and signed by a Responsible Officer.
(b) Within 45 days after the last day of each calendar quarter, Parent shall deliver to Bank copies of all NAIC Quarterly Statements as required by each state in which Borrowers and its Subsidiaries conduct business.
(c) As soon as possible and in any event within 3 calendar days after becoming aware of the occurrence or existence of an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.
(d) As soon as possible and in any event within 3 calendar days after becoming aware of any Borrower having a combined claims ratio in the United States falling in a variance that is at least 10% higher than the agreed upon ratios in Borrowers’ business plan which has been submitted to and approved by Bank in writing, a written statement of a Responsible Officer presenting a plan to rectify such variance, such plan to be reasonably acceptable to Bank.
(e) Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, inspect, audit and appraise the Collateral at Borrower’s expense (not to exceed $7,500 per year as long as no Event of Default has occurred and is continuing) in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral.
(f) Within 5 days after the last day of each month, Parent shall deliver to Bank a report of Cash held by the Insurance Company Subsidiary.
(g) Within 30 days after the last day of each calendar quarter, Parent shall deliver to Bank a status report on rate increase requests pending and to be initiated.
Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 6.2, and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer. Borrower shall include a submission date on any certificates and reports to be delivered electronically.
 
10

6.3 Inventory and Equipment; Returns. Borrower shall keep all Inventory and Equipment in good and merchantable condition, free from all material defects except for Inventory and Equipment (i) sold in the ordinary course of business, and (ii) for which adequate reserves have been made, in all cases in the United States and such other locations as to which Borrower gives prior written notice. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist on the Closing Date. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims involving inventory having a book value of more than $250,000.
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, provincial, municipal and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower or such Subsidiary.
6.5 Insurance. Borrower, at its expense, shall (i) keep the Collateral insured against loss or damage, and (ii) maintain liability and other insurance, in each case in as ordinarily insured against by other owners in businesses similar to Borrower’s. All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and specify that the insurer must give at least 20 days notice to Bank before canceling its policy for any reason. Upon Bank’s request, Borrower shall deliver to Bank certified copies of the policies of insurance and evidence of all premium payments. Proceeds payable under any casualty policy will, at Borrower’s option, be payable to Borrower to replace the property subject to the claim, provided that any such replacement property shall be deemed Collateral in which Bank has been granted a first priority security interest, provided that if an Event of Default has occurred and is continuing, all proceeds payable under any such policy shall, at Bank’s option, be payable to Bank to be applied on account of the Obligations.
6.6 Accounts. With the exception of cash and investments required to be maintained outside Bank or Bank’s Affiliates due to regulatory restrictions (including, without limitation, cash and other assets and investments held in Trust Accounts), Borrower and each of its Subsidiaries shall maintain all of its cash with Bank or Bank’s Affiliates in custodial accounts which are not objected to by state insurance regulators. Bank acknowledges that the Insurance Company Subsidiary is restricted from maintaining more than 10% of its capital and surplus at any one financial institution.
6.7 Financial Covenants. Borrower shall at all times maintain the following financial ratios and covenants:
(a) Minimum Cash. Borrower shall cause the Insurance Company Subsidiary to maintain statutory capital and surplus at all times of not less than the greater of (i) required by the Insurance Company Subsidiary or (ii) 110% of the highest capital and surplus required in any state in which the Insurance Company Subsidiary is licensed.
(b) Cash at Bank. A balance of Cash at Bank of not less than $500,000, monitored on a daily basis.
 
11

(c) Average Monthly Revenue. Beginning with the reporting period ending April 30, 2012 and measured on a rolling three months basis, Borrowers shall achieve at least the levels of average Revenues set forth in the table immediately below.

Period	  	Revenue	 	
January 2012	  	$	2,891,866	  	
February 2012	  	$	3,018,075	  	
March 2012	  	$	3,302,673	  	
April 2012	  	$	3,442,604	  	
May 2012	  	$	3,614,587	  	
June 2012	  	$	3,810,783	  	
July 2012	  	$	4,015,056	  	
August 2012	  	$	4,229,079	  	
September 2012	  	$	4,449,482	  	
October 2012	  	$	4,676,584	  	
November 2012	  	$	4,902,278	  	
December 2012	  	$	5,128,470	  	
Average Monthly Revenue levels for reporting periods following December 31, 2012 will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrower pursuant to Section 6.2(viii).
(d) Maximum EBITDA Loss/Minimum EBITDA. Measured monthly, beginning with the reporting period ended January 31, 2012, Borrowers’ consolidated EBITDA loss shall not exceed the following amounts for the respective periods:

Tested on a Rolling:	  	Period Ended	  	Maximum EBITDA Loss	 	
1 month basis	  	1/31/2012	  	($	300,000	) 	
2 month basis	  	2/29/2012	  	($	380,000	) 	
3 month basis	  	3/31/2012	  	($	590,000	) 	
3 month basis	  	4/30/2012	  	($	595,000	) 	
3 month basis	  	5/31/2012	  	($	630,000	) 	
3 month basis	  	6/30/2012	  	($	505,000	) 	
3 month basis	  	7/31/2012	  	($	171,000	) 	
3 month basis	  	8/31/2012	  	($	268,000	) 	
3 month basis	  	9/30/2012	  	($	120,000	) 	
3 month basis	  	10/31/2012	  	($	145,000	) 	
3 month basis	  	11/30/2012	  	$	250,000	  	
3 month basis	  	12/31/2012	  	$	250,000	  	
 
12

EBITDA levels for reporting periods following December 31, 2012 will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrower pursuant to Section 6.2(viii).
6.8 Registration of Intellectual Property Rights.
(a) Borrower shall promptly give Bank written notice of any applications or registrations of intellectual property rights filed with the United States Patent and Trademark Office or the Canadian Intellectual Property Office, including the date of such filing and the registration or application numbers, if any.
(b) Borrower shall (i) give Bank not less than 30 days prior written notice of the filing of any applications or registrations with the United States Copyright Office or the Canadian Intellectual Property Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed; (ii) prior to the filing of any such applications or registrations, execute such documents as Bank may reasonably request for Bank to maintain its perfection in such intellectual property rights to be registered by Borrower; (iii) upon the request of Bank, either deliver to Bank or file such documents simultaneously with the filing of any such applications or registrations; (iv) upon filing any such applications or registrations, promptly provide Bank with a copy of such applications or registrations together with any exhibits, evidence of the filing of any documents requested by Bank to be filed for Bank to maintain the perfection and priority of its security interest in such intellectual property rights, and the date of such filing.
(c) Borrower shall execute and deliver such additional instruments and documents from time to time as Bank shall reasonably request to perfect and maintain the perfection and priority of Bank’s security interest in the Intellectual Property Collateral.
(d) Borrower shall (i) protect, defend and maintain the validity and enforceability of the trade secrets, Trademarks, Patents and Copyrights (other than those which have no value or only de minimis value), (ii) use commercially reasonable efforts to detect infringements of the Trademarks, Patents and Copyrights (other than those which have no value or only de minimis value) and promptly advise Bank in writing of material infringements detected and (iii) not allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Bank, which shall not be unreasonably withheld or delayed.
(e) Bank shall have the right, but not the obligation, to take, at Borrower’s sole expense, any actions that Borrower is required under this Section 6.8 to take but which Borrower fails to take, after 15 days’ notice to Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this Section 6.8.
 
13

6.9 Consent of Inbound Licensors. Prior to entering into or becoming bound by any material inbound license or agreement, Borrower shall: (i) provide written notice to Bank of the material terms of such license or agreement with a description of its likely impact on Borrower’s business or financial condition; and (ii) in good faith use commercially reasonable efforts to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for Borrower’s interest in such licenses or contract rights to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted by the terms of the applicable license or agreement, whether now existing or entered into in the future, provided, however, that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.
6.10 Capital, Licensing and Compliance Requirements; Financial Covenants. Borrower and each Subsidiary shall maintain compliance with all capital requirements, financial covenants and other licensing and compliance requirements as required by each state and/or province in which Borrower or a Subsidiary conducts business.
6.11 Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations are paid in full or for so long as Bank may have any commitment to make any Credit Extensions, such Borrower will not do any of the following without Bank’s prior written consent, which shall not be unreasonably withheld:
7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with Bank to accounts opened at another financial institution, other than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control. Change its name or the state or jurisdiction of Borrower’s formation or relocate its chief executive office without 30 days prior written notification to Bank; replace its chief executive officer or chief financial officer without providing written notification to Bank within 2 days thereafter; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal year end; have a Change in Control; or suffer a change on Borrower’s board of directors which results in the failure of at least one Managing Director or General Partner of Maveron or its Affiliates to be a voting member of such board of directors, without the prior written consent of Bank which may be withheld in Bank’s sole discretion.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except where (a) each of the following conditions is applicable: (i) the consideration paid in connection with such transactions (including assumption of liabilities) does not in the aggregate exceed $500,000 during
 
14

any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) a Borrower is the surviving entity; or (b) the Obligations are repaid in full concurrently with the closing of any merger or consolidation of Borrower in which Borrower is not the surviving entity.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect to its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person (other than (i) the licensors of in-licensed property with respect to such property or (ii) the lessors of specific equipment or lenders financing specific equipment with respect to such leased or financed equipment) that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property.
7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrower may (i) repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase, (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists; and (iii) pay dividends in common stock of Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments, or maintain or invest any of its Investment Property with a Person other than Bank or Bank’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank, in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement (other than this Agreement) that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt, or amend any provision affecting Bank’s rights contained in any documentation relating to the Subordinated Debt without Bank’s prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment of a book value in excess of $100,000 with a bailee, warehouseman, or similar third party unless the third party has been notified of Bank’s security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory or Equipment. Except for Inventory sold in the ordinary course of business, movable items of personal property such as laptop computers having an aggregate book value not in excess of $100,000 and except for such other locations as Bank
 
15

may approve in writing, Borrower shall keep the Inventory and Equipment only at the location set forth in Section 10 and such other locations of which Borrower gives Bank prior written notice and as to which Bank is able to take such actions as may be necessary needed to perfect its security interest or to obtain a bailee’s acknowledgment of Bank’s rights in the Collateral.
7.11 No Investment Company; Margin Regulation. Become or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.
7.12 Insurance Company Subsidiary Capital Withdrawals. Permit any withdrawals of capital from the Insurance Company Subsidiary.
7.13 Canadian Subsidiaries. Borrower shall conduct no business operations in its 2 Canadian subsidiaries Vetinsurance Holding Company, ULC (Canada) and Vetinsurance Ltd. (Canada). Neither Vetinsurance Holding Company, ULC (Canada) nor Vetinsurance Ltd. (Canada) shall hold more than $50,000 in current assets.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of Default by Borrowers under this Agreement:
8.1 Payment Default. If a Borrower fails to pay any of the Obligations when due;
8.2 Covenant Default.
(a) If a Borrower fails to perform any obligation under Sections 6.2, 6.4, 6.5, 6.6, 6.7 or 6.10 or violates any of the covenants contained in Article 7 of this Agreement; or
(b) If a Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between a Borrower and Bank and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within 15 days after a Borrower receives notice thereof or any officer of a Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the 15 day period or cannot after diligent attempts by Borrowers be cured within such 15 day period, and such default is likely to be cured within a reasonable time, then Borrowers shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;
8.3 Material Adverse Change. If there occurs any circumstance or circumstance any circumstances which would reasonably be expected to have a Material Adverse Effect;
8.4 Attachment. If any material portion of a Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 15 days, or if a Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of
 
16

its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of a Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any material portion of a Borrower’s assets by the United States Government or Canadian Government, or any department, agency, or instrumentality thereof, or by any state, provincial, county, municipal, or governmental agency, and the same is not paid within 15 days after such Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by such Borrower (provided that no Credit Extensions will be made during such cure period);
8.5 Insolvency. If a Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by a Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within 45 days (provided that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default or other failure to perform in any agreement to which a Borrower is a party with a third parry or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of $500,000 or that would reasonably be expected to have a Material Adverse Effect;
8.7 Judgments. If a final, uninsured judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least $500,000 shall be rendered against a Borrower and shall remain unsatisfied and unstayed for a period of 15 days (provided that no Credit Extensions will be made prior to the satisfaction or stay of the judgment); or
8.8 Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.
8.9 Guaranty. If any guaranty of all or a portion of the Obligations (a “Guaranty) ceases for any reason to be in full force and effect, or any guarantor fails to perform any obligation under any Guaranty or a security agreement securing any Guaranty (collectively, the “Guaranty Documents”), or any event of default occurs under any Guaranty Document or any guarantor revokes or purports to revoke a Guaranty, or any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth in any Guaranty Document or in any certificate delivered to Bank in connection with any Guaranty Document, or if any of the circumstances described in Sections 8.3 through 8.9 occur with respect to any guarantor.
9. BANK’S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 (insolvency), all Obligations shall become immediately due and payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of Borrowers under this Agreement or under any other agreement between a Borrower and Bank;
 
17

(c) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;
(d) Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrowers agree to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrowers authorize Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of a Borrower’s owned premises, Borrowers hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of a Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrowers’ labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrowers’ rights under all licenses and all franchise agreements shall inure to Bank’s benefit;
(g) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrowers’ premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate. Bank may sell the Collateral without giving any warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Bank sells any of the Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrowers shall be credited with the proceeds of the sale;
(h) Bank may credit bid and purchase at any public sale;
(i) Apply for the appointment of a receiver, receiver/manager, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of any Borrower, any guarantor or any other Person liable for any of the Obligations; and
(j) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrowers.
Bank may comply with any applicable state, provincial or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
 
18

9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrowers hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrowers’ true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse each Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign each Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to a Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; (g) enter into a short-form intellectual property security agreement consistent with the terms of this Agreement for recording purposes only or modify, in its sole discretion, any intellectual property security agreement entered into between a Borrower and Bank without first obtaining such Borrower’s approval of or signature to such modification by amending Exhibits A, B, and C, thereof, as appropriate, to include reference to any right, title or interest in any Copyrights, Patents or Trademarks acquired by a Borrower after the execution hereof or to delete any reference to any right, title or interest in any Copyrights, Patents or Trademarks in which a Borrower no longer has or claims to have any right, title or interest; and (h) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower where permitted by law; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clauses (g) and (h) above, regardless of whether an Event of Default has occurred. The appointment of Bank as each Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during the continuation of an Event of Default, Bank may notify any Person owing funds to a Borrower of Bank’s security interest in such funds and verify the amount of such Account. Borrowers shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If a Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrowers: (a) make payment of the same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank’s Liability for Collateral. Bank has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Borrowers.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Bank may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Bank’s rights against Borrowers. Each Borrower waives any right it may have to require Bank to pursue any other Person for any of the Obligations.
 
19

9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on a Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. Each Borrower expressly agrees that this Section 9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement, each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrowers or to Bank, as the case may be, at its addresses set forth below:

If to Borrowers:	  	VETINSURANCE INTERNATIONAL, INC.	
	  	on behalf of all Borrowers	
	  	5245 Shilshole Avenue NW	
	  	Seattle, WA 98107-4833	
	  	Attn:                     	
	  	FAX: (    )                    	
		
If to Bank:	  	Square 1 Bank	
	  	406 Blackwell Street, Suite 240	
	  	Crowe Building	
	  	Durham, NC 27701	
	  	Attn: Manager	
	  	FAX: (919) 314-3080	
		
with a copy to:	  	Square 1 Bank	
	  	701 5th Avenue, Suite 7170	
	  	Seattle WA 98104	
	  	Attn: Tom Reimer - Vice President, Venture Banker	
	  	FAX: (206) 812-4253	
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.
 
20

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of North Carolina, without regard to principles of conflicts of law. Jurisdiction shall lie in the State of North Carolina. All disputes, controversies, claims, actions and similar proceedings arising with respect to Borrowers’ accounts or any related agreement or transaction shall be brought in the General Court of Justice of North Carolina sitting in Durham County, North Carolina or the United States District Court for the Middle District of North Carolina, except as provided below with respect to arbitration of such matters. BANK AND EACH BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR ANY BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. If the jury waiver set forth in this Section 11 is not enforceable, then any dispute, controversy, claim, action or similar proceeding arising out of or relating to this Agreement, the Loan Documents or any of the transactions contemplated therein shall be settled by final and binding arbitration held in Durham County, North Carolina in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with those rules. The arbitrator shall apply North Carolina law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration. Judgment upon any award resulting from arbitration may be entered into and enforced by any state or federal court having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this Section. The costs and expenses of the arbitration, including without limitation, the arbitrator’s fees and expert witness fees, and reasonable attorneys’ fees, incurred by the parties to the arbitration may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such costs and expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the consent of or notice to Borrowers to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder.
12.2 Indemnification. Each Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered; incurred, or paid by Bank, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to
 
21

transactions between Bank and a Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. All amendments to or terminations of this Agreement or the other Loan Documents must be in writing. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations remain outstanding or Bank has any obligation to make any Credit Extension to a Borrower. The obligations of Borrowers to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information, Bank and all employees and agents of Bank shall exercise the same degree of care that Bank exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or Affiliates of Bank in connection with their present or prospective business relations with Borrowers, (ii) to prospective transferees or purchasers of any interest in the Credit Extensions, provided that they have entered into a comparable confidentiality agreement in favor of Borrowers and have delivered a copy to Borrowers, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank and (v) as Bank may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.
12.9 Effect of Amendment and Restatement. Except as otherwise set forth herein, this Agreement is intended to and does completely amend and restate, without novation, the Original Agreement. All security interests granted under the Original Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement.
 
22

13. CO-BORROWER PROVISIONS.
13.1 Primary Obligation. This Agreement is a primary and original obligation of each Borrower and shall remain in effect notwithstanding future changes in conditions, including any change of law or any invalidity or irregularity in the creation or acquisition of any Obligations or in the execution or delivery of any agreement between Bank and any Borrower. Each Borrower shall be liable for existing and future Obligations as fully as if all of all Credit Extensions were advanced to such Borrower. Bank may rely on any certificate or representation made by any Borrower as made on behalf of, and binding on, all Borrowers, including without limitation Disbursement Request Forms, Borrowing Base Certificates and Compliance Certificates.
13.2 Enforcement of Rights. Borrowers are jointly and severally liable for the Obligations and Bank may proceed against one or more of the Borrowers to enforce the Obligations without waiving its right to proceed against any of the other Borrowers.
13.3 Borrowers as Agents. Each Borrower appoints the other Borrower as its agent with all necessary power and authority to give and receive notices, certificates or demands for and on behalf of both Borrowers, to act as disbursing agent for receipt of any Credit Extensions on behalf of each Borrower and to authorize Parent to apply to Bank on behalf of each Borrower for Credit Extensions, any waivers and any consents. This authorization cannot be revoked, and Bank need not inquire as to each Borrower’s authority to act for or on behalf of such Borrower.
13.4 Subrogation and Similar Rights. Notwithstanding any other provision of this Agreement or any other Loan Document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Bank under the Loan Documents) to seek contribution, indemnification, or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by the Borrower with respect to the Obligations in connection with the Loan Documents or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by the Borrower with respect to the Obligations in connection with the Loan Documents or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 14.4 shall be null and void. If any payment is made to a Borrower in contravention of this Section 14.4, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
13.5 Waivers of Notice. Except as otherwise provided in this Agreement, each Borrower waives notice of acceptance hereof; notice of the existence, creation or acquisition of any of the Obligations; notice of an Event of Default; notice of the amount of the Obligations outstanding at any time; notice of intent to accelerate; notice of acceleration; notice of any adverse change in the financial condition of any other Borrower or of any other fact that might increase the Borrower’s risk; presentment for payment; demand; protest and notice thereof as to any instrument; default; and all other notices and demands to which such Borrower would otherwise be entitled. Each Borrower waives any defense arising from any defense of any other Borrower, or by reason of the cessation from any cause whatsoever of the liability of any other Borrower. Bank’s failure at any time to require strict performance by any Borrower of any provision of the Loan Documents shall not waive, alter or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Nothing contained herein shall prevent Bank from foreclosing on the Lien of any deed of trust, mortgage or other security instrument, or exercising any rights available thereunder, and the exercise of any such rights shall not constitute a legal or equitable discharge of any Borrower. Each Borrower also waives any defense arising from any act or omission of Bank that changes the scope of the Borrower’s risks hereunder.
 
23

13.6 Subrogation Defenses. Until the Obligations have been repaid in full and this Agreement has been terminated, each Borrower hereby waives any defense based on impairment or destruction of its subrogation or other rights against any other Borrower and waives all benefits which might otherwise be available to it under applicable law, as those statutory provisions are now in effect and hereafter amended, and under any other similar statutes now and hereafter in effect.
13.7 Right to Settle, Release.
(a) The liability of Borrowers hereunder shall not be diminished by (i) any agreement, understanding or representation that any of the Obligations is or was to be guaranteed by another Person or secured by other property, or (ii) any release or unenforceability, whether partial or total, of rights, if any, which Bank may now or hereafter have against any other Person, including another Borrower, or property with respect to any of the Obligations.
(b) Without affecting the liability of any Borrower hereunder, Bank may (i) compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Obligations with respect to a Borrower, (ii) grant other indulgences to a Borrower in respect of the Obligations, (iii) modify in any manner any documents relating to the Obligations with respect to a Borrower, (iv) release, surrender or exchange any deposits or other property securing the Obligations, whether pledged by a Borrower or any other Person, or (v) compromise, settle, renew, or extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any guarantor, endorser or other Person who is now or may hereafter be liable with respect to any of the Obligations.
13.8 Subordination. All indebtedness of a Borrower now or hereafter arising held by another Borrower is subordinated to the Obligations and the Borrower holding the indebtedness shall take all actions reasonably requested by Lender to effect, to enforce and to give notice of such subordination.
 
24

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

VETINSURANCE INTERNATIONAL, INC.	
		
By:	 	/s/ Howard E. Rubin	
		
Title:	 	C.O.O.	
	
VETINSURANCE MANAGERS, INC.	
		
By:	 	/s/ Howard E. Rubin	
		
Title:	 	C.O.O.	
	
SQUARE 1 BANK	
		
By:	 	/s/ Illegible	
		
Title:	 	AVP	
[ Signature Page to Amended and Restated Loan and Security Agreement ]

EXHIBIT A
DEFINITIONS
“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrowers arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrowers and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrowers and Borrowers’ Books relating to any of the foregoing.
“Advance” or “Advances” means a cash advance or cash advances under the Revolving Line.
“Agreed Currency” has the meaning set forth in Section 2.9 hereof.
“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and general partners.
“Ancillary Services” means any of the following products or services requested by a Borrower and approved by Bank under the Revolving Line, including, without limitation, Automated Clearing House transactions, corporate credit card services, FX Contracts, Letters of Credit and other treasury management services.
“Ancillary Services Sublimit” means a sublimit for Ancillary Services under the Revolving Line not to exceed $500,000.
“Bank Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether generated in-house or by outside counsel) incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.
“Borrower’s Books” means all of a Borrower’s books and records including: ledgers; records concerning such Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of North Carolina are authorized or required to close.
Cash” means unrestricted cash and cash equivalents.
“Change in Control” shall mean a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d¬3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of a Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of a Borrower, who did not have such power before such transaction. Notwithstanding the foregoing, the sale of equity securities to Borrower’s existing venture capital investors (or other venture capital investors reasonably acceptable to Bank) in a bona fide equity financing shall not be deemed to be a Change of Control.

“Closing Date” means the date of this Agreement.
“Code” means the North Carolina Uniform Commercial Code as amended or supplemented from time to time.
“Collateral” means the property described on Exhibit B attached hereto and all Negotiable Collateral and Intellectual Property Collateral to the extent not described on Exhibit B, except to the extent any such property (i) is nonassignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406 and 9408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, (iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporations entitled to vote, or (iv) property (including any attachments, accessions or replacements) that is subject to a Lien that is permitted pursuant to clause (c) of the definition of Permitted Liens, if the grant of a security interest with respect to such property pursuant to this Agreement would be prohibited by the agreement creating such Permitted Lien or would otherwise constitute a default thereunder, provided, that such property will be deemed “Collateral” hereunder upon the termination and release of such Permitted Lien.
“Collateral Jurisdiction” means the U.S. state or Canadian province where the Collateral is located, which is Washington.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.
“Credit Extension” means each Advance or any other extension of credit by Bank to or for the benefit of a Borrower hereunder.
“EBITDA” means with respect to any fiscal period an amount equal to earnings before the sum of (a) tax, plus (b) depreciation and amortization, plus (c) interest, plus (d) any non-cash expenses.

“Environmental Laws” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other governmental or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.
“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which a Borrower has any interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“Event of Default” has the meaning assigned in Article 8.
“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time to time.
“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations.
“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada) or the Companies Creditors Arrangement Act (Canada), each as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Insurance Company Subsidiary” means American Pet Insurance Company, Inc., a Delaware corporation and a wholly owned subsidiary of Parent.
“Intellectual Property Collateral” means all of a Borrower’s right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to a Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

“Inventory” means all present and future inventory in which a Borrower has any interest.
“Investment” means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any Person, or any loan, advance or capital contribution to any Person.
“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
“Letter of Credit” means a commercial or standby letter of credit or similar undertaking issued by Bank at Parent’s request.
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.
“Loan Documents” means, collectively, this Agreement, any note or notes executed by a Borrower, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time; provided however, such term shall exclude the Warrant.
“Material Adverse Effect” means a material adverse effect on (i) the operations, business or financial condition of Borrowers and their Subsidiaries taken as a whole, (ii) the ability of Borrowers taken as a whole to repay the Obligations or otherwise perform their obligations under the Loan Documents, (iii) a Borrower’s interest in, or the value, perfection or priority of Bank’s security interest in the Collateral.
“Negotiable Collateral” means all of a Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes), securities, documents of title, and chattel paper, and a Borrower’s Books relating to any of the foregoing.
“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrowers pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from a Borrower to others that Bank may have obtained by assignment or otherwise; provided however, that such terms shall exclude any obligations of Parent arising under or in connection with the Warrant.
“Parent” means Borrower Vetinsurance International, Inc.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment Currency” has the meaning set forth in Section 2.9 hereof.
“Periodic Payments” means all installments or similar recurring payments that a Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrowers and Bank.

“Permitted Indebtedness” means:
(a) Indebtedness of Borrowers in favor of Bank arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness not to exceed $500,000 in the aggregate in any fiscal year of Borrowers secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the property financed with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of business; and
(f) Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon a Borrower or its Subsidiary, as the case may be.
“Permitted Investment” means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s certificates of deposit maturing no more than one year from the date of investment therein, and (iv) Bank’s money market accounts; (v) Investments in regular deposit or checking accounts held with Bank or subject to a control agreement in favor of Bank; and (vi) Investments consistent with any investment policy adopted by the Parent’s board of directors;
(c) Repurchases of stock from officers, consultants, employees or directors of a Borrower under the terms of applicable repurchase agreements (i) in an aggregate amount not to exceed $500,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the cancellation of indebtedness owed by such officers, consultants, employees or directors to such Borrower regardless of whether an Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or a Borrower and Investments by a Borrower in Subsidiaries not to exceed $500,000 in the aggregate in any fiscal year;
(f) Investments not to exceed $500,000 outstanding in the aggregate at any time consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of a Borrower or its Subsidiaries pursuant to employee stock purchase plan agreements approved by a Borrower’s Board of Directors;
(g) Investments in unfinanced capital expenditures in any fiscal year, not to exceed 250,000;

(h) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of a Borrower’s business;
(i) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (h) shall not apply to Investments of a Borrower in any Subsidiary;
(j) Joint ventures or strategic alliances in the ordinary course of a Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrowers do not exceed $500,000 in the aggregate in any fiscal year; and
(k) Investments permitted under Section 7.3.
“Permitted Liens” means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Credit Extensions) or arising under this Agreement, the other Loan Documents, or any other agreement in favor of Bank;
(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which the relevant Borrower maintains adequate reserves;
(c) Liens not to exceed $500,000 in the aggregate (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by a Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;
(e) Liens of materialmen, mechanics, warehousemen, carriers, artisans or other similar Liens arising in the ordinary course of Borrower’s business or by operation of law, which are not past due or which are being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP;
(f) Deposits in the ordinary course of business under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds;
(g) Liens in favor of other financial institutions arising in connection with Borrower’s deposit accounts held at such institutions which are permitted by Section 6.6 hereof to secure standard fees for

deposit services charged by, but not financing made available by such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit accounts (other than the Trust Accounts); and
(h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections 8.4 (attachment) or 8.7 (judgments).
“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by a Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property of Borrowers or their Subsidiaries in the ordinary course of business;
(c) worn-out, surplus or obsolete Equipment not financed with the proceeds of Credit Extensions;
(d) cash to accounts at financial institutions permitted by Section 6.6 hereof;
(e) grants of security interests and other Liens that constitute Permitted Liens; and
(f) other assets of Borrowers or their Subsidiaries that do not in the aggregate exceed $500,000 during any fiscal year.
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“Prime Rate” means the variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.
“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of a Borrower.
“Revolving Line” means a Credit Extension of up to the lesser of (i) $12,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit) or (ii) the dollar amount of capital required to be held by the Insurance Company Subsidiary pursuant to regulatory requirements.
“Revolving Maturity Date” means July 24, 2014; provided however, the Revolving Maturity Date will be automatically renewed for an additional 12 month period, unless Bank provides Borrower written notice that it will not extend the Revolving Maturity Date at least 11 months prior to the then current Revolving Maturity Date.
“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.
“Shares” means (i) sixty-five percent (65%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by a Borrower in any Subsidiary of such Borrower which is not an entity organized under the laws of the United States or any territory thereof, and (ii) one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by a Borrower in any Subsidiary of such Borrower which is an entity organized under the laws of the United States or any territory thereof.

“SOS Reports” means the official reports from the Secretaries of State or equivalent entity responsible for keeping such records of each Collateral Jurisdiction, the state or jurisdiction where each Borrower’s chief executive office is located, the jurisdiction of each Borrower’s formation and other applicable federal, state, provincial or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.
“Subordinated Debt” means any debt incurred by a Borrower that is subordinated in writing to the debt owing by such Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).
“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than 50% of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by a Borrower, either directly or through an Affiliate.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of a Borrower connected with and symbolized by such trademarks.
“Trust Accounts” means cash, cash equivalents and other assets and investments held by the Insurance Company Subsidiary in trust for the benefit of insurers and policyholders.
“Warrant” means the warrant issued by Parent to Bank in connection with this Agreement.

			
DEBTOR	  	VETINSURANCE INTERNATIONAL, INC.	
		
SECURED PARTY:	  	SQUARE 1 BANK	
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;
(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given to them in the North Carolina Uniform Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the Uniform Commercial Code-Secured Transactions.

			
DEBTOR	  	VETINSURANCE MANAGERS, INC.	
		
SECURED PARTY:	  	SQUARE 1 BANK	
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;
(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given to them in the North Carolina Uniform Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the Uniform Commercial Code-Secured Transactions.

EXHIBIT C
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 5:30 P.M. Eastern Time*
DEADLINE FOR WIRE TRANSFERS IS 4:30 P.M., Eastern Time
*At month end and the day before a holiday, the cut off time is 1:30 P.M, Eastern Time

TO: Loan Analysis	  		  	DATE:	  	TIME:	
FAX #:	  		  		  		

FROM:	  	VETINSURANCE INTERNATIONAL, INC. and VETINSURANCE MANAGERS, INC.
Borrowers’ Names	  	TELEPHONE REQUEST (For Bank Use Only):	
	  		  	The following person is authorized to request the loan payment transfer/loan advance on the designated account and is known to me.	
FROM:	  		  		
	  	Authorized Signer’s Name	  		  		
FROM:	  		  		
	  	Authorized Signature (Borrower)	  	Authorized Request & Phone #	
PHONE #:	  		  		
	  		  	Received by (Bank) & Phone #	
FROM ACCOUNT#:	  		  		
(please include Note number, if applicable)	  		  		
TO ACCOUNT #:	  	Authorized Signature (Bank)	
(please include Note number, if applicable)	  		  		

REQUESTED TRANSACTION TYPE	  	REQUESTED DOLLAR AMOUNT	  	For Bank Use Only	
			
PRINCIPAL INCREASE* (ADVANCE)	  	$	  	Date Rec’d:	
PRINCIPAL PAYMENT (ONLY)	  	$	  	Time:	  		  		
	  		  	Comp. Status:	  	YES	  	NO	
OTHER INSTRUCTIONS:	  		  	Status Date:	  		  		
	  		  	Time:	  		  		
	  		  	Approval:	  		  		

											
All representations and warranties of Borrower stated in the Loan Agreement are true, correct and complete in all material respects as of the date of the telephone request for and advance confirmed by this Loan Advance/Paydown Request Form; provided, however, that those representations and warranties the date expressly referring to another date shall be true, correct and complete in all material respects as of such date.	
				
*  IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE)	  	YES	  	NO	 		
If YES, the Outgoing Wire Transfer Instructions must be completed below.	

							
OUTGOING WIRE TRANSFER INSTRUCTIONS	  	Fed Reference Number	 	Bank Transfer Number	
	
The items marked with an asterisk (*) are required to be completed.	
				
*Beneficiary Name	  		  		 		
*Beneficiary Account Number	  		  		 		
*Beneficiary Address	  		  		 		
Currency Type	  		  	US DOLLARS ONLY	
*ABA Routing Number (9 Digits)	  		  		 		
*Receiving Institution Name	  		  		 		
*Receiving Institution Address	  		  		 		
*Wire Account	  	$	  		 		

EXHIBIT D
COMPLIANCE CERTIFICATE
[Please refer to New Borrower Kit]

FIRST AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This First Amendment to Amended and Restated Loan and Security Agreement is entered into as of December 26, 2012 (the “ Amendment ”) by and between SQUARE 1 BANK (the “ Bank ”) and VETINSURANCE INTERNATIONAL, INC. and VETINSURANCE MANAGERS, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
 
1.	Bank hereby waives Borrowers’ violation of the Maximum EBITDA Loss/Minimum EBITDA covenant, as more particularly described in Section 6.7(d) of the Agreement (as in effect immediately prior to the date of this Amendment), for the reporting period ending October 31, 2012 only.	
 
2.	Section 6.7(c) of the Agreement is hereby amended and restated, as follows:	
(c) Average Monthly Revenue. Beginning with the reporting period ending April 30, 2012 and measured on a rolling three months basis, Borrowers shall achieve at least the levels of average Revenues set forth in the table immediately below.

Period	  	Revenue	 	
November 2012	  	$	4,538,904	  	
December 2012	  	$	4,631,283	  	
Average Monthly Revenue levels for reporting periods following December 31, 2012 will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrower pursuant to Section 6.2(viii).
 
1

3.	Section 6.7(d) of the Agreement is hereby amended and restated, as follows:	
(d) Maximum EBITDA Loss/Minimum EBITDA. Measured monthly, beginning with the reporting period ended January 31, 2012, Borrowers’ consolidated EBITDA loss shall not exceed the following amounts for the respective periods:

Tested on a Rolling:	  	Period Ended	  	Maximum EBITDA
Loss	 	
3 month basis	  	November 30, 2012	  	($	750,000	) 	
3 month basis	  	December 31, 2012	  	($	2,100,000	) 	
EBITDA levels for reporting periods following December 31, 2012 will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrower pursuant to Section 6.2(viii).
 
4.	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof Borrowers ratify and reaffirm the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
5.	Borrowers represent and warrant that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
6.	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
7.	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
(a) this Amendment, duly executed by Borrowers;
(b) payment of all Bank expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrowers’ accounts; and
(c) such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.
[Remainder of page intentionally left blank]
 
2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

VETINSURANCE INTERNATIONAL, INC.	
		
By:	 	/s/ Howard E. Rubin	
Name:	 	Howard E. Rubin	
Title:	 	C.O.O.	
	
VETINSURANCE MANAGERS, INC.	
		
By:	 	/s/ Howard E. Rubin	
Name:	 	Howard E. Rubin	
Title:	 	C.O.O.	
	
SQUARE 1 BANK	
		
By:	 	/s/ Victor DeMarco	
Name:	 	Victor DeMarco	
Title:	 	VP	
[Signature page to First Amendment to Amended and Restated Loan and Security Agreement]
 
3

SECOND AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Second Amendment to Amended and Restated Loan and Security Agreement is entered into as of March 28, 2013 (the “ Amendment ”) by and between SQUARE 1 BANK (the “ Bank ”) and VETINSURANCE INTERNATIONAL, INC. and VETINSURANCE MANAGERS, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
 
1)	A new Section 2.1(c) is hereby added to the Agreement, as follows:	
(c) Term Loans.
(i) Subject to and upon the terms and conditions of this Agreement, Bank agrees to make one (1) or more term loans to Borrowers, in such dollar amount as requested by Borrowers, in an aggregate principal amount not to exceed Three Million Dollars ($3,000,000) (each a “Term Loan” and collectively the “Term Loans”). Parent may request Term Loans at any time from the date hereof through the Availability End Date. The proceeds of the Term Loans shall be used for general working capital purposes.
(ii) Interest shall accrue from the date of each Term Loan at the rate specified in Section 2.3(a), and prior to the Availability End Date for the applicable Term Loan shall be payable monthly beginning on the 28th day of the month next following such Term Loan, and continuing on the same day of each month thereafter. Any Term Loans that are outstanding on the Availability End Date shall be payable in 30 equal monthly installments of principal, plus all accrued interest, beginning on the date that is one month immediately following the Availability End Date, and continuing on the same day of each month thereafter through the Term Loan Maturity Date, at which time all amounts due in connection with the Term Loans and any other amounts due under this Agreement shall be immediately due and payable. Term Loans, once repaid, may not be reborrowed. Borrowers may prepay any Term Loan without penalty or premium.
(iii) When Borrowers desire to obtain a Term Loan, Parent shall notify Bank (which notice shall be irrevocable) by facsimile transmission to be received no later than 3:30 p.m. Eastern time on the Business Day prior to the date on which the Term Loan is to be made. Such notice shall be substantially in the form of Exhibit C. The notice shall be signed by someone designated as an “Authorized Officer” in the corporate resolutions most recently provided by Borrower to Bank addressing Authorized Officers.
 
1

2)	Section 2.3(a) of the Agreement is hereby amended and restated, as follows:	
(a) Interest Rates.
(i) Advances. Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of (x) 1.50% above the Prime Rate then in effect, or (y) 5.00%.
(ii) Term Loans. Except as set forth in Section 2.3(p),-the Term Loans shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of (A) 2.00% above the Prime Rate then in effect, or (B) 5.50%.
 
3)	Section 6.7(b) of the Agreement is hereby amended and restated, as follows:	
(b) Cash at Bank. A balance of Cash at Bank of not less than $500,000, monitored on a daily basis; provided that, to the extent that the Insurance Company Subsidiary maintains funds in Cash at Bank or in Bank investments, Bank’s CDARS products, or other Bank instruments in excess of the amount necessary to comply with Section 2.1(b)(i) of this Agreement, such funds shall be included for purposes of calculating the balance of Cash at Bank for this Section 6.7(b).
 
4)	Section 6.7(c) of the Agreement is hereby amended and restated, as follows:	
(c) Average Monthly Revenue. Measured monthly and calculated on a rolling-three-months basis, Borrowers shall achieve at least the levels of average Revenues set forth in the table immediately below for the corresponding reporting periods.

Reported Period Ending	  	Revenue	 	
February 28, 2013	  	$	4,494,867	  	
March 31, 2013	  	$	4,592,930	  	
April 30, 2013	  	$	4,733,898	  	
May 31, 2013	  	$	4,867,792	  	
June 30, 2013	  	$	5,030,311	  	
July 31, 2013	  	$	5,174,232	  	
August 31, 2013	  	$	5,374,039	  	
September 30, 2013	  	$	5,561,308	  	
October 31, 2013	  	$	5,787,469	  	
November 30, 2013	  	$	5,982,071	  	
December 31, 2013	  	$	6,196,418	  	
 
2

Average Monthly Revenue levels for subsequent reporting periods will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrowers pursuant to Section 6.2(viii).
 
5)	Section 6.7(d) of the Agreement is hereby amended and restated, as follows:	
(d) Maximum EBITDA Loss/Minimum EBITDA. Measured monthly and calculated (i) on a one-month basis for the reporting period ending February 28, 2013, (ii) on a rolling-two-months basis for the reporting period ending March 31, 2013, and (iii) on a rolling-three-months basis for all subsequent reporting periods, Borrowers’ consolidated EBITDA loss shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods.

Reported Period Ending	  	Maximum EBITDA
Loss	 	
February 28, 2013	  	($	725,437	) 	
March 31, 2013	  	($	1,274,026	) 	
April 30, 2013	  	($	1,736,064	) 	
May 31, 2013	  	($	1,451,787	) 	
June 30, 2013	  	($	1,364,802	) 	
July 31, 2013	  	($	1,329,576	) 	
August 31, 2013	  	($	1,208,799	) 	
September 30, 2013	  	($	1,136,190	) 	
October 31, 2013	  	($	1,038,915	) 	
November 30, 2013	  	($	988,943	) 	
December 31, 2013	  	($	907,671	) 	
EBITDA levels for subsequent reporting periods will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrowers pursuant to Section 6.2(viii).
 
6)	Section 7.12 of the Agreement is hereby amended and restated, as follows:	
7.12 Insurance Company Subsidiary Capital Withdrawals. Permit any withdrawals of capital from the Insurance Company Subsidiary, except for excess balances over and above the greater of (I) the amount of Cash and investments required to be held for insurance company reserves and surplus at the Insurance Company Subsidiary and (ii) the amount necessary to comply with Section 2.1(b)(i) of this Agreement.
 
3

7)	The following defined terms are hereby added to Exhibit A to the Agreement, as follows:	
“Availability End Date” means March 28, 2014.
“Term Loan Maturity Date” means September 28, 2016.
 
8)	The following defined terms in Exhibit A to the Agreement are hereby amended and restated, as follows:	
“Credit Extension” means each Advance, Term Loan, or any other extension of credit by Bank to or for the benefit of a Borrower hereunder,
“EBITDA” means, with respect to any fiscal period, an amount equal to the difference between:
(i) earnings before the sum of (a) tax, plus (b) depreciation and amortization, plus (c) interest and non-Cash expenses, plus (d) any non-Cash stock compensation expenses; less
(ii) any increase in capitalized expenditures from the prior period, plus any increase in capitalized software from the prior period, plus any increase in deferred acquisition costs from the prior period.
“Revolving Line” means a Credit Extension of up to $12,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).
 
9)	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
10)	Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
11)	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
12)	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
 
 	a)	this Amendment, duly executed by each Borrower;	
 
 	b)	an officer’s certificate of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;	
 
4

 	c)	a Warrant to Purchase Stock, duly executed by VETINSURANCE INTERNATIONAL, INC.;	
 
 	d)	payment of a $7,500 facility fee, which may be debited from any of Borrowers’ accounts;	
 
 	e)	payment of all Bank Expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing lees, which may be debited from any of Borrowers’ accounts; and	
 
 	f)	such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.	
[Remainder of page intentionally left blank]
 
5

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

VETINSURANCE INTERNATIONAL, INC.	
		
By:	 	/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
Title:	 	CEO	
	
VETINSURANCE MANAGERS, INC.	
		
By:	 	/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
Title:	 	CEO	
	
SQUARE 1 BANK	
		
By:	 	/s/ Zack Robbins	
Name:	 	Zack Robbins	
Title:	 	AVP	
[Signature page to Second Amendment to Amended and Restated Loan and Security Agreement]
 
6

THIRD AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Third Amendment to Amended and Restated Loan and Security Agreement is entered into as of September 17, 2013 (the “ Amendment ”) by and among SQUARE 1 BANK (“ Bank ”) and TRUPANION, INC. and VETINSURANCE MANAGERS, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1) Borrower has changed its name from VetInsurance International, Inc. to Trupanion, Inc. (the “Name Change”). Bank and Borrower hereby agree that the Agreement is hereby amended wherever necessary to reflect the Name Change, and Bank hereby waives Borrower’s violation of Section 7.2 of the Agreement related to the Name Change.
 
2)	Section 6.2(ii) of the Agreement is hereby amended and restated, as follows:	
(ii) as soon as available, but in any event within 180 days after the end of Borrower’s fiscal year, audited consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is either unqualified, qualified only for going concern so long as Borrower’s investors provide additional equity as needed or otherwise consented to in writing by Bank on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank;
 
3)	Section 6.2(viii) of the Agreement is hereby amended and restated, as follows:	
(viii) as soon as available, but in any event no later than December 15th of each year, a Board approved, fully-funding operating plan of Borrower for the following year, which shall include, without limitation, monthly balance sheet projections produced by Borrower for such following year, acceptable to bank,
 
4)	The following defined term set forth in Exhibit A to the Agreement is hereby amended and restated, as follows:	
“Revolving Maturity Date” means July 23, 2015; provided, however, that the Revolving Maturity Date will be automatically renewed for an additional 12 month period, unless Bank provides Borrower written notice that it will not extend the Revolving Maturity Date at least 11 months prior to the then current Revolving Maturity Date.
 
1

5)	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
6)	Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
7)	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
8)	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
 
 	a)	this Amendment, duly executed by each Borrower;	
 
 	b)	payment of a $7,500 facility fee, which may be debited from any of Borrowers’ accounts;	
 
 	c)	payment of all Bank Expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrowers’ accounts; and	
 
 	d)	such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.	
[Remainder of page intentionally left blank]
 
2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

TRUPANION, INC.	
		
By:	 	/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
Title:	 	CEO	
	
VETINSURANCE MANAGERS, INC.	
		
By:	 	/s/ Darryl Rawlings	
Name:	 	Darryl Rawlings	
Title:	 	CEO	
	
SQUARE 1 BANK	
		
By:	 	/s/ Evan Travis	
Name:	 	Evan Travis	
Title:	 	AVP	
[Signature page to Third Amendment
to Amended and Restated Loan and Security Agreement]
 
3

FOURTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Fourth Amendment to Amended and Restated Loan and Security Agreement is entered into as of December 20, 2013 (the “ Amendment ”) by and among SQUARE 1 BANK (“ Bank ”) and TRUPANION, INC. and TRUPANION MANAGERS USA, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
 
1)	Bank hereby waives Borrowers’ violation of the Maximum EBITDA Loss/Minimum EBITDA covenant, as more particularly described in Section 6.7(d) of the Agreement (as in effect immediately prior to the date of this Amendment), for the reporting period ending August 31, 2013.	
 
2)	Bank hereby waives Borrowers’ violation of Section 6.2(ii) of the Agreement for failing to deliver to Bank when previously due Borrowers’ audited consolidated and consolidating fiscal year-end financial statements for the 2012 fiscal year (the “2012 Financials”). Bank hereby extends to January 15, 2014 the due date for Borrower to deliver to Bank the 2012 Financials.	
 
3)	Borrower Vetinsurance Managers, Inc. has changed its name from VetInsurance Managers, Inc. to Trupanion Managers USA, Inc. (the “Name Change”). Bank and Borrowers hereby agree that the Agreement is hereby amended wherever necessary to reflect the Name Change.	
 
4)	Section 6.7(d) of the Agreement is hereby amended and restated, as follows:	
(d) Maximum EBITDA Loss/Minimum EBITDA. Measured monthly and calculated (i) on a one-month basis for the reporting period ending November 30, 2013 and (ii) on a rolling-two-months basis for the reporting period ending December 31, 2013, Borrowers’ consolidated EBITDA loss shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods.

Reported Period Ending	  	Maximum EBITDA
Loss	 	
November 30, 2013	  	($	1,000,000	) 	
December 31, 2013	  	($	2,200,000	) 	
 
1

EBITDA levels for subsequent reporting periods will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrowers pursuant to Section 6.2(viii).
 
5)	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
6)	Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
7)	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
8)	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
 
 	a)	this Amendment, duly executed by each Borrower;	
 
 	b)	payment of a $1,000 facility fee, which may be debited from any of Borrowers’ accounts;	
 
 	c)	payment of all Bank Expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrowers’ accounts; and	
 
 	d)	such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.	
[Remainder of page intentionally left blank]
 
2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

TRUPANION, INC.	
		
By:	 	/s/ Michael O. Banks	
Name:	 	Michael O. Banks	
Title:	 	Chief Financial Officer	
	
TRUPANION MANAGERS USA, INC.	
		
By:	 	/s/ Michael O. Banks	
Name:	 	Michael O. Banks	
Title:	 	Chief Financial Officer	
	
SQUARE 1 BANK	
		
By:	 	/s/ Joshua D. Cashwell	
Name:	 	Joshua D. Cashwell	
Title:	 	AVP	
[Signature page to Fourth Amendment
to Amended and Restated Loan and Security Agreement]
 
3

FIFTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Amended and Restated Loan and Security Agreement is entered into as of December 23, 2013 (the “ Amendment ”) by and among SQUARE 1 BANK (“ Bank ”) and TRUPANION, INC. and TRUPANION MANAGERS USA, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
 
1)	A new Section 2.1(d) is hereby added to the Agreement, as follows:	
(d) Crediting of Credit Extensions to Cash Security Account. Notwithstanding anything to the contrary in this Agreement, if Bank determines that an Advance or Term Loan requested by a Borrower would result in the aggregate outstanding Credit Extensions exceeding $15,000,000, then Bank may credit to the Cash Security Account the amount of such Advance or Term Loan as is necessary to cause the amount of outstanding Credit Extensions above $15,000,000 to be cash-secured by cash in the Cash Security Account.
 
2)	A new Section 4.4 is hereby added to the Agreement, as follows:	
4.4 Pledge of Cash Collateral.
(a) Borrowers hereby pledge to Bank and grant to Bank a security interest in the Cash Security Account as security for the prompt performance of all of Borrowers’ Obligations. Borrowers shall enter into such agreements as Bank requests in order to perfect or ensure the priority of Bank’s security interest in the Cash Security Account.
(b) Borrowers authorize Bank immediately, and as may, be necessary from time to time, to transfer, from any Borrower’s other accounts at Bank to the Cash Security Account, the balances required to be held in the Cash Security Account pursuant to Section 6.12 of this Agreement. Each Borrower authorizes Bank to hold in pledge the balances required to be held in the Cash Security Account pursuant to Section 6.12 of this Agreement, and to decline to honor any drafts thereon or any request by a Borrower or any other Person to pay or otherwise transfer any part of such balances, for so long as any Obligations are outstanding.
(c) Prior to the maturity, if any, of the Cash Security Account held by Bank pursuant hereto, Borrowers and Bank shall agree upon a security or other instrument similar in form, quality, and substance to the original Cash Security Account in which the proceeds
 
1

of the Cash Security Account can be reinvested on maturity. Upon maturity, if any, of the Cash Security Account in accordance with its terms, or in the event that the Cash Security Account otherwise becomes payable during the term of this Agreement, such maturing Cash Security Account may be presented for payment, exchange, or otherwise marketed by Bank on behalf of Borrowers and the proceeds therefrom used to purchase the security or instrument agreed to by Borrowers and Bank in accordance with the immediately preceding sentence. If no agreement has been made, such proceeds shall be placed into an interest- bearing account at Bank until such time as an agreement as to the security replacing the original Cash Security Account can be reached. Bank may retain any such successor collateral and the proceeds therefrom as cash security in accordance with the terms of this Agreement.
 
3)	Section 6.2(viii) of the Agreement is hereby amended and restated, as follows:	
(viii) as soon as available, but in any event no later than January 15th of each year, a Board-approved, fully-funded operating plan of Borrower for such year, which shall include, without limitation, monthly balance sheet projections produced by Borrower for such year, acceptable to Bank.
 
4)	A new Section 6.12 is hereby added to the Agreement, as follows:	
6.12 Cash Security Account. Borrower shall at all times maintain the Cash Security Account, with a balance of cash in such Cash Security Account at all times greater than or equal to (1) the aggregate amount of all Credit Extensions then outstanding, less (ii) $15,000,000.
 
5)	Section 8.2(a) of the Agreement is hereby amended and restated, as follows:	
(a) If a Borrower fails to perform any obligation under Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.10, or 6.12 or violates any of the covenants contained in Article 7 of this Agreement;
 
6)	The following defined term is hereby added to Exhibit A to the Agreement, as follows:	
“Cash Security Account” means Money Market Account number 3097844, together with all proceeds and substitutions thereof, all interest paid thereon, and all other cash and non-cash proceeds of the foregoing.
 
7)	The following defined term in Exhibit A to the Agreement is hereby amended and restated, as follows:	
“Revolving Line” means a Credit Extension of up to $15,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).
 
8)	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance	
 
2

 	of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
9)	Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
10)	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
11)	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
 
 	a)	this Amendment, duly executed by each Borrower;	
 
 	b)	an officer’s certificate of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;	
 
 	c)	payment of a $2,500 facility fee, which may be debited from any of Borrowers’ accounts;	
 
 	d)	payment of all Bank Expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrowers’ accounts; and	
 
 	e)	such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.	
[Remainder of page intentionally left blank]
 
3

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

TRUPANION, INC.	
				
By:	 	/s/ Michael O. Banks	 		 	/s/ Asher Bearman	
Name:	 	Michael O. Banks	 		 	Asher Bearman, Secretary	
Title:	 	Chief Financial Officer	 		 	 	
			
TRUPANION MANAGERS USA, INC.	 		 		
				
By:	 	/s/ Michael O. Banks	 		 		
Name:	 	Michael O. Banks	 		 		
Title:	 	Chief Financial Officer	 		 		
			
SQUARE 1 BANK	 		 		
				
By:	 	/s/ Illegible	 		 		
Name:	 	Illegible	 		 		
Title:	 	VP	 		 		
[Signature page to Fifth Amendment
to Amended and Restated Loan and Security Agreement]
 
4

SIXTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Amended and Restated Loan and Security Agreement is made and entered into as of March 27, 2014 (the “ Amendment ”) by and among SQUARE 1 BANK (“ Bank ”) and TRUPANION, INC. and TRUPANION MANAGERS USA, INC. (each a “ Borrower ”, and collectively “ Borrowers ”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of August 24, 2012 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
 
1)	Section 6.2(viii) of the Agreement is hereby amended and restated, as follows:	
(viii) as soon as available, but in any event no later than December 15 of the previous fiscal year of Borrower, a Board-approved, fully-funded operating plan of Borrower for the upcoming fiscal year of Borrower, which shall include, without limitation, monthly balance sheet projections produced by Borrower for such upcoming fiscal year, acceptable to Bank.
 
2)	Section 6.7(c) of the Agreement is hereby amended and restated, as follows:	
(c) Average Monthly Revenue . Measured on a rolling three months basis, Borrowers shall achieve at least the levels of average Revenues set forth in the table immediately below.

Reporting Period Ending	  	Revenue	 	
January 31, 2014	  	$	6,509,000	  	
February 28, 2014	  	$	6,669,000	  	
March 31, 2014	  	$	6,953,000	  	
April 30, 2014	  	$	7,172,000	  	
May 31, 2014	  	$	7,346,000	  	
June 30, 2014	  	$	7,515,000	  	
July 31, 2014	  	$	7,665,000	  	
August 31, 2014	  	$	7,846,000	  	
September 30, 2014	  	$	8,035,000	  	
October 31, 2014	  	$	8,237,000	  	
November 30, 2014	  	$	8,419,000	  	
December 31, 2014	  	$	8,596,000	  	

					
	    	Trupanion, Inc. -6th Amendment to A&R LSA	  		
	    		  		
1

Average Revenue levels for subsequent reporting periods will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrowers pursuant to Section 6.2(viii).
 
3)	Section 6.7(d) of the Agreement is hereby amended and restated, as follows:	
(d) Maximum EBITDA Loss/Minimum EBITDA . Measured monthly and calculated on: (i) a trailing 1-month basis for the reporting period ending January 31, 2014, (ii) a trailing 2-month for the reporting period ending February 28, 2014, and (iii) a trailing three-months basis for all reporting periods thereafter, Borrowers’ consolidated EBITDA loss shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods.

Reporting Period Ending	  	Maximum EBITDA
Loss	 	
January 31, 2014	  	($	2,317,000	) 	
February 28, 2014	  	($	4,149,000	) 	
March 31, 2014	  	($	6,407,000	) 	
April 30, 2014	  	($	6,231,000	) 	
May 31, 2014	  	($	6,671,000	) 	
June 30, 2014	  	($	6,908,000	) 	
July 31, 2014	  	($	6,679,000	) 	
August 31, 2014	  	($	6,421,000	) 	
September 30, 2014	  	($	5,525,000	) 	
October 31, 2014	  	($	5,340,000	) 	
November 30, 2014	  	($	4,650,000	) 	
December 31, 2014	  	($	4,389,000	) 	
EBITDA levels for subsequent reporting periods will be set by Bank based upon the board approved, fully-funded operating plan to be provided by Borrowers pursuant to Section 6.2(viii).
 
4)	Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power,	

					
	    	Trupanion, Inc. -6th Amendment to A&R LSA	  		
	    		  		
2

 	or remedy of Bank under the Agreement, as in effect prior to the date hereof. Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.	
 
5)	Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment.	
 
6)	This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.	
 
7)	As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:	
 
 	a)	this Amendment, duly executed by each Borrower;	
 
 	b)	payment of all Bank Expenses, including Bank’s expenses for the documentation of this amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrowers’ accounts; and	
 
 	c)	such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.	
[Remainder of page intentionally left blank]

					
	    	Trupanion, Inc. -6th Amendment to A&R LSA	  		
	    		  		
3

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

TRUPANION, INC.	
		
By:	 	/s/ Howard E. Rubin	
Name:	 	Howard E. Rubin	
Title:	 	C.O.O.	
	
TRUPANION MANAGERS USA, INC.	
		
By:	 	/s/ Howard E. Rubin	
Name:	 	Howard E. Rubin	
Title:	 	C.O.O.	
	
SQUARE 1 BANK	
		
By:	 	/s/ ILLEGIBLE	
Name:	 	ILLEGIBLE	
Title:	 	AVP	
[Signature page to Sixth Amendment
to Amended and Restated Loan and Security Agreement]

					
	    	Trupanion, Inc. -6th Amendment to A&R LSA	  		
	    		  		
4

Exhibit 10.11

 
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated effective as of December 23, 2013
Among
Trupanion, Inc. and Trupanion Managers, USA, Inc.,
as the Borrowers,
and
PEPI CAPITAL, L.P.
as Agent and Lender and
Highland Consumer Fund I Limited Partnership,
Highland Consumer Fund 1-B Limited Partnership
and Highland Consumer Entrepreneurs Fund I
Limited Partnership as Lenders

 

Table of Contents

1.    	 	DEFINITIONS AND CONSTRUCTION	  	 	1	  	
				
	 	1.1.	  	Definitions	  	 	1	  	
	 	1.2.	  	Accounting Terms	  	 	1	  	
			
2.	 	LOAN AND TERMS OF PAYMENT	  	 	1	  	
				
	 	2.1.	  	Loan	  	 	1	  	
	 	2.2.	  	Repayment of Loans	  	 	2	  	
	 	2.3.	  	Prepayments	  	 	2	  	
	 	2.4.	  	Interest	  	 	3	  	
	 	2.5.	  	Lender Expenses	  	 	4	  	
	 	2.6.	  	Payments Generally	  	 	4	  	
	 	2.7.	  	All Payments Pro Rata	  	 	4	  	
			
3.	 	CONDITIONS TO LOAN.	  	 	4	  	
				
	 	3.1.	  	Receipt of Loan Documents	  	 	4	  	
	 	3.2.	  	Further Conditions	  	 	5	  	
	 	3.3.	  	Receipt of Documents in Connection with This Agreement	  	 	5	  	
			
4.	 	CREATION OF SECURITY INTEREST AND GUARANTEES.	  	 	6	  	
				
	 	4.1.	  	Grant of Security Interest	  	 	6	  	
	 	4.2.	  	Pledge of Collateral	  	 	6	  	
	 	4.3.	  	Perfection of Security Interest	  	 	7	  	
	 	4.4.	  	Subordination Agreement	  	 	7	  	
	 	4.5.	  	Guaranties and Subsidiary Pledges	  	 	8	  	
	 	4.6.	  	Deposit Account Control Agreement	  	 	8	  	
			
5.	 	REPRESENTATIONS AND WARRANTIES.	  	 	9	  	
				
	 	5.1.	  	Due Organization and Qualification	  	 	9	  	
	 	5.2.	  	Due Authorization; No Conflict	  	 	9	  	
	 	5.3.	  	Collateral	  	 	9	  	
	 	5.4.	  	Intellectual Property Collateral	  	 	9	  	
	 	5.5.	  	Name; Location of Chief Executive Office	  	 	10	  	
	 	5.6.	  	Litigation	  	 	10	  	
	 	5.7.	  	No Material Adverse Change in Financial Statements	  	 	10	  	
	 	5.8.	  	Solvency, Payment of Debts	  	 	10	  	
	 	5.9.	  	Compliance with Laws and Regulations	  	 	10	  	
	 	5.10.	  	Subsidiaries; Equity Interests	  	 	10	  	
	 	5.11.	  	Government Consents	  	 	11	  	
	 	5.12.	  	Inbound Licenses	  	 	11	  	
	 	5.13.	  	Shares	  	 	11	  	
	 	5.14.	  	Full Disclosure	  	 	11	  	
	 	5.15.	  	ERISA Compliance	  	 	11	  	
	 	5.16.	  	Intellectual Property; Licenses, Etc	  	 	12	  	
	 	5.17.	  	Trust and Deposit Accounts	  	 	12	  	
 
i

									
	 	5.18.	  	Real Property	  	 	12	  	
	 	5.19.	  	Offices	  	 	12	  	
			
6.    	 	AFFIRMATIVE COVENANTS.	  	 	13	  	
				
	 	6.1.	  	Good Standing and Government Compliance	  	 	13	  	
	 	6.2.	  	Financial Statements, Reports, Certificates	  	 	13	  	
	 	6.3.	  	Inventory and Equipment; Returns	  	 	15	  	
	 	6.4.	  	Taxes	  	 	15	  	
	 	6.5.	  	Insurance	  	 	15	  	
	 	6.6.	  	Financial Covenants	  	 	15	  	
	 	6.7.	  	Springing Covenants	  	 	16	  	
	 	6.8.	  	Registration of IP Rights	  	 	17	  	
	 	6.9.	  	Consent of Inbound Licensors	  	 	17	  	
	 	6.10.	  	Capital, Licensing and Compliance Requirements; Financial Covenants	  	 	18	  	
	 	6.11.	  	Shares	  	 	18	  	
	 	6.12.	  	Further Assurances	  	 	18	  	
	 	6.13.	  	Certain Post-Closing Items	  	 	18	  	
			
7.	 	NEGATIVE COVENANTS.	  	 	18	  	
				
	 	7.1.	  	Dispositions	  	 	18	  	
	 	7.2.	  	Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control	  	 	18	  	
	 	7.3.	  	Mergers or Acquisitions	  	 	19	  	
	 	7.4.	  	Indebtedness	  	 	19	  	
	 	7.5.	  	Encumbrances	  	 	19	  	
	 	7.6.	  	Distributions	  	 	19	  	
	 	7.7.	  	Investments	  	 	19	  	
	 	7.8.	  	Transactions with Affiliates	  	 	20	  	
	 	7.9.	  	Subordinated Debt	  	 	20	  	
	 	7.10.	  	Inventory and Equipment	  	 	20	  	
	 	7.11.	  	No Investment Company; Margin Regulation	  	 	20	  	
	 	7.12.	  	Insurance Subsidiary Capital Withdrawals	  	 	20	  	
	 	7.13.	  	Canadian Subsidiaries	  	 	20	  	
	 	7.14.	  	NPIC of Arizona	  	 	20	  	
			
8.	 	EVENTS OF DEFAULT.	  	 	21	  	
				
	 	8.1.	  	Payment Default	  	 	21	  	
	 	8.2.	  	Covenant Default	  	 	21	  	
	 	8.3.	  	Senior Default Debt	  	 	21	  	
	 	8.4.	  	Material Adverse Change	  	 	21	  	
	 	8.5.	  	Attachment	  	 	21	  	
	 	8.6.	  	Insolvency	  	 	22	  	
	 	8.7.	  	Other Agreements	  	 	22	  	
	 	8.8.	  	Judgments	  	 	22	  	
	 	8.9.	  	Misrepresentations	  	 	22	  	
	 	8.10.	  	Guaranty	  	 	22	  	
 
ii

									
			
9.	 	LENDER’S RIGHTS AND REMEDIES.	  	 	22	  	
				
	 	9.1.	  	Rights and Remedies	  	 	22	  	
	 	9.2.	  	Power of Attorney	  	 	24	  	
	 	9.3.	  	Accounts Collection	  	 	24	  	
	 	9.4.	  	Agent Expenses	  	 	25	  	
	 	9.5.	  	Agent’s Liability for Collateral	  	 	25	  	
	 	9.6.	  	No Obligation to Pursue Others	  	 	25	  	
	 	9.7.	  	Remedies Cumulative	  	 	25	  	
	 	9.8.	  	Demand; Protest	  	 	25	  	
			
10.  	 	NOTICES.	  	 	26	  	
			
11.	 	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.	  	 	26	  	
				
	 	11.1.	  	Governing Law	  	 	26	  	
	 	11.2.	  	Submission to Jurisdiction	  	 	26	  	
	 	11.3.	  	Waiver of Venue	  	 	26	  	
	 	11.4.	  	Service of Process	  	 	27	  	
	 	11.5.	  	Waiver of Jury Trial	  	 	27	  	
			
12.	 	GENERAL PROVISIONS.	  	 	28	  	
	 	12.1.	  	Successors and Assigns	  	 	28	  	
	 	12.2.	  	Indemnification	  	 	28	  	
	 	12.3.	  	Time of Essence	  	 	28	  	
	 	12.4.	  	Severability of Provisions	  	 	28	  	
	 	12.5.	  	Amendments in Writing, Integration	  	 	28	  	
	 	12.6.	  	Counterparts	  	 	29	  	
	 	12.7.	  	Survival	  	 	29	  	
	 	12.8.	  	Confidentiality	  	 	29	  	
	 	12.9.	  	Intercreditor Agreement	  	 	30	  	
			
13.	 	CO-BORROWER PROVISIONS.	  	 	30	  	
				
	 	13.1.	  	Primary Obligation	  	 	30	  	
	 	13.2.	  	Enforcement of Rights	  	 	30	  	
	 	13.3.	  	Borrowers as Agents	  	 	30	  	
	 	13.4.	  	Subrogation and Similar Rights	  	 	30	  	
	 	13.5.	  	Waivers of Notice	  	 	31	  	
	 	13.6.	  	Subrogation Defenses	  	 	31	  	
	 	13.7.	  	Right to Settle, Release	  	 	31	  	
	 	13.8.	  	Subordination	  	 	32	  	
		
EXHIBIT A	  				
			
	 	DEFINITIONS	  	 	1	  	
 
iii

AMENDED AND RESTATED
CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT (the “ Agreement ”) is executed on the 28th day of February, 2014, to be effective as of December 23, 2013, by and among TRUPANION, INC. and TRUPANION MANAGERS USA, INC. (each a “ Borrower ” and collectively, “ Borrowers ”) and PEPI CAPITAL, L.P. (“ Original Lender ”), Highland Consumer Fund I Limited Partnership, Highland Consumer Fund 1-B Limited Partnership and Highland Consumer Entrepreneurs Fund I Limited Partnership (each an “ Additional Lender ” and collectively the “ Additional Lenders ”).
RECITALS
Amendment to Credit Agreement . Borrowers entered into a Credit Agreement (the “ Original Credit Agreement ”) also dated as of December 23, 2013 with PEPI CAPITAL, L.P. as Lender pursuant to which PEPI CAPITAL, L.P. made a loan to Borrowers as described therein. PEPI CAPITAL, INC. has entered into an Assignment and Assumption Agreement with the Additional Lenders executed on the 28th day of February, 2014, to be effective as of December 23, 2014, pursuant to which PEPI CAPITAL, L.P. has agreed to assign a certain percentage interest in the Loan made pursuant to the Credit Agreement to the Additional Lenders as outlined therein and in conjunction therewith. In order to facilitate that assignment and assumption, Borrowers, Original Lender and Additional Lenders agree to enter into this Amended and Restated Credit Agreement, which amends and restates the Original Credit Agreement in its entirety.
AGREEMENT
The parties agree as follows:
 
 	1.	DEFINITIONS AND CONSTRUCTION	
1.1. Definitions . As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A . Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.
1.2. Accounting Terms . Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.
 
 	2.	LOAN AND TERMS OF PAYMENT	
2.1. Loan.
(a) Loan . Subject to the terms and conditions set forth herein, Original Lender made the loan to Borrowers in a single advance in an aggregate amount
 
1

of Twelve Million and No/100 Dollars ($12,000,000.00). As a result of the assignment by the Original Lender to the Additional Lenders pursuant to the Assignment and Assumption Agreement the Loan shall be evidenced by Notes executed by Borrowers as co-makers and payable to Lenders as follows:
(i) a note payable to PEPI CAPITAL, L.P. in the principal amount of $10,000,000.00;
(ii) a note payable to Highland Consumer Fund I Limited Partnership in the principal amount of $1,605,876.28;
(iii) a note payable to Highland Consumer Fund I-B Limited Partnership in the principal amount of $342,623.57; and
(iv) a note payable to Highland Consumer Entrepreneurs Fund I Limited Partnership in the amount of $51,500.15.
(b) Return of Original Note. The Original Note shall be returned to Borrowers by Agent marked to indicate that it has been amended and replaced.
2.2. Repayment of Loans.
(a) Except for mandatory prepayments on the Notes required pursuant to Section 2.3(b) hereof, the Borrowers shall not be required to make any payments of principal on the Notes prior to the Maturity Date;
(b) Accrued interest on the Notes shall be due and payable on December 23, 2014, and December 23, 2015, provided, that rather than pay the accrued interest on such dates, Borrowers may elect to compound the accrued interest and have it added to the principal balance of each Note as of the date it is due. If Borrowers fail to pay accrued interest on or prior to the date it is due under the Notes, such accrued interest shall be automatically added to the principal balance of each Note as of such due date.
(c) Each of the Notes shall mature on December 23, 2016 (the “ Maturity Date ”) and on the Maturity Date, the unpaid principal amount of each of the Notes plus all accrued interest thereon plus all other amounts due hereunder shall be due and payable.
2.3. Prepayments.
(a) Voluntary Prepayments . Borrowers may, upon notice to the Agent, at any time or from time to time voluntarily prepay the outstanding interest on, or the principal of the Notes, in whole or in part, without premium or penalty; provided that (i) such notice must be received by the Agent not later than noon on the date prior to prepayment; (ii) any prepayment of the Notes shall be in an aggregate principal amount of at least One Million and No/100 Dollars ($1,000,000.00) or, in each case, if less, the entire principal amount of the Notes then outstanding; (iii) each prepayment shall be applied first to the payment of all interest which has accrued since the last anniversary
 
2

date of the Notes, together with any additional amounts required to be paid by Borrower to Lenders pursuant to Section 2.5 ; (iv) and the balance of such prepayments shall be applied to original balance of the Notes on a pro rata basis.
(b) Mandatory Prepayments . The outstanding Principal Balance of the Notes plus all accrued and unpaid interest thereon plus all Lenders Expenses and all other amounts required to be paid by Borrowers to Lenders pursuant hereto shall be due and payable in full on the occurrence of any of the following:
(i) a Change of Control of any Borrower or any Subsidiary;
(ii) a sale of all or substantially all of the assets of the Borrowers or any Subsidiaries;
(iii) a merger or consolidation of any Borrower or any Subsidiary in which a Borrower or a Subsidiary is not the surviving entity;
(iv) completion by a Borrower or a Subsidiary of a Qualified IPO (as defined in the Company’s Certificate of Incorporation, as amended from time to time);
(v) receipt by the Borrowers and the Subsidiaries of an aggregate net proceeds of Six Million Dollars ($6,000,000) or more from one or more equity financings, the proceeds of which are not applied to prepay the Loan; provided that, proceeds received by the Borrowers pursuant to the exercise of options or warrants outstanding as of the date hereof will not be treated as proceeds from an equity financing for purposes of this paragraph;
(vi) if the Senior Debt exceeds Thirty-Three Million and No/100 Dollars ($33,000,000.00) in the aggregate or the Borrowers and the Subsidiaries have used in excess of Thirty Million and No/100 Dollars ($30,000,000.00) of Senior Debt to fund the capital requirements of the Insurance Subsidiary or have used in excess of Three Million and No/100 Dollars ($3,000,000.00) of Senior Debt for general corporate purposes.
2.4. Interest .
(a) Interest Rate . Interest will accrue on the Notes at the rate of eleven percent (11%) per annum until the Notes mature.
(b) Default Interest . If any amount payable by Borrowers under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at an interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable laws.
(c) Computation of Interest. All computations of interest for the Notes shall be made on the basis of a 360-day year and actual days elapsed.
 
3

2.5. Lender Expenses . On the Closing Date, Borrowers paid the Agent all Lender Fees incurred through the Closing Date, all Lender Expenses, as and when they become due after the Closing Date, shall be payable to Lenders following receipt by Borrowers of an invoice therefor describing them in reasonable detail; provided that Additional Lenders shall be responsible for paying all Amendment Expenses of Borrowers and Agent.
2.6. Payments Generally . All payments to be made by Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. All payments received by the Lenders after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. If a payment relative to any of the Obligations is made to Lenders in a currency other than Dollars (whether voluntarily or pursuant to an order of judgment of a court or tribunal of any jurisdiction), such payment will constitute a discharge of the liability in respect of such Obligations only to the extent of the amount of Dollars which Lenders purchase with the amount received at Dallas, Texas, such purchase to be at such time as Lenders may reasonably elect, but in any event within three Business Days after receipt of such payment. If the amount of Dollars able to be purchased is less than the amount of such currency originally due to it in respect to the relevant Obligation, Borrowers will indemnify and save Lenders harmless from and against any loss or damage arising as a result of such deficiency.
2.7. All Payments Pro Rata . All payments made on the Notes must be made pro rata amongst the Lenders. If any Lender receives any payment or reduction of any Note whether through set-off or otherwise, in excess of his pro rata share such Lender shall (i) immediately notify the Borrowers of such fact and (ii) immediately share the excess payment or reduction on a pro rata basis with the other Lenders.
 
 	3.	CONDITIONS TO LOAN.	
3.1. Receipt of Loan Documents . In connection with the Original Loan, the Original Lender received the following:
(a) the Original Agreement;
(b) an officer ’ s certificate of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;
(c) an officer’s certificate of each Guarantor with respect to incumbency and resolutions authorizing the execution of the Guaranty to be executed by it.
(d) a financing statement (Form UCC-1) for each Borrower and each Guarantor;
(e) a Security Agreement (as defined in Section 4.1) from each Borrower and each Guarantor;
 
4

(f) payment of the Lender Expenses then due;
(g) current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the Collateral;
(h) a current Compliance Certificate in accordance with Section 6.2 ;
(i) a Warrant in form and substance reasonably satisfactory to Original Lender;
(j) a Borrowers Information Certificate;
(k) the Subordination Agreement;
(l) a legal opinion of counsel to Borrowers in a form acceptable to the Lender; and
(m) such other documents or certificates, and completion of such other matters, as Lender may reasonably request.
3.2. Further Conditions. The obligation of Original Lender to make the Original Loan was also subject to the condition that the representations and warranties contained in Section 5 of the Original Credit Agreement were true and correct and no Event of Default had occurred. The making of the Original Loan was deemed to be a representation and warranty by Borrowers on the date of the Original Loan as to the accuracy of the facts referred to in this Section 3.2 .
3.3. Receipt of Documents in Connection with This Agreement. The execution and delivery of this Agreement is subject to the condition that Lenders and Borrowers shall have entered into the following documents:
(a) this Agreement;
(b) an Assignment and Assumption Agreement;
(c) the Intercreditor Agreement;
(d) Financing Statements (Form UCC-1) for each Borrower naming each Lender as secured party;
(e) An Amendment of each Security Agreement signed by each Borrower and each Guarantor;
(f) payment of the Amendment Expenses by Additional Lenders to Borrowers and Original Lender;
(g) an Amended Subordination Agreement;
 
5

(h) an amendment to the Warrant reasonably satisfactory to Original Lender and a New Warrant in form and substance reasonably satisfactory to Additional Lenders; and
(i) such other documents and certificates and completion of such other matters as Lenders and Borrowers may reasonably require or request to complete the transaction contemplated herein.
 
 	4.	CREATION OF SECURITY INTEREST AND GUARANTEES.	
4.1. Grant of Security Interest . Each Borrower grants, pledges, assigns, mortgages, hypothecates and charges to Lenders a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrowers of each of its covenants and duties under the Loan Documents. Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, subject to liens of the Senior Lender existing as of the date hereof (“ Senior Liens ”), and will constitute a valid, first priority security interest in later-acquired or after-acquired Collateral, subject to Senior Liens. Such security interest shall be evidenced by a Security and Pledge Agreement in a form acceptable to Lender as amended pursuant to this Agreement, executed by Borrowers and delivered to Lenders.
4.2. Pledge of Collateral . Each Borrower hereby pledges, assigns, grants, mortgages, hypothecates and charges to and in favor of Lender a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. Such security interest shall be evidenced by a Security Agreement executed by Borrowers and delivered to Lender as of the Closing Date as amended pursuant to this Agreement. On the Closing Date, the certificate or certificates for the Shares have been delivered to Senior Lender, accompanied by an instrument of assignment duly governing the Shares and the relevant Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares both to Senior Lender and to Lenders. Upon the occurrence and during the continuance of an Event of Default hereunder, subject to the rights of the Senior Lender and subject to the terms of the Amended Subordination Agreement, Agent may (subject to Section 9.1(f) ) effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Agent and cause new certificates representing such securities to be issued in the name of Agent or its transferee. Unless an Event of Default shall have occurred and be continuing, each Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent in any material respect with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. Subject to the terms of the Amended Subordination Agreement, all such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.
 
6

4.3. Perfection of Security Interest . Each Borrower authorizes each Lender to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of such Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code, or, if applicable, the Personal Property Security Act (Ontario) or the Personal Property Security Act (British Columbia) for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether such Borrower is an organization, the type of organization and any organizational identification number issued to such Borrower, if applicable. Each Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Agent chooses to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third party bailee, each Borrower shall take such steps as Agent reasonably requests for Agent to (i) subject to Section 7.10 below, obtain an acknowledgment, in form and substance satisfactory to Agent, of the bailee that the bailee holds such Collateral for the benefit of Agent, and (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing lender to execute a control agreement in form and substance satisfactory to Agent. No Borrower will create any chattel paper without placing a legend on the chattel paper acceptable to Agent indicating that Lenders have a security interest in the chattel paper. Each Borrower shall take such other actions as Agent requests to perfect Lenders’ security interests granted under this Agreement.
4.4. Subordination Agreement . The Original Lender and the Senior Lender entered into the Subordination Agreement pursuant to which Original Lender agreed to subordinate the Loan and all of Borrower’s obligations to it to the Senior Debt as set forth in the Subordination Agreement. In connection with this Agreement, Lenders and Senior Lender have amended the Subordination Agreement by execution of the Amended Subordination Agreement. Lenders agree to enter into an Amended Subordination Agreement on terms substantively identical to the Amended Subordination Agreement (or no less favorable to Lender) with any future lenders with respect to Senior Debt permitted hereunder, upon which such lenders shall be deemed Senior Lenders for purposes of this Agreement and their liens and security interests shall be deemed “Senior Liens” hereunder, and the applicable loan agreement shall be deemed to be the “Senior Loan Agreement” hereunder.
Borrowers agree that:
(a) Borrowers will not amend or modify the Senior Loan Documents without the prior written approval of Agent in any manner that is not permitted by the Subordination Agreement as amended.
(b) The maximum amount of Senior Debt used for the operation of the Borrowers shall not exceed Three Million and No/100 Dollars ($3,000,000.00).
(c) Other than as permitted pursuant to Section 4.4(b) , Senior Debt shall be used exclusively to fund the regulatory capital requirements of the Insurance Subsidiary and shall not exceed Thirty-Three Million and No/100 Dollars ($33,000,000.00).
 
7

(d) Borrower will immediately forward to Agent copies of any default notice or other notice received by Borrower from the Senior Lender.
(e) Borrower will provide to Agent copies of any documents, certificates, reports, financial statements or other information provided by Borrower to Senior Lender at any time and from time to time.
4.5. Guaranties and Subsidiary Pledges . Each United States Subsidiary of each Borrower shall execute and deliver to Lenders as of the Closing Date a guaranty of this Loan and all obligations of each Borrower arising under this Agreement and under any of the Loan Documents. However, notwithstanding the foregoing, (a) American Pet Insurance Company shall not be required to execute a guaranty or a security agreement, and (b) North American Pet Insurance Company, Inc., an Arizona corporation which Borrowers represent is inactive, shall not be required to execute a guaranty or a security agreement unless and until it acquires assets with a value in excess of One Hundred and No/100 Dollars ($100,000.00) or unless and until Agent requests that it execute a security agreement and Guaranty and a security agreement in substantially the same form as that executed by other Subsidiaries. In addition, notwithstanding anything to the contrary set forth herein or in any other Loan Document, the Borrowers and their United States Subsidiaries shall not be required to pledge more than sixty-six percent (66%) of the stock they may own in any foreign subsidiary, and no foreign subsidiary shall be required to pledge any stock it may own in any other foreign subsidiary, except that, if and to the extent that, a greater portion of any Subsidiary or foreign subsidiary stock has been pledged pursuant to the Senior Loan Documents, then such greater portion shall also be pledged to Lenders; provided that, in the event Senior Lender releases any pledged stock in an indirect foreign subsidiary for the express purpose of preventing adverse effects to the Borrower under Section 956 of the US tax code, then Lenders will also release the same shares from pledge. In addition, Borrowers will pledge from time to time such additional shares of any foreign subsidiary directly held by a Borrower or a United States Subsidiary thereof necessary to maintain Lenders’ pledge at 66% of the total outstanding shares of such foreign subsidiary. To the extent Senior Lender has possession of stock or a stock power with respect to any foreign subsidiary of a foreign subsidiary, then Borrowers will deliver to Agent a executed blank stock power for such shares by no later than January 10, 2014. Each Borrower hereby represents and warrants that a holder of 66% or more of the outstanding stock of any foreign subsidiary of the Borrowers has full control over such foreign subsidiary and has indirect control over any of its direct or indirect subsidiaries.
4.6. Deposit Account Control Agreement . By             , 2014, each Borrower shall execute and deliver to Agent an Amendment to Deposit Account Control Agreement with respect to each Deposit Account owned by Borrowers recognizing the security interest of Lenders subject only to the Senior Debt, which agreement shall be sufficient to perfect Lenders’ security interest in such account and shall be consistent with the requirements of the Amended Subordination Agreement; provided that, Borrowers shall not be required to execute and deliver an Amendment to Deposit Account Control Agreement with respect to any Deposit Account if such Deposit Account is the subject of a deposit account control agreement with the holder of Senior Debt and such deposit account control agreement is in form sufficient to perfect the Lenders’ security interest in such Deposit Account.
 
8

 	5.	REPRESENTATIONS AND WARRANTIES.	
Each Borrower represents and warrants to Lenders as to itself and as to each of its Subsidiaries as follows:
5.1. Due Organization and Qualification . Borrower and each Subsidiary is a corporation duly existing under the laws of the jurisdiction in which it is organized as reflected on Schedule 5.1 attached hereto and qualified and licensed to do business in any state or Canadian province in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.
5.2. Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within each Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in its Articles or Certificate of Incorporation (as applicable) or Bylaws (or other formation or governing documents), nor will they constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.
5.3. Collateral . Subject to the limitations set forth in Section 9.1(f) , each Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. Except as set forth in the Schedule, all Collateral other than movable items of personal property such as laptop computers, having an aggregate book value not in excess of $100,000 is located solely in the Collateral Jurisdictions or such other locations as Borrower informs Agent in writing from time to time. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made. Except as set forth in the Schedule, none of Borrower’s or its Subsidiaries’ Cash is maintained or invested with a Person other than Senior Lender or Senior Lender’s Affiliates.
5.4. Intellectual Property Collateral . Each Borrower is the sole owner of the Intellectual Property Collateral, except for licenses granted by Borrower to its customers in the ordinary course of business. To the best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrowers that any part of the Intellectual Property Collateral violates the rights of any third party except to the extent such claim would not reasonably be expected to cause a Material Adverse Effect. All of Borrowers’ Trademarks, Patents and Copyrights that are registered with the Patent and Trademark Office or the Copyright Office of the Government are listed on Schedule 5.4 hereto. Except as set forth in the Schedule, Borrower’s rights as a licensee of intellectual property do not give rise to more than 5% of its gross revenue in any given month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service.
 
9

5.5. Name; Location of Chief Executive Office . Except as disclosed in the Schedule, no Borrower has done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement. The chief executive office of each Borrower is located at the addresses indicated in Section 10 hereof or such other location as Borrowers may notify Agent in writing from time to time in accordance with Section 7.2 hereof.
5.6. Litigation . Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrowers or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a Material Adverse Effect.
5.7. No Material Adverse Change in Financial Statements. All consolidated and consolidating financial statements related to Borrowers and any Subsidiary that have been delivered by Borrowers to Lenders fairly present in all material respects Borrowers’ consolidated and consolidating financial condition as of the date thereof and Borrowers’ consolidated and consolidating results of operations for the period then ended. There has not been a material adverse change in the consolidated or in the consolidating financial condition of Borrowers since the date of the most recent of such financial statements submitted to Lenders.
5.8. Solvency, Payment of Debts . Borrowers and each of their Subsidiaries are able to pay their debts (including trade debts) as they mature; the fair saleable value of Borrowers’ and each of its Subsidiaries’ assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrowers are not left with unreasonably small capital after the transactions contemplated by this Agreement.
5.9. Compliance with Laws and Regulations . No Borrower is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. Borrowers are not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). No Borrower has violated any statutes, laws, ordinances or rules applicable to it, the violation of which would reasonably be expected to have a Material Adverse Effect. Each Borrower and each Subsidiary has filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material Adverse Effect.
5.10. Subsidiaries; Equity Interests. No Borrower has any Subsidiaries other than those specifically disclosed in the Schedule or disclosed in writing to the Lenders, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by Borrowers or a Subsidiary of Borrowers or disclosed in writing to the Lender free and clear of all Liens other than the Liens created pursuant to the Loan
 
10

Documents. No Borrower has any equity investments in any other corporation or entity other than those specifically disclosed in the Schedule or disclosed in writing to the Lenders. All of the outstanding Equity Interests in Parent have been validly issued, are fully paid and nonassessable, and are owned by the parties and in the amounts specified on the Schedule or disclosed in writing to the Lender free and clear of all Liens.
5.11. Government Consents . Each Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of each Borrowers’ or any Subsidiary’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect, including without limitation, all licenses, permits or authorizations from any regulatory authority with respect to the insurance business.
5.12. Inbound Licenses. Except as disclosed on the Schedule or as otherwise disclosed to Agent in writing, the Borrower is a party to, nor is bound by, any material inbound license that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such inbound license, other than this Agreement or the other Loan Documents.
5.13. Shares . Each Borrower has full power and authority to create a first lien subject only to Senior Liens on the Shares and no disability or contractual obligations exists that would prohibit Borrowers from pledging the Shares pursuant to this Agreement. To each Borrower’s knowledge, except as set forth in Section  9.1(g) hereof, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares. The Shares have been duly authorized and validly issued, and are fully paid and non-assessable. To each Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrowers know of no reasonable grounds for the institution of any such proceedings.
5.14. Full Disclosure. No representation, warranty or other statement made by any Borrower in any certificate or written statement furnished to Agent taken together with all such certificates and written statements furnished to Lenders contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading in light of the circumstances in which they were made, it being recognized by Lenders that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.
5.15. ERISA Compliance.
(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and other federal, state or provincial Laws. Each Plan that is intended to qualify under Section 401(a) of the IRC has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of Borrowers,
 
11

nothing has occurred which would prevent, or cause the loss of, such qualification. Each Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the IRC, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the IRC has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.
5.16. Intellectual Property; Licenses, Etc. Each Borrower owns, or possesses the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses, permits and other intellectual property rights (collectively, “ IP Rights ”) that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person except where the same would not reasonably be expected to have a Material Adverse Effect. To the best knowledge of each Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by a Borrower infringes upon any rights held by any other Person except where the same would not reasonably be expected to have a Material Adverse Effect. Except as specifically disclosed to Lender in writing, no, claim or litigation regarding any of the foregoing is pending or, to the best knowledge of each Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.17. Trust and Deposit Accounts. All trust and deposit accounts of the Borrowers are listed on Schedule 5.17 hereto.
5.18. Real Property. Borrowers have no interest in real property other than interests as a lessee.
5.19. Offices . All offices of Borrowers and their Subsidiaries are listed on Schedule 5.19 hereto.
 
12

 	6.	AFFIRMATIVE COVENANTS.	
Each Borrower covenants that, until payment in full of all outstanding Obligations, such Borrower shall do all of the following:
6.1. Good Standing and Government Compliance . Each Borrower shall maintain its and each of its Subsidiaries’ corporate existence and good standing in their respective jurisdictions of formation, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect, and shall furnish to Agent the organizational identification number issued to Borrower by the authorities of the jurisdiction in which Borrower is organized, if applicable. Each Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Each Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.
6.2. Financial Statements, Reports, Certificates. Borrowers shall deliver to Agent: (i) as soon as available, but in any event within 30 days after the end of each calendar month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrowers’ operations during such period, including a net worth reconciliation and accounting for maintenance of minimum, state mandated capital requirements (where required), and including copies of account statements for any Cash, in a form reasonably acceptable to Agent and certified by a Responsible Officer; (ii) as soon as available, but in any event within 150 days after the end of Borrowers’ fiscal year, audited consolidated and consolidating financial statements of Borrowers prepared in accordance with GAAP, consistently applied, together with an opinion which is either unqualified, qualified only for going concern so long as Borrowers’ investors provide additional equity as needed or otherwise consented to in writing by Lender on such financial statements of an independent certified public accounting firm reasonably acceptable to Lender; (iii) if applicable, copies of all statements, reports and notices sent or made available generally by a Borrowers to its security holders or to any holder of Senior Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrowers or any Subsidiary that could reasonably be expected to result in damages or costs to a Borrowers or any Subsidiary of $500,000 or more; (v) promptly upon receipt, each management letter prepared by Borrowers’ independent certified public accounting firm regarding Borrowers’ management control systems; (vi) such budgets, sales projections, operating plans or other financial information generally prepared by Borrowers in the ordinary course of business as Agent may reasonably request from time to time; (vii) within 30 days of the last day of each fiscal quarter, a report signed by Parent, in form reasonably acceptable to Agent, listing any applications or registrations that Borrowers have made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well as any material change in Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of a Borrower in or to any IP Rights not specified in any Intellectual Property Security Agreement delivered to Agent by a Borrower in connection with this
 
13

Agreement and (viii) as soon as available, but in any event no later than December 15th of each year, a Board approved, fully-funded operating plan of each Borrower for the following year, acceptable to Agent.
(a) Within 45 days after the last day of each calendar quarter, Parent shall deliver to Agent (i) a Compliance Certificate (which shall certify compliance with the covenants contained herein and all state governing body rules and regulations) certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of Exhibit D hereto and (ii) a report of 12-month average claims ratios by state and 12-month average combined claims ratio with respect to Borrowers’ insurance policies and signed by a Responsible Officer.
(b) Within 45 days after the last day of each calendar quarter, Parent shall deliver to Agent copies of all NAIC Quarterly Statements as required by each state in which Borrowers and its Subsidiaries conduct business.
(c) As soon as possible and in any event within 3 calendar days after becoming aware of the occurrence or existence of an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrowers have taken or proposes to take with respect thereto.
(d) As soon as possible and in any event within 3 calendar days after becoming aware of any Borrower having a combined claims ratio in the United States falling in a variance that is at least 10% higher than the agreed upon ratios in Borrowers’ business plan which has been submitted to and approved by Agent in writing, a written statement of a Responsible Officer presenting a plan to rectify such variance, such plan to be reasonably acceptable to Agent.
(e) Agent (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrowers’ usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrowers’ Books and to make copies thereof and to check, test, inspect, audit and appraise the Collateral at Borrowers’ expense (not to exceed $7,500 per year as long as no Event of Default has occurred and is continuing) in order to verify Borrowers’ financial condition or the amount, condition of, or any other matter relating to, the Collateral.
(f) Within 5 days after the last day of each month, Parent shall deliver to Agent a report of Cash held by the Insurance Subsidiary.
(g) Within 30 days after the last day of each calendar quarter, Parent shall deliver to Agent a status report on rate increase requests pending and to be initiated.
Borrowers may deliver to Agent on an electronic basis any certificates, reports or information required pursuant to this Section 6.2 , and Agent shall be entitled to rely on the information contained in the electronic files, provided that Agent in good faith believes that the files were delivered by a Responsible Officer. Borrowers shall include a submission date on any certificates and reports to be delivered electronically.
 
14

6.3. Inventory and Equipment; Returns. Borrowers shall keep all Inventory and Equipment in good and merchantable condition, free from all material defects except for Inventory and Equipment (i) sold in the ordinary course of business, and (ii) for which adequate reserves have been made, in all cases in the United States and such other locations as to which Borrowers give prior written notice. Returns and allowances, if any, as between Borrowers and their account debtors shall be on the same basis and in accordance with the usual customary practices of Borrowers, as they exist on the Closing Date. Borrowers shall promptly notify Agent of all returns and recoveries and of all disputes and claims involving inventory having a book value of more than $250,000.
6.4. Taxes . Borrowers shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, provincial, municipal and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Agent, on demand, proof satisfactory to Agent indicating that each Borrower or Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof; provided that, Borrowers or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrowers or such Subsidiary.
6.5. Insurance . Borrowers, at their expense, shall (i) keep the Collateral insured against loss or damage, and (ii) maintain liability and other insurance, in each case in as ordinarily insured against by other owners in businesses similar to Borrowers’. All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Agent. All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Agent, showing Agent as an additional loss payee for the benefit of the Lenders, and all liability insurance policies shall show Agent as an additional insured and specify that the insurer must give at least 20 days’ notice to Agent before canceling its policy for any reason. Upon Agent’s request, Borrowers shall deliver to Agent certified copies of the policies of insurance and evidence of all premium payments. Proceeds payable under any casualty policy will, at Borrowers’ option, be payable to Borrowers to replace the property subject to the claim, provided that any such replacement property shall be deemed Collateral in which Agent, on behalf of the Lenders, has been granted a security interest subject only to the Senior Debt, provided that if an Event of Default has occurred and is continuing, all proceeds payable under any such policy shall, at Agent’s option, be payable to Agent for the benefit of the Lender to be applied on account of the Obligations.
6.6. Financial Covenants . Borrowers shall at all times maintain the following financial ratios and covenants:
(a) Minimum Cash . Borrowers shall cause the Insurance Subsidiary to maintain statutory capital and surplus at all times of not less than the greater of (i) the amount required by the Insurance Subsidiary or (ii) 110% of the highest capital and surplus required in any state in which the Insurance Subsidiary is licensed, and Borrowers shall in addition maintain an additional unrestricted, non-insurance, cash balance of at least $1,000,000.
 
15

(b) Minimum Revenues . Borrowers shall achieve at least the levels of Revenues set forth in the table immediately below for the applicable month:

Month:	  	Revenue:	 	
		
January 2014	  	$	8,208,653	  	
		
February 2014	  	 	8,420,994	  	
		
March 2014	  	 	8,649,582	  	
		
April 2014	  	 	8,881,907	  	
		
May 2014	  	 	9,042,072	  	
		
June 2014	  	 	9,242,892	  	
		
July 2014	  	 	9,411,911	  	
		
August 2014	  	 	9,667,454	  	
		
September 2014	  	 	9,900,039	  	
		
October 2014	  	 	10,128,546	  	
		
November 2014	  	 	10,329,350	  	
		
December 2014	  	 	10,531,837	  	
(c) New Covenants . Minimum Revenues hereof for reporting periods following December 2014 will be set by Agent, based upon the Borrowers’ board approved, fully funded operating plan provided by Borrowers pursuant to Section 6.2 .
6.7. Springing Covenants. The Borrowers shall maintain the following financial covenants at all times after the earlier to occur of (i) receipt by the Borrowers and the Subsidiaries of any proceeds from any equity financing that are not applied to prepay the Loan; and (ii) June 23, 2015.
(a) Minimum Discretionary Profit . Borrowers shall achieve at least the levels of Discretionary Profit as set by Agent.
(b) Minimum Free Cash Flow . Borrowers shall achieve at least the levels of cumulative Free Cash Flow as set by Agent.
(c) Lifetime Value . Borrowers shall achieve at least the levels of Lifetime Value set forth by Agent.
(d) Establishment of Covenants . Once the covenants in this Section 6.7 become applicable at the beginning of the next month and at the beginning of each year thereafter, required levels of Minimum Discretionary Profit, Minimum Free Cash Flow, and Lifetime Value will be established for each month in such year based upon the board-approved fully funded operating plan to be provided by Borrowers pursuant to Section 6.2 .
 
16

6.8. Registration of IP Rights.
(a) Borrowers shall promptly give Agent written notice of any applications or registrations of IP Rights filed with the United States Patent and Trademark Office or the Canadian Intellectual Property Office, including the date of such filing and the registration or application numbers, if any.
(b) Borrowers shall (i) give Agent not less than 30 days prior written notice of the filing of any applications or registrations with the United States Copyright Office or the Canadian Intellectual Property Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed; (ii) prior to the filing of any such applications or registrations, execute such documents as Agent may reasonably request for Agents to maintain their perfection in such IP Rights to be registered by Borrowers; (iii) upon the request of Agent, either deliver to Agent or file such documents simultaneously with the filing of any such applications or registrations; and (iv) upon filing any such applications or registrations, promptly provide Agent with a copy of such applications or registrations together with any exhibits, evidence of the filing of any documents requested by Agent to be filed for Lender to maintain the perfection and priority of its security interest in such IP Rights, and the date of such filing.
(c) Borrowers shall execute and deliver such additional instruments and documents from time to time as Agent shall reasonably request to perfect and maintain the perfection and priority of Lender’s security interest in the IP Rights.
(d) Borrowers shall (i) protect, defend and maintain the validity and enforceability of the trade secrets, Trademarks, Patents and Copyrights (other than those which have no value or only de minimis value), (ii) use commercially reasonable efforts to detect infringements of the Trademarks, Patents and Copyrights (other than those which have no value or only de minimis value) and promptly advise Lender in writing of material infringements detected and (iii) not allow any material Trademarks, Patents and Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Agent, which shall not be unreasonably withheld or delayed.
(e) Agent shall have the right, but not the obligation, to take, at Borrowers’ sole expense, any actions that Borrowers are required under this Section 6 to take but which Borrowers fail to take, after 15 days’ notice to Borrowers. Borrowers shall reimburse and indemnify Agent and Lenders for all reasonable costs and reasonable expenses incurred in the reasonable exercise of their rights under this Section 6.8 .
6.9. Consent of Inbound Licensors. Prior to entering into or becoming bound by any material inbound license, Borrowers shall: (i) provide written notice to Agent of the material terms of such license with a description of its likely impact on Borrowers’ business or financial condition; and (ii) in good faith use commercially reasonable efforts to obtain the
 
17

consent of, or waiver by, any person whose consent or waiver is necessary for Borrowers’ interest in such licenses to be deemed Collateral and for Lenders to have a security interest in it that might otherwise be restricted by the terms of the applicable license, whether now existing or entered into in the future, provided, however, that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.
6.10. Capital, Licensing and Compliance Requirements; Financial Covenants . Borrowers and each Subsidiary shall maintain compliance with all capital requirements, financial covenants and other licensing and compliance requirements as required by each state and/or province in which Borrowers or a Subsidiary conducts business
6.11. Shares . The Shares will remain duly authorized and validly issued, and are fully paid and non-assessable.
6.12. Further Assurances . At any time and from time to time, Borrowers shall execute and deliver such further instruments and take such further action as may reasonably be requested by Agent to effect the purposes of this Agreement.
6.13. Certain Post-Closing Items .
(a) Borrowers have delivered to Original Lender a legal opinion from Arizona counsel substantially similar to the opinion delivered at closing (with respect to numbered opinion paragraphs 1, 2, 3,4 and 9 therein) which was reasonably acceptable to Borrowers and Borrowers counsel with respect to Trupanion Managers USA, Inc.
(b) Borrowers will make appropriate voluntary disclosures regarding any unreported or unpaid taxes described in the Schedule by January 31, 2014 and, thereafter, will pay the tax liability that is ultimately required on a timely basis.
(c) Borrowers will use commercially reasonable efforts to have the financing statement naming Vetinsurance Brokers Canada, Inc. as Debtor and ING Insurance Company of Canada and ING Novex Insurance Company of Canada as Secured Parties, filed in the Personal Property Security Registration System of Ontario under file no. 631156014, terminated as soon as practicable following closing.
 
 	7.	NEGATIVE COVENANTS.	
Each Borrower covenants and agrees that, until the outstanding Obligations are paid in full, such Borrower will not do any of the following without Agent’s prior written consent, which shall not be unreasonably withheld:
7.1. Dispositions . Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with Senior Lender to accounts opened at another financial institution, other than Permitted Transfers.
7.2. Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control . Change its
 
18

name or the state or jurisdiction of Borrower’s formation or relocate its chief executive office without 30 days prior written notification to Agent; replace its chief executive officer or chief financial officer without providing written notification to Agent within 2 days thereafter; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrowers; change its fiscal year end; have a Change in Control; without the prior written consent of Agent which may be withheld in Agent’s sole discretion.
7.3. Mergers or Acquisitions . Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into a Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except where (a) each of the following conditions is applicable: (i) the consideration paid in connection with such transactions (including assumption of liabilities) does not in the aggregate exceed $500,000 during any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) a Borrower is the surviving entity; or (b) the Obligations are repaid in full concurrently with the closing of any merger or consolidation of a Borrower in which a Borrower is not the surviving entity.
7.4. Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except the Senior Debt and Indebtedness to Lenders.
7.5. Encumbrances . Create, incur, assume or allow any Lien with respect to its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person (other than (i) the licensors of in-licensed property with respect to such property or (ii) the lessors of specific equipment or lenders financing specific equipment with respect to such leased or financed equipment) that Borrowers in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of a Borrower’s property.
7.6. Distributions . Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrowers may (i) repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase, (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees to Borrowers regardless of whether an Event of Default exists; and (iii) pay dividends in common stock of Borrower.
7.7. Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments, or maintain or invest any of its Investment Property with a Person other than Senior Lender or Senior Lender’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Agent, in form and substance satisfactory to Agent, or suffer
 
19

or permit any Subsidiary to be a party to, or be bound by, an agreement (other than this Agreement) that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower.
7.8. Transactions with Affiliates . Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of a Borrower, except for transactions that are in the ordinary course of a Borrower’s business, upon fair and reasonable terms that are no less favorable to a Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9. Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt, or amend any provision affecting Lender’s rights contained in any documentation relating to the Subordinated Debt without Agent’s prior written consent.
7.10. Inventory and Equipment . Store the Inventory or the Equipment of a book value in excess of $100,000 with a bailee, warehouseman, or similar third party unless the third party has been notified of Lenders’ security interest and Agent (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Lenders’ benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory or Equipment. Except for Inventory sold in the ordinary course of business, movable items of personal property such as laptop computers having an aggregate book value not in excess of $100,000 and except for such other locations as Agent may approve in writing, Borrowers shall keep the Inventory and Equipment only at the location set forth in Section 10 and such other locations of which Borrowers give Agent prior written notice and as to which Agent is able to take such actions as may be necessary needed to perfect its security interest or to obtain a bailee’s acknowledgment of Lenders’ rights in the Collateral.
7.11. No Investment Company; Margin Regulation . Become or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.
7.12. Insurance Subsidiary Capital Withdrawals. Permit any withdrawals of capital from the Insurance Subsidiary.
7.13. Canadian Subsidiaries . Borrowers shall not conduct or allow business operations to be conducted in its 2 Canadian subsidiaries, Vetinsurance Holding Company, ULC and Vetinsurance, Ltd. Neither Vetinsurance Holding Company, ULC nor Vetinsurance, Ltd. shall hold more than $50,000 in current assets.
7.14. NPIC of Arizona . Borrowers shall not conduct or allow business operation to be conducted in or by North American Pet Insurance Company, Inc. (“ NAPIC ”), organized under the laws of the State of Arizona, and Borrowers represent that no assets are owned by NAPIC. If Borrowers elect to use NAPIC in the future or allow it to own or acquire assets, they will first notify Agent in writing and, at the request of Lender, NAPIC will execute a
 
20

Guaranty of the Obligations of Borrowers hereunder and a security agreement granting a security interest to Lenders to secure the guaranty in substantial form as the Guaranties and Security Agreements being executed by other Subsidiaries in connection herewith.
 
 	8.	EVENTS OF DEFAULT.	
Any one or more of the following events shall constitute an Event of Default by Borrowers under this Agreement:
8.1. Payment Default. If a Borrower fails to pay any of the Obligations when due;
8.2. Covenant Default .
(a) If a Borrower fails to perform any obligation under Sections 6.2 , 6.4 , 6.5 , 6.6 , 6.7 , 6.9 or 6.11 or violates any of the covenants contained in Section 7 of this Agreement; or
(b) If a Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between a Borrower and Lender and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within 15 days after a Borrower receives notice thereof or any officer of a Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the 15 day period or cannot after diligent attempts by Borrowers be cured within such 15 day period, and such default is likely to be cured within a reasonable time, then Borrowers shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;
8.3. Senior Default Debt . If an event of default occurs under the terms of the Senior Loan Agreement (or any of the Senior Loan Documents);
8.4. Material Adverse Change . If there occurs any circumstance or circumstance any circumstances which would reasonably be expected to have a Material Adverse Effect;
8.5. Attachment . If any material portion of a Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 15 days, or if a Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of a Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any material portion of a Borrower’s assets by the United States Government or Canadian Government, or any department, agency, or instrumentality thereof, or by any state, provincial, county, municipal, or governmental agency,
 
21

and the same is not paid within 15 days after such Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by such Borrower (provided that no Credit Extensions will be made during such cure period);
8.6. Insolvency . If a Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by a Borrower, or if an Insolvency Proceeding is commenced against a Borrower and is not dismissed or stayed within 45 days;
8.7. Other Agreements . If there is a default or other failure to perform in any agreement to which a Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of $500,000 or that would reasonably be expected to have a Material Adverse Effect;
8.8. Judgments . If a final, uninsured judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least $500,000 shall be rendered against a Borrower and shall remain unsatisfied and unstayed for a period of 15 days (provided that no Credit Extensions will be made prior to the satisfaction or stay of the judgment);
8.9. Misrepresentations . If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Lenders by any Responsible Officer pursuant to this Agreement and the Original Credit Agreement or to induce Lenders to enter into this Agreement or any other Loan Document; or
8.10. Guaranty . If any guaranty of all or a portion of the Obligations (a “ Guaranty ”) ceases for any reason to be in full force and effect, or any guarantor fails to perform any obligation under any Guaranty or a security agreement securing any Guaranty (collectively, the “ Guaranty Documents ”), or any event of default occurs under any Guaranty Document or any guarantor revokes or purports to revoke a Guaranty, or any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth in any Guaranty Document or in any certificate delivered to Lender in connection with any Guaranty Document, or if any of the circumstances described in Sections 8.3 through 8.9 occur with respect to any guarantor.
 
 	9.	LENDER’S RIGHTS AND REMEDIES.	
9.1. Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Agent may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.6 (insolvency), all Obligations shall become immediately due and payable without any action by Agent);
 
22

(b) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Agent reasonably considers advisable;
(c) Make such payments and do such acts as Agent considers necessary or reasonable to protect its security interest in the Collateral. Borrowers agree to assemble the Collateral if Agent so requires, and to make the Collateral available to Agent as Agent may designate. Borrowers authorize Agent to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Agent’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of a Borrowers’ owned premises, Borrowers hereby grants Agent a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Agent’s rights or remedies provided herein, at law, in equity, or otherwise;
(d) Set off and apply to the Obligations any and all (i) balances and deposits of Borrowers held by Agent or any of the Lenders, and (ii) indebtedness at any time owing to or for the credit or the account of a Borrower held by Agent or any of the Lenders;
(e) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Agent is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1 , to use, without charge, Borrowers’ labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Agent’s or any Lenders’ exercise of its rights under this Section 9.1 , Borrowers’ rights under all licenses and all franchise agreements shall inure to Lenders’ benefit;
(f) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrowers’ premises) as Agent determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Agent deems appropriate. Agent may sell the Collateral without giving any warranties as to the Collateral. Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by Agent, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Agent may resell the Collateral and Borrowers shall be credited with the proceeds of the sale;
(g) Agent may credit bid and purchase at any public sale;
 
23

(h) Apply for the appointment of a receiver, receiver/manager, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of any Borrowers, any guarantor or any other Person liable for any of the Obligations; and
(i) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrowers.
Agent may comply with any applicable state, provincial or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
9.2. Power of Attorney . Effective only upon the occurrence and during the continuance of an Event of Default, Borrowers hereby irrevocably appoint Agent (and any of Agent’s designated officers, or employees) as Borrowers’ true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Lenders’ security interest in the Accounts; (b) endorse each Borrowers’ name on any checks or other forms of payment or security that may come into Agent’s possession; (c) sign each Borrowers’ name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to a Borrowers’ policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Agent determines to be reasonable; (g) enter into a short-form intellectual property security agreement consistent with the terms of this Agreement for recording purposes only or modify, in its sole discretion, any intellectual property security agreement entered into between a Borrower and Agent without first obtaining such Borrowers’ approval of or signature to such modification by amending Exhibits thereof, as appropriate, to include reference to any right, title or interest in any Trademarks, Patents and Copyrights acquired by a Borrower after the execution hereof or to delete any reference to any right, title or interest in any Trademarks, Patents and Copyrights in which a Borrower no longer has or claims to have any right, title or interest; and (h) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrowers where permitted by law; provided Agent may exercise such power of attorney to sign the name of Borrowers on any of the documents described in clauses (g) and (h) above, regardless of whether an Event of Default has occurred. The appointment of Agent as each Borrowers’ attorney in fact, and each and every one of Agent’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed.
9.3. Accounts Collection . At any time after the occurrence and during the continuation of an Event of Default, Agent may notify any Person owing funds to a Borrowers of Agent’s security interest in such funds and verify the amount of such Account. Borrowers shall collect all amounts owing to Borrowers for Agent, receive in trust all payments as Agent’s trustee, and immediately deliver such payments to Agent in their original form as received from the account debtor, with proper endorsements for deposit.
 
24

9.4. Agent Expenses . If a Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Agent may do any or all of the following after reasonable notice to Borrowers: (a) make payment of the same or any part thereof; or (b) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take any action with respect to such policies as Agent deems prudent. Any amounts so paid or deposited by Agent shall constitute Agent Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Agent shall not constitute an agreement by Lender to make similar payments in the future or a waiver by Agent of any Event of Default under this Agreement.
9.5. Agent’s Liability for Collateral . Agent has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Borrowers.
9.6. No Obligation to Pursue Others . Agent has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Agent may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Lenders’ rights against Borrowers. Each Borrower waives any right it may have to require Agent or Lenders to pursue any other Person for any of the Obligations.
9.7. Remedies Cumulative. Agent’s and Lenders’ rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Agent and the Lenders shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Agent or a Lender of one right or remedy shall be deemed an election, and no waiver by Agent or a Lender of any Event of Default on a Borrowers’ part shall be deemed a continuing waiver. No delay by Agent or a Lender shall constitute a waiver, election, or acquiescence by it. No waiver by Agent shall be effective unless made in a written document signed on behalf of Agent and then shall be effective only in the specific instance and for the specific purpose for which it was given. Each Borrower expressly agrees that this Section 9.7 may not be waived or modified by Agent by course of performance, conduct, estoppel or otherwise.
9.8. Demand; Protest . Except as otherwise provided in this Agreement, each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of intent to accelerate or notice of acceleration and any other notices relating to the Obligations.
 
25

 	10.	NOTICES.	
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrowers or to Lender, as the case may be, at its addresses set forth below:

If to Borrowers:	  	TRUPANION, INC.	  		  		
	  	on behalf of all Borrowers	  		  		
	  	907 NW Ballard Way	  		  		
	  	Seattle, Washington 98107	  		  		
	  	Attn: General Counsel	  		  		
	  	FAX:	  	 	  		  		
				
If to Agent:	  	PEPI Capital, L.P.	  		  		
	  	Attn: Chief Operating Officer	  		  		
	  	2300 West Plano Parkway	  		  		
	  	Plano, Texas 75075	  		  		
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.
 
 	11.	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.	
11.1. Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.2. Submission to Jurisdiction . BORROWERS IRREVOCABLY AND UNCONDITIONALLY SUBMIT, THEMSELVES AND THEIR PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF TEXAS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
11.3. Waiver of Venue . BORROWERS IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE
 
26

PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
11.4. Service of Process . IN FURTHERANCE OF THE FOREGOING, BORROWERS HEREBY IRREVOCABLY DESIGNATE AND APPOINT CT CORPORATION SYSTEM AS AGENT OF BORROWERS TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST SUCH BORROWERS WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWERS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO BE SENT BY REGISTERED MAIL TO SUCH BORROWERS AT ITS ADDRESS SET FORTH IN SECTION 10 , BUT THE FAILURE OF SUCH BORROWERS TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. BORROWERS SHALL FURNISH TO LENDER A CONSENT OF CT CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWERS’ AGENT, BORROWERS HEREBY IRREVOCABLY AGREE TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO LENDER TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO LENDER THE WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO LENDER) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
11.5. Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO AND EACH OTHER LOAN PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. EACH LOAN PARTY AND EACH LENDER HEREBY FURTHER (A) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY “SPECIAL DAMAGES,” AS DEFINED BELOW, (B) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
 
27

AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
 
 	12.	GENERAL PROVISIONS.	
12.1. Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrowers without Agent’s prior written consent, which consent may be granted or withheld in Agent’s sole discretion, Lender shall have the right to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Lender’s obligations, rights and benefits hereunder; provided that unless a Default or Event of Default shall have occurred and be continuing Lenders may not sell, assign or transfer any interest in the Loans to any person other than an Affiliate of Lenders without Borrower’s prior written consent.
12.2. Indemnification . Each Borrower shall defend, indemnify and hold harmless Agent and Lenders and their officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Lender Expenses in any way suffered, incurred, or paid by Agent or any Lender, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Agent, any Lender and a Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys’ fees and expenses), except for losses caused by Agent’s or a Lender’s gross negligence or willful misconduct.
12.3. Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
12.4. Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
12.5. Amendments in Writing, Integration .
(a) All amendments, modifications, terminations or waivers of any provision of this Agreement or the other Loan Documents must be in writing; provided that no amendment, modification, termination or waiver of any provision of this
 
28

Agreement or the other Loan Documents, or consent to any departure by the Borrowers therefrom, shall in any event be effective without the written concurrence of the Agent (and any amendment, modification, termination or waiver to which the Agent has concurred in writing shall be binding upon all Lenders); provided , further , that no such amendment, modification, termination or waiver shall affect any Lender in a disproportionate manner than its effect on the other Lenders without the written consent of such disproportionately affected Lender.
(b) No Borrower will, directly or indirectly, pay any remuneration or other thing of value, whether by way of additional interest, fee or otherwise, to any Lender (in its capacity as Lender hereunder) as consideration in connection with any agreement by such Borrower with any modification of any Loan Documents, unless such remuneration or value is concurrently paid, on the same terms, on a pro rata basis, to all Lenders, except for the amount payable to the Original Lender pursuant to the Assignment and Assumption Agreement and the Amendment Expenses.
12.6. Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.
12.7. Survival . All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations remain outstanding. The obligations of Borrowers to indemnify Lender with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against a Lender have run.
12.8. Confidentiality. In handling any confidential information, each Lender and all employees and agents of each Lender shall exercise the same degree of care that each Lender exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or Affiliates of each Lender in connection with their present or prospective business relations with Borrowers, (ii) to prospective transferees or purchasers of any interest in the Loan, provided that they have entered into a comparable confidentiality agreement in favor of Borrowers and have delivered a copy to Borrowers, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of any Lender and (v) as each Lender may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of any Lender when disclosed to any Lender, or becomes part of the public domain after disclosure to any Lender through no fault of said Lender; or (b) is disclosed to any Lender by a third party, provided such Lender does not have actual knowledge that such third party is prohibited from disclosing such information.
 
29

12.9. Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document:
(a) the Liens granted to the Lenders pursuant to this Agreement and the other Loan Documents, and the exercise of any right related to any collateral shall be subject, in each case, to the terms of the Intercreditor Agreement;
(b) in the event of any conflict between the express terms and provisions of this Agreement or any other Loan Document, on the one hand, and the Intercreditor Agreement, on the other hand, the terms and provisions of the Intercreditor Agreement shall control; and
(c) each Lender, by its acceptance hereof, shall be bound by the provisions of the Intercreditor Agreement.
 
 	13.	CO-BORROWER PROVISIONS.	
13.1. Primary Obligation . This Agreement is a primary and original obligation of each Borrower and shall remain in effect notwithstanding future changes in conditions, including any change of law or any invalidity or irregularity in the creation or acquisition of any Obligations or in the execution or delivery of any agreement between any Lender and any Borrower. Each Borrower shall be liable for existing and future Obligations as fully as if Loans or advances were advanced to such Borrower. Lenders may rely on any certificate or representation made by any Borrower as made on behalf of, and binding on, all Borrowers.
13.2. Enforcement of Rights . Borrowers are jointly and severally liable for the Obligations and Lenders may proceed against one or more of the Borrowers to enforce the Obligations without waiving their right to proceed against any of the other Borrowers.
13.3. Borrowers as Agents . Each Borrower appoints the other Borrower as its agent with all necessary power and authority to give and receive notices, certificates or demands for and on behalf of both Borrowers, to act as disbursing agent for receipt of the Loan on behalf of each Borrower and to authorize Parent to apply to Lenders on behalf of each Borrower for the Loan, any waivers and any consents. This authorization cannot be revoked, and Lenders need not inquire as to each Borrower’s authority to act for or on behalf of such Borrower.
13.4. Subrogation and Similar Rights. Notwithstanding any other provision of this Agreement or any other Loan Document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Lender under the Loan Documents) to seek contribution, indemnification, or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by the Borrower with respect to the Obligations in connection with the Loan Documents or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by the Borrower with respect to the Obligations in connection with the Loan Documents or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 13.4 shall be null and void. If any payment is made to a Borrower in contravention of this Section 13.4 , such Borrower shall hold such payment in trust for Lender and such payment shall be promptly delivered to Agent for application to the Obligations, whether matured or unmatured.
 
30

13.5. Waivers of Notice . Except as otherwise provided in this Agreement, each Borrower waives notice of acceptance hereof; notice of the existence, creation or acquisition of any of the Obligations; notice of an Event of Default; notice of the amount of the Obligations outstanding at any time; notice of intent to accelerate; notice of acceleration; notice of any adverse change in the financial condition of any other Borrower or of any other fact that might increase the Borrower’s risk; presentment for payment; demand; protest and notice thereof as to any instrument; default; and all other notices and demands to which such Borrower would otherwise be entitled. Each Borrower waives any defense arising from any defense of any other Borrower, or by reason of the cessation from any cause whatsoever of the liability of any other Borrower. Any Lender’s failure at any time to require strict performance by any Borrower of any provision of the Loan Documents shall not waive, alter or diminish any right of any Lender thereafter to demand strict compliance and performance therewith. Nothing contained herein shall prevent Agent from foreclosing on the Lien of any deed of trust, mortgage or other security instrument, or exercising any rights available thereunder, and the exercise of any such rights shall not constitute a legal or equitable discharge of any Borrower. Each Borrower also waives any defense arising from any act or omission of any Lender that changes the scope of the Borrower’s risks hereunder,
13.6. Subrogation Defenses. Until the Obligations have been repaid in full and this Agreement has been terminated, each Borrower hereby waives any defense based on impairment or destruction of its subrogation or other rights against any other Borrower and waives all benefits which might otherwise be available to it under applicable law, as those statutory provisions are now in effect and hereafter amended, and under any other similar statutes now and hereafter in effect.
13.7. Right to Settle, Release.
(a) The liability of Borrowers hereunder shall not be diminished by (i) any agreement, understanding or representation that any of the Obligations is or was to be guaranteed by another Person or secured by other property, or (ii) any release or unenforceability, whether partial or total, of rights, if any, which any Lender may now or hereafter have against any other Person, including another Borrower, or property with respect to any of the Obligations.
(b) Without affecting the liability of any Borrower hereunder, Agent may (i) compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Obligations with respect to a Borrower, (ii) grant other indulgences to a Borrower in respect of the Obligations, (iii) modify in any manner any documents relating to the Obligations with respect to a Borrower, (iv) release, surrender or exchange any deposits or other property securing the Obligations, whether pledged by a Borrower or any other Person, or (v) compromise, settle, renew, or extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any guarantor, endorser or other Person who is now or may hereafter be liable with respect to any of the Obligations.
 
31

13.8. Subordination. All indebtedness of a Borrower now or hereafter arising held by another Borrower is subordinated to the Obligations and the Borrower holding the indebtedness shall take all actions reasonably requested by Agent to effect, to enforce and to give notice of such subordination.
[Signature pages follow.]
 
32

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

TRUPANION, INC.	
		
By:	 	/s/ Darryl Rawlings	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	CEO	
	
TRUPANION MANAGERS USA, INC.	
		
By:	 	/s/ Darryl Rawlings	
	 	Name:	 	Darryl Rawlings	
	 	Title:	 	CEO	
 
[Signature page to Amended and Restated Credit Agreement]

					
PEPI CAPITAL, L.P.	
		
By:	 	/s/ Steve Blasnik	
	 	Name:	 	Steve Blasnik	
	 	Title:	 	President	
 
[Signature page to Amended and Restated Credit Agreement]

									
HIGHLAND CONSUMER FUND I LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited	
	 	Partnership, its General Partner	
			
	 	By:	 	Highland Consumer GP GP
LLC, its General Partner	
				
	 		 	By:	 	/s/ Peter F. Cornetta	
	 		 		 	Name:	 	Peter F. Cornetta	
	 		 		 	Its:	 	Authorized Manager	
	
HIGHLAND CONSUMER FUND I-B LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited	
	 	Partnership, its General Partner	
			
	 	By:	 	Highland Consumer GP GP	
	 	LLC, its General Partner	
				
	 		 	By:	 	/s/ Peter F. Cornetta	
	 		 		 	Name:	 	Peter F. Cornetta	
	 		 		 	Its:	 	Authorized Manager	
	
HIGHLAND CONSUMER ENTREPRENEURS FUND I LIMITED PARTNERSHIP	
		
By:	 	Highland Consumer GP Limited	
	 	Partnership, its General Partner	
			
	 	By:	 	Highland Consumer GP GP
LLC, its General Partner	
				
	 		 	By:	 	/s/ Peter F. Cornetta	
	 		 		 	Name:	 	Peter F. Cornetta	
	 		 		 	Its:	 	Authorized Manager	
 
[Signature page to Amended and Restated Credit Agreement]

EXHIBIT A
DEFINITIONS
“ Accounts ” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrowers arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrowers and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrowers and Borrowers’ Books relating to any of the foregoing.
“ Additional Lenders ” mean Highland Consumer Fund I Limited Partnership, Highland Consumer Fund I-B Limited Partnership, and Highland Consumer Entrepreneurs Fund I Limited Partnership collectively, and “ Additional Lender ” means each of them.
“ Affiliate ” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and general partners.
“ Agent ” means PEPI Capital, L.P. as agent for the Lenders pursuant to the terms of the Intercreditor Agreement.
“ Amended Subordination Agreement ” means the Subordination Agreement entered into among Borrowers, PEPI Capital, L.P., and Senior Lender, as amended by that certain Joinder to Subordination Agreement executed by Borrowers, Lenders, and Senior Lender.
“ Amended Warrant ” means the Original Warrant as amended pursuant hereto.
“ Amendment to Deposit Account Control Agreement ” means an amendment to Deposit Account Control Agreements executed pursuant to Section 4.4 hereof.
“ Amendment Expenses ” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred by Borrowers and Original Lender in connection with the preparation and negotiation of this Agreement and all documents and agreements entered into pursuant to this Agreement.
“ Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement entered into among Original Lender and the Additional Lenders.
“ Borrowers’ Books ” means all of a Borrowers’ books and records including: ledgers; records concerning such Borrowers’ assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.
“ Business Day ” means any day that is not a Saturday, Sunday, or other day on which Lenders in the State of Delaware are authorized or required to close.

“ Cash ” means unrestricted cash and cash equivalents.
“ Change in Control ” shall mean a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of a Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of a Borrower, who did not have such power before such transaction. Notwithstanding the foregoing, (a) the sale of equity securities to Borrowers’ existing venture capital investors (or other venture capital or similar institutional investors) in a bona fide equity financing shall not be deemed to be a Change in Control and (b) any such transaction involving a Subsidiary of Trupanion, Inc. (but not representing a Change in Control with respect to Trupanion, Inc.) shall not be deemed a Change in Control if such Subsidiary or Subsidiaries remain direct or indirect Subsidiaries of Trupanion, Inc.
“ Closing Date ” means the date of the Original Credit Agreement.
“ Code ” means the Uniform Commercial Code as adopted in New York and as amended or supplemented from time to time.
“ Collateral ” means all Accounts, Inventory, Intellectual Property, Equipment, Goods, Deposit Accounts, General Intangibles, Chattel Paper, Documents, Instruments, Investment Property, Letter of Credit Rights, licenses, permits, data bases, software or other property in which a security interest has been granted to Lender pursuant to any of the Loan Documents by Borrowers, except to the extent any such property (i) is nonassignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9.406 and 9.408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, or (iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporations entitled to vote.
“ Collateral Jurisdiction ” means the U.S. state or Canadian province where the Collateral is located.
“ Contingent Obligation ” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or ar r angement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “ Contingent Obligation ” shall not include endorsements for collection or deposit in the ordinary course of

business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“ Copyrights ” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.
“ Default Rate ” means the lesser of the maximum rate allowed by applicable law or fourteen percent (14%) per annum.
“ Environmental Laws ” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other governmental or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.
“ Discretionary Profit ” means, for any applicable period, Revenue minus (a) claims expenses, (b) costs of revenues, (c) general and administrative expenses and (d) technology expenses (excluding direct pay expenses), in each case (i) excluding stock compensation expense and warrant expense, (ii) without duplication and (iii) on a consolidated basis and determined in accordance with GAAP.
“ Equipment ” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which a Borrower has any interest.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“ Event of Default ” has the meaning assigned in Section 8 .
“ Free Cash Flow ” means, for any applicable period, (i) consolidated net cash from operations plus (ii) consolidated capital expenditures plus (iii) any payments of principal of Senior Debt plus (iv) proceeds from the exercise of stock options, with respect to (i), (ii) and (iv) as determined in accordance with GAAP and, with respect to (iii), as provided by the Senior Loan Documents, as amended or waived by the Senior Lender from time to time.
“ GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

“ Indebtedness ” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and all synthetic lease obligations; and (d) all Contingent Obligations.
“ Insolvency Proceeding ” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada) or the Companies Creditors Arrangement Act (Canada), each as amended, or under any other Bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“ Insurance Subsidiary ” means American Pet Insurance Company, Inc., a New York company and a wholly owned subsidiary of Parent.
“ Intellectual Property ” means all of a Borrower’s right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to a Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
“ Intercreditor Agreement ” means the Collateral and Intercreditor Agreement entered into among the Lenders.
“ Inventory ” means all present and future inventory in which a Borrower has any interest.

“ Investment ” means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any Person, or any loan, advance or capital contribution to any Person.
“IP Rights” has the meaning ascribed thereto in Section 5.16 of the Agreement.
“ IRC ” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
“ Lender Expenses ” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents, except for the Amendment Expenses; reasonable Collateral audit fees; and Lender’s reasonable attorneys’ fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.
“ Lenders ” means collectively PEPI Capital, L.P. as a lender and Highland Consumer Fund I Limited Partnership, Highland Consumer Fund I-B Limited Partnership and Highland Entrepreneurs Fund I Limited Partnership and the term Lender shall refer to each of them.
“ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
“ Lifetime Value ” means (a) (i) Revenues minus (ii) claims expense minus (iii) cost of revenues, divided by (b) the product of (i) total Pet Months (as defined below) multiplied by Expected Months Enrolled, in each case excluding underwriting of any unaffiliated third-party managing general agents (including, without limitation, Pet Partners), and in each case (i) excluding stock compensation expense and warrant expense, (ii) on a consolidated basis and determined in accordance with GAAP, if applicable, and (iii) in the case of amounts that are not set forth in, or derived from, the Borrower’s financial statements, as determined by Borrowers and reported in good faith based to the Parent’s Board of Directors in monthly reporting packages based on Borrower’s internal data and metrics. As used herein, the term “ Pet Months ” means the total number of enrolled pets at the end of the applicable month, the term “ Expected Months Enrolled ” means the quotient of 1 divided by Monthly Pet Churn, and “ Monthly Pet Churn ” means total cancellations in the applicable month divided by total pets enrolled at the beginning of the applicable month.
“ Loan ” means the amount advanced to Borrowers pursuant to Section 2.1 hereof as evidenced by the Notes.
“ Loan Documents ” means, collectively, the Loan Documents as defined in the Original Credit Agreement and this Agreement, the Notes and any other note or notes executed by a Borrowers, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time; provided however, such term shall exclude the Amended Warrant, the Original Warrant, and the New Warrant.

“ Material Adverse Effect ” means a material adverse effect on (i) the operations, business or financial condition of Borrowers and their Subsidiaries taken as a whole, (ii) the ability of Borrowers taken as a whole to repay the Obligations or otherwise perform their obligations under the Loan Documents, or (iii) a Borrower’s interest in, or the value, perfection or priority of Lender’s security interest in the Collateral.
“Maturity Date” means December 23, 2016.
“ Negotiable Collateral ” means all of a Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes), securities, documents of title, and chattel paper, and a Borrower’s Books relating to any of the foregoing.
“ New Warrant ” means the warrants issued by Parent to the Additional Lenders in connection with this Agreement.
“ Notes ” means those promissory notes described in Section 2.1 of this Agreement.
“ Obligations ” means all debt, principal, interest, Lender Expenses and other amounts owed to Lender by Borrowers pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from a Borrower to others that Lender may have obtained by assignment or otherwise; provided however, that such terms shall exclude any obligations of Parent arising under or in connection with the Warrant.
“ Original Credit Agreement ” has the meaning set forth in the Recitals to this Agreement.
“ Original Lender ” means PEPI Capital, L.P. as Lender under the terms of the Original Credit Agreement.
“ Original Note ” means a promissory note executed by Borrowers payable to Original Lender in the principal amount of Twelve Million and No/100 Dollars ($12,000,000.00) pursuant to the Original Credit Agreement.
“ Original Warrant ” means the Warrant issued by Borrowers to Original Lender pursuant to the Original Credit Agreement.
“ Parent ” means Trupanion, Inc.
“ Patents ” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“ Permitted Indebtedness ” means:
(a) Indebtedness of Borrowers in favor of Lender arising under this Agreement or any other Loan Document;

(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness not to exceed $500,000 in the aggregate in any fiscal year of Borrowers secured by a lien described in clause (c) of the defined term “ Permitted Liens ,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the property financed with such Indebtedness;
(d) Senior Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of business; and
(f) Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon a Borrower or its Subsidiary, as the case may be.
“ Permitted Investment ” means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Lender’s certificates of deposit maturing no more than one year from the date of investment therein, and (iv) Lender’s money market accounts; (v) Investments in regular deposit or checking accounts held with Lender or subject to a control agreement in favor of Lender; and (vi) Investments consistent with any investment policy adopted by the Parent’s board of directors;
(c) Repurchases of stock from officers, consultants, employees or directors of a Borrower under the terms of applicable repurchase agreements (i) in an aggregate amount not to exceed $500,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the cancellation of indebtedness owed by such officers, consultants, employees or directors to such Borrower regardless of whether an Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or a Borrower and Investments by a Borrower in Subsidiaries not to exceed $500,000 in the aggregate in any fiscal year;
(f) Investments not to exceed $500,000 outstanding in the aggregate at any time consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of a Borrower or its Subsidiaries pursuant to employee stock purchase plan agreements approved by a Borrower’s Board of Directors;

(g) Investments in unfinanced capital expenditures in any fiscal year, not to exceed 250,000;
(h) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of a Borrower’s business;
(i) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (i) shall not apply to Investments of a Borrower in any Subsidiary;
(j) Joint ventures or strategic alliances in the ordinary course of a Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrowers do not exceed $500,000 in the aggregate in any fiscal year; and
(k) Investments permitted under Section 7.7 .
“ Permitted Liens ” means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Credit Extensions) or arising under this Agreement, the other Loan Documents, or any other agreement in favor of Lender;
(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which the relevant Borrower maintains adequate reserves;
(c) Liens not to exceed $500,000 in the aggregate (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by a Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;
(e) Liens of materialmen, mechanics, warehousemen, carriers, artisans or other similar Liens arising in the ordinary course of Borrower’s business or by operation of law, which are not past due or which are being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP;

(f) Deposits in the ordinary course of business under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds;
(g) Liens in favor of other financial institutions arising in connection with Borrowers’ deposit accounts held at such institutions which are permitted herein to secure standard fees for deposit services charged by, but not financing made available by such institutions, provided that Lender has a perfected security interest in the amounts held in such deposit accounts; and
(h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections 8.5 (attachment) or 8.7 (judgments).
“ Permitted Transfer ” means the conveyance, sale, lease, transfer or disposition by a Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property of Borrowers or their Subsidiaries in the ordinary course of business;
(c) worn-out, surplus or obsolete Equipment;
(d) cash to accounts at financial institutions as permitted herein;
(e) grants of security interests and other Liens that constitute Permitted Liens; and
(f) other assets of Borrowers or their Subsidiaries that do not in the aggregate exceed $500,000 during any fiscal year.
“ Person ” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“ Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by Borrowers or, with respect to any such plan that is subject to Section 4.12 of the IRC or Title IV of ERISA, any ERISA Affiliate.
“ Responsible Officer ” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of a Borrower.

“ Revenue ” means the consolidated net revenue of the Parent for any applicable period, determined in accordance with GAAP. “ Schedule ” means Company Disclosure Schedule most recently provided to Lender prior to or concurrently with execution of this Agreement.
“ Security Agreement ” means the Security and Pledge Agreement in a form acceptable to Lender executed by Borrower and delivered to Lender as of the Closing Date, as amended from time to time.
“ Senior Debt ” means all Indebtedness owed by Borrower to Senior Lender pursuant to the Senior Loan Documents and any Indebtedness incurred to refinance or replace the same.
“ Senior Lender ” means Square 1 Bank and any other lender or lenders from time to time with respect to the Senior Debt.
“ Senior Liens ” means liens of the Senior Lender existing as of the date hereof.
“ Senior Loan Agreement ” means that Amended and Restated Loan and Security Agreement entered into by and between Senior Lender and Borrowers dated as of April 24, 2012, as amended from time to time.
“ Senior Loan Documents ” means the Senior Loan Agreement and all of the Loan Documents, as that term is defined in the Senior Loan Agreement.
“ Shares ” means (i) sixty-six percent (66%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by a Borrower in any Subsidiary of such Borrower which is not an entity organized under the laws of the United States or any territory thereof, and (ii) one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by a Borrower in any Subsidiary of such Borrower which is an entity organized under the laws of the United States or any territory thereof.
“ SOS Reports ” means the official reports from the Secretaries of State or equivalent entity responsible for keeping such records of each Collateral Jurisdiction, the state or jurisdiction where each Borrower’s chief executive office is located, the jurisdiction of each Borrower’s formation and other applicable federal, state, provincial or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.
“ Subordinated Debt ” means any debt incurred by a Borrower that is subordinated in writing to the debt owing by such Borrower to Lenders on terms reasonably acceptable to Lender (and identified as being such by Borrower and Lenders).
“ Subordination Agreement ” means that Subordination Agreement entered into by and between Lender and Senior Lender dated of even date with the Original Credit Agreement, as amended from time to time.

“ Subsidiary ” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than 50% of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by a Borrower, either directly or through an Affiliate.
“ Trademarks ” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of a Borrower connected with and symbolized by such trademarks.
“ Trust Accounts ” means cash, cash equivalents and other assets and investments held by the Insurance Subsidiary in trust for the benefit of insurers and policyholders.
“ Warrant ” means the warrant issued by Parent to Lender in connection with this Agreement.

EXHIBIT 10.12

	  	[*]    Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.	
THIS FRONTING AND ADMINISTRATION AGREEMENT is made this 18 th day of
November, 2009
Between:
AMERICAN PET INSURANCE COMPANY (“APIC”)
a New York State regulated Insurance Company
and
OMEGA GENERAL INSURANCE COMPANY (“Omega”)
A Canadian regulated Insurance Company
WHEREAS:
(A) APIC provides pet insurance for eligible policyholders in the United States and wishes to underwrite a Canadian pet insurance program (the “Program”) for eligible policyholders in Canada but is not currently a licensed insurance company in Canada;
(B) Omega is an insurance company duly licensed to carry out business in each province and territory of Canada has agreed to act as a participating fronting company for the Program and has entered into a Stop Loss reinsurance agreement in the form attached hereto as Schedule “A” (the “Reinsurance Agreement”) with APIC;
(C) A Broker as defined herein has been appointed by APIC and Omega to act as the broker of record for the Program and has entered into an Agency Agreement with Omega in the form attached hereto as Schedule “B” (the “Agency Agreement”);
(D) The parties wish to confirm the basis on which the Program will be underwritten, administered and managed.
Now in consideration of the premises and the covenants and agreements herein contained, the parties hereby agreed as follows:
 
1

Definitions
In this Agreement and in the schedules attached hereto, the following terms and expressions will have the following meanings.
Agreement means this Agreement as amended from time to time by written agreement of the parties; 
Broker means a brokerage company or a managing general agent approved by APIC and Omega that has entered into a Representation Agreement in the form attached as Schedule “B” and that has agreed to comply with the terms hereof as it applies to the Broker. 
Business means the business of writing insurance policies as part of the Program for Omega in its capacity as fronting insurer for APIC; 
Business Day means a day (other than a Saturday, Sunday or statutory holiday) on which banks are open for the transaction of general banking business in Toronto; 
Confidential Information means all information obtained by a party as a result of negotiating and entering into this Agreement; and all financial or other information received by a party pursuant to this Agreement in respect of the Program. 
Claim means, in relation to the Business, the notification by the insured of an actual or potential claim. 
Regulatory Action means any order of a court of competent jurisdiction; or any order made, decision given or final view expressed by a competent national, governmental or regulatory authority or agency; or any enactment of a legislative body which prohibits or restricts to a material extent the carrying on of the Business or the arrangements contemplated by this Agreement; or in consequence of which any of the parties would incur fines or a liability in damages were this Agreement to be performed in accordance with its terms. 
Superintendent means the Superintendent of Financial Institutions Canada. 
Taxation means all forms of taxation and statutory, governmental, federal, provincial, local or municipal governmental impositions, duties, contribution and levies and all penalties, charges, costs and interest relating thereto. 
References to Recitals, Clauses, Schedules and parties are, except where otherwise provided, to Recitals, Clauses, Schedules or parties to this Agreement.
The Schedules form part of this Agreement and have the same force and effect as if set out in the body of this Agreement.
The sections and headings hereto are inserted for convenience only and shall not affect the construction of this Agreement.
References to APIC, Omega, or the Broker or any of them mean and include their respective successors in title and permitted assigns.
 
2

Where the context so admits, references to the singular shall be deemed to include the plural and vice versa.
Section 1—Appointment of Omega to write Fronting Insurance:
APIC hereby appoints Omega:
To underwrite and/or bind and/or effect policies in the name of Omega with respect to the Business pursuant to the Program in accordance with the terms of this Agreement provided that all Underwriting Guidelines and/or decisions are acknowledged to remain under the control of APIC; and to administer the Business as provided herein.
Section 2—Appointment of Broker of Record:
Omega and the Broker shall enter into an Agency Agreement in the form attached hereto as Schedule “B” with respect to the Program. The Broker shall act as broker of record with respect to the Program and shall be paid commissions with respect to the Business as agreed to pursuant to the Agency Agreement. The Broker shall receive each premium payment as the agent of Omega and shall hold all premiums in a trust account.
Section 3—Underwriting:
Omega shall issue policies using forms and rates approved by APIC as provided in the Underwriting Guidelines provided in Schedule “C” (“Underwriting Guidelines”) attached hereto.
Omega shall at all times follow the Underwriting Guidelines and decisions of APIC with respect to the Program.
Section 4—Claims:
Omega shall manage and perform the administration of the Business and the negotiation and settlement of Claims hereunder, and in doing so, shall act as agent of APIC. Omega shall at all times follow the claims handling procedures of APIC as provided in Schedule “D” attached hereto. Omega shall immediately notify APIC of all claims and provide for a full right of consultation regarding the handing of them.
APIC shall ensure that, at all times, sufficient funds are provided to Omega to enable all obligations under or in relation to the Business to be met as and when they fall due pursuant to the terms of the Reinsurance Agreement.
In the event of the termination of this Agreement, APIC shall have the right to assume responsibility for the handling of all claims with respect to the Program. Omega agrees to follow all decisions made by APIC with respect to all claims made under the Program under such circumstances.
 
3

Any and all funds provided by APIC pursuant to the Reinsurance Agreement shall, until physically disbursed to or on behalf of the relevant insured, be held by Omega as agent for APIC.
Section 5—Accounts and Information:
Omega and the Broker agree to provide accounting and other information to APIC in the form and in the manner that may be reasonably required by APIC from time to time.
Omega and the Broker shall keep, in such forms as may be agreed from time to time with APIC, books, records, underwriting statistics and accounts of all transactions under this Agreement.
APIC may, subject to any confidentiality obligations, at any reasonable time and on reasonable notice appoint its officers, employees, agents, or auditors to inspect, examine and verify at the offices of Omega and the Broker (and to take copies of such books and records) all such accounts, records, books, vouchers, correspondence and papers relating to any of the functions performed by the relevant party under this Agreement insofar as they relate to the Program and the affairs of APIC, including the application of any money belonging to APIC paid or received by the relevant party pursuant to this Agreement; and Omega and the Broker shall whenever reasonably required at any time during normal business hours give such officers, employees, servants or agents of APIC access to its offices for such purposes.
APIC undertakes to agree to supply, to the extent permissible under any applicable law or regulatory requirements, such information as Omega or the Broker shall reasonably request from time to time in order to facilitate the management of the Business.
Section 6—Relationship between the Parties:
Nothing in this Agreement shall create or constitute a partnership between the parties hereto or any of them nor, save as expressly provided herein, constitute any one the agent of another and no party shall do or suffer anything to be done whereby it shall or may be represented that it is the partner or agent of any other party hereto (save as aforesaid) unless such party is appointed partner or agent of another party subject to the written consent of every other party to this Agreement.
Section 7—Term:
Unless earlier terminated in accordance with the provisions of Sections 8 or 9 hereof, the initial term of this Agreement shall be for a period of sixty (60) months, commencing on January 1 st , 2010 (the “Effective Date”) and ending on December 31 st , 2014 (the “Initial Term”).
During the Initial Term either APIC or Omega may terminate this Agreement by providing one hundred and eighty (180) days prior written notice to the other parties, to take effect at any calendar month end.
 
4

At the completion of the Initial Term, this Agreement shall be automatically renewed for a minimum of one year terms provided that any party may terminate this Agreement at any time after the end of the Initial Term by providing ninety (90) days prior written notice to the other parties, to take effect at any calendar year end.
Section 8—Termination:
For the purposes of this Clause 8, a Trigger Event shall be deemed to have occurred with respect to Omega or APIC if:
(a) It ceases to be duly authorized, or licensed as an insurance company (or has any suspension, restriction or other limitation imposed in respect of its authority, licence, approval or permission), in the case of Omega in each province and territory of Canada and in the case of APIC in the jurisdiction in which it is incorporated or has its principal place of business (home jurisdiction);
(b) It goes into liquidation whether compulsorily or voluntarily (other than a voluntary and solvent liquidation for the purpose of reconstruction or amalgamation pursuant to a scheme previously agreed between the parties);
(c) It enters into any composition with its creditors generally or suffers any similar action in consequence of default by it in its obligations in respect of any indebtedness for borrowed moneys; or an administration order shall be made in respect of such party;
(d) It stops or threatens to stop payment or ceases or threatens to cease to carry on its business (otherwise than in connection with or in pursuance of a winding-up for the purpose of a reconstruction or amalgamation pursuant to a scheme previously agreed between the parties) or is deemed to be unable to pay its debts;
(e) It has an administrative receiver or other receiver or other similar official appointed over all (or substantially all) of its undertaking and assets;
In the event that a Trigger Event occurs in relation to either Omega or APIC, the other party may suspend entirely with immediate effect the operation of the Program.
If this Section 8 applies, neither Omega, nor the Broker shall (nor shall they have any authority to):
(a) Accept new policies with respect to the Business;
(b) Provide quotations or enter into (or continue) any negotiations relating to the possible acceptance of new policies with respect to the Business;
(c) Agree to any amendments to the terms of or otherwise agree to any endorsements to any policy with respect to the Business which would, or be reasonably likely to, increase materially the gross exposure of Omega and APIC under the policy in question.
 
5

Each party shall notify the other parties upon becoming aware of a Trigger Event in relation to Omega or APIC at any time.
Suspension and/or termination of the authority granted pursuant to this Agreement in whatever manner shall in no way affect or limit any accrued rights which any party to this Agreement may have against the others pursuant to this Agreement or any rights expressly stated to survive termination of this Agreement.
Notwithstanding anything in this Agreement to the contrary if one party is in default of this Agreement and if such default is capable of being cured the non defaulting party shall give written notice of the default in reasonable detail to the non defaulting party who shall be given a reasonable amount of time to cure such default prior to the non defaulting party terminating this Agreement for such default.
Section 9—Transfer of Business:
In the event that APIC becomes a licensed insurance company in Canada, Omega and APIC shall each have the right to require a transfer of the run-off of the Business from Omega to APIC pursuant to a Transfer and Assumption Agreement, subject to any applicable regulatory approval. A transfer of the Business shall be conditional upon Omega and APIC reaching agreement with respect to the amount of reserves to be transferred regarding it. In the event that APIC becomes a licensed insurance company in Canada, APIC may terminate this agreement upon 3 months written notice.
Section 10—Confidentiality:
Each party hereto shall hold in confidence and shall not divulge to any other party or any third party any Confidential Information nor make any public or press announcement regarding this Agreement or matters connected therewith.
Notwithstanding the provisions of this Section 10, any party may disclose Confidential Information:
(a) In respect of any party to any other party with the prior written consent of the first party (such consent not to be unreasonably withheld or delayed);
(b) If and to the extent required by law or for the purpose of any judicial proceedings;
(c) If and to the extent required by any securities exchange or regulatory or governmental body or tax authority to which that party is subject, wherever situated;
(d) To its professional advisers, auditors and bankers.
Notwithstanding this Section 10 each party shall be entitled to provide extracts of this Agreement to such banks, reinsurers, brokers and insurance regulators as it reasonably deems necessary for the purpose of carrying out the Business.
 
6

Each party shall comply with all applicable federal and provincial privacy laws.
The provisions of this Section 10 shall remain in full force and effect notwithstanding the termination of this Agreement and each party shall remain bound by the provisions of this Section 10 for a period of five years following the termination of this Agreement.
Section 11—Undertakings:
APIC, Omega, and the Broker shall use all reasonable care and skill in the performance of their respective obligations under this Agreement and shall comply with all applicable laws relating thereto.
Each party agrees, warrants and undertakes to the others that it has and will have all necessary consents, powers and authorities to enter into this Agreement in accordance with its terms.
Omega represents and warrants to APIC and the Broker that it is duly authorized and licensed to write the Business it Canada and Omega undertakes to take all reasonable steps to maintain such authorizations and licenses during the duration of this Agreement.
Omega undertakes to notify APIC and the Broker in writing as soon as reasonably practicable of any changes as to the authorizations and licenses which it has, or expects to obtain, from time to time.
Section 12—Regulatory Matters:
The parties shall co-operate with each other to ensure that all information necessary or desirable for making any regulatory notification or filing in respect of this Agreement, or any agreement, arrangement or concerted practice of which it forms part (or responding to any requests for further information following any such notification or filing), is supplied to the party dealing with such notification or filing and that any such notification or filing is properly, accurately and promptly made.
The parties will each ensure that any other registrations, filings and/or submissions required under the laws or regulations of any jurisdiction in respect of the Agreement or the Business are made.
Section 13—Waiver of Obligations:
Waiver by any party of any default by any other party in the performance of any obligation of such other party hereunder shall not affect such party’s rights in respect of any other default nor any subsequent default of the same or of a different kind nor shall any delay or omission of any party to exercise any right arising from any default affect or prejudice that party’s rights as to the same or any future default. Waiver by one party of any default by any other party shall not constitute a waiver of such default on the part of or on behalf of any other party.
 
7

Section 14—Amendments and Representations:
Any amendment to any term of this Agreement shall be in writing and signed by the authorized representatives of the parties hereto.
This Agreement together with the Reinsurance Agreement and the Agency Agreement sets out the entire agreement and understanding between the parties in relation to the Business. It is agreed that no party has entered into this Agreement in reliance upon, or been induced to enter into this Agreement by, any representation, warranty or undertaking of any other party hereto (whether express or implied and whether pursuant to statute or otherwise) which is not set out in this Agreement or the Reinsurance Agreement or the Agency Agreement and to the extent that it may have done so, it hereby waives all rights, remedies and claims it may have in respect thereto.
A party may claim in contract for breach of warranty under this Agreement or the Reinsurance Agreement or the Agency Agreement but shall otherwise have no claim or remedy in respect of misrepresentation (whether negligent or otherwise, and whether made prior to, and/or in, this Agreement) or untrue statement made by any other party, provided that this Section 14 shall not exclude any liability for, or remedy in respect of any fraud including, without limitation, fraudulent misrepresentation by any party.
Section 15—Assignment:
No party shall sell, transfer or encumber all or any of its rights or obligations under this Agreement without the prior written consent of all the other parties.
Section 16—Notices and Communications:
Notices under this Agreement shall be sent to a party at its address and for the attention of the individual set out in Section 17 provided that a party may change its notice details on giving written notice to the other parties of the change. That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.
All notices or other communications required for the purposes of this Agreement shall be in English and shall be given or sent by hand, facsimile, registered mail or courier to the parties and shall be deemed to be received: (i) if given by hand, at the time of delivery; or (ii) if sent by facsimile; at the time when the sender receives from the recipient facsimile machine or from the addressee of the notice confirmation of receipt of the whole of the facsimile; or (iii) if sent by registered mail, 24 hours after confirmation of delivery; or (iv) if sent by courier , 24 hours after the date of delivery by the courier company.
 
8

Section 17—Addresses:
Notices under this Agreement shall be sent to the following addresses or facsimile numbers for the attention of the person indicated:

a) if to APIC:	  	1148 NW Leary Way,
Seattle, Washington
U.S.A.	
		
	  	Facsimile: 425-776-4295	
		
b) if to Omega:	  	36 King Street East, Suite 500
Toronto, Ontario, M5C 1E5
Canada.
 
Facsimile: 416-361-6113	
Different persons may be authorized to give or receive instructions for different purposes, and such persons may include officers of corporations other than the parties hereto, authorized in that regard by the board of the relevant party.
A certified copy of a resolution of the board of Omega or APIC or the Broker may be received and accepted by either party as conclusive evidence of the authority of any person to act and may be considered in full force and effect until receipt of written notice to the contrary.
Section 18—Governing Law:
This Agreement and the relationship between the parties shall be governed by and interpreted in accordance with the law of the Province of Ontario, Canada.
Section 19—Enforceability:
If any provision of this Agreement or any part thereof:
(a) Purports to exclude, restrict or limit any liability and such exclusion, restriction or limitation is prohibited, rendered void or unenforceable by any legislation to which it is subject;
(b) Is itself prohibited, rendered void or unenforceable by any legislation to which it is subject, then the exclusion, restriction or limitation or the provision or part thereof in question shall be so prohibited or rendered void or unenforceable to the extent to which it is thus prohibited or rendered void or unenforceable and the validity or enforceability of any other part of this Agreement shall not thereby be affected.
 
9

Section 20—Arbitration:
1. In the event that any dispute arises between the parties signatory to this agreement, whether such dispute arises during or after the term of this agreement, and as a precedent to any right of action hereunder a meeting will be held between representatives of each of the parties with decision making authority to settle the dispute. At the meeting the parties will attempt in good faith to negotiate an informal resolution of the dispute. If the dispute is not resolved through negotiation within 10 Business Days the parties hereby agree to submit their dispute to Arbitration. Upon the written request of either party to the dispute the parties shall select an arbitrator from among persons with not less than 10 years experience in the insurance or reinsurance business, as persons engaged in the industry itself or as lawyers or other professional advisors, or as otherwise agreed by the parties. If the parties are unable to agree on an arbitrator within 30 days after receipt of written notice from the other party requesting it to do so then either party may proceed pursuant to the Arbitration Act, 1991 (Ontario) to have an arbitrator appointed.
2. The arbitrator shall interpret this agreement as an honourable engagement and not as a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this agreement in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to the arbitrator within 30 days of the appointment of the arbitrator.
3. The arbitrator, so far as is permissible under the law and practice of the place of arbitration, shall have power to fix all procedural rules for the holding of the arbitration including discretionary power to make orders as to any matters which it may consider proper in the circumstances of the case with regard to pleadings, discovery, inspection of the documents, examination of witnesses and any other matter whatsoever relating to the conduct of the arbitration and may receive and act upon such evidence whether oral or written strictly admissible or not as it shall in its discretion think fit.
4. The decision in writing of the arbitrator shall be final and binding on both parties. Judgement may be entered upon the final decision of the arbitrator in any court in Canada having jurisdiction. The arbitrator shall determine who pays the expense of the arbitration. The arbitration will take place in Toronto, Ontario, Canada, or such other venue in Ontario, Canada as determined by the arbitrator.
 
10

Section 21—Counterparts:
This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts and by facsimile transmission, each of which is an original but all of which together constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been signed by and on behalf of the parties. 

AMERICAN PET INSURANCE COMPANY	
		
	 	/s/ Darryl Rawlings	
	 	By:	
	
OMEGA GENERAL INSURANCE COMPANY	
		
	 	/s/ Philip H. Cook	
By:     Philip H. Cook, C.E.O.	
 
11

SCHEDULE “A”
REINSURANCE AGREEMENT
(see attached)

AGREEMENT NUMBER: 200903
STOP LOSS REINSURANCE AGREEMENT
made between
OMEGA GENERAL INSURANCE COMPANY
A company organized and existing under the laws of Canada
(hereinafter referred to as the “Reinsured”)
and
AMERICAN PET INSURANCE COMPANY
A company organized and existing under the laws of New York,
(hereinafter referred to as the “Reinsurer”)
WHEREAS: The parties to this Agreement having entered into a separate Fronting and Administration Agreement (herein referred to as the “FAA”) wherein the Reinsured is willing to cede, and the Reinsurer is willing to accept, certain risks underwritten by the Reinsured as contemplated under the FAA.
and
WHEREAS: The Reinsured has also entered into a Representation Agreement with the Broker as defined in the FAA.
and
WHEREAS: For and in consideration of the Premium specified in this Agreement being paid by the Reinsured to the Reinsurer and subject always to the terms and conditions of this Agreement, the Reinsurer agrees to indemnify the Reinsured as follows:
ARTICLE 1 INTEREST CLAUSE
This Agreement is to indemnify the Reinsured in respect of liability, which may accrue to them under any and all policies and/or contracts of insurance in respect of the business produced by the Broker and underwritten pursuant to the FAA, and in accordance with underwriting and claims handling guidelines set out therein. At no time shall the Reinsured accept or underwrite business not provided for in the FAA for this reinsurance.
 
1

ARTICLE 2 PERIOD CLAUSE
This Agreement is in respect of losses as herein defined pertaining to risks attaching during the period specified in the FAA.
ARTICLE 3 EXCLUSIONS
This Agreement follows the underlying coverage issued to the policyholders of the Reinsured in accordance with the FAA. For further clarity, this Agreement does not contain any exclusions or limitations, which are not present in the underlying policies.
ARTICLE 4 REINSURING CLAUSE
 
A.	The Reinsurer hereby agrees to pay the Reinsured 100% of the annual Net Underwriting Loss incurred on the subject portfolio underwritten by the Reinsured as business under the FAA (“Business”), in excess of the Net Premium Retained by the Reinsured.	
 
B.	The term “Net Underwriting Loss” shall mean the total sum incurred by the Reinsured for all losses or liability in respect of the Business covered hereunder, including paid claims plus outstanding claims plus incurred but not reported claims as determined by the Reinsured’s Actuary.	
Calculation of the Net Underwriting Loss hereunder, shall include all costs and adjustment expenses arising from the handling of claims, other than the salaries of employees and the office expenses of the Reinsured.
For purposes of the Net Underwriting Loss calculation, prior to any calendar year end, the Reinsured will estimate the Net Underwriting Loss as [*].
 
C.	The term “Net Premium Retained” shall mean the gross premium charged to the policyholder, less broker acquisition costs (including profit commission where applicable), less premium tax incurred by the Reinsured, less the premium paid under Article 8 of this Agreement, less [*].	
For purposes of the Net Premium Retained calculation, prior to any calendar year end, the Reinsured will estimate the premium tax incurred to be 3% of the gross premiums charged to the policyholders.
 
D.	The Reinsurer hereby agrees to pay the Reinsured, in cash, the amount identified in the above Article 4A, upon presentation of supporting documentation by the Reinsured. The Reinsured undertakes to provide up-dated loss information including paid and outstanding claims on a quarterly basis, no later than 30 days after the end of each calendar quarter. The Reinsurer will have the option of authorising the Reinsured to deduct such amounts due hereunder from premium funds due to the Reinsurer, but in any event, the Reinsurer agrees to fund the subject losses either by “offset” or direct payment as soon as supporting documentation is received.	
* Confidential Treatment Requested.
 
2

ARTICLE 5 ULTIMATE NET UNDERWRITING LOSS SETTLEMENT CLAUSE
The Reinsured will continue to update the calculations in the above Article 4A until the third calendar year following the year in which the premium is received by the Reinsured, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
ARTICLE 6 NET RETAINED LINES CLAUSE
This Agreement shall only protect that portion of any Business the subject matter of this Agreement which is above the Reinsured’s net retention as agreed in advance with the Reinsurer. The Reinsurers’ liability hereunder shall not be increased due to an error or omission which results in an increase in the Reinsured’s net retention nor by the inability of the Reinsured to collect from any other reinsurer any amounts which may have become due from them whether such inability arises from the insolvency of such other reinsurer or otherwise.
ARTICLE 7 TERRITORIAL LIMITATIONS
This Agreement is in respect of Business in Canada.
ARTICLE 8 PREMIUM CLAUSE
The Reinsured hereby agrees to pay the Reinsurer a premium equal to [*]. This premium shall be paid to the Reinsurer on a monthly basis, fifteen (15) days following the end of the month in which the premium is received by the Reinsured.
ARTICLE 9 CURRENCY CLAUSE
For the purpose of this Agreement all currencies are expressed in Canadian dollars. Any losses involving other than Canadian currency shall be converted into Canadian currency at the rates of exchange used in the Reinsured’s books, or where there is a specific remittance for a loss settlement, at the rates of exchange used in making such remittance.
ARTICLE 10 UNDERWRITING POLICY CLAUSE
It is a condition precedent to the Reinsurer’s liability hereunder that the Reinsured shall not introduce at any time after the Reinsured enters into this Agreement any change in the FAA without the prior written approval of the Reinsurer.
* Confidential Treatment Requested.
 
3

ARTICLE 11 INSPECTION OF RECORDS CLAUSE
For as long as either party retains any liability hereunder the Reinsured shall, upon request by the Reinsurer, make available at the Reinsured’s head office for inspection at any reasonable time by such representatives as may be authorised by the Reinsurer for that purpose, all information relating to business reinsured hereunder (including actuarial reviews and evaluations) in the Reinsured’s possession or under its control and the said representatives may arrange for copies to be made of any of the records containing such information as they may require.
ARTICLE 12 AMENDMENTS AND ALTERATIONS CLAUSE
Any amendments and/or alterations to this Agreement that are agreed either by correspondence and/or Broker’s Slip endorsements, shall be automatically binding on the parties and unless otherwise agreed by the parties hereto shall be formally documented by an exchange of correspondence signed by the parties or by the issue of a contract addendum which shall be considered to form an integral part hereof.
ARTICLE 13 ERRORS OR OMISSIONS CLAUSE
Any inadvertent errors or omissions on the part of either the Reinsured or the Reinsurer shall not relieve the other party from any liability which would have attached hereunder, provided that such errors or omissions shall be rectified as soon as possible after discovery. Nevertheless, nothing contained in this Article shall be held to override any of the terms and conditions of this Agreement and no liability shall be imposed on the other party greater than would have attached hereunder had such errors or omissions not occurred.
ARTICLE 14 CLAIMS NOTIFICATION AND SETTLEMENTS CLAUSE
The Reinsured undertakes to advise the Reinsurer as soon as possible in the event of a loss being likely to arise hereunder together with an estimate of the Reinsurer’s liability and thereafter keep the Reinsurer fully informed of any developments regarding the original claims. In addition, the Reinsured shall provide to the Reinsurer with monthly information on all claims made under the subject agreement, even if the aggregate total of such claims (including incurred but not reported) does not exceed the Reinsured’s retention.
All losses under the program will be adjusted on behalf of the Reinsured by claim handlers selected by mutual agreement between the Reinsured and the Reinsurer.
All loss settlements made by the Reinsured shall be binding upon the Reinsurer, provided such settlements are within the terms and conditions of the original policies and/or contracts and within the terms and conditions of this Agreement, and amounts falling to the share of the Reinsurer shall be payable by them upon reasonable evidence being given by the Reinsured.
ARTICLE 15 INSOLVENCY CLAUSE
Where an Insolvency Event (as defined below) occurs in relation to the Reinsured the following terms shall apply (and, in the event of any inconsistency between these terms and any other terms of this Agreement, these terms shall prevail):
 
4

A.	Notwithstanding any requirement in this Agreement to the contrary:	
 
 	(i)	the Reinsurer shall be liable to pay the Reinsured even though the Reinsured is unable actually to pay, or discharge its liability to, its policyholder; but	
 
 	(ii)	nothing in this clause shall operate to accelerate the date for payment by the Reinsurer of any sum which may be payable to the Reinsured but for it being the subject of any Insolvency Event.	
 
B.	The existence, quantum, valuation and date for payment of any sum which the Reinsurer is liable to pay the Reinsured under this Agreement shall be those and only those for which the Reinsurer would be liable to the Reinsured if the liability of the Reinsured to its policyholders had been determined without reference to any term in any composition or scheme of arrangement or any similar such arrangement, entered into between the Reinsured and all or any part of its policyholders, unless and until the Reinsurer serves written notice to the contrary on the Reinsured in relation to any composition or scheme of arrangement.	
 
C.	The Reinsurer shall be entitled (but not obliged) to set-off, against any sum which it may be liable to pay the Reinsured, any sum for which the Reinsured is liable to pay the Reinsurer.	
 
D.	The Reinsurer shall be entitled (but not obliged) to assume direct control of any losses under this program by giving notice to the policyholder, the Reinsured or its representative. The Reinsurer will then assume total responsibility for such losses as though they had issued the underlying policy.	
An Insolvency Event shall occur if
 
 	(i) (a)	(for the purposes of and in relation to A, B, C and D above) a winding up petition is presented in respect of the Reinsured or a provisional liquidator is appointed over it or if the Reinsured goes into administration, administrative receivership or receivership or if the Reinsured has a scheme of arrangement or voluntary arrangement proposed in relation to all or any part of its affairs; or	
 
 	(b)	(for the purposes of and in relation to A above) the Reinsured goes into compulsory or voluntary liquidation;	
 
 	(c)	(for the purposes of and in relation to D above) the Reinsured becomes subject to any regulatory intervention.	
or, in each case, if the Reinsured becomes subject to any other similar insolvency process; and
 
 	(ii)  	the Reinsured is unable to pay its debts as and when they fall due within the meaning of relevant Canadian law or statute.	
 
5

ARTICLE 16 TERMINATION CLAUSE
Either party shall have the right to terminate this Agreement immediately by giving the other party written notice:-
 
A.	If the performance of the whole or any part of this Agreement is prohibited or rendered impossible de jure or de facto in particular and without prejudice to the generality of the preceding words in consequence of any law or regulation which is or shall be in force in any country or territory or if any law or regulation shall prevent directly or indirectly the remittance of any or all or any part of the balance of payments due to or from either party.	
 
B.	If the other party has become insolvent or unable to pay its debts or has lost the whole or any part of it’s paid up capital.	
 
C.	If there is any material change in the ownership or control of the other party.	
 
D.	If the country or territory in which the other party resides or has its head office or is incorporated shall be involved in armed hostilities with any other country whether war be declared or not or is partly or wholly occupied by another power.	
 
E.	If the other party shall have failed to comply with any of the terms and conditions of this Agreement.	
After the date of any such termination the liability of the Reinsurers hereunder shall cease outright other than in respect of losses which have occurred prior thereto.
All notices of termination in accordance with any of the provisions of this paragraph shall be by Telex, Facsimile, Telegram or any other permanent means of instantaneous communication, and shall be deemed to be served upon despatch or where communications between the parties are interrupted upon attempted despatch.
All notices of termination served in accordance with any of the provisions of this Article shall be addressed to the party concerned at its head office or at any other address previously designated by that party.
Notwithstanding anything in this Agreement to the contrary if one party is in default of this Agreement and if such default is capable of being cured the non defaulting party shall give written notice of the default in reasonable detail to the non defaulting party who shall be given 60 days or such additional time as the non defaulting party may consider reasonable to cure such default prior to the non defaulting party terminating this Agreement for such default.
ARTICLE 17 ARBITRATION CLAUSE
1. In the event that any dispute arises between the parties signatory to this agreement, whether such dispute arises during or after the term of this agreement, and as a precedent to any right of action hereunder a meeting will be held between representatives of each of the parties with
 
6

decision making authority to settle the dispute. At the meeting the parties will attempt in good faith to negotiate an informal resolution of the dispute. If the dispute is not resolved through negotiation within 10 Business Days the parties hereby agree to submit their dispute to Arbitration. Upon the written request of either party to the dispute the parties shall select an arbitrator from among persons with not less than 10 years experience in the insurance or reinsurance business, as persons engaged in the industry itself or as lawyers or other professional advisors, or as otherwise agreed by the parties. If the parties are unable to agree on an arbitrator within 30 days after receipt of written notice from the other party requesting it to do so then either party may proceed pursuant to the Arbitration Act, 1991 (Ontario) to have an arbitrator appointed.
2. The arbitrator shall interpret this agreement as an honourable engagement and not as a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this agreement in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to the arbitrator within 30 days of the appointment of the arbitrator.
3. The arbitrator, so far as is permissible under the law and practice of the place of arbitration, shall have power to fix all procedural rules for the holding of the arbitration including discretionary power to make orders as to any matters which it may consider proper in the circumstances of the case with regard to pleadings, discovery, inspection of the documents, examination of witnesses and any other matter whatsoever relating to the conduct of the arbitration and may receive and act upon such evidence whether oral or written strictly admissible or not as it shall in its discretion think fit.
4. The decision in writing of the arbitrator shall be final and binding on both parties. Judgement may be entered upon the final decision of the arbitrator in any court in Canada having jurisdiction. The arbitrator shall determine who pays the expense of the arbitration. The arbitration will take place in Toronto, Ontario, Canada, or such other venue in Ontario, Canada as determined by the arbitrator.
ARTICLE 18 JURISDICTION CLAUSE
This Agreement shall be governed by the laws of Ontario, Canada.
ARTICLE 19 INTERMEDIARY CLAUSE
The parties to this agreement recognize and accept that there is no intermediary involved in the placement or handling of this Agreement and that the relationship is direct between the Reinsured and the Reinsurer.
 
7

ARTICLE 20 WARRANTIES AND/OR SPECIAL CONDITIONS CLAUSE
The parties to this agreement hereby warrant and confirm that they are licensed in good standing in their respective regulatory jurisdictions and that they are authorized to carry on the business of Insurance or Reinsurance for the line of business contemplated by this Agreement. The parties also warrant and confirm that they have the necessary authority to enter in to and execute this Agreement, and that both have accepted the terms and conditions of the FAA.
ARTICLE 21 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts and by facsimile transmission, each of which is an original but all of which together constitute one and the same instrument.
SIGNED this 18 th day of November, 2009
For the Reinsured, OMEGA GENERAL INSURANCE COMPANY

/s/ Philip H. Cook C.E.O.	
SIGNED this 18 th day of November, 2009	
For the Reinsurer, AMERICAN PET INSURANCE COMPANY

/s/ Darryl Rawlings	

8

SCHEDULE “B”
AGENCY AGREEMENT
(see attached)

Agency Agreement
Between
Omega General Insurance Company
36 King Street East, Suite 500
Toronto, Ontario M5C 1E5
hereinafter called “The Company”
And
Vetinsurance Brokers Canada Inc.
PO Box 34538, 1268 Marine Drive
North Vancouver, British Columbia V7P 1T2
hereinafter called “The Broker”
ARTICLE I
Appointment
Whereas The Company and American Pet Insurance Co. have entered into a separate Fronting and Administration Agreement (“FAA”), The Company hereby appoints the Broker, subject to all the terms and conditions herein, all of the insurance laws and other laws applicable to insurance companies and insurance brokers of each province and territory of Canada (“Provincial Insurance Laws”) and to any limitations, underwriting rules and procedural instructions issued by The Company. It is understood and agreed that this appointment is solely for the purpose of selling policies of insurance as contemplated under the FAA and other related insurance as may be mutually agreed by the parties to this agreement. The Broker shall not hold itself out as having the power to bind or obligate The Company in any manner whatsoever except for the purpose set out herein.
The Broker has read and fully understands the contents, terms, conditions and covenants of the FAA and agrees to be bound by FAA as it relates to the Broker and the business of the Broker.
ARTICLE II
Accounts
1. The Broker agrees to submit to The Company monthly statements in the required format, reporting all policies in numerical order; a record of all premiums due; and such other reports as The Company may reasonably request pertaining to its business in force or expired. The Broker shall forward statements due to The Company no later than 15 calendar days following the end of each month in which the business is recorded at its offices. If no sale is made during the month, a “Nil” report must be submitted. Commissions and other remuneration shall be determined by agreement and may be subject to change from time to time. The initial commission is set out in the attached Exhibit 1.
 
1

2. All monies received or collected by the Broker on behalf of The Company, less The Broker’s commissions, and any other amounts agreed to herein shall be the property of The Company, and shall be held by The Broker in trust for The Company. The Broker shall not use the funds or apply them for other purposes, except as contained in this agreement, unless otherwise approved by The Company in writing.
ARTICLE III
Records
 
1.	All records of The Broker pertaining to the business of The Company shall be open to inspection by The Company at any reasonable time for the purpose of determining any fact related to money due The Company, or the status of business placed with The Company by The Broker. Except for forms, manuals, advertising and other materials that may be supplied to The Broker by The Company at its option and in the ordinary course of business, The Broker shall bear all the cost and expense of operating its business.	
 
2.	Ownership, use and control of all customer lists and records shall remain the property of The Broker and shall not be used by The Company without the express written permission of The Broker, except to the extent required by law.	
ARTICLE IV
Sub Agents
The Broker shall have the sole responsibility of appointing or removing other agencies, brokers and producers with respect to the business contemplated under the FAA. The Company reserves the right to require that any such appointments be cancelled with or without cause on 30 days notice and The Company shall be relieved of all liability hereunder. Any sub agents or affiliated agents will be expected to confirm their agreement to the terms and conditions of this Agreement.
ARTICLE V
Termination
1. It is expressly understood and agreed that The Company and The Broker have mutually agreed to the premiums and coverages assigned to the business contemplated under the FAA and that neither party has the authority to change the premium or coverage terms.
2. This Appointment may be terminated by giving 60 days prior written notice, or in accordance with the termination provisions of the FAA. Upon termination by either party The Broker shall return to The Company all documents and supplies in their possession, if any, along with any monies due to The Company.
 
2

ARTICLE VI
Administration
1. The Broker, after deducting The Broker’s agreed commission as compensation, will remit all premiums to The Company by the 30th day of the month following the month in which the transactions are recorded at its offices.
2. The Company located at Suite 500, 36 King Street East, Toronto, Ontario MSC 1E5 will receive all premiums from The Broker, and will validate and process all entries of premium as required herein.
ARTICLE VII
Service of Suit
The Broker may not accept service of legal process issued against The Company in respect of any of the business hereunder.
ARTICLE VIII
Indemnity
1. It is expressly understood and agreed that in order to comply with the Provincial Insurance Laws, The Broker, and any sub agents or brokers representing the business under this agreement when required by law or regulation, shall be in possession of a valid Insurance License appointment in each Province or Territory of Canada where it solicits business as the case may be. Also, the Broker shall indemnify and hold The Company harmless against liability to policy or certificate holders caused solely by acts or omissions of negligence or fraud by The Broker in processing authorized business for The Company.
2. The Company shall hold The Broker harmless from any civil liability resulting from The Company’s acts or omissions in services performed under this Agreement. Such indemnification shall include reasonable legal fees incurred in connection with the investigation or defense against any claim. Upon receiving notice of any claim that could be covered by this section, The Broker shall notify The Company within 5 working days.
ARTICLE IX
Arbitration
1. In the event that any dispute arises between the parties signatory to this agreement, whether such dispute arises during or after the term of this agreement, and as a precedent to any right of action hereunder a meeting will be held between representatives of each of the parties with decision making authority to settle the dispute. At the meeting the parties will attempt in good faith to negotiate an informal resolution of the dispute. If the dispute is not resolved through negotiation within 10 Business Days the parties hereby agree to submit their dispute to
 
3

Arbitration. Upon the written request of either party to the dispute the parties shall select an arbitrator from among persons with not less than 10 years experience in the insurance or reinsurance business, as persons engaged in the industry itself or as lawyers or other professional advisors, or as otherwise agreed by the parties. If the parties are unable to agree on an arbitrator within 30 days after receipt of written notice from the other party requesting it to do so then either party may proceed pursuant to the Arbitration Act, 1991 (Ontario) to have an arbitrator appointed.
2. The arbitrator shall interpret this agreement as an honourable engagement and not as a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this agreement in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to the arbitrator within 30 days of the appointment of the arbitrator.
3. The arbitrator, so far as is permissible under the law and practice of the place of arbitration, shall have power to fix all procedural rules for the holding of the arbitration including discretionary power to make orders as to any matters which it may consider proper in the circumstances of the case with regard to pleadings, discovery, inspection of the documents, examination of witnesses and any other matter whatsoever relating to the conduct of the arbitration and may receive and act upon such evidence whether oral or written strictly admissible or not as it shall in its discretion think fit.
4. The decision in writing of the arbitrator shall be final and binding on both parties. Judgement may be entered upon the final decision of the arbitrator in any court in Canada having jurisdiction. The arbitrator shall determine who pays the expense of the arbitration. The arbitration will take place in Toronto, Ontario, Canada, or such other venue in Ontario, Canada as determined by the arbitrator.
Signed and accepted by the parties to this agreement.
Dated this 18 th day of November, 2009, in Toronto, Ontario.
For – Omega General Insurance Company
      By: Philip H. Cook, CEO

/s/ Philip H. Cook	
For – Vetinsurance Brokers Canada Inc.
      By:

/s/ Darryl Rawlings	
 
4

EXHIBIT 1 – Commissions
Regular Commission: [*].
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned. 
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows—the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
* Confidential Treatment Requested.
 
5

SCHEDULE “C”
UNDERWRITING GUIDELINES
(see attached)

AMERICAN PET INSURANCE COMPANY
PET INSURANCE PROGRAM
Underwriting and Rate Guidelines
AMERICAN PET INSURANCE COMPANY
1148 NW Leary Way
Seattle, Washington 98107-5133
888-738-7478
www.trupanion.com
EFFECTIVE:
January 1, 2008

COMPANY DIRECTORY
UNDERWRITING

	  	ADDRESS:	  	1148 NW Leary Way
Seattle, Washington 98107-5133	
			
	  	PHONE:	  	888-738-7478	
			
CLAIMS	  		  		
	  	ADDRESS:	  	1148 NW Leary Way
Seattle, Washington 98107-5133	
			
	  	PHONE:	  	888-738-7478	
			
BILLING	  		  		
	  	ADDRESS:	  	1148 NW Leary Way
Seattle, Washington 98107-5133	
			
	  	PHONE:	  	888-738-7478	

APIC January 2008	  	1	

PET INSURANCE PROGRAM
Effective January 1, 2008
UNDERWRITING RULES & GUIDELINES
Since it is not possible to make rules to cover every situation, final decisions with respect to acceptance of risk, underwriting, rates, etc., are reserved by the Company.
MONTHLY PREMIUM
 
1.	Your monthly premium will not increase as your pet’s age increases.	
 
2.	Your monthly premium will not increase regardless of the number of claims you make.	
ELIGIBLE PETS
 
 	1.	All dogs and cats under age 14 are eligible for enrollment,	
POLICY TERM
 
 	1.	All policies are on a monthly basis.	
OPTIONAL COVERAGES
 
 	1.	Coverage for hip dysplasia may be purchased. An additional surcharge will be applied if this coverage is elected.	
 
 	2.	Coverage for veterinarian exam fees may be purchased. An additional surcharge will be applied if this coverage is elected.	
 
 	3.	Coverage is provided with 90% co-insurance. You may select optional co-insurance amounts ranging from 50% to 90%. Your premium will be adjusted accordingly.	
 
 	4.	Coverage is provided with no deductible. You may select optional deductible amounts ranging from $50.00 to $1,000.00. Your premium will be adjusted accordingly.	
 
 	5.	Coverage for Additional Benefits may be purchased. These benefits include Third Party Property Damage Liability, Advertising and Reward, Boarding Fees, Holiday Cancellation Costs, and Pet Cremation or Burial. An additional charge will be applied if this coverage is elected.	
POLICY PLANS
 
 	1.	Plan 1 is for pets under one year old. This plan features a 90% co-insurance, no deductible, no hip dysplasia coverage, no exam fee coverage, and no additional benefits coverage.	
 
 	2.	Plan 2 is for pets under one year old. This plan allows you to choose all optional coverages.	
 
 	3.	Plan 3 is for all pets under 14 years old. This plan features a 90% co-insurance, no deductible, no hip dysplasia coverage, no exam fee coverage, and no additional benefits coverage.	
 
 	4.	Plan 4 is for all pets under 14 years old. This plan allows you to choose all optional coverages.	
Please refer to your policy for various exclusions and limitations, which restrict coverage. Please read it carefully.

APIC January 2008	  	2	

RATING ORDER OF CALCULATIONS
DOG RATING FORMULA
 
 	1)	Dog Base Rate $25.06	
 
 	2)	x AGE OF DOG FACTOR	
 
 	3)	x BREED OF DOG FACTOR	
 
 	4)	x HIP DYSPLASIA FACTOR	
 
 	5)	x EXAM FEE FACTOR	
 
 	6)	x ZIP CODE FACTOR	
 
 	7)	x CO-INSURANCE FACTOR	
 
 	8)	x DEDUCTIBLE FACTOR	
 
 	9)	x WEB LINK PARTNER CREDIT FACTOR	
 
 	10)	x AFFINITY GROUP CREDIT FACTOR	
 
 	11)	+ ADDITIONAL BENEFITS COVERAGE (if elected) $4.95	
 
 	12)	+ EXPENSE FACTOR $9.00	
CAT RATING FORMULA
 
 	1)	Cat Base Rate $14.58	
 
 	2)	x AGE OF CAT FACTOR	
 
 	3)	x HIP DYSPLASIA FACTOR	
 
 	4)	x ZIP CODE FACTOR	
 
 	5)	x EXAM FEE FACTOR	
 
 	6)	x CO-INSURANCE FACTOR	
 
 	7)	x DEDUCTIBLE FACTOR	
 
 	8)	x WEB LINK PARTNER CREDIT FACTOR	
 
 	9)	x AFFINITY GROUP CREDIT FACTOR	
 
 	10)	+ ADDITIONAL BENEFITS COVERAGE (if elected) $4.95	
 
 	11)	+ EXPENSE FACTOR $6.00	

APIC January 2008	  	3	

									
 	  	PET AGE RELATIVITIES	  	 	
					
	  	Age of Dog	  	Factor	  	Age of Cat	  	Factor	
					
	  	less than 1 year old	  	0.90	  	less than 1 year old	  	0.90	
	  	1 year old	  	1.00	  	1 year old	  	1.00	
	  	2 years old	  	1.10	  	2 years old	  	1.10	
	  	3 years old	  	1.20	  	3 years old	  	1.20	
	  	4 years old	  	1.30	  	4 years old	  	1.30	
	  	5 years old	  	1.40	  	5 years old	  	1.40	
	  	6 years old	  	1.50	  	6 years old	  	1.50	
	  	7 years old	  	1.55	  	7 years old	  	1.55	
	  	8 years old	  	1.65	  	8 years old	  	1.65	
	  	9 years old	  	1.75	  	9 years old	  	1.75	
	  	10 years old	  	1.85	  	10 years old	  	1.85	
	  	11 years old	  	1.95	  	11 years old	  	1.95	
	  	12 years old	  	2.05	  	12 years old	  	2.05	
	  	13 years old	  	2.10	  	13 years old	  	2.10	
	
BREED OF DOG FACTOR—Apply a factor of 1.40 for pure breeds or a factor of 1.20 for cross breeds to the following:	
				
	  	American Bandogge Mastiff	  	Coonhound-Blue Tick	  	Newfoundland	
	  	American Black and Tan Coonhound	  	Coonhound-Redbone	  	Old English Mastiff	
	  	American. Blue Gascon Hound	  	Dachshund	  	Old English Sheepdog	
	  	American Bulldog	  	Doberman Pinscher	  	Olde Boston Buildogge	
	  	American Cocker Spaniel	  	English Bulldog	  	Olde English Sheepdog	
	  	American Mastiff	  	French Bulldog	  	Olde Victorian Bulldogge	
	  	American Mastiff (Panja)	  	French Mastiff	  	Perro De Presa Canario	
	  	Belgian Mastiff	  	Great Dane	  	Pyrenean Mastiff	
	  	Berger Des Pyrenees	  	Great Pyrenees	  	Pyrenean Mountain Dog	
	  	Bernese Mountain Dog	  	Greater Swiss Mountain	  	Saint Bernard	
	  	Bull Boxer	  	Irish Wolfhound	  	Scottish Deerhound	
	  	Bulldog	  	Italian Buildogge	  	Shar Pei	
	  	Bullmastiff	  	Labradoodle	  	Spanish Bulldog	
	  	Canary Dog	  	Mastiff	  	Spanish Mastiff	
	  	Chow Chow	  	Nebolish Mastiff	  	Snoodle	
	  	Coonhound-Black and Tan	  	Neopolitan Mastiff	  	Tibetan Mastiff	
	  		  		  		  	Treeing Walker Coon Hound	
			
	  	HIP DYSPLASIA RELATIVITIES – DOG	  	HIP DYSPLASIA RELATIVITIES - CAT	
					
	  	Coverage	  	Factor	  	Coverage	  	Factor	
					
	  	Yes	  	1.24	  	Yes	  	1.24	
	  	No	  	1.00	  	No	  	1.00	
					
	  	EXAM FEE
RELATIVITIES—DOG	  		  	EXAM FEE
RELATIVITIES—CAT	  		
					
	  	Coverage	  	Factor	  	Coverage	  	Factor	
					
	  	Yes	  	1.20	  	Yes	  	1.20	
	  	No	  	1.00	  	No	  	1.00	

APIC January 2008	  	4	

									
					
	  	CO-INSURANCE RELATIVITIES—DOG	  	CO-INSURANCE RELATIVITIES—CAT	  		  		
					
	  	Co-insurance Formula	  	Co-insurance Formula	  		  		
					
	  	1.05 - [1.05 x (0.9-
selected co-insurance)].
Co-insurance selections range from 50% to 90%.	  	1.05 - [1.05 x (0.9-
selected co-insurance)].
Co-insurance selections range from 50% to 90%.	  		  		
					
	  	DEDUCTIBLE RELATIVITIES -
DOG	  	DEDUCTIBLE RELATIVITIES –
CAT	  		  		
					
	  	Deductible Formula	  	Deductible Formula	  		  		
					
	  	1.00 – (selected deductible raised to the power of 0.81) divided by 407.2806.
Deductible selections are $0 or range from 50 to $1,000.	  	1.00 – (selected
deductible raised to the
power of 0.81) divided by 407.2806. Deductible selections are $0 or range from 50 to $1,000.	  		  		
					
	  	WEB LINK PARTNER CREDIT—CATS & DOGS	  		  		  		
	  	Web Link Partner	  	Factor	  		  		
					
	  	Yes	  	0.94	  		  		
	  	No	  	1.00	  		  		
					
	  	AFFINITY GROUP
CREDIT – CATS & DOGS	  		  		  		
	  	Affinity/Strategic Educational/Promotion
al Providers Group	  	Factor	  		  		
					
	  	Yes	  	0.89	  		  		
	  	No	  	1.00	  		  		
					
ZIP CODE RELATIVITIES—CATS AND DOGS	  	See attached. If your zip code is not included in the list, please contact your agent.	  		  		  		

APIC January 2008	  	5	

SCHEDULE “D”
CLAIMS HANDLING PROCEDURES
(see attached)

Vetinsurance Claims Wizard
and
SOAP Manual

			
Claims Wizard : Other For	  	Page 1 of 1	

	  	ILLNESS	  	Owner : [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number : [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  Paid Policy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
	 	 	
   Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  		  		
   Claim Status>> Claim Conclusions>> Summary	  		

Clinics & Additional Forms	  		  		 		 		 		 		  	Patient History	  	 	
  Add Clinics	  		  		 		 		 		 		  	Date of Loss: 6/15/2009	  	 	
	 		 		 		 		  		  		 		 		 		 		  	 Current Claim status	  	 	
  Clinics:	  		  		 		 		 		 		  	 Is Claim Form Complete:	  	Yes	
	  		  		 		 		  	 Claim Express:	  	No	
  Vet Clinic:	  		  		 		 		 		 		  	 Certificate Claim:	  	No	
   Select	 		 		 		 		  	Other: 	  	 	 	Add	 		 		 		  	 Pre Approval:	  	No	
	 		 		  		  		 		 		 		 		  	 Suspicious Claim:	  	No	
  Add Additional Forms	 		 		  		  		 		 		 		 		  	 90 Day Claim:	  	No	
Form Name	 	Form Type	  	Clinic	  	Description	 	Data Attache	 	Remove	 		  	 Claim From QC, NB, PEI,  NFL:	  	No	
180408946.pdf	 	Others	  		  	Information from Owner	 	Jul 06 2009	 		 		  	 Claim Over $2500:	  	No	
176340582.pdf	 	Update History	  		  	Leduc	 	Jul 16 2009	 		 		  		  	 	
	 		 		 		 		  		  		 		 		 		 		  	Current records	  	 	
Upload Additional Forms :  	 		 		  		  		 		 		 		 		  	Others	  	 	
	 	  Browse...  	 		  		  		 		 		  	UpdateHistory	  	 	
	 		 		 		 		  		  		 		 		 		 		  	ClaimForm	  	 	
Form Type:	 		 		 		  		  		 		 		 		 		  		  	 	
Select	 		 		 		 		  		  		 		 		  	Pre-Existing Records	  	 	
	 		 		 		 		  		  		 		 		 		 		  	Claim [*] ClaimForm.pdf -	
Description:	 		 		  		  		 		 		 		 		  		  	 	
	 		 	 	 	 	 	 	  	 	  		 		 		 		 		  	Past Claims	  	 	
Clinic:	 		 		  		  		 		 		 		 		  	Added Date  Type   No     Status	
Select	 		  		  		 		 		 		 		  	7/20/2009     -Ill   - [*]    -paid	
	 		 		  		  		 		 		 		 		  	Conjunctivitis-bilateral suspect	
Add Form	 		 		 		  		  		 		 		 		 		  	hypersensitivity	
	 		 		 		 		  		  		 		 		 		 		  	 	
Back  	 		 		 		 		  		  		 	Continue  	 		 		 		  	 	

http://www.petorganizer.com/ClaimsWizard/ClaimRecords.aspx?claimID=[*]	  	7/20/2009	
*Confidential Treatment Requested.

			
Claims Wizard : Claim Form	  	Page 1 of 1	

	  	ILLNESS    	  	Owner : [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number: [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  Paid Policy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
	 	 	
   Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  		  		
   Claim Status>> Claim Conclusions>> Summary	  		

ClaimForm Details:         Edit	  		  		 		 		  	Patient History	  	 	
	  		  		 		 		  	Date of Loss: 6/15/2009	  	 	
 	  	 	  	 	 	 	 		  	Current Claim status	  	 	
 
Is Condition Initial, Novel, or Repeat? : Initial	  		 		 		  	Is Claim Form Complete:	  	Yes	
	  		  		 		 		  	Claims Express:	  	No	
Claims Form: ClaimForm From Fax 176241401.pdf	  		 		 		  	Certificate Claim:	  	No	
 	  	 	  	 	 	 	 		  	Pre Approval:	  	No	
Is Claim Form Complete :	  	Yes	  		 		 		  	Suspicious Claim:	  	No	
Claims Express:	  	No	  		 		 		  	90 Day Claim:	  	No	
Certificate Claim:	  	No	  		 		 		  	Claim From QC, NB, PEI,	  	No	
Pre Approval:	  	No	  		 		 		  	NFL:	  	 	
Suspicious Claim:	  	No	  		 		 		  	Claim Over $2500:	  	No	
90 Day Claim:	  	No	  		 		 		  		  	 	
Claim From QC, NB, PEI, NFL:	  	No	  		 		 		  	Current records	  	 	
Claim Over $2500:	  	No	  		 		 		  	Others	  	 	
 	  	 	  	 	 	 	 		  	UpdateHistory	  	 	
Assign To: [*]	  		  		 		 		  	ClaimForm	  	 	
	 		  		  		 		 		  		  	 	
Back  	 		  		  	  Continue  	 		 		  	Pre-Existing Records	  	 	
	 		  		  		 		 		  	Claim [*] ClaimForm.pdf -	
	 		  		  		 		 		  		  	 	
	 		  		  		 		 		  	Past Claims
 	  	 	
	 		  		  		 		 		  	Added Date  Type   No     Status	
	 		  		  		 		 		  	7/20/2009     -Ill   - [*]    -Paid	
	 		  		  		 		 		  	Conjunctivitis-bilateral suspect
hypersensitivity	

 
					
http://www.petorganizer.com/ClaimsWizard/ClaimForm.aspx?claimID=[*]	  	 	7/20/2009	  	
*Confidential Treatment Requested.

			
Claims Wizard : Claim Form	  	Page 1 of 1	

	  	ILLNESS	  	Owner: [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number : [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  Paid Policy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
   Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  	 	  	 	
   Claim Status>> Claim Conclusions>> Summary	  		

Accident/Illness:	 		 		  		 		 		  		  	Patient History	  	 	
  Accident    Illness	 		 		  		 		 		  		  	Date of Loss: 6/15/2009	  	 	
Date of Loss (Service):	 		 	Total Customer Claimed($):	 		  		  	Current Claim Status	  	 	
15-Jun-2009	 		 	90	  		 		 		  		  	Is Claim Form Complete:	  	Yes	
	 		 		 		  		 		 		  		  	Claims Express:	  	No	
Diagnosis or Clinical Symptoms of the Illness as noted on claim Form:	 		 		  		  	Certificate Claim:	  	No	
	 		 		 		  		 		 		  		  	Pre Approval:	  	No	
Persistent Bilateral conjunctivitis	 		 		  		  	Suspicious Claim:	  	No	
	 		 		 		  		 		 		  		  	90 Day Claim:	  	No	
	 		 		 		  		 		 		  		  	Claim From QC, NB, PEI, NFL:	  	No	
Is Condition Initial, Novel, or Repeat?	 		 		  		  	Claim Over $2500:	  	No	
Initial	 		 		 		  		 		 		  		  		  	 	
 	 	 	 	 	 	 	  	 	 	 	 	 	  		  	Current records	  	 	
Check All that Apply:	 		  		 		 		  		  	Others	  	 	
¨ 90 Day Claim	 	¨ Suspicious Claim	 		 		  		  	UpdateHistory	  	 	
¨ Claim Over $2500	 	¨ Claim From QC, NB, PEI, NFL	 		 		  		  	ClaimForm	  	 	
¨ Certificate Claim	 		 		  		 		 		  		  		  	 	
	 		 		 		  		 		 		  		  	Pre-Existing Records	  	 	
	 		 		 		  		 		 		  		  	Claim [*] ClaimForm.pdf -	  	 	
Note: Old ClaimForm file may not be shown here. If it is not shown please browse the file again.	 		  		  		  	 	
Claims Form: ClaimForm From Fax 176241401.pdf          Delete	 		 		  		  	Past Claims	  	 	
	 		 		 		  		 		 		  		  	Added Date  Type   No     Status	
Type Of Claim:	 		 		  		 		 		  		  	7/20/2009      -Ill   - [*]    -Paid	
  Claim Form  Claims Express  Pre Approval	 		  		  	Conjunctivitis-bilateral suspect hypersensitivity	
Form complete and legible:	 		 		  		 		 		  		  	 	
  Yes  No	 		 		  		 		 		  		  	 	
 	 	 	 	 	  	 	 	 	 	 	  		  	 	
Assign To: [*]	 		 		  		 		 		  		  	 	
	 		 		  		 		 		  		  	 	
Cancel  	 		 		 	  Save and Exit  	  		 	  Save And Continue  	 		  		  	 	
	 		 		 		  		 		 		  		  	 	
http://www.petorganizer.com/ClaimsWizard/ClaimForm.aspx?claimID=[*]&EditView...    7/20/2009
* Confidential Treatment Requested.

			
Claims Wizard : Summary	  	Page 1 of 2	

	  	ILLNESS	  	Owner : [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number : [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  Paid Policy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
   Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  	 	  	 	
   Claim Status>> Claim Conclusions>> Summary	  		

Summary	  		  		  	Patient History	  	 	
Claim Number: [*]	  		  		  		  		  		  	Date of Loss: 6/15/2009	  	 	
    Claim Status	  		  		  		  		  		  	Current Claim status	  	 	
    Status: Paid	  		  		  		  		  		  	Is Claim Form Complete:	  	Yes	
	  		  		  		  		  	Claim Express:	  	No	
	 		 	 	 	 	  	 	  	 	  	Not Covered	  	Covered	  		  	Certificate Claim:	  	No	
	 		 	  1  	 	Consultation/Examination	  	$44.9	  	 	  		  	Pre Approval:	  	No	
	 		 	  2  	 	Recheck/s	  	$0	  	 	  		  	Suspicious Claim:	  	No	
	 		 	  3  	 	Kennel Fee(hospitalization)	  	$0	  	 	  		  	90 Day Claim:	  	No	
	 		 	  4  	 	Unrelated charges that are included on the receipt:	  	$0	  	 	  		  	Claim From QC, NB, PEI,	  	 	
	 		 	  5  	 	All other Veterinary costs related to this case/claim	  	 	  	$41.05	  		  	NFL:	  	No	
	 		 	 	 	GST of section 5	  	 	  	$2.05	  		  	Claim Over $2500:	  	No	
	 		 	 	 	Deductible Applied	  	 	  	$0	  		  		  	 	
	 		 	 	 	Total Claim	  	 	  	$43.1	  		  	Current records	  	 	
	 		 	 	 	Total Claim amount paid to owner at 90% coinsurance	  	 	  	$38.79	  		  	Others
Update History	  	 	
	 		 		 	            Cheque issued by [*]            on 7/7/2009	  		  	ClaimForm	  	 	
	 		 		 		  		  		  	 	
	 		 		 		 		  		  		  		  		  	Pre-Existing Records	  	 	
Date Closed: 7/7/2009	  		  		  		  	Claim [*] ClaimForm.pdf -	
Invoice Number: 120107	  		  		  		  		  	 	
Claim Form Values	  		  		  		  	Past Claims	  	 	
Diagnosis or Clinical Symptoms of the Illness as noted on claim Form: Persistent Bilateral conjunctivitis	  		  	Added Date  Type   No     Status	
Date of loss (Service): 6/15/2009	  		  		  	7/20/2009     -Ill   - [*]    -paid	
Is condition Initial, Novel, or Repeat? : Initial	  	 	  		  	Conjunctivitis-bilateral suspect hypersensitivity	
	 		 		 		 		  		  		  		  		  		  	 	
Is Claim Form Complete:	 		 	Yes	 		  	Claims Express:	  	No	  		  		  		  	 	
Certificate Claim:	 	No	 		  	Per Approval:	  	No	  		  		  		  	 	
Suspicious Claim	 		 	No	 		  	90 Day Claim:	  	No	  		  		  		  	 	
Claim form QC, NB, PEI, NFL:	 		 	No	 		  	Claim Over $ 2500:	  	No	  		  		  		  	 	
	 		 		 		 		  		  		  		  		  		  	 	
ClaimForm: ClaimForm From Fax 176241401.pdf	  		  		  		  		  	 	
	 		 		 		 		  		  		  		  		  		  	 	
Forms:	 		 		 		 		  		  		  		  		  		  	 	
Form Name	 	Date Attached	  		  		  		  		  		  	 	
1.     Others.pdf	 	7/6/2009	 		 		 		  		  		  		  		  		  	 	
2.     UpadateHistory.pdf	 	6/16/2009	 		 		 		  		  		  		  		  		  	 	
 	 	 	 	 	 	 	 	 	  	 	  	 	  	 	  	 	  		  		  	 	
Observation	 		 		 		 		  		  		  		  		  		  		  	 	
Date Observed	 	Observation	 	 	 	Type	 	Occurance	  	Significance	  	Relationship	  	ClaimID	  	Added
By	  	Added
Date	  	 	  	   	
4/8/2009	 	Spay: at less than 1 yr. (Boosters done and Initial eye Issue noted)	 		 	Objective	 	Single	  	Low	  	Single	  	[*]	  	[*]	  	07/07/2009  	  		  	 	
2/22/2009	 	Misc: dog adopted Early 2009, Vaccine up to date from previous owner, No access to those records.	 		 		 		  		  		  	[*]	  	[*]	  	07/07/2009  	  		  	 	
2/22/2009	 	First Exam: Vomiting- ER visit. Abd-no pain on palon.	 		 	Objective	 	Single	  	Low	  	Single	  	[*]	  	[*]	  	07/07/2009  	  	 	  	 	
http://www.petorganizer.com/ClaimsWizard/Summary.aspx?claimID=[*]                                     7/20/2009
*Confidential Treatment Requested.

					
Claims Wizard: Summary	  		  	Page 2 of 2	
Increased gut
sounds
bilaterally,
abnormal
contents
palpable-
liquidy, Try
NPO at
home.	  		  		
	  		  		
Letter sent/Other Attachments	  		  		
			
      Date
    Created	  	Regarding	  	Attachment	
7/20/2009 Paid Letter	  		  	Claim [*] Att 126501 AutoCheqLetter.html	
7/20/2009 Paid Letter	  		  	Claim [*] Att 126500 AutoCheqLetter.html	
7/20/2009 Paid Letter	  		  	Claim [*] Att 126499 AutoCheqLetter.html	
7/20/2009 Paid Letter	  		  	Claim [*] Att 126498 AutoCheqLetter.html	
7/7/2009 Paid Letter	  		  	Claim [*] Att 123930 AutoCheqLetter.html	
7/7/2009 Paid Letter	  		  	Claim [*] Att 123929 AutoCheqLetter.html	
Paid/Denied Letter/Envelope
Paid Letter
VI Cheque Letter
Envelope
RePrint the Cheque # [*] 

Relssue  	  	the cheque for this claim.	
Cheques list for this Claim

 	    	Date
Requested	    	Check
Number	 	    	Amount	 	    	Date
Issued	 	    	Issued By	 	    	Check
Status	 	    	Requested
By	    	Reason	  	Comments	
¨	    	01/01/01	    	 	[*]	  	    	 	38.79	  	    	 	07/07/09	  	    	 	[	*] 	    	 	Issued	  	    		    		  		
Reason:

  Stop Selected Cheques  	  		
Adjuster Comments
Awaiting record...061609. Awaiting info from O...061709...062609. No pp symptoms consistent with coughing nor eye infections (Bordatella Vx not recc in April previous Hx not know) Paid.
									
	  		  	Close  	  		  		
http://www.petorganizer.com/ClaimsWizard/Summary.aspx?claimID=[*]                                             7/20/2009
*Confidential Treatment Requested.

			
Claims Wizard : Observation Diagnosis	  	Page 1 of 1	

	  	ILLNESS	  	Owner: [*]
Pet Name: : [*]
Date Of Birth: [*]
Gender: Female
Claim Number : [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  PaidPolicy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
	 	 	
   Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>> Claim Status>>	  		  		
   Claim Conclusions>> Summary	  		

Pre Existing Observation	  		  		 		 		 		 		 		 		 		  	Patient History	  	 	
  Observations	  		  		 		 		 		 		 		 		 		  	Date of Loss: 6/15/2009	  	 	
	  		  		 		 		 		 	Added	 	Added	 		 		  		  	 	
Date	 	Observations	  	Type	  	Occurance	 	Significance	 	Relationship	 	ClaimID	 	By	 	Date	 	Edit	 		  	Current Claim status	  	 	
04/08/09	 	Spay: at less than 1 yr. (Boosters	  	Objective	  	Single	 	Low	 	Single	 	[*]	 	[*]	 	07/07/2009	 	Edit	 		  	Is Claim Form Complete:	  	Yes	
	 	done and initial eye issue noted)	  		  		 		 		 		 		 		 		 		  	Claims Express:	  	No	
02/22/09	 	Misc: dog adopted Early 2009.	  		  		 		 		 	[*]	 	[*]	 	07/07/2009	 	Edit	 		  	Certificate Claim:	  	No	
	 	Vaccine up todate from previous	  		  		 		 		 		 		 		 		 		  	Pre Approval:	  	No	
	 	owner. No access to those records.	  		  		 		 		 		 		 		 		 		  	Suspicious Claim:	  	No	
02/22/09	 	First Exam: Vomiting- ER visit.	  	Objective	  	Single	 	Low	 	Single	 	[*]	 	[*]	 	07/07/2009	 	Edit	 		  	90 Day Claim:	  	No	
	 	Abd-no pain on palpn. Increased	  		  		 		 		 		 		 		 		 		  	Claim From QC, NB, PEI,	  	 	
	 	gut sounds bilaterally, abnormal	  		  		 		 		 		 		 		 		 		  	NFL:	  	No	
	 	contents palpable-liquidy. Try	  		  		 		 		 		 		 		 		 		  	Claim Over $2500:	  	No	
	 	NPO at home.	  		  		 		 		 		 		 		 		 		  		  	 	
	 		  		  		 		 		 		 		 		 		 		  	Current records	  	 	
	 		  		  		 		 		 		 		 		 		 		  	Others	  	 	
	 		  		  		 		 		 		 		 		 		 		  	UpdateHistory	  	 	
	 		  		  		 		 		 		 		 		 		 		  	ClaimForm	  	 	
	 		  		  		 		 		 		 		 		 		 		  		  	 	
	 		  		  		 		 		 		 		 		 		 		  	Pre-Existing Records	  	 	
	 		  		  		 		 		 		 		 		 		 		  	Claim [*] ClaimForm.pdf -	
Add Observations	  		  		 		 		 		 		 		 		 		  		  	 	
	 		  		  		 		 		 		 		 		 		 		  	Past Claims	  	 	
Diagnosis	  		  		 		 		 		 		 		 		 		  	Added Date  Type   No     Status	
Add Diagnoses	  		  		 		 		 		 		 		 		 		  	7/20/2009     -Ill   - [*]    -paid	
	 		  		  		 		 		 		 		 		 		 		  	Conjunctivitis-bilateral suspect hypersensitivity	
Back	 		  		  		 		 		 		 		 	Continue	 		 		  	 	
	 		  		  		 		 		 		 		 		 		 		  	 	
http://www.petorganizer.com/ClaimWizard/Observations.aspx?claimID=[*]                                     7/20/2009
*Confidential Treatment Requested.

			
Claims Wizard : Analysis	  	Page 1 of 1	

	  	ILLNESS	  	Owner: [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number: [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  PaidPolicy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
  Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  	 	  	 	
  Claim Status>> Claim Conclusions>> Summary	  		

Analysis	  		  		  		  		  		 		 		 		  	Patient History	  	 	
Observation	  		  		  		  		  		 		 		 		  	Date Of Loss: 6/15/2009	  	 	
	 		 		  		  		  		  		  		 		 		 		  	Current Claim status	  	 	
Date Observed	 	Observation	  	Type	  	Occurance	  	Significance	  	Relationship	  	Claim ID	 	Added
By	 	Added Date	 		  	Is Claim Form Complete:	  	Yes	
	 		 	Spay: at less	  		  		  		  		  		 		 		 		  	Claim Express:	  	No	
	 		 	than 1 yr.	  		  		  		  		  		 		 		 		  	Certificate Claim:	  	No	
	 		 	(Boosters	  		  		  		  		  		 		 		 		  	Pre Approval:	  	No	
4/8/2009	 	done and	  	Objective	  	Single	  	Low	  	Single	  	[*]	 	[*]	 	07/07/2009	 		  	Suspicious Claim:	  	No	
	 		 	initial eye	  		  		  		  		  		 		 		 		  	90 Day Claim:	  	No	
	 		 	issue noted)	  		  		  		  		  		 		 		 		  	Claim From QC, NB, PEI, NFL:	  	No	
	 		 	Misc: dog	  		  		  		  		  		 		 		 		  	Claim Over $2500:	  	No	
	 		 	adopted Early	  		  		  		  		  		 		 		 		  		  	 	
	 		 	2009,	  		  		  		  		  		 		 		 		  	Current records	  	 	
	 		 	Vaccine up	  		  		  		  		  		 		 		 		  	Others	  	 	
2/22/2009	 	todate from	  		  		  		  		  	[*]	 	[*]	 	07/07/2009	 		  	UpdateHistory	  	 	
	 		 	previous	  		  		  		  		  		 		 		 		  	ClaimForm	  	 	
	 		 	owner. No	  		  		  		  		  		 		 		 		  		  	 	
	 		 	access to	  		  		  		  		  		 		 		 		  	Pre-Existing Records	  	 	
	 		 	those records.	  		  		  		  		  		 		 		 		  	Claim [*] ClaimForm.pdf -	
	 		 		  		  		  		  		  		 		 		 		  		  	 	
	 		 	First Exam:	  		  		  		  		  		 		 		 		  		  	 	
	 		 	Vomiting- ER	  		  		  		  		  		 		 		 		  	Past Claims	  	 	
	 		 	Visit, Abd-no	  		  		  		  		  		 		 		 		  	AddedDate  Type   No     Status	
	 		 	pain on palpn.	  		  		  		  		  		 		 		 		  	7/20/2009     -Ill   -[*]    -paid	
	 		 	increased gut	  		  		  		  		  		 		 		 		  	Conjunctivitis-bilateral suspect	
2/22/2009	 	sounds	  	Objective	  	Single	  	Low	  	Single	  	[*]	 	[*]	 	07/07/2009	 		  	hypersensitivity	
	 		 	bilaterally,	  		  		  		  		  		 		 		 		  	 	
	 		 	abnormal	  		  		  		  		  		 		 		 		  	 	
	 		 	contents	  		  		  		  		  		 		 		 		  	 	
	 		 	palpable-	  		  		  		  		  		 		 		 		  	 	
	 		 	liquidy. Try	  		  		  		  		  		 		 		 		  	 	
	 		 	NPO at home.	  		  		  		  		  		 		 		 		  	 	

Was this pet spayed or neutered prior to 12 months?
 
 Yes      No
 
Was the Illness or injury related to an activity that caused a similar condition within 18 months prior to policy Inception?
 
 Yes      No
 
Was the pet pre-disposed to stated problem prior to full coverage?
 
 Yes      No
 
Are preventative measure available for the stated condition?
 
 Yes      No
 
Is this an elective procedure?
 
 Yes      No
 
Should the problem have been detected either at birth or during a routine vet exam?
 
 Yes      No
 	 		  	 	
  Back  	 		 		  		  		  		  	Save And Continue	  		 		 		 		  	 	

http://www.petorganizer.com/ClaimsWizard/ReviewHistory.aspx?claimID=[*]	  	7/20/2009	
*Confidential Treatment Requested.

 
			
Claims Wizard : Claim St	  	Page 1 of 1	

	  	ILLNESS	  	Owner: [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number: [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  PaidPolicy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
	 	 	
  Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>>	  		  		
  Claim Status>> Claim Conclusions>> Summary	  		

Observation	 		 		  		  		  		  		  		  		  	Patient History	  	 	
	 		 		 		  		  		  		  		  		  		  	Date of Loss: 6/15/2009	  	 	
Date Observed Observation	 	Type	 	Occurance	  	Significance	  	Relationship	  	ClaimID	  	Added	  	Added	  		  	 Current Claim Status	  	 	
	 		 		 		  		  		  		  	By	  	Date	  		  	 Is Claim Form Complete:	  	Yes	
	 	Spay: at less	 		 		  		  		  		  		  		  		  	 Claim Express:	  	No	
	 	than 1 yr.	 		 		  		  		  		  		  		  		  	 Certificate Claim:	  	No	
4/8/2009	 	(Boosters	 	Objective	 	Single	  	Low	  	Single	  	[*]	  	[*]	  	07/07/2009	  		  	 Pre Approval:	  	No	
	 	done and	 		 		  		  		  		  		  		  		  	 Suspicious Claim:	  	No	
	 	initial eye	 		 		  		  		  		  		  		  		  	 90 Day Claim:	  	No	
	 	issue noted)
Misc: dog	 		 		  		  		  		  		  		  		  	 Claim From QC, NB, PEI,  NFL:	  	No	
	 	adopted	 		 		  		  		  		  		  		  		  	 Claim Over $2500:	  	No	
	 	Early 2009,	 		 		  		  		  		  		  		  		  		  	 	
	 	Vaccine up	 		 		  		  		  		  		  		  		  	Current records	  	 	
2/22/2009	 	todate from	 		 		  		  		  	[*]	  	[*]	  	07/07/2009	  		  	Others	  	 	
	 	Previous	 		 		  		  		  		  		  		  		  	UpdateHistory	  	 	
	 	Owner, No	 		 		  		  		  		  		  		  		  	ClaimForm	  	 	
	 	access to	 		 		  		  		  		  		  		  		  		  	 	
	 	those records.	 		 		  		  		  		  		  		  		  	Pre-Existing Records	  	 	
	 	First Exam:	 		 		  		  		  		  		  		  		  	Claim [*] ClaimForm.pdf -	
	 	Vomiting-ER	 		 		  		  		  		  		  		  		  		  	 	
	 	Visit. Abd-no	 		 		  		  		  		  		  		  		  	past claims	  	 	
	 	Pain on paipn,	 		 		  		  		  		  		  		  		  	Added Date  Type   No     Status	
	 	Increased gut	 		 		  		  		  		  		  		  		  	7/20/2009     -Ill   - [*]    -paid	
2/22/2009	 	sounds	 	Objective	 	Single	  	Low	  	Single	  	[*]	  	[*]	  	07/07/2009	  		  	Conjunctivitis-bilateral suspect	
	 	bilaterally,	 		 		  		  		  		  		  		  		  	hypersensitivity	
	 	abnormal	 		 		  		  		  		  		  		  		  	 	
	 	contents	 		 		  		  		  		  		  		  		  	 	
	 	palpable-	 		 		  		  		  		  		  		  		  	 	
	 	liquidy, Try	 		 		  		  		  		  		  		  		  	 	
	 	NPO at	 		 		  		  		  		  		  		  		  	 	
	 	home.	 		 		  		  		  		  		  		  		  	 	

Analysis	  		  	 	
1. Was this pet spayed or neutered prior to 12 months? No	  		  	 	
		 	
2. Was the illness or injury related to an activity that caused a similar condition within 18 months prior to
Policy Inception? No	  		  	 	
		 	
3. Was the pet pre-disposed to stated problem prior to full coverage? No	  		  	 	
		 	
4. Are Preventative measure available for the stated condition? No	  		  	 	
		 	
5. Is this an elective procedure? No	  		  	 	
		 	
6. Should the problem have been detected either at birth or during a routine Vet exam? No	  		  	 	
		 	
Adjuster Comments:	  		  	 	
Awaiting records...061609.    Awaiting info from
O...061709...062609. No pp symptoms consistent with	  		  	 	
		 	
ING Claim Reference :	  		  	 	
  [*]	 		 		 		  		  		  		  		  		  		  	 	
Paid or Denied:	 		 		  		  		  		  		  		  		  	 	
  Paid	 		 		 		  		  		  		  		  		  		  	 	
	 		 		 		  		  		  		  		  		  		  	 	
Cancel  	 		 		 		  		  		  	Save and Continue  	  		  		  		  	 	

http://www.petorganizer.com/ClaimsWizard/ClaimStatus.aspx?ClaimId=[*]	  	7/20/2009	
*Confidential Treatment Requested.

			
Claims Wizard : Claim Conclusions	  	Page 1 of 1	

	  	ILLNESS	  	Owner: [*]
Pet Name: [*]
Date Of Birth: [*]
Gender: Female
Claim Number : [*]
Total Rem: $19936.21	  	Policy #: [*]
Policy Type:  PaidPolicy
Effective Date: 2/28/2009
Adjuster: [*]
Status: Paid
Reserve: $81.0

	  	Persistent Bilateral conjunctivitis   	  		  		
	  	 	  		  		
Add Comment    Show Comments	  		  		
	 	 	
Wizard Home>> Claim Form>> Other Forms>> SOAP>> Analysis>> Claim Status>>	  		  		
Claim Conclusions>> Summary	  		

Input Manually	  		  		 		 		  	Patient History	  	 	
Invoice SubTotal($):	  	Invoice Numbers(seperate by ,)	  		 		 		  	Date of Loss: 6/15/2009	  	 	
85.95	 		  	120107	  		 		 		  	Current Claim Status	  	 	
	 		  		  		 		 		  	Is Claim Form Complete:	  	Yes	
Exam Fees($):	  	Rechecks($):	  	Boarding Fees($):	 	Deductibel Applied:	  	Claims Express:	  	No	
44.9	 		  	0	  	0	 	0	 		  	Certificate Claim:	  	No	
	 		  		  		 		 		  	Pre Approval:	  	No	
Unrelated charges($):	  	Unrelated Charges Description:	  		 		 		  	Suspicious Claim:	  	No	
0	 		  		  		 		 		  	90 Day Claim:	  	No	
	 		  		  		 		 		  	Claim From QC, NB, PEI, NFL:	  	No	
Calculate 	 		  		  		 		 		  	Claim Over $2500:	  	No	
	 		  		  		 		 		  		  	 	
Calculate	 		  		  		 		 		  	Current records	  	 	
	 		  		  		 		 		  	Others	  	 	
Other Vet Cost($):	  	GST Rate of 5 applied($):	 	Total claimed($):	  	UpdateHistory	  	 	
41.05	 		  	2.05	  		 	43.1	 		  	ClaimForm	  	 	
	 		  		  		 		 		  		  	 	
	 		  		  		 	Amount Paid Out($):	  	Pre-Existing Records	  	 	
	 		  		  		 	38.79	 		  	Claim [*] ClaimForm.pdf -	
Are funds paid to clinic?   ¨ 	  		  		 		 		  		  	 	
	 		  		  		 		 		  	Past Claims	  	 	
Is this a legacy ING Claim?   ¨ 	  		  		 		 		  	Added Date  Type   No     Status	
	 		  		  		 		 		  	7/20/2009     -Ill   - [*]    -paid	
Cheque issued by [*]                 on
7/7/2009	  		  		 		 		  	Conjunctivitis-bilateral suspect hypersensitivity	
	 		  		  		 		 		  	 	
Cancel  	 		  		  		 	Save and Continue  	 		  	 	

http://www.petorganizer.com/ClaimsWizard/ClaimConclusions.aspx?claimID=[*]	  	7/20/2009	
*Confidential Treatment Requested.

SOAP Manual
Veterinarian’s use the SOAP acronym as a regular guideline for assessing their patients during an exam.

S – subjective	  	O – objective	  	A – assessment	  	P – plan	
Vetinsurance Member Specialists (VIMS) have reconfigured this guideline and developed an efficient and effective way to transcribe the information from veterinary notes into a more legible and summarized report. This report is easily accessible in the Claims Wizard application in PetOrganizer. It is used, by those adjusting a claim, to determine whether or not an enrolled pet’s claimed clinical symptom(s) is consistent with those noted pre-policy, or prior to enrolment with Vetinsurance.
Please consider the VIMS’s coined use of the SOAP acronym, at Vetinsurance it is commonly used as a noun (ex. Fido’s SOAP is complete.) and also as a verb (ex. Have you SOAPed Fido’s records?).
How To SOAP...
Please see attached medical records and SOAP sample.
 
 	1.)	P ET ’ S FIRST EXAM . Start at the beginning of the pet’s complete medical records and note the date and any clinical findings specific to that date, or if the pet is healthy, make that notation instead. Be sure to note that it is the pet’s first exam. Note what clinical symptoms the pet showed, and what the veterinarian assessed.	
 
 	2.)	S ECOND AND OTHER FOLLOWING EXAMS . It is only necessary to make entries of exams where clinical symptoms are anything but healthy. Note what clinical symptoms the pet showed, and what the veterinarian assessed.	
 
 	3.)	N EUTER OR SPAY DATES . It is important to include an entry for the pet which notes the date that the pet was altered, and whether or not the pet was mature (over 1 year of age) or immature (under 1 year of age). This entry can be included in any other entry.	
 
 	4.)	E XAMS WITHIN THE 5 AND 30 DAY WAITING PERIODS . Before the entry make note that the date of the exam took place within both the accident and illness waiting periods. Otherwise a regular entry, and is not necessary if the pet has continued from a vet certificate.	
 
 	5.)	E XAMS WITHIN THE 30 DAY WAITING PERIOD . Before the entry make note that the date of the exam took place within the illness waiting period. Otherwise a regular entry, and is not necessary if the pet has continued from a vet certificate.	
 
 	6.)	E XAMS AFTER THE WAITING PERIODS . If there are any important notes from exams that occurred after enrolment and waiting periods make note of the date of the exam, that the exam occurred post-policy, and continue with the entry as normal.	
 
 	7.)	O BSERVATION DROP DOWN OPTIONS . There are 4 different drop downs, each with different options.	
 
 	a.	TYPE defines the type of observation you have entered as subjective or objective.	
 
 	b.	OCCURANCE labels an observation as whether it is the first time it has been noted, an ongoing note of the original observation, or a repeat observation but separate occurrence.	

 	c.	SIGNIFICANCE defines the observation as ranging from low (a condition not likely to increase In severity) to high (a condition that is severe and may need to be flagged).	
 
 	d.	RELATIONSHIP denotes if the observation is unrelated to other conditions that the pet may suffer from (single), if it has occurred because of the pet’s other conditions (compounded), or if it could be both.	
 
8.)	D IAGNOSIS OBSERVATIONS . These entries are reserved for observations found in the pet’s medical records as a diagnosis (ex. Blood work results).	
 
9.)	D IAGNOSIS DROP DOWN OPTIONS . There are 4 different drop downs, each with different options.	
 
 	a.	TYPE differentiates between the diagnosis being causative, symptomatic, therapeutic, or definitive.	
 
 	b.	OCCURANCE labels an observation as whether It is the first time it has been noted, an ongoing note of the original observation, or a repeat observation but separate occurrence.	
 
 	c.	SIGNIFICANCE defines the observation as ranging from low (a condition not likely to increase In severity) to high (a condition that is severe and may need to be flagged).	
 
 	d.	RELATIONSHIP denotes if the observation is unrelated to other conditions that the pet may suffer from (single), if it has occurred because of the pet’s other conditions (compounded), or if it could be both.	
SOAP Examples...
Fido is a male dog born in August of 2006. His owner’s have enrolled him with Vetinsurance at 6 months of age on February 17 th of 2007. The following is an example of Fido’s SOAPed medical records.

F IRST EXAM OBSERVATIONS : 10/06/2006 – First Exam – Wax in ears, otherwise healthy puppy.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Single.	
O BSERVATIONS : 10/30/2006 – Puppy scratching at ears, possible otitis, swab taken.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Ongoing.	  	Relationship: Single.	
D IAGNOSIS : 10/31/2006 – Results from swab taken 10/30/2007: Yeast otitis externa.	
				
Type: Definitive.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Single.	
O BSERVATIONS : 11/21/2006 – Otitis has resolved, still some wax in ears.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Single.	
O BSERVATIONS : 02/15/2007 – Neuter under 1 year of age. Deciduous canine teeth extracted.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Single.	
O BSERVATIONS : 02/20/2007 – Within 5- And 30-Day Waiting Periods – Neuter incision irritated, red and weeping. Infected.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Single.	
O BSERVATIONS : 02/28/2007 – Within 30-Day Waiting Period – Ears bothering dog again, repeat of otitis externa. Both eyes slightly red, conjunctivitis. Possible allergies?	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Repeat	  	Relationship: Compounded.	
O BSERVATIONS : 03/30/2007 – Post-Policy – Dog is limping, cut foot pad. Ears and eyes inflamed and red, allergies.	
				
Type: Objective.	  	Significance: Low.	  	Occurrence: Single.	  	Relationship: Compounded.	

Definitions…
S UBJECTIVE – An opinion based on an observation. Ex. Lethargy, not well, shedding.
O BJECTIVE – A factual observation. Ex. Non-weight bearing lameness of the right hind leg, temperature, respiration, heart rate.
C AUSATIVE – A diagnosis based on symptoms consistent with found etiology. Ex. Diarrhea’s causative agent is Giardia.
S YMPTOMATIC – A diagnosis based on symptoms. Ex. Common symptoms of allergies are otitis, conjunctivitis, itchy skin, etc.
T HERAPEUTIC – A diagnosis based on the response to treatment. Ex. Diarrhea is resolved with deworming medication, diagnosis is worms.
D EFINITIVE – A diagnosis based on factual observation(s). Ex, Dog’s femur broken and protruding through skin, diagnosed broken femur.

We have been asked to generate a more uniform SOAP model to align with development targets to improve claims processing at a future date.
Currently the SOAPing we are doing is fine, it now needs to be more uniform In order for data collection and program developments to occur.
New headings to be used for observations as well as separating unrelated symptoms noted on the same visit into their own observation.
From December 1 st forward please use the following:
New headings for Observations are:
Misc, First Exam, Vaccines, Neuter/Spay, 5dayWP, WP.
Separate entry per Issue: ‘Presenting complaint’-
Misc:
This is where one will put the information that is not part of the actual exam but is important for context. This usually happens most on the first exam but the label can be used when ever needed; for example,
Misc: O stepped on RF foot 3 days prior was limping now fine.
First Exam:
For the initial exam of the pet’s medical records one will enter “First Exam:” followed by findings relevant to that exam.
First Exam: Otitis externa, (symptoms of otitis if noted) otherwise healthy.
Additional findings that are involved on the first exam but are not pertaining to that exam, will be noted under “Misc:” as a separate observation.
Misc: First Exam: Had diarrhea on adoption date, 3 days ago.
Misc: First Exam: Dog was adopted 3 days ago and had vaccines at breeders. Dewormer given.

Vaccines:
For every exam where vaccines take place a separate entry is to be made. Please note any vaccine separately should you feel it is important to your claims processing.
Example,
Vaccines: Yearly booster and rabies.
Vaccines: 2 nd booster, including Bordatella
Spay/Neuter:
On the spay/neuter date label the entry as such followed by if the pet is over or under 1 year of age.
Example,
Neuter: > 1 year or Neuter: Over age of 1 year
Spay: < 1 year or Spay: at less than 1 year
5 Day WP:
For the exams that occur within the 5-day accident waiting period and ARE regarding an accident. the entry will be labelled as above and followed by relevant findings.
Example,
5 Day WP: Fell out of truck, broken leg
If the accident within the 5 days is also the First exam, use the following.
5 Day WP: First Exam: fell down stairs, broken leg, otherwise healthy.
WP:
For exams that occur within the 30-day waiting period and are an illness or an accident the entry will be labelled as “WP:” and followed by relevant findings.
Example,
WP: Vomiting and diarrhea, (symptoms pertaining)
Example if first exam falls with in this time frame,
WP: First Exam: Otitis Externa, otherwise healthy.

Separating out Observations from the same exam date:
For each unrelated condition noted during an exam, a separate entry is required.
‘Presenting Complaint’-
On all examinations that do not fall into the categories above, begin the entry with a word or phrase that illustrates why ‘fluffy’ is at the vet.
Examples;
Scratching ears- Yeast otitis, left ear.
Diarrhea- notation of symptoms
Limping- non wt bearing left hind for 5 days.
Vomiting and Diarrhea-
Check eyes

EXHIBIT 10.12(a)

	 	[*]	  	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.	
AGREEMENT NUMBER: 200903
STOP LOSS REINSURANCE AGREEMENT
made between
OMEGA GENERAL INSURANCE COMPANY
A company organized and existing under the laws of Canada
(hereinafter referred to as the “Reinsured”)
and
AMERICAN PET INSURANCE COMPANY
A company organized and existing under the laws of New York,
(hereinafter referred to as the “Reinsurer”)
WHEREAS: The parties to this Agreement having entered into a separate Fronting and Administration Agreement (herein referred to as the “FAA”) effective January 1, 2010 wherein the Reinsured is willing to cede, and the Reinsurer is willing to accept, certain risks underwritten by the Reinsured as contemplated under the FAA.
and
WHEREAS: The Reinsured has also entered into a Representation Agreement with the Broker as defined in the FAA.
and
WHEREAS: For and in consideration of the Premium specified in this Agreement being paid by the Reinsured to the Reinsurer and subject always to the terms and conditions of this Agreement, the Reinsurer agrees to indemnify the Reinsured as follows:
ARTICLE 1 INTEREST CLAUSE
This Agreement is to indemnify the Reinsured in respect of liability, which may accrue to them under any and all policies and/or contracts of insurance in respect of the business produced by

the Broker and underwritten pursuant to the FAA, and in accordance with underwriting and claims handling guidelines set out therein. At no time shall the Reinsured accept or underwrite business not provided for in the FAA for this reinsurance.
ARTICLE 2 PERIOD CLAUSE
This Agreement is in respect of losses as herein defined pertaining to risks attaching during the period specified in the FAA.
ARTICLE 3 EXCLUSIONS
This Agreement follows the underlying coverage issued to the policyholders of the Reinsured in accordance with the FAA. For further clarity, this Agreement does not contain any exclusions or limitations, which are not present in the underlying policies.
ARTICLE 4 REINSURING CLAUSE
 
A.	The Reinsurer hereby agrees to pay the Reinsured 100% of the annual Net Underwriting Loss incurred on the subject portfolio underwritten by the Reinsured as business under the FAA (“Business”), in excess of the Net Premium Retained by the Reinsured.	
 
B.	The term “Net Underwriting Loss” shall mean the total sum paid by the Reinsured for all losses or liability in respect of the Business covered hereunder.	
Calculation of the Net Underwriting Loss hereunder, shall include all costs and adjustment expenses arising from the handling of claims, other than the salaries of employees and the office expenses of the Reinsured.
 
C.	The term “Net Premium Retained” shall mean the gross premium charged to the policyholder, less broker acquisition costs (including profit commission where applicable), less premium tax incurred by the Reinsured, less the premium paid under Article 8 of this Agreement, less [*].	
For purposes of the Net Premium Retained calculation, prior to any calendar year end, the Reinsured will estimate the premium tax incurred to be 3.75% of the gross premiums charged to the policyholders.
 
D.	The Reinsurer hereby agrees to pay the Reinsured, in cash, the amount identified in the above Article 4A, upon presentation of supporting documentation by the Reinsured. The Reinsured undertakes to provide up-dated loss information including paid and outstanding claims on a quarterly basis, no later than 45 days after the end of each calendar quarter. The Reinsurer will have the option of authorising the Reinsured to deduct such amounts due hereunder from premium funds due to the Reinsurer, but in any event, the Reinsurer agrees to fund the subject losses either by “offset” or direct payment as soon as supporting documentation is received.	
 
*Confidential Treatment Requested.

ARTICLE 5 ULTIMATE NET UNDERWRITING LOSS SETTLEMENT CLAUSE
The Reinsured will continue to update the calculations in the above Article 4A on a quarterly basis until the natural extinction of the subject portfolio.
ARTICLE 6 NET RETAINED LINES CLAUSE
This Agreement shall only protect that portion of any Business the subject matter of this Agreement which is above the Reinsured’s net retention as agreed in advance with the Reinsurer. The Reinsurers’ liability hereunder shall not be increased due to an error or omission which results in an increase in, the Reinsured’s net retention nor by the inability of the Reinsured to collect from any other reinsurer any amounts which may have become due from them whether such inability arises from the insolvency of such other reinsurer or otherwise.
ARTICLE 7 TERRITORIAL LIMITATIONS
This Agreement is in respect of Business in Canada.
ARTICLE 8 PREMIUM CLAUSE AND UNLIMITED RECOURSE
The Reinsured hereby agrees to pay the Reinsurer a premium equal to [*]. This premium shall be paid to the Reinsurer on a quarterly basis, forty-five (45) days following the end of each calendar quarter, or fifteen (15) days following the month in which the premium is received by the Reinsured, whichever is later. The Reinsurer also acknowledges that the Reinsured has agreed that the producing broker may remit the subject premium directly to the Reinsurer and that such premiums are deemed to have been received by the Reinsurer when due. Failure on the part of the producing broker to remit the premiums to the Reinsurer when due will not affect the Reinsured’s right to recover amounts due to it under this Agreement
ARTICLE 9 CURRENCY CLAUSE
For the purpose of this Agreement all currencies are expressed in Canadian dollars. Any losses involving other than Canadian currency shall be converted into Canadian currency at the rates of exchange used in the Reinsured’s books, or where there is a specific remittance for a loss settlement, at the rates of exchange used in making such remittance.
ARTICLE 10 UNDERWRITING POLICY CLAUSE
It is a condition precedent to the Reinsurer’s liability hereunder that the Reinsured shall not introduce at any time after the Reinsured enters into this Agreement any change in the FAA without the prior written approval of the Reinsurer.
ARTICLE 11 INSPECTION OF RECORDS CLAUSE
For as long as either party retains any liability hereunder the Reinsured shall, upon request by the Reinsurer, make available at the Reinsured’s head
 
*Confidential Treatment Requested.

office for inspection at any reasonable time by such representatives as may be authorised by the Reinsurer for that purpose, all information relating to business reinsured hereunder (including actuarial reviews and evaluations) in the Reinsured’s possession or under its control and the said representatives may arrange for copies to be made of any of the records containing such information as they may require.
ARTICLE 12 AMENDMENTS AND ALTERATIONS CLAUSE
Any amendments and/or alterations to this Agreement that are agreed either by correspondence and/or Broker’s Slip endorsements, shall be automatically binding on the parties and unless otherwise agreed by the parties hereto shall be formally documented by an exchange of correspondence signed by the parties or by the issue of a contract addendum which shall be considered to form an integral part hereof.
ARTICLE 13 ERRORS OR OMISSIONS CLAUSE
Any inadvertent errors or omissions on the part of either the Reinsured or the Reinsurer shall not relieve the other party from any liability which would have attached hereunder, provided that such errors or omissions shall be rectified as soon as possible after discovery. Nevertheless, nothing contained in this Article shall be held to override any of the terms and conditions of this Agreement and no liability shall be imposed on the other party greater than would have attached hereunder had such errors or omissions not occurred.
ARTICLE 14 CLAIMS NOTIFICATION AND SETTLEMENTS CLAUSE
The Reinsured undertakes to advise the Reinsurer as soon as possible in the event of a loss being likely to arise hereunder together with an estimate of the Reinsurer’s liability and thereafter keep the Reinsurer fully informed of any developments regarding the original claims. In addition, the Reinsured shall provide to the Reinsurer with quarterly information on all claims made under the subject agreement, even if the aggregate total of such claims does not exceed the Reinsured’s retention.
All losses under the program will be adjusted on behalf of the Reinsured by claim handlers selected by mutual agreement between the Reinsured and the Reinsurer.
All loss settlements made by the Reinsured shall be binding upon the Reinsurer, provided such settlements are within the terms and conditions of the original policies and/or contracts and within the terms and conditions of this Agreement, and amounts falling to the share of the Reinsurer shall be payable by them upon reasonable evidence being given by the Reinsured.
ARTICLE 15 INSOLVENCY CLAUSE
Where an Insolvency Event (as defined below) occurs in relation to the Reinsured the following terms shall apply (and, in the event of any inconsistency between these terms and any other terms of this Agreement, these terms shall prevail):
 
A.	Notwithstanding any requirement in this Agreement to the contrary:	
 
 	(i)	the Reinsurer shall be liable to pay the Reinsured even though the Reinsured is unable actually to pay, or discharge its liability to, its policyholder; but	
 
 	(ii)	nothing in this clause shall operate to accelerate the date for payment by the Reinsurer of any sum which may be payable to the Reinsured but for it being the subject of any Insolvency Event.	

B.	The existence, quantum, valuation and date for payment of any sum which the Reinsurer is liable to pay the Reinsured under this Agreement shall be those and only those for which the Reinsurer would be liable to the Reinsured if the liability of the Reinsured to its policyholders had been determined without reference to any term in any composition or scheme of arrangement or any similar such arrangement, entered into between the Reinsured and all or any part of its policyholders, unless and until the Reinsurer serves written notice to the contrary on the Reinsured in relation to any composition or scheme of arrangement.	
 
C.	The Reinsurer shall be entitled (but not obliged) to set-off, against any sum which it may be liable to pay the Reinsured, any sum for which the Reinsured is liable to pay the Reinsurer.	
 
D.	The Reinsurer shall be entitled (but not obliged) to assume direct control of any losses under this program by giving notice to the policyholder, the Reinsured or its representative. The Reinsurer will then assume total responsibility for such losses as though they had issued the underlying policy.	
An Insolvency Event shall occur if:

(i)	 	(a)	  	(for the purposes of and in relation to A, B, C and D above) a winding up petition is presented in respect of the Reinsured or a provisional liquidator is appointed over it or if the Reinsured goes into administration, administrative receivership or receivership or if the Reinsured has a scheme of arrangement or voluntary arrangement proposed in relation to all or any part of its affairs; or	
			
	 	(b)	  	(for the purposes of and in relation to A above) the Reinsured goes into compulsory or voluntary liquidation;	
			
	 	(c)	  	(for the purposes of and in relation to D above) the Reinsured becomes subject to any regulatory intervention.	
	
or, in each case, if the Reinsured becomes subject to any other similar insolvency process; and	
			
	 	(ii)	  	the Reinsured is unable to pay its debts as and when they fall due within the meaning relevant Canadian law or statute.	
ARTICLE 16 TERMINATION CLAUSE
Either party shall have the right to terminate this Agreement immediately by giving the other party written notice:
 
A.	If the performance of the whole or any part of this Agreement is prohibited or rendered impossible de jure or de facto in particular and without prejudice to the generality of the	

 	preceding words in consequence of any law or regulation which is or shall be in force in any country or territory or if any law or regulation shall prevent directly or indirectly the remittance of any or all or any part of the balance of payments due to or from either party.	
 
B.	If the other party has become insolvent or unable to pay its debts or has lost the whole or any part of it’s paid up capital.	
 
C.	If there is any material change in the ownership or control of the other party.	
 
D.	If the country or territory in which the other party resides or has its head office or is incorporated shall be involved in aimed hostilities with any other country whether war be declared or not or is partly or wholly occupied by another power.	
 
E.	If the other party shall have failed to comply with any of the terms and conditions of this Agreement.	
After the date of any such termination the liability of the Reinsurers hereunder shall cease outright other than in respect of losses which have occurred prior thereto.
All notices of termination in accordance with any of the provisions of this paragraph shall be by Telex, Facsimile, Telegram or any other permanent means of instantaneous communication, and shall be deemed to be served upon despatch or where communications between the parties are interrupted upon attempted despatch.
All notices of termination served in accordance with any of the provisions of this Article shall be addressed to the party concerned at its head office or at any other address previously designated by that party.
Notwithstanding anything in this Agreement to the contrary if one party is in default of this Agreement and if such default is capable of being cured the non defaulting party shall give written notice of the default in reasonable detail to the non defaulting party who shall be given 60 days or such additional time as the non defaulting party may consider reasonable to cure such default prior to the non defaulting party terminating this Agreement for such default.
ARTICLE 17 ARBITRATION CLAUSE
1. In the event that any dispute arises between the parties signatory to this agreement, whether such dispute arises during or after the term of this agreement, and as a precedent to any right of action hereunder a meeting will be held between representatives of each of the parties with decision making authority to settle the dispute. At the meeting the parties will attempt in good faith to negotiate an informal resolution of the dispute. If the dispute is not resolved through negotiation within 10 Business Days the parties hereby agree to submit their dispute to Arbitration. Upon the written request of either party to the dispute the parties shall select an arbitrator from among persons with not less than 10 years experience in the insurance or reinsurance business, as persons engaged in the industry itself or as lawyers or other professional advisors, or as otherwise agreed by the parties. If the parties are unable to agree on an arbitrator within 30 days after receipt of written notice from the other party requesting it to do so then either party may proceed pursuant to the Arbitration Act, 1991 (Ontario) to have an arbitrator appointed.

2. The arbitrator shall interpret this agreement as an honourable engagement and not as a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this agreement in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to the arbitrator within 30 days of the appointment of the arbitrator.
3. The arbitrator, so far as is permissible under the law and practice of the place of arbitration, shall have power to fix all procedural rules for the holding of the arbitration including discretionary power to make orders as to any matters which it may consider proper in the circumstances of the case with regard to pleadings, discovery, inspection of the documents, examination of witnesses and any other matter whatsoever relating to the conduct of the arbitration and may receive and act upon such evidence whether oral or written strictly admissible or not as it shall in its discretion think fit.
4. The decision in writing of the arbitrator shall be final and binding on both parties. Judgement may be entered upon the final decision of the arbitrator in any court in Canada having jurisdiction. The arbitrator shall determine who pays the expense of the arbitration. The arbitration will take place in Toronto, Ontario, Canada, or such other venue in Ontario, Canada as determined by the arbitrator.
ARTICLE 18 JURISDICTION CLAUSE
This Agreement shall be governed by the laws of Ontario, Canada.
ARTICLE 19 INTERMEDIARY CLAUSE
The parties to this agreement recognize and accept that there is no intermediary involved in the placement or handling of this Agreement and that the relationship is direct between the Reinsured and the Reinsurer.
ARTICLE 20 WARRANTIES AND/OR SPECIAL CONDITIONS CLAUSE
The parties to this agreement hereby warrant and confirm that they are licensed in good standing in their respective regulatory jurisdictions and that they are authorized to carry on the business of Insurance or Reinsurance for the line of business contemplated by this Agreement. The parties also warrant and confirm that they have the necessary authority to enter in to and execute this Agreement, and that both have accepted the terms and conditions of the FAA.
ARTICLE 21 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts and by facsimile transmission, each of which is an original but all of which together constitute one and the same instrument.

	
SIGNED	
	
For the Reinsured, OMEGA GENERAL INSURANCE COMPANY	
	
/s/ Philip H. Cook	
Philip H. Cook CEO	
	
SIGNED	
	
For the Reinsurer, AMERICAN PET INSURANCE COMPANY	
	
/s/ Howard E. Rubin	

EXHIBIT 10.12(b)

	 	[*]	  	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.	
Agency Agreement
Between
Omega General Insurance Company
36 King Street East, Suite 500
Toronto, Ontario M5C 1E5
hereinafter called “The Company”
And
Vetinsurance Brokers Canada Inc.
PO Box 34538, 1268 Marine Drive
North Vancouver, British Columbia V7P 1T2
hereinafter called “The Broker”
ARTICLE I
Appointment
Whereas The Company and American Pet Insurance Co. have entered into a separate Fronting and Administration Agreement (“FAA”) effective January 1, 2010, The Company hereby appoints the Broker, subject to all the terms and conditions herein, all of the insurance laws and other laws applicable to insurance companies and insurance brokers of each province and territory of Canada (“Provincial Insurance Laws”) and to any limitations, underwriting rules and procedural instructions issued by The Company. It is understood and agreed that this appointment is solely for the purpose of selling policies of insurance as contemplated under the FAA and other related insurance as may be mutually agreed by the parties to this agreement, The Broker shall not hold itself out as having the power to bind or obligate The Company in any manner whatsoever except for the purpose set out herein.
The Broker has read and fully understands the contents, terms, conditions and covenants of the FAA and agrees to be bound by FAA as it relates to the Broker and the business of the Broker.
ARTICLE II
Accounts
1. The Broker agrees to submit to The Company monthly statements in the required format, reporting all policies in numerical order; a record of all premiums due; and such other reports as

The Company may reasonably request pertaining to its business in force or expired. The Broker shall forward statements due to The Company no later than 15 calendar days following the end of each month in which the business is recorded at its offices. If no sale is made during the month, a “Nil” report must be submitted. Commissions and other remuneration shall be determined by agreement and may be subject to change from time to time. The initial commission is set out in the attached Exhibit 1.
2. All monies received or collected by the Broker on behalf of The Company, less The Broker’s commissions, and any other amounts agreed to herein shall be the property of The Company, and shall be held by The Broker in trust for The Company. The Broker shall not use the funds or apply them for other purposes, except as contained in this agreement, unless otherwise approved by The Company in writing.
ARTICLE III
Records
1. All records of The Broker pertaining to the business of The Company shall be open to inspection by The Company at any reasonable time for the purpose of determining any fact related to money due The Company, or the status of business placed with The Company by The Broker. Except for forms, manuals, advertising and other materials that may be supplied to The Broker by The Company at its option and in the ordinary course of business, The Broker shall bear all the cost and expense of operating its business.
2. Ownership, use and control of all customer lists and records shall remain the property of The Broker and shall not be used by The Company without the express written permission of The Broker, except to the extent required by law.
ARTICLE IV
Sub Agents
The Broker shall have the sole responsibility of appointing or removing other agencies, brokers and producers with respect to the business contemplated under the FAA. The Company reserves the right to require that any such appointments be cancelled with or without cause on 30 days notice and The Company shall be relieved of all liability hereunder. Any sub agents or affiliated agents will be expected to confirm their agreement to the terms and conditions of this Agreement.
ARTICLE V
Termination
1. It is expressly understood and agreed that The Company and The Broker have mutually agreed to the premiums and coverages assigned to the business contemplated under the FAA and that neither party has the authority to change the premium or coverage terms.

2. This Appointment may be terminated by giving 60 days prior written notice, or in accordance with the termination provisions of the FAA. Upon termination by either party The Broker shall return to The Company all documents and supplies in their possession, if any, along with any monies due to The Company.
ARTICLE VI
Administration
1. The Broker, after deducting The Broker’s agreed commission as compensation, will remit all premiums to The Company by the 30th day of the month following the month in which the transactions are recorded at its offices.
2. The Company located at Suite 500, 36 King Street East, Toronto, Ontario M5C 1E5 will receive all premiums from The Broker, and will validate and process all entries of premium as required herein.
ARTICLE VII
Service of Suit
The Broker may not accept service of legal process issued against The Company in respect of any of the business hereunder.
ARTICLE VIII
Indemnity
I. It is expressly understood and agreed that in order to comply with the Provincial Insurance Laws, The Broker, and any sub agents or brokers representing the business under this agreement when required by law or regulation, shall be in possession of a valid Insurance License appointment in each Province or Territory of Canada where it solicits business as the case may be. Also, the Broker shall indemnify and hold The Company harmless against liability to policy or certificate holders caused solely by acts or omissions of negligence or fraud by The Broker in processing authorized business for The Company.
2. The Company shall hold The Broker harmless from any civil liability resulting from The Company’s acts or omissions in services performed under this Agreement. Such indemnification shall include reasonable legal fees incurred in connection with the investigation or defense against any claim. Upon receiving notice of any claim that could be covered by this section, The Broker shall notify The Company within 5 working days.
ARTICLE IX
Arbitration
I. In the event that any dispute arises between the parties signatory to this agreement, whether such dispute arises during or after the term of this agreement, and as a precedent to any right of

action hereunder a meeting will be held between representatives of each of the parties with decision making authority to settle the dispute. At the meeting the parties will attempt in good faith to negotiate an informal resolution of the dispute. If the dispute is not resolved through negotiation within 10 Business Days the parties hereby agree to submit their dispute to Arbitration. Upon the written request of either party to the dispute the parties shall select an arbitrator from among persons with not less than 10 years experience in the insurance or reinsurance business, as persons engaged in the industry itself or as lawyers or other professional advisors, or as otherwise agreed by the parties. If the parties are unable to agree on an arbitrator within 30 days after receipt of written notice from the other party requesting it to do so then either party may proceed pursuant to the Arbitration Act, 1991 (Ontario) to have an arbitrator appointed.
2. The arbitrator shall interpret this agreement as an honourable engagement and not as a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law, and they shall make their award with a view to effecting the general purpose of this agreement in a reasonable manner rather than in accordance with a literal interpretation of the language. Each party shall submit its case to the arbitrator within 30 days of the appointment of the arbitrator.
3. The arbitrator, so far as is permissible under the law and practice of the place of arbitration, shall have power to fix all procedural rules for the holding of the arbitration including discretionary power to make orders as to any matters which it may consider proper in the circumstances of the case with regard to pleadings, discovery, inspection of the documents, examination of witnesses and any other matter whatsoever relating to the conduct of the arbitration and may receive and act upon such evidence whether oral or written strictly admissible or not as it shall in its discretion think fit.
4. The decision in writing of the arbitrator shall be final and binding on both parties. Judgement may be entered upon the final decision of the arbitrator in any court in Canada having jurisdiction. The arbitrator shall determine who pays the expense of the arbitration. The arbitration will take place in Toronto, Ontario, Canada, or such other venue in Ontario, Canada as determined by the arbitrator.
Signed and accepted by the parties to this agreement.

For – Omega General Insurance Company	
	 	By:    	 	Philip H. Cook CEO	
	
/s/ Philip H. Cook	

	
For – Vetinsurance Brokers Canada Inc.	
  By:	
	
/s/ Howard E. Rubin	

EXHIBIT 1 – Commissions
Regular Commission: [*]
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned.
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows - the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
*Confidential Treatment Requested.
 
6

ADDENDUM #1 TO AGENCY AGREEMENT
WHEREAS Omega General Insurance Company (“The Company”) and Vetinsurance Brokers Inc. (“The Broker”) entered into an Agency Agreement effective January 1, 2010;
AND WHEREAS The Company and The Broker now desire to further amend the Agency Agreement to take effect as of January 1, 2011;
In consideration of the covenants and agreements contained herein and for other good and valuable consideration, receipt and sufficiency of which is acknowledged, the parties agree as follows:
Amendment of Exhibit 1
Exhibit 1 of the Agency Agreement is hereby deleted in its entirety, and the following shall be substituted in its place:
EXHIBIT 1 – Commissions
Regular Commission: [*]
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned.
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows - the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
Signed and accepted by the parties to this agreement. Dated this 21 st day of January, 2011.

For – Omega General Insurance Company	
	
/s/ Philip H. Cook	
	
For – Vetinsurance Brokers Canada Inc.	
	
/s/ Howard E. Rubin	
 
*Confidential Treatment Requested.

ADDENDUM #2 TO AGENCY AGREEMENT
WHEREAS Omega General Insurance Company (“The Company”) and Vetinsurance Brokers Inc. (“The Broker”) entered into an Agency Agreement effective January 1, 2010;
AND WHEREAS The Company and The Broker now desire to further amend the Agency Agreement to take effect as of January 1, 2011;
In consideration of the covenants and agreements contained herein and for other good and valuable consideration, receipt and sufficiency of which is acknowledged, the parties agree as follows:
Amendment of Exhibit 1
Exhibit 1 of the Agency Agreement is hereby deleted in its entirety, and the following shall be substituted in its place:
EXHIBIT 1 – Commissions
Regular Commission: [*]
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned.
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows - the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
Signed and accepted by the parties to this agreement. Dated this 1 st day of November, 2011.

For – Omega General Insurance Company	
	
/s/ Philip H. Cook	
	
For – Vetinsurance Brokers Canada Inc.	
	
/s/ Howard E. Rubin	
 
*Confidential Treatment Requested.

ADDENDUM #3 TO AGENCY AGREEMENT
WHEREAS Omega General Insurance Company (“The Company”) and Vetinsurance Brokers Inc. (“The Broker”) entered into an Agency Agreement effective January 1, 2010;
AND WHEREAS The Company and The Broker now desire to further amend the Agency Agreement to take effect as of January 1, 2012;
In consideration of the covenants and agreements contained herein and for other good and valuable consideration, receipt and sufficiency of which is acknowledged, the parties agree as follows:
Amendment of Exhibit 1
Exhibit 1 of the Agency Agreement is hereby deleted in its entirety, and the following shall be substituted in its place:
EXHIBIT 1 – Commissions
Regular Commission: [*]
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned.
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows - the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
Signed and accepted by the parties to this agreement. Dated this 12 th day of January, 2012.

For – Omega General Insurance Company	
	
/s/ Philip H. Cook	
	
For – Vetinsurance Brokers Canada Inc.	
	
/s/ Barry Johnson	
 
*Confidential Treatment Requested.

ADDENDUM #4 TO AGENCY AGREEMENT
WHEREAS Omega General Insurance Company (“The Company”) and Vetinsurance Brokers Inc. (“The Broker”) entered into an Agency Agreement effective January 1, 2010;
AND WHEREAS The Company and The Broker now desire to further amend the Agency Agreement to take effect as of July 1, 2012;
In consideration of the covenants and agreements contained herein and for other good and valuable consideration, receipt and sufficiency of which is acknowledged, the parties agree as follows:
Amendment of Exhibit 1
Exhibit 1 of the Agency Agreement is hereby deleted in its entirety, and the following shall be substituted in its place:
EXHIBIT 1 – Commissions
Regular Commission: [*]
Profit Commission: to be paid to The Broker annually by The Company based on the performance of the business for each calendar year, such payment to be made no later than 90 days following the end of the year in which the profit commission is earned.
The profit commission shall be equal to 100% of the net profit generated by the business. Net profit for the purpose of this calculation is defined as follows - the gross premium charged to the policyholder, minus the regular commission paid to The Broker, minus premium tax incurred by The Company, minus the stop loss reinsurance premium paid to American Pet Insurance Co, minus claims incurred by The Company (including paid claims plus outstanding claims) minus [*].
Where the net profit for any given year is negative, The Broker will not be eligible for a profit commission for that year.
Each calendar year calculation of the profit commission will be updated annually thereafter (and adjusted accordingly) until its third anniversary, when the calculation made at that time will be considered “final” unless an extension is agreed between the parties.
Signed and accepted by the parties to this agreement. Dated this 19 th day of December, 2012.

For – Omega General Insurance Company	
	
/s/ Philip H. Cook	
	
For – Vetinsurance Brokers Canada Inc.	
	
/s/ Howard E. Rubin	
 
*Confidential Treatment Requested.

Exhibit 10.13
LEASE AGREEMENT
This Lease Agreement (“Lease”) is made and dated as of June 14, 2012, by and among AMERICAN PET INSURANCE COMPANY, a New York corporation, duly qualified to do business in the State of Washington, dba TRUPANION (“Tenant”), and the HOUSING AUTHORITY OF THE CITY OF SEATTLE, a Washington public body corporate and politic (“Landlord”).
In consideration of the covenants and agreements of the Tenant and Landlord hereunder, Landlord and Tenant agree as follows:
1. Premises. Landlord leases to Tenant certain real property located at 907 NW Ballard Way, Seattle, Washington, consisting of certain portions of a building (the “Building”), described on Exhibit A attached hereto and by this reference incorporated herein. The portion of the Building leased hereunder is referred to as the “Premises”. The Building consists of approximately 37,448 rentable square feet as shown on Exhibit B . Tenant shall have exclusive use of the Premises, and except as expressly set forth in this Section 1, exclusive use for parking only (except on Sunday) of the surface parking adjacent to the Building consisting of 196 parking spaces (the “Parking Lot”). Notwithstanding the foregoing, Tenant acknowledges that Landlord has entered into a month to month agreement with Mars Hill Fellowship (“Mars Hill”) to rent 150 parking spaces in the Parking Lot on Sundays (“Mars Hill Agreement”), and occasionally on Friday evenings and Saturdays. Mars Hill’s use of the Parking Lot on Friday evenings and Saturdays shall be subject to Tenant’s advance approval, which approval shall not be unreasonably withheld, provided Landlord delivers to Tenant seven (7) days prior written request to Tenant for any such additional use of the Parking Lot by Mars Hill and provided that any use on Fridays shall be limited to 6:00pm or later. If Tenant determines the Sunday use of the Parking Lot by Mars Hill unreasonably interferes with Tenant’s right to use its 46 parking stalls, and if Tenant provides Landlord notice of such unreasonable interference and within seven (7) days thereafter the interference has not been cured, Tenant may give Landlord a final notice of interference and reason to terminate the Mars Hill Agreement (the “Final Mars Hill Notice”). Landlord will terminate the Mars Hill Agreement, with a termination effective date thirty-five (35) days after receipt of the Final Mars Hill Notice. In addition, Tenant may exercise the right to direct Landlord to terminate the Mars Hill Agreement for any other reason, and in such case, the base rent payable by Tenant hereunder shall be increased monthly by $1,500.
2. Use of Premises. Tenant shall use the Premises solely for the purpose of general office and administrative use including, but not limited to the operation of a pet insurance company and call center. In addition, Tenant shall have exclusive use of the Parking Lot, except as set forth in Section 1 above. Tenant and Tenant’s employees, subtenants and invitees shall be entitled to access the Premises, the Building and the Parking Lot 24 hours per day, 7 days per week, 365 days per year and shall be entitled to bring pets into the Building, the Premises and the Parking Lot. Tenant shall use the Premises in compliance with all applicable laws, rules and regulations, shall not knowingly permit any illegal activity thereon. No other use of the Premises shall be permitted without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Tenant has inspected the Premises and has determined the Premises are suitable for its purposes provided, however, the foregoing shall not
 
1

limit Landlord’s repair and maintenance obligations under this Lease. Notwithstanding any other provision of this Lease to the contrary, Landlord represents that to the best of its knowledge the Building and the Premises are in compliance with all applicable laws, statutes, ordinances, codes, regulations and other rules or requirements of any governmental authorities having jurisdiction over the Building and the Premises as of the date of this Lease and will be in compliance therewith as of the Commencement Date. Landlord, at its sole cost and expense, without any right of reimbursement from Tenant, shall remedy any noncompliance that exists as of the Commencement Date (regardless of whether Landlord has actual knowledge of the same as of the date of this Lease) promptly upon knowledge thereof; provided, however, Landlord shall not be liable for any damage or such noncompliance to the extent caused by Tenant.
3. Term. The initial term of this Lease (the “First Term”) shall be for a period of twenty-four (24) months commencing on August 16, 2012 (“Commencement Date”) and expiring on August 15, 2014 unless terminated earlier or extended longer as provided herein. Notwithstanding the Commencement Date of the Lease, in order to prepare for relocation to the Premises and begin installation of furniture, fixtures, equipment, decorations and tenant improvements prior to the Commencement Date, Tenant will be permitted to enter the Premises upon execution of this Lease; provided, however, Tenant shall not occupy the Premises until Tenant delivers to Landlord insurance certificates with the amounts required under Section 14 hereof and names Landlord as an additional insured and provided further that (a) Tenant shall not commence any work that requires Landlord’s approval pursuant to Section 8 of this Lease unless and until Landlord provides its written approval and (b) Tenant, throughout the duration of completing the tenant improvements, shall be responsible for any loss, cost, damage, liability and expense related to any such approved tenant improvements to the extent set forth in Tenant’s indemnification of Landlord under Section 13 and Tenant acknowledges and agrees that such indemnification extends to the work performed for any such tenant improvements.
4. Option to Renew. Tenant shall have the option to renew this Lease for one additional one (1) year term (“Option Term”) under the same terms and conditions provided that Tenant is not in monetary default or material non-monetary default under any provisions of this Lease beyond applicable grace and cure periods. To exercise this option, Tenant shall provide written notice to the Executive Director of Landlord on or before December 31, 2013.
5. Rent. Tenant shall pay to Landlord as rental for the Premises and the Parking Lot beginning on the Commencement Date, a monthly “Base Rent” of $24,185.17 for the first six (6) months of the First Term, then thereafter, Base Rent shall be $48,370.00 per month.
Upon execution of this Lease, Tenant shall deliver to Landlord the first month’s Rent totaling $29,391.29, which includes the Base Rent plus current annual common costs defined in Section 6.
6. Service and Utilities/Common Costs. In addition to Base Rent, Tenant shall pay all charges for electricity, and for all other public utilities that are separately metered which are be used in or charged against the Premises during the First Term hereunder and any extension of this Lease. In addition, Tenant shall reimburse Landlord for actual costs of the leasehold excise tax defined by the Washington State Department of Revenue (“DOR”) currently calculated as 12.84% of Base Rent and is included in the Common Costs under this Lease. Tenant agrees to
 
2

reimburse Landlord for the actual costs of the property insurance, maintenance and repairs, elevator maintenance, leasehold excise tax and surface water management fees that serve the Premises (“Common Costs”). The charge for these Common Costs will be adjusted per square footage annually for rate and fee changes actually incurred by Landlord. The total of the Common Costs (excluding the leasehold excise tax or real property tax, if any) shall not exceed $2.00 per rentable square foot per year. The parties acknowledge the current Landlord is exempt as a public body from paying real property taxes; however, Tenant and Landlord agree that if the Building and Parking Lot are sold to a private third party which is not exempt from real property taxes the actual cost of such taxes for the Premises and the portion of the Parking Lot leased to Tenant will be passed on to Tenant on a proportionate basis. Tenant shall contract directly with grounds/landscaping and garbage service vendors. Landlord shall not be liable for any loss or damage caused by or resulting from any interruption or failure of such services or loss or damage incident to the making of repairs, alterations or improvements to the Premises or due to accident or strike or other conditions or events not under Landlord’s control. None of the occurrences described in the preceding sentence shall be deemed an eviction of the Tenant or relieve the Tenant of any of Tenant’s obligations hereunder. Landlord agrees to keep in good repair and operating condition the Building systems including HVAC, plumbing, elevator, roof and light fixtures and as further described in Section 9, Repairs and Maintenance below.
Rent shall be paid to Landlord no later than the first (1st) day of the month for which the Rent is due. A late fee of ten percent (10%) will be charged for Rent that is paid after the fifth (5 th ) day of the month. An additional penalty of one percent (1%) per day will be charged on the balance due after the fifteenth (15 th ) day of the month. Rent checks shall be made payable to Landlord and mailed to:
Seattle Housing Authority
Attention: Accounts Receivable Dept.
or at such other address as Landlord shall specify in writing. In the check memo line Tenant shall add                      to have the rent payment credited to the proper account.
7. Security Deposit. There shall be no security deposit.
8. Tenant Improvements. Landlord shall not make any improvements to the Premises. Tenant shall not undertake any tenant improvements that involve plumbing or electrical work, wall demolition, or drilling into the floors, walls or ceilings without Landlord’s prior written consent which shall not be unreasonably withheld, conditioned or delayed.
9. Repairs and Maintenance: Landlord will provide major maintenance for the Premises and the Building (including the parking area). Under this Lease “major maintenance” means work which Landlord normally does to maintain its facilities in a good and habitable condition including the following, provided Tenant keeps the Premises and the Parking Lot in good condition and has not damaged (normal wear and tear, damage due to casualty or
 
3

condemnation and any condition in the Parking Lot not caused by Tenant or Tenant’s officers, directors, employees, agents, contractors, licensees or invitees excepted) any of the items listed below:
Landlord Responsibilities:
 
 	•	 	Structural integrity and all structural components, including, without limitation, Building foundations, footings, roof, roof membrane	
 
 	•	 	Exterior - siding, window, exterior walls, doors and hardware	
 
 	•	 	Major mechanical such as HVAC, plumbing and fixtures, fire alarms, and major electrical and fixtures	
 
 	•	 	Heavy grounds labor such as shrub removal, sidewalk and parking lot repair, retaining walls and fencing	
 
 	•	 	Sanitary sewer lines, provided any damage to the lines are not caused by Tenant’s negligence or willful misconduct	
 
 	•	 	All subsurface conditions	
 
 	•	 	Utility facilities to the point of connection at the interior of the Building	
Tenant will be charged for repairs necessitated by damage to the Premises or the Parking Lot or loss of equipment caused by willful or negligent acts of Tenant’s staff, clients, agents, contractors, invitees or permitted subtenants. For example repairs that are the responsibility of Tenant to pay include but are not limited to:
 
 	•	 	Lock changes	
 
 	•	 	Access due to lock-outs	
 
 	•	 	Replacement of keys	
 
 	•	 	Broken windows	
 
 	•	 	Plugged drains, toilets	
 
 	•	 	Removal of trash from inside or outside the Premises and the Parking Lot (except for any litter caused by invitees of Mars Hill on Sundays)	
 
 	•	 	Repair of landscape damage caused by Tenant or its operations	
 
 	•	 	Interior construction for the Building only such as interior trim, doors, hardware, wall finishes, flooring and floor finishes, ceilings and finishes	
 
 	•	 	Any damage to the Premises or equipment caused by a willful or negligent act of Tenant.	
Landlord will not provide maintenance repairs for which Tenant will be charged without first providing prior written notice to Tenant of the repairs to be made, except in an emergency in which there is a threat of damage to property or personal injury.
Tenant shall be responsible for minor maintenance including, but not limited to:
 
 	•	 	All janitorial and general cleaning of the Premises and the Parking Lot	
 
 	•	 	Vacuuming/mopping	
 
 	•	 	Emptying of trash baskets	
 
 	•	 	Refilling paper towels, toilet paper, and other paper product dispensers	
 
 	•	 	Supplying and installing replacement light bulbs	
 
 	•	 	Supplying cleaning products and supplies.	
 
4

10. Care of Premises. Tenant has inspected and accepts the Premises in its present condition and shall keep and maintain the Premises and the Parking Lot and all tenant improvements in good, safe and sanitary condition and appearance and shall permit no waste, damage, or injury to the Premises, the Parking Lot or the tenant improvements (normal wear and tear, damage due to casualty or condemnation and any condition in the Parking Lot not caused by Tenant or Tenant’s officers, directors, employees, agents, contractors, licensees or invitees excepted). The Premises and the Parking Lot shall at all times be kept and used by the Tenant in accordance with the laws, ordinances and regulations of all governmental agencies having jurisdiction over the Premises. The Building and all common areas thereto shall at all times be maintained by Landlord in accordance with the laws, ordinances and regulations of all governmental agencies having jurisdiction thereto. Tenant shall not use or knowlingly permit in the Premises, Building or Parking Lot any activity that is illegal, dangerous to the life or limb or overload the floors of the Building beyond the loads existing at this time, or permit any objectionable noise or odor to escape from the Premises. Tenant shall not do or knowingly permit to be done on the Premises or the Parking Lot anything that will increase the rate of insurance on the Premises provided, however, Landlord represents and warrants to Tenant that Tenant’s express rights pursuant to Section 2 of this Lease will not result in increased insurance rates. Tenant shall keep the Premises and the Parking Lot clean and in sanitary condition, and in compliance with the regulations of the Board of Health and City of Seattle Fire Department. Notwithstanding anything in this Lease to the contrary, Tenant shall have no obligation or liability with respect to the condition of the Parking Lot or any activities therein except to the extent caused by Tenant or Tenant’s officers, directors, employees, agents, contractors, licensees or invitees.
At the end of the term of this Lease or upon earlier termination of the Lease, Tenant shall deliver the Premises, the Parking Lot and the tenant improvements to Landlord in good and sound condition and appearance as received, broom clean, ordinary wear and tear and damage due to casualty or condemnation excepted. Tenant shall repair any damage to the Premises or the Parking Lot occasioned by its use thereof, or by the removal of Tenant’s trade fixtures, furnishings and equipment, which repair shall include, but shall not be limited to, the patching and filling of holes, repairing the floor, and repair of structural damage.
11. Hazardous Substances. Tenant shall not cause or permit any waste, substances or material designated or regulated as ‘toxic,” “hazardous” or “extremely hazardous” under federal, state or local laws (“Hazardous Substances”) to be placed, held, released, located or disposed of on, under or at the Premises or the Parking Lot, except in commercially reasonable amounts used in the construction and operation of the tenant improvements and in ordinary general office use and provided that work is performed in accordance with all applicable laws, rules and regulations of any government authorities. Tenant shall indemnify Landlord for all claims, actions, causes of action, judgments, liabilities, expenses, costs and attorneys’ fees and costs (including, without limitation, costs and expenses of cleaning up and remediation of any Hazardous Substances) and from all limitations, restraints, penalties or obligations pertaining to Landlord arising out of the presence of any Hazardous Substances on the Premises, the Parking Lot or on other property provided in either case that it is caused by Tenant or Tenant’s officers, directors, employees, agents, or contractors, licensees or invitees.
 
5

12. Accidents. All personal property on the Premises or the Parking Lot shall be at the risk of the Tenant. Landlord shall not be liable for any damage, either to persons or property, sustained by the Tenant or others, caused by any defects in the Premises or the Parking Lot by the bursting or leaking of water, gas, sewer or steam pipes, or from any act or negligence of employees, co-tenants, or any other occupants of the Premises or the Parking Lot or any other persons or due to the happening of any accident from whatsoever cause in and about the Premises or the Parking Lot, except to the extent caused by Landlord’s (or Landlord’s agents, employees, officers or contractors) negligence or willful misconduct. Tenant agrees to indemnify, defend and hold Landlord, and its officers, employees, independent contractors and agents harmless from any and all claims for damages suffered or alleged to be suffered in or about the leased Premises or by any person, or entity and from any and all claims for damages suffered or alleged to be suffered in or about the Parking Lot by Tenant or Tenant’s officers, directors, employees, agents, contractors, licensees or invitees, and from any expenses, including reasonable attorney fees incurred by Landlord in respect to any such claim, except to the extent caused by Landlord’s (or Landlord’s agents, employees, officers or contractors) negligence or willful misconduct.
13. Hold Harmless. Tenant shall indemnify, defend and hold Landlord and its directors, officers, employees, contractors and agents harmless from any and all liabilities, damages of every kind and nature whatsoever that may be claimed or accrued by reason of any bodily injury, personal injury, accident or property damage arising from any negligent or wrongful act or omission of Tenant, or its invitees, employees, guests, or visitors in, on, or around the Premises or the Parking Lot, except to the extent caused by the negligence or willful misconduct of Landlord, its employees, officers, contractors, or agents.
Landlord shall indemnify, defend and hold Tenant and its directors, officers, employees, contractors and agents harmless from any and all liabilities, damages of every kind and nature whatsoever that may be claimed or accrued by reason of any bodily injury, personal injury, accident or property damage arising from any negligent or wrongful act or omission of Landlord, or its employees, agents, or contractors in, on, or around the Premises or the Parking Lot, except to the extent caused by the negligence or willful misconduct of Tenant, its employees, invitees or agents.
14. Liability and Insurance. Tenant shall obtain and maintain hazard insurance covering any tenant improvements and Tenant’s property on the Premises or the Parking Lot in an amount not less than its replacement cost, as that cost is adjusted from time to time, which shall insure against the perils of fire, lightning, extended coverage, vandalism and malicious mischief, extended by special extended coverage endorsement to insure against all other risks of direct physical loss, and such other coverages as a prudent owner would carry. If a casualty occurs to any tenant improvements or the Premises or the Parking Lot the insurance proceeds shall he payable to Tenant, or its lenders, as their interests may appear and shall be used for restoration of any tenant improvements and the Premises. Notwithstanding anything to the contrary herein, if damage to the tenant improvements or the Premises shall in Tenant’s reasonable judgment take more than one hundred eighty (180) days to repair, (b) occurs in the last two (2) years of the term or (c) the cost to repair such damage not covered by insurance exceeds Fifteen Thousand and No/100 Dollars ($15,000.00), then either party may terminate this Lease by delivering written notice of termination to the other party within thirty (30) days after the date of the casualty, whereupon this Lease shall terminate. All personal property on the Premises shall be at the risk of the Tenant.
 
6

Tenant shall, during the term of this Lease and any other period of occupancy, at its sole cost and expense, keep in full force and effect commercial general liability insurance insuring Tenant against any liability arising out of the lease, use, occupancy or maintenance of the Premises, the tenant improvements and all areas appurtenant thereto. Such insurance shall be in the amount of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate for injury to, or death of one or more persons in an occurrence, and for damage to tangible property (including loss of use) in an occurrence. The Tenant’s commercial general liability insurance shall also include fire legal liability in an amount not less than $300,000 per occurrence.
All policies described above shall include Landlord and the holders of mortgages on the Premises who have requested in writing to be so included, as additional named insureds, All policies shall contain (i) the agreement of the insurer to give Landlord and each holder of a mortgage, as applicable, at least thirty (30) days’ notice prior to cancellation or any material change in said policies; (ii) an agreement that such policies are primary and non-contributing with any insurance that may be carried by Landlord or Tenant; (iii) a provision that no act or omission of the Tenant shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained; (iv) a waiver by the insurer of all rights of subrogation against Landlord, Landlord’s officers, directors, employees and agents in connection with any loss or damage thereby insured against; (v) terms providing that any loss covered by such insurance may be adjusted with the Tenant, but shall, to the extent required by the loan documents of any mortgage on the Premises, be payable to the holder of any such mortgage, who shall agree to receive and disburse all proceeds of such insurance subject to the duty of the Tenant to repair or restore the Premises, and (vi) Landlord reserves the right to allow its insurers to inspect the property at any time for purposes of loss control; should the insurer recommend measures or improvements related to safety or loss prevention, Tenant shall cooperate with Landlord in implementation of insurer’s recommendations.
15. Casualty and Condemnation. If the Building or the Premises shall be damaged by fire or other casualty to the extent that they are untenantable in whole or in part, then Landlord, at Landlord’s option may proceed with reasonable diligence to repair the damage (excluding Tenant’s personal property) in a good and workmanlike manner. Landlord shall notify Tenant in writing within thirty (30) days after the occurrence of any damage whether Landlord intends to repair the damage. If Landlord elects not to proceed with repair, Tenant shall have the right to terminate this Lease by written notice to Landlord. If any part of the Building shall be untenanable, while under repair, Rent shall be abated in proportion to the affected portion of the Building for the period from the date of the damage or inaccessibility to the date repaired. If fifty percent (50%) or more of the Building shall be damaged by fire or other casualty, or inaccessible due to any other cause, so that the estimated period for repair or restoring access is one hundred twenty (120) days or more (as estimated by a reputable independent contractor, registered architect or licensed professional engineer selected by Landlord), either party may terminate this Lease by providing notice to the other party. If Landlord undertakes repairs but does not substantially complete repairs within one hundred twenty (120) days after the occurrence of the damage, Tenant shall have the right to terminate this Lease by written notice to Landlord. Notwithstanding the foregoing, if within the last nine
 
7

months of the term of this Lease a casualty occurs which damages 50% or more of the Building, Tenant may at its sole option terminate this Lease by giving written notice of termination due to casualty to Landlord, provided further that such notice is given within thirty days after the occurrence of the casualty. If all or substantially all of the Building shall be taken by condemnation or in any other manner for any public or quasi-public use or purpose, this Lease shall terminate as of the date of vesting of title, and Rent shall be prorated and adjusted as of that date.
16. Successors. All covenants, agreements, terms and conditions contained in this Lease shall apply to and be binding upon Landlord and Tenant and their respective successors and/or permitted assigns.
17. Labor and Material Liens. Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for the Tenant at or for use in the Premises, which, claims are or may be secured by any mechanics’ or materialmen’s lien against the Premises or an interest therein. If the Tenant, in good faith, contests the validity of any lien, claim or demand, the Tenant shall, at its sole expense, defend itself and Landlord and Tenant shall satisfy any adverse judgment before any enforcement against Landlord or the Premises.
18. Assignment, Subletting or Substitution of Tenants, Encumbrances. Tenant shall not create or permit any lien or encumbrance against the Premises or assign its interest as Tenant in this Lease or sublet all or a part of the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Notwithstanding any permitted encumbrance, assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the Rent and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease.
19. Defaults: Remedies.
19.1 Defaults. Each of the following is a material default and breach of this Lease by the Tenant:
(a) Failure to pay any sum, including rent, as and when due, if the failure continues for a period of ten (10) days after written notice from Landlord.
(b) Failure to comply with any of the covenants or provisions of this Lease, other than those described in subparagraph (a), if the failure continues for a period of thirty (30) days after written notice from the Landlord. If the nature of the Tenant’s default reasonably requires more than thirty (30) days for its cure,
(c) Tenant vacates the Premises (defined as an absence for at lease 15 consecutive days without prior notice to Landlord), or Tenant abandons the Premises (defined as an absence of five (5) days or more while Tenant is in breach of some other term of this Lease). Tenant’s vacation or abandonment of the Premises shall not be subject to any notice or right to cure.
(d) Tenant’s making any general assignment or arrangement for the benefit of creditors; the filing by or against the Tenant of a petition to have it
 
8

adjudged a bankrupt or a petition for reorganization or arrangement under any bankruptcy law (unless any petition filed against the Tenant is dismissed within sixty (60) days); the appointment of a trustee or receiver to take possession of substantially all of the Tenant’s assets at the Premises or its interest in this Lease, if possession is not restored to the Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of the Tenant’s assets at the Premises or its interest in this Lease, if that seizure is not discharged within thirty (30) days.
19.2 Remedies. If any material default or breach by the Tenant occurs, the Landlord may at any time thereafter without notice or demand do any or all of the following:
(a) Upon thirty (30) days written notice to Tenant, terminate the Tenant’s right to possession of the Premises by any lawful means, and this Lease shall terminate; Landlord may re-enter and take possession of and remove all persons or property, and the Tenant shall immediately surrender possession of the Premises to Landlord and shall pay all rent and other payments due to Landlord as of the date of such termination. Landlord may recover from the Tenant all damages incurred by Landlord for the Tenant’s default as permitted under applicable law.
(b) Maintain the Tenant’s right to possession, and this Lease shall continue in force whether or not the Tenant has abandoned the Premises. Landlord shall be entitled to enforce all of its rights and remedies under this Lease, including the right to recover rent and other payments as they becomes due.
(c) Pursue any other remedy available to Landlord under the law or equity. These remedies are not exclusive.
20. General Provisions.
20.1 Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction will not affect the validity of any other provision.
20.2 Time of Essence. Time is of the essence of this Lease.
20.3 Notices. Any notice given under this Lease shall be in writing and may be given by personal delivery, by certified mail, postage prepaid, by overnight courier service or via electronic mail, addressed to the Tenant or to Landlord at their addresses set forth above their signatures below, and shall be effective when received. Notices personally delivered are considered received upon delivery. Notices sent via personal delivery, overnight courier service, electronic mail and facsimile will be effective upon receipt. A courtesy copy of any notice given by facsimile or electronic mail also shall be mailed to the party receiving the notice.
20.4 Waiver. Waiver by Landlord of the breach of any provision of this Lease is not a waiver of any subsequent breach by the Tenant of the same or any other provision. Landlord’s consent to or approval of any act does not make Landlord’s consent to or approval of
 
9

any subsequent act unnecessary. Acceptance of rent by Landlord is not a waiver of any preceding breach of any provision of this Lease, other than the Tenant’s failure to pay the rent so accepted.
20.5 Covenants and Conditions. Each provision of this Lease performable by Landlord or the Tenant is both a covenant and a condition.
20.6 Authority. Each individual executing this Lease on behalf of the respective entities represents and warrants that he/she is duly authorized to execute and deliver this Lease on behalf of such entity, and that this Lease is binding upon that entity in accordance with its terms.
20.7 Attorneys’ Fees. In any action to enforce or interpret this Lease the prevailing party is entitled to recover reasonable attorneys’ fees from the losing party.
20.8 Quiet Possession. Upon paying the rent and observing and performing all of its covenants and conditions, the Tenant shall have quiet possession of the Premises for the entire term subject to all of the provisions of this Lease.
20.9 Relationship of Parties/Liability. For the purposes of this Lease, the relationship of the parties hereto is strictly that of Landlord and Tenant. Nothing herein shall be construed so as to create a partnership, joint venture, or agency.
20.10 Consent. Consent or approval of parties whenever required under this Lease shall not be unreasonably withheld, unless otherwise specifically provided by the terms of this Lease.
20.11 Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Washington and venue for any dispute shall be in King County, Washington.
20.12 Holdover. If Tenant remains in possession of the Premises or any part thereof after the expiration of the term hereof without the express written consent of Landlord, such occupancy shall be an unlawful detainer of Premises at a rental equal to 135% for the then current Rent due plus all other charges payable hereunder. Acceptance by Landlord or by Management Agent of Rent after such expiration or other termination shall not result in a renewal of this Lease. The foregoing provisions of this Section 20.12 are in addition to and do not affect Landlord’s right of re-entry or any rights of Landlord hereunder or as otherwise provided by law. If Tenant shall hold over after the expiration or earlier termination of this Lease without the written consent of Landlord, such occupancy shall be deemed an unlawful detainer of the Premises subject to the applicable laws of the state in which the Premises are located.
20.13 No Recording of Lease. Tenant shall not record this Lease or a memorandum of this Lease without the prior written consent of Landlord.
20.14 Signage. Tenant at its expense shall have the right to install signage on and around the Building subject to jurisdictional approvals.
 
10

20.15 Brokerage. Each party represents to the other that it has not had dealings with any real estate broker, finder, or other person who would be entitled to any commission or fee in connection with the negotiation, execution or delivery of the Lease except Washington Partners, Inc. who represents Tenant and Kidder Mathews who represents Landlord, both of whose fees shall be paid by Landlord pursuant to a separate agreement. If any other claims for brokerage commissions, finder’s fees, or like payments arise out of or in connection with this transaction, such claims shall be defended and if sustained paid by the party whose alleged actions or commitment form the bases of such claims. If Landlord does not fulfill the obligations to pay the brokerage fees due to Washington Partners, Inc. as required, Tenant may pay Washington Partners, Inc. said amount and deduct such amount from rent due to Landlord.
 
11

			
LANDLORD:	
	
HOUSING AUTHORITY OF THE CITY OF SEATTLE , a Washington public body corporate and politic	
		
By:	 	/s/ Thomas M. Tierney	
Thomas M. Tierney, Executive Director	
Address:
Thomas M. Tierney, Executive Director
Seattle Housing Authority
P.O. Box 19028
190 Queen Anne Avenue North
Seattle, WA 98109-1028

STATE OF WASHINGTON	  	)	  		  		
	  	)	  	ss.	  		
COUNTY OF KING	  	)	  		  		
I certify that I know or have satisfactory evidence that Thomas M. Tierney is the person who appeared before me and said person acknowledged that he signed this instrument, and on oath stated that he was authorized to execute the instrument as Executive Director for the HOUSING AUTHORITY OF THE CITY OF SEATTLE, a Washington public body, corporate and politic, and acknowledged it to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal as of the 14 th day of June, 2012.

	 		 	/s/ Ellen L. Callahan
 
NOTARY PUBLIC for the State of Washington
Residing at Langley, Washington.
My appointment expires: 04-01-2014	
 
12

			
TENANT:	
	
AMERICAN PET INSURANCE COMPANY, a New York corporation dba TRUPANION	
	
/s/ Howard E. Rubin	
Howard E. Rubin	
Print Name	
Its:	 	C.O.O.	
Address:
5245 Shilshole Avenue NW
Seattle, WA 98107
Attn: Howard Rubin, COO

STATE OF WA	  	)	  		  		
	  	)	  	ss.	  		
COUNTY OF King	  	)	  		  		
I certify that I know or have satisfactory evidence that Howard Rubin is the person who appeared before me and said person acknowledged that he/she signed this instrument, and on oath stated that he/she was authorized to execute the instrument as the COO of American Pet Insurance Company, a New York corporation dba Trupanion, and acknowledged it to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal as of the 14 th day of June, 2012.

	 		 	/s/ Kelsey K. Miyoshi
 
NOTARY PUBLIC for the State of WA
Residing at Seattle, WA.
My appointment expires: 5/25/2014	
 
13

EXHIBIT A
LEGAL DESCRIPTION:
PARCEL B, CITY OF SEATTLE SHORT PLAT NUMBER 79-115, ACCORDING TO THE SHORT PLAT RECORDED JULY 17, 1979 UNDER RECORDING NO. 7907170846, RECORDS OF KING COUNTY, WASHINGTON.
 
14

 

 

MARTIN SELIG
MSRE MANAGEMENT, LLC
September 24, 2013
Mr. Howard E. Rubin
AMERICAN PET INSURANCE COMPANY
907 NW Ballard Way
Seattle, WA 98107
Dear Mr. Rubin:
Please refer to the Lease Agreement between American Pet Insurance Company (hereinafter referred to as “Lessee”) and Selig Real Estate Holding XXXIV, LLC (“Lessor”) as successor-in-interest to Housing Authority of the City of Seattle for the building and parking lot at 907 NW Ballard Way, Seattle, Washington (“Premises”). Please consider this an amendment to attach thereto.
Lessor and Lessee acknowledge that contained within the Lease is Lessee’s right to renew the lease term for one (1) year under all the same terms and conditions as provided in the Lease. They hereby agree that instead of Lessee having the right to renew for one (1) year, Lessee will have the right to renew for two (2) years with two subsequent one (1) year options thereafter. In such case, Lessee will provide Lessor with written notice to renew no later nine (9) months prior to the expiration date of the Lease. Further, the rent for the first year of the two year renewal term will remain the same. The base rent for the second year of the two year renewal term will increase to $16.70 per square foot, per year. Rent for the subsequent two (2) one year renewal options shall be $17.20 per square foot and $17.71 per square foot respectively.
Unless modified above, all Lease Agreement terms and conditions shall remain unchanged and in full force and effect.
If you are in agreement with the above, please sign below where indicated and return all three originals to me for Martin Selig’s signature. Upon full execution, I shall return one copy to you for your files.
Sincerely,
/s/ Theresa Howard
Theresa Howard
SIGNATURE LINES ONLY ON THE LAST PAGE
1000 SECOND AVENUE
SUITE 1600
SEATTLE, WASHINGTON 96104-1046
(206) 467-7600
FAX (206) 366-5296

Mr. Howard E. Rubin
AMERICAN PET INSURANCE COMPANY
September 24, 2013
Page 2
AGREED AND ACCEPTED:

REAL ESTATE HOLDINGS XXXIV, LLC	 		 	AMERICAN PET INSURANCE COMPANY	
					
	 	/s/ Martin Selig	 		 		 	/s/ Michael O. Banks	
By:	 	Martin Selig	 		 	By:	 	Michael O. Banks	
Its:	 	Managing Member	 		 	Its:	 	CFO	
Dated:	 	9/25/13	 		 	Date:	 	10/2/13	

					
STATE OF WASHINGTON	 	)	 		
	 	)	 	ss.	
COUNTY OF KING	 	)	 		
	
On this 25th day of September , 20 13 before me, a Notary Public in and for the State of Washington, personally appeared MARTIN SELIG, to me known to be the Managing Member, respectively, of SELIG REAL ESTATE HOLDINGS XXXIV, LLC the entity that executed the foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said entity, for the uses and purposes therein mentioned, and on oath stated that he is authorized to execute said instrument on behalf of the entity.	
		
[NOTARY STAMP]	 	/s/ Jill M. Hayes	
	 	Notary Public in and for the State of Washington
Residing at: Issaquah
My commission expires: 6-1-14	
			
STATE OF	 	)	 		
	 	)	 	ss.	
COUNTY	 	)	 		
	
On this 7th dat of October , 20 13 before me, a Notary Public in and for the State of Washington , personally appeared Michael Banks , to me known to be the Chief Financial Officer , respectively, of                                  , the corporation that executed the within and foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he/she/they is/are authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation.
 
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official seal, the day and year first above written.	
		
	 	/s/ Lu Yang	
Document2	 	Notary Public in and for the State of Washington
Residing at: Seattle
My commission expires: 6/1/17	
			
[NOTARY STAMP]	 		 		

October 9, 2013

Mr. Martin Selig	  	Hand delivered	
Martin Selig Real Estate	  		
1000 Second Avenue, Suite 1800	  		
Seattle, Washington 98101	  		

RE:	 	Lease Agreement dated June 14, 2012	
	 	Selig Real Estate Holding XXXIV, LLC (Lessor or Landlord) and American Pet Insurance Company	
	 	(Lessee or Tenant)	
	 	Exercise of Renewal Option – 907 NW Ballard Avenue Seattle, WA	
Dear Mr. Selig,
Please consider this letter as formal exercise of our two (2) year renewal option pursuant to the amendment dated September 24, 2013 between the above referenced parties. With this lease extension, the new lease expiration date will be August 15, 2016.
Sincerely,
AMERICAN PET INSURANCE COMPANY
/s/ Darryl Rawlings
Darryl Rawlings
Chief Executive Officer
cc: Larry Almeleh – Washington Partners, Inc.

Exhibit 10.14
SALMON BAY CENTER LEASE
C. D. STIMSON COMPANY,
LANDLORD
AMERICAN PET INSURANCE COMPANY,
TENANT
August 29, 2011
 
i

LEASE
(Salmon Bay Center)
THIS LEASE (“Lease”) is made and entered into as of the 29 th day of August, 2011, by C. D. STIMSON COMPANY, a Washington corporation (“Landlord”), and American Pet Insurance Company, a New York corporation (“Tenant”). In consideration of this Lease, Landlord and Tenant covenant and agree as follows:
SECTION 1: BASIC PROVISIONS
This Section contains the basic lease provisions between Landlord and Tenant.
A. Building, Property, and Center : Salmon Bay Center, 5245 Shilshole Ave. NW, Seattle, WA (the “Building”) located on the property legally described on Exhibit A (the “Property”), which is part of the Salmon Bay Center, legally described on Exhibit A-1 (the “Center”).
B. Premises : Office space comprised of 12,048 square feet of rentable area as depicted on the floor plan attached hereto as Exhibit B (the “Premises” ), comprising the entire Building.
C. Commencement Date : The date Landlord delivers possession of the Premises to Tenant in the condition required by this Lease, estimated to be October 15, 2011, subject to the terms of Section 3.
D. Expiration Date : Thirty-six (36) full calendar months following the Commencement Date, subject to the terms of Section 3.
E: Rentable Area : The rentable area of the Premises shall be confirmed by P2 Design Group as set out in Section 2 (C) hereof.
F. Tenant’s Share : 6.24%
G. Base Rent : From the Commencement Date through the Expiration Date, as further described in Section 4, as follows:

					
MONTH(S)	  	            MONTHLY BASE RENT FOR             
PREMISES	  	ANNUAL RENT PER RENTABLE
SQUARE FOOT	
Month One (1)*	  	$-0- (Tenant will pay Tenant’s Share of Additional Rent during this month)	  	NA	
Months Two (2) through Twelve (12)	  	$14,056.00	  	$14.00	
Months Thirteen (13) through Twenty-four (24)	  	$14,477.68	  	$14.42	
Months Twenty-five (25) through Thirty-six (36)	  	$14,909.40	  	$14.85	
Months Thirty-seven (37) through Forty-eight (48) (First Option Term)	  	$15,361.20	  	$15.30	
Months Forty-nine (49) through Sixty (60) (Second Option Term)	  	$15,823.04	  	$15.76	
 
2

*	“Month One” means the first thirty (30) days beginning on the Commencement Date and ending on the 30 th day after the Commencement Date. If the Commencement Date is not the first day of a calendar month, any partial month will be pro-rated on a per diem basis at the rental rate effective for month two.	
H. Additional Rent : Tenant’s Share of Taxes and Expenses, pursuant to Section 4(C).
I. Parking : Thirty-six (36) parking spaces which shall be reserved for Tenant at the locations shown on Exhibit D , at no cost to Tenant.
J. Permitted Use : General office use for pet insurance company and no other uses.
K. Security Deposit : $28,112.00
L. Guarantors : None.
M. Broker (if any) : Yates, Wood & MacDonald, Inc. and Ellen Mohl thereof for Landlord; Washington Partners and Larry Almeleh thereof for Tenant.
N. Option Terms : Two (2) options to extend the term of this Lease for an additional period of one (1) year each, pursuant to Section 3(D).
O. Riders/Exhibits : In addition to Exhibit A (Legal Description of Property), Exhibit A-1 (Legal Description of Center), Exhibit B (Drawing of Premises), Exhibit C (Parking), Exhibit D (Work Letter), Exhibit E (Existing Rights), and Rider One (Rules), this Lease includes: No other Exhibits or Riders.
P. Landlord’s Notice Address (subject to Section 24) :
C. D. Stimson Company
1411 Fourth Avenue
Suite 730
Seattle, WA 98101
Q. Tenant’s Notice Address (subject to Section 24) :
Before Commencement Date:
American Pet Insurance Company
1148 N.W. Leary Way
Seattle, WA 98107
 
3

After Commencement Date:
American Pet Insurance Company
5245 Shilshole Ave. NW
Seattle, WA 98107
R. Rent Payments : Rent shall be paid to:
C. D. Stimson Company
1411 Fourth Avenue
Suite 730
Seattle, WA 98101
or to such other parties and addresses as to which Landlord shall provide advance notice.
SECTION 2: PREMISES AND PREPARATION OF PREMISES
A. Premises . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises subject to the provisions herein contained. Tenant has inspected the Premises (and portions of the Property and Center providing access to or serving the Premises) or has had an opportunity to do so, and agreed to accept the same “ AS IS ” without any agreements, representations, understandings or obligations on the part of Landlord to perform any Alterations, repairs or improvements unless expressly provided under this Lease. Tenant further acknowledges that Landlord has not made any representation or warranty (express or implied) with respect to the habitability, condition or suitability of the Premises or Property for Tenant’s purposes or any particular purpose. Notwithstanding anything to the contrary contained in this Lease and without reducing any other obligations of Landlord hereunder, Landlord represents and warrants to Tenant that, as of the Commencement Date, (i) the Premises shall be free and clear of occupants and third party occupancy rights, (ii) the Building and the Premises and every part thereof, shall be in compliance with all applicable codes, laws, ordinances and regulations, (iii) all Landlord’s Work shall be substantially completed in a good and workmanlike manner and free from defects with the exception of “punch list” items which shall be agreed between the parties and completed by Landlord as provided in Exhibit D, Work Letter, and (iv) the structural elements of the Building, the electrical and lighting systems serving and within the Premises, the life safety systems servicing the Premises, if any, the sprinkler system serving the Premises, if any, the HVAC systems serving the Premises, the roof (including the roof membrane), the plumbing and sewer systems serving the Premises and the window coverings on the Premises are all in good working order and condition.
B. Preparation of Premises . If no “Work Letter” is referenced in Section 1 as an Exhibit and attached hereto, Tenant agrees to accept the Premises on the Commencement Date in its existing “ As Is ” condition as described in Section A above without any agreement, representation or obligation on the part of Landlord to perform or provide any alterations, improvements, repairs or allowance of any kind, except as set out explicitly in this Section 2.B. Otherwise, the obligations of Landlord and Tenant to perform work and supply materials and labor to prepare the Premises for Tenant’s occupancy shall be as set forth in the Work Letter attached hereto and incorporated herein. Landlord’s obligation, if any, for completion of the Premises (“Landlord’s Work”) shall be defined and limited by said Work Letter, and Landlord shall not be required to furnish or install any item not indicated thereon. Any additional alterations or improvements to the Premises beyond those set forth on the Work Letter shall be at Tenant’s sole cost and expense and subject to all provisions of Section 10, including without limitation the prior approval of Landlord. This Lease and Landlord’s performance of its obligations hereunder shall be contingent upon the availability of all required permits for Landlord’s Work and Tenant’s occupancy for the uses set out in Section 1 (J) above, under terms and conditions reasonably satisfactory to Landlord, in its sole discretion. Taking possession of the Premises by Tenant shall be conclusive evidence the Premises were, on that date, in good, clean, and tenantable condition and delivered in accordance with this Lease, unless set forth otherwise in a mutually agreed upon written “punch list.”
C. Usable and Rentable Area . Within thirty (30) days after the delivery of the Premises to Tenant, Landlord shall deliver to Tenant its measurement and calculation of the usable and rentable area of the Premises, measured and calculated by P2 Design Group according to the methods and standards of ANSI/BOMA Z65.1 —
 
4

1996. The measurements of P2 Design Group shall be conclusive and binding upon the parties for all purposes under this Lease. If P2 Design Group’s determination of rentable area is different from those set out in Section 1 hereof, the parties will execute an amendment to this Lease setting out the revised areas and recalculating Monthly Base Rent and Tenant’s Share (for purposes of Additional Rent). If the revised rentable area indicates that Tenant has overpaid Monthly Base Rent and Additional Rent under this Lease, then Landlord will apply the amount of the overcharge to the next amounts due from Tenant under this Lease. If the revised rentable area indicates that Tenant has underpaid Monthly Base Rent and Additional Rent under this Lease, then Tenant will pay to Landlord the amount of the underpayment within thirty (30) days after receipt of demand therefor.
D. Right of First Offer for Additional Space . Subject to the existing rights of first offer, options, and practices between Landlord and Pacific Studio, Inc., as set forth on Exhibit E hereto, if additional leasable office space becomes available at the Center (“Additional Space”), then Landlord shall offer the Additional Space to Tenant before Landlord generally markets the Additional Space for rent. Landlord shall give Tenant written notice describing the location, square footage, date available, and terms under which Landlord is willing to lease the space to Tenant. Tenant shall have ten (10) business days in which to accept the Additional Space upon the terms set out in Landlord’s notice to Tenant or to propose different terms under which Tenant would be willing to lease the Additional Space. If Tenant declines to lease the Additional Space under the terms set out in Landlord’s notice or fails to respond within the period set out above, then Landlord shall be free to market the Additional Space for rent to the general public and to lease it to any party under such terms as Landlord is willing to accept, provided, however, if Landlord has not leased such Additional Space within one hundred eighty (180) days after Tenant elects not to lease the same, any further transaction shall be deemed a new determination by Landlord to lease such Additional Space and the provisions of this paragraph shall again be applicable. If Tenant makes a timely counterproposal to Landlord, then the parties agree to negotiate in good faith to attempt to reach agreement on the terms of a lease for the Additional Space, provided, that if the parties have failed to reach such agreement within fifteen (15) days of Tenant’s counterproposal, then neither party shall have any further obligations to the other under this Section 2.D. and Landlord may proceed to market and lease the Additional Space in its discretion, subject to the proviso of the immediately preceding sentence.
SECTION 3: TERM AND COMMENCEMENT
A. Term and Confirmation . The term (“Term”) of this Lease shall commence on the Commencement Date and end on the Expiration Date as specified in Section 1 above, unless sooner terminated as provided herein, subject to adjustment as provided below and the other provisions hereof. If the Commencement Date is advanced or postponed as provided below, the Expiration Date set forth in Section 1 shall be advanced or postponed for the same length of time. Tenant shall execute a confirmation of the Commencement Date and other matters in such form as Landlord may reasonably request within ten (10) days after requested (but nothing herein shall require Landlord to so request); any failure to respond within such time shall be deemed an acceptance of the matters as set forth in Landlord’s confirmation. If Tenant disagrees with Landlord’s adjustment of the Commencement Date, Tenant shall pay Rent and perform all other obligations commencing on the date determined by Landlord, subject to refund or credit when the matter is resolved.
B. Adjustments to Commencement . It is acknowledged that the Commencement Date specified in Section 1 is an estimated date. This Lease shall commence on the Commencement Date specified in Section 1 if Landlord’s Work, if any, is “substantially completed” (as that term is used in the construction industry) and a Certificate of Occupancy has been issued for the Premises by such date but otherwise the Commencement Date shall be adjusted to be the first to occur of the following events: (i) the date Landlord provides Tenant notice that Landlord’s Work is substantially complete and that a Certificate of Occupancy has been issued for the Premises; (ii) the date on which Tenant commences beneficial occupancy of the Premises; or (iii) if substantial completion of Landlord’s Work is delayed due to Tenant’s Delay (defined in the attached Work Letter), then the date determined by Landlord as the date upon which Landlord’s Work would have been substantially completed, but for such Tenant’s Delay. In no event shall Landlord have any liability for loss or damage to Tenant resulting in any delay in the Commencement Date, and Tenant’s sole recourse shall be the postponement of Rent and other obligations until the Commencement Date is established as set forth above; provided, however, that such date shall be extended by a period equal to any delays caused by force majeure or by any delays in space planning or preparation and approval of working drawings (“Planning Delays”); provided, further, however, that the Commencement Date shall not be extended due to Planning Delays caused by the party seeking the extension of the Commencement Date. The term
 
5

“Force Majeure” means and includes strikes, lockouts, labor disputes, shortages of labor or materials, fire or other casualty, Acts of God or any other cause beyond the reasonable control of Landlord. If Landlord does not deliver possession of the Premises with Landlord’s Work substantially completed to Tenant on or before November 15, 2011 (which date shall be extended by one day for each day of Tenant Delay, the “Initial Delivery Deadline”) then Tenant shall be entitled to abatement of one day of Rent for each day after the Initial Delivery Deadline until the Premises are so delivered and such abatement of Rent shall be Tenant’s exclusive remedy for such delay, subject to the remedy provided below for Landlord’s failure to deliver the Premises by the Outside Delivery Date. If Landlord does not deliver possession of the Premises with Landlord’s Work substantially completed to Tenant on or before December 15, 2011 (which date shall be extended by one day for each day of Tenant Delay, the “Outside Delivery Deadline”) then Tenant shall be entitled to terminate this Lease by giving written notice to Landlord within ten (10) business days following the Outside Delivery Deadline and, in the event of such termination, such termination shall be Tenant’s exclusive remedy for Landlord’s failure to deliver the Premises as required by the Outside Delivery Date.
C. Entry . Upon reasonable notice from Tenant to Landlord, Tenant shall be entitled to enter the Premises for fixturing, cabling and move-in purposes provided (i) Tenant shall not interfere with or cause delay to Landlord’s completion of Landlord’s Work and shall coordinate its activities and comply with Landlord’s reasonable directives, (ii) all provisions of this Lease other than those relating to payment of Rent shall apply to any such pre-commencement entry (including without limitation all insurance, indemnity and freedom from lien provisions), and (iii) if Tenant beneficially occupies the Premises (or any part thereof) or commences business operations from the Premises (or any part thereof) during such period, then the Commencement Date (and obligation to pay Rent) shall be deemed advanced to the date Tenant so occupies the premises, provided, the mere moving of furniture and equipment into the Premises, and the installation of fixtures and cabling, shall not be deemed commencement of business operations or other beneficial occupancy as those terms are used in this Section 3(C). Provided the current tenant has vacated the Premises and prior thereto only with the consent of the current tenant, Landlord shall allow Tenant, upon reasonable prior notice, to tour the Premises with prospective customers of Tenant prior to the Commencement Date; provided, further, that Tenant and Tenant’s customers shall not interfere with or delay Landlord’s Work; and provided, further, that the indemnification provisions of Section 21 shall apply to such entry.
D. Option Terms . Provided that Tenant is not in default under this Lease at the time of exercising the option granted herein or at any time thereafter through commencement of the Option Term, Tenant shall have the option to lease the Premises for the additional periods set forth in Section 1.N. of this Lease, if any, (“Option Terms”), the first of which commencing upon expiration of the Term of this Lease (“Initial Term”), and each subsequent Option Term, if any, commencing upon expiration of the immediately preceding Option Term, under the same terms and conditions as set out in this Lease, except for Monthly Base Rent. Tenant shall exercise an option by delivering written notice thereof to Landlord not more than nine (9) months prior to, and not less than six (6) months prior to, expiration of the immediately preceding term of this Lease. Monthly Base Rent during an Option Term shall be as set forth in Section 1.G. for that Option Term.
E. Tenant’s Early Termination Right . Tenant shall have the right to terminate this Lease with such termination effective at any time on or after the second (2 nd ) anniversary of the Commencement Date by delivering written notice of termination to Landlord. Such notice shall be effective only if it specifies the termination date for the Lease, which must be not less than three (3) months following Landlord’s receipt of such notice and is accompanied by Tenant’s payment of one-half of the Termination Payment (as defined below). The remaining one-half of the Termination Payment shall be paid on or before the termination date. As used herein, “Termination Payment” means: (i) the unamortized portion of the Tenant Improvement Cost and the Brokerage Commission, each of which shall be amortized monthly over the Initial Term of the Lease, together with interest on the amounts thereof at the rate of eight percent (8%) per annum; plus (ii) the amount of $14,056.00 representing the free rent granted to Tenant under Section 1(G) hereof.
SECTION 4. BASE RENT
A. Base Rent . Tenant shall pay Landlord the monthly Base Rent set forth in Section 1 in advance on or before the first day of each calendar month during the Term, without offset or deduction of any kind, except as expressly set forth herein.
 
6

B. Adjustments to Base Rent . The monthly Base Rent shall be adjusted as provided in Section 1.
C. Additional Rent. In addition to Base Rent, Tenant shall pay Landlord “Tenant’s Share of Taxes, and Expenses” in the manner described below. All such charges shall be deemed to constitute “Additional Rent” which shall be deemed to accrue uniformly during the calendar year in which the payment is due. Tenant agrees to pay as “Additional Rent” for the Premises, “Tenant’s Share” (defined below) of all Taxes and Expenses incurred by Landlord in the operation of the Building, Property, and Center. For purposes of this Lease, “Tenant’s Share” shall mean the ratio between the rentable area of the Premises and the rentable area of the Center. Tenant’s Share, calculated based on the initial square foot area of the Premises, is set forth in Section 1(F) above, and is subject to adjustment as set forth in Section 31(N).
1. Prior to or promptly after the commencement of each calendar year following the year in which the Lease commences, Landlord shall give Tenant a written estimate of the anticipated Taxes and Expenses for the calendar year and Tenant’s Share thereof. Tenant shall pay such estimated amount to Landlord in equal monthly installments, in advance, without deduction or offset, on or before the first day of each calendar month, with the monthly installment of Base Rent payable according to Section 4(A) above. Within ninety (90) days after the end of each calendar year, Landlord shall furnish to Tenant a statement showing in reasonable detail the actual amount of Taxes and Expenses incurred by Landlord during the applicable calendar year and Tenant’s Share thereof. If the statement shows Tenant’s Share of the actual amount exceeds the amount of Tenant’s estimated payments, within thirty (30) days after receiving the statement, Tenant shall pay the amount of the deficiency to Landlord. If the statement shows Tenant has overpaid, the amount of the excess shall be credited against installments next coming due under this Section 4; provided, however upon the expiration or earlier termination of the Lease Term, if Tenant is not then in default under this Lease, Landlord shall refund the excess to Tenant. During the first year of the Lease, Tenant’s Share of estimated Taxes and Expenses shall be not more than $2.00 per rentable square foot of the Premises per year, regardless of an actual share in excess of that amount. Notwithstanding the amount actually incurred by Landlord, the amount payable by Tenant hereunder in respect of Tenant’s Share of estimated Taxes and Expenses for any calendar year shall not increase by more than $.12 (on a non-cumulative basis) over the amount payable by Tenant hereunder for the immediately preceding calendar year, as limited by this Section C.1. For purposes of the cap in the preceding sentence, any partial year shall be annualized.
2. If at any time during any calendar year of the Lease Term the Taxes and Expenses applicable to the Building, Property, or Center change, Tenant’s estimated share of such Taxes, and Expenses, as applicable, may be adjusted accordingly effective as of the month in which such changes become effective, by written notice from Landlord to Tenant of the amount or estimated amount of the change, the month in which effective, and Tenant’s Share thereof, provided, that Tenant’s Share of Taxes and Expenses shall not be adjusted in excess of the limits imposed under Section C.1. Tenant shall pay such increase to Landlord as a part of Tenant’s monthly payments of estimated Taxes or Expenses as provided above, commencing with the month following the month in which Tenant is notified of the adjustment.
3. For purposes of this Lease, the term “Expenses” means all costs of and expenses paid or incurred by Landlord for maintaining, operating, managing, insuring, repairing, and administering the Building, Common Areas, Property, and Center, including all common areas and facilities and Systems and Equipment, and shall include the following costs by way of illustration but not limitation: water and sewer charges; storm drainage charges and retention facility charges; insurance premiums; insurance deductibles actually paid not to exceed $50,000 per claim; license, permit, and inspection fees; heat; light; power; steam; janitorial, cleaning, and security services; labor; salaries; air conditioning; landscaping; maintenance, repair, repaving and repainting or restriping of driveways, sidewalks, curbs, , and surface areas; painting of building exteriors; traffic and directional signs; an administrative fee of ten percent (10%) of total Expenses payable to Landlord or, in the alternative, if Landlord employs professional property managers for the Center, professional management fees not to exceed three percent (3%) of gross rents; supplies; materials; equipment; tools; the cost of any capital improvements or modifications made to the Building, Property, or Center by Landlord that reduce Expenses or are required under any Laws not applicable to the Building, Property, or Center or not in effect at the time the Building was constructed; trash removal; all property management costs, including office rent for any property management office and professional property management fees; legal and accounting expenses; and all other expenses or charges which, in accordance with generally accepted management practices would be considered an expense of maintaining, operating, repairing,
 
7

replacing or administering the Building, Property, or Center. Capital costs included in Expenses shall be amortized over such reasonable period as Landlord shall determine with a return on capital at the current market rate per annum on the unamortized balance or at such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing such capital replacements or improvements.
4. For purposes of this Lease, the term “Taxes” means all real estate taxes or personal property taxes and other taxes, surcharges and assessments, unforeseen as well as foreseen, which are levied with respect to the Building, Property, or Center and any improvements, fixtures and equipment and other property of Landlord, real or personal, located in the Building, Property, or Center and used in connection with the operation of the Building, Property, or Center and any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered in Section 15. The term “Taxes” shall also include any rental, excise, sales, transaction, privilege, or other tax or levy, however denominated, imposed upon or measured by the rental reserved hereunder or on Landlord’s business of leasing the Premises, excepting only net income, inheritance, gift, business and occupation, and franchise taxes.
5. Notwithstanding anything to the contrary contained above, as to each specific category of expense which one or more tenants of the Building , Property, or Center, at Landlord’s sole discretion, either pays directly to third parties or specifically reimburses to Landlord (e.g., separately metered utilities, separately contracted janitorial service, property taxes directly reimbursed to Landlord, etc.) such tenant(s) payments with respect thereto shall not be included in Expenses for purposes of this Section 4, but Tenant’s Share of each of such category of expense shall be adjusted by excluding from the denominator thereof the rentable area of all such tenants paying such category of expense directly to third parties or reimbursing the same directly to Landlord. Tenant shall not enter into separate contracts to provide any specific utility or service normally provided by the Building, without Landlord’s prior written consent in Landlord’s sole discretion. Moreover, if Tenant pays or directly reimburses Landlord for any such category of expense (which shall only be Landlord’s prior consent), such category of expense shall be excluded from the determination of Expenses for Tenant to the extent such expense was incurred with respect to space in the Building, Property, or Center actually leased to or occupied by other Tenants.
6. Tenant’s obligations to pay its share of Taxes and Expenses (or any other amounts) as provided in this Lease accruing during, or relating to, the period prior to expiration or earlier termination of this Lease, shall survive such expiration or termination. Landlord may reasonably estimate all or any of such obligations within a reasonable time before, or anytime after, such expiration or termination. Tenant shall pay the full amount of such estimate and any additional amount due after the actual amounts are determined, in each case within thirty (30) days after Landlord sends a statement therefore. If the actual amount is less than the amount Tenant pays as an estimate, Landlord shall refund the difference within thirty (30) days after such determination is made. Within ninety (90) days following the end of the calendar year in which the Lease terminates, Landlord shall deliver to Tenant its final statement of Taxes and Expenses.
7. Unless Tenant takes exception by notice to Landlord within ninety (90) days after Landlord provides any statement to Tenant for any item of Additional Rent, such statement shall be considered final and binding on Tenant (except as to additional Expenses or Taxes not then known or omitted by error). If Tenant takes exception by notice within such time, Landlord may seek confirmation from an independent certified public accountant as to the proper amount of Taxes and Expenses determined in accordance with sound accounting practices. In such case: (i) such confirmation shall be considered final and binding on both parties (except as to additional Expenses or Taxes not then known or omitted by error), and (ii) Tenant shall pay Landlord for the cost of such confirmation, unless it shows that Taxes and Expenses were overstated by at least five percent (5%). Pending resolution of any such exceptions, Tenant shall pay all amounts shown on such Landlord’s statement, subject to credit, refund or additional payment after any such exceptions are resolved.
D. Prorations . If the Term commences on a day other than the first day of a calendar month or ends on a day other than the last day of a calendar month, the Base Rent, Additional Rent, and any other amounts payable on a monthly basis shall be prorated on a per diem basis for such partial calendar months. If the Base Rent is scheduled to increase under Section 1 other than on the first day of a calendar month, the amount for such month shall be prorated on a per diem basis to reflect the number of days of such month at the then current and increased rates, respectively. If the Term commences other than on January 1, or ends other than on December 31, Tenant’s obligations to pay amounts under this Section 4 towards Taxes and Expenses for such first or final calendar years shall be prorated on a per diem basis to reflect the portion of such years included in the Term.
 
8

E. General Payment Matters . Base Rent and Additional Rent, which includes without limitation any other amounts which Tenant is or becomes obligated to pay Landlord under this Lease or other agreement entered in connection herewith, are sometimes herein referred to collectively as “Rent,” and all remedies applicable to the non-payment of Rent shall be applicable thereto. Rent shall be paid in good funds and legal tender of the United States of America without prior demand, offset, deduction, recoupment, set-off, or counterclaim, and without relief from any valuation or appraisement laws. Rent obligations hereunder are independent covenants. In addition to all other Landlord remedies, if any portion of Rent is not received within five (5) business days after written notice to Tenant, (i) any Rent not paid by Tenant when due shall accrue interest from the due date at the Default Rate until payment is received by Landlord and (ii) in addition to such interest, Tenant shall pay Landlord a service charge of two hundred fifty dollars ($250.00) or five percent (5%) of the delinquent amount, whichever is greater. No delay by Landlord in providing any Rent statement to Tenant shall be deemed a default by Landlord or a waiver of Landlord’s right to require payment of Tenant’s obligations hereunder including those for actual or estimated taxes, expenses or capital expenditures. In no event shall a decrease in Taxes or Expenses ever decrease the monthly Base Rent or give rise to a credit in favor of Tenant. Landlord may apply payments received from Tenant to any obligations of Tenant then accrued, in Landlord’s discretion, without regard to such obligations as Tenant may have designated.
SECTION 5: QUIET ENJOYMENT
Landlord agrees that if Tenant timely pays the Rent and performs the terms and provisions hereunder, while not in Default under this Lease Tenant shall hold the Premises during the Term, free of lawful claims by any party acting by or through Landlord, subject to the rights of mortgagees and to all other terms and provisions of this Lease.
SECTION 6: UTILITIES AND SERVICES
A. Utilities and Services .
1. Utilities . When a utility service is separately metered to the Premises, Tenant shall be solely responsible for contracting with the appropriate utility companies and shall promptly pay all usage charges and taxes for such utility services, which may include heating, ventilation, and air conditioning (“HVAC”), water, gas, sewage, electricity or any other utility used, consumed or provided in, furnished to or attributable to the Premises at the rates charged by the supplying utility companies and/or Landlord. Tenant shall pay directly to the utility provider, before due, all charges for utility services separately metered to the Premises. If a particular utility is not separately metered, or if a particular utility is metered through a deduct-meter for an account for which Landlord is responsible, Tenant shall pay Landlord monthly for such utility based upon the deduct-meter, if any, or otherwise based upon Tenant’s pro rata share of the monthly charges for such utilities based upon Tenant’s Share if utility usage is ratable among all tenants of the Building or Center based upon square footage occupied by each tenant or based upon actual utility usage by the tenants of the Building or Center as reasonably determined by Landlord if such usage is not ratable based upon square footage occupied. Should Landlord elect to supply any or all of such utilities, Tenant agrees to purchase and pay for the same as Additional Rent as apportioned by Landlord. The rate to be charged by Landlord to Tenant shall not exceed the rate charged to Landlord by any supplying utility. Tenant shall reimburse Landlord within ten (10) days of billing for fixture charges and/or water tariffs, if applicable, which are charged to Landlord by local utility companies. Landlord will notify Tenant of this charge as soon as it becomes known. This charge will increase or decrease with current charges being levied against Landlord, the Premises, Building, or Center by the local utility company, and will be due as Additional Rent.
2. Services . In addition to the repair and maintenance obligations of each party under Section 9 of this Lease, each party shall provide the following services:
(a) Janitorial Service. Tenant shall provide its own janitorial service within the Premises.
 
9

(b) Light Bulbs. Landlord will provide fluorescent tubes in light fixtures which are standard for the Premises, for Tenant’s use in replacing burned out tubes. Burned out bulbs, tubes or other light sources in fixtures which are not standard for the Premises will be provided and replaced by Tenant, at Tenant’s expense.
B. Interruptions . Landlord shall use reasonable diligence to remedy an interruption in the furnishing of such services and utilities required to be furnished by Landlord. If (i) any utilities or services to the Premises are interrupted or discontinued due to a cause within Landlord’s reasonable control, (ii) Tenant is unable to, and does not, use the Premises as a result of such interruption or discontinuance, (iii) Tenant shall have given notice respecting such interruption or discontinuance to Landlord, and (iv) Landlord fails to cure such interruption or discontinuance within ten (10) consecutive business days after receiving such notice, then Rent hereunder shall thereafter be abated until such time as such services or utilities are restored or Tenant begins using the Premises again, whichever shall first occur. Such abatement of Rent shall be Tenant’s sole remedy in the event of a discontinuance or interruption of services or utilities required to be provided by Landlord hereunder. Interruption of services and utilities shall not be deemed an eviction or disturbance of Tenant’s use and possession of the Premises or any part thereof or render Landlord liable to Tenant for damages or loss of any kind, or relieve Tenant from performance of Tenant’s obligations under this Lease, except as expressly provided herein. If, however, any governmental authority imposes regulations, controls, or other restrictions upon Landlord or the Building which would require a change in the services provided by Landlord under this Lease, Landlord may comply with such regulations, controls, or other restrictions, including without limitation, curtailment, rationing or restrictions on the use of electricity or any other form of energy serving the Premises. Tenant will cooperate and do such things as are reasonably necessary to enable Landlord to comply with such regulations, controls, or other restrictions.
C. Non-Standard Usage . Whenever heat generating machines or equipment or lighting other than building standard lights are used in the Premises by Tenant which affect the temperature otherwise maintained by the air cooling system, Landlord shall have the right to install supplementary air cooling units in the Premises, and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant. Landlord may impose a reasonable charge for utilities, to the extent not separately metered to the Premises, and services, including without limitation, the installation and operation of air cooling equipment, electric current and water, required to be provided the Premises by reason of, (a) any use beyond what Landlord agrees to furnish as described above, (b) electricity used by equipment other than low power usage office machines or by equipment reasonably designated by Landlord as high power usage equipment, or (c) the installation, maintenance, repair, replacement, or operation of supplementary air cooling equipment, additional electrical systems, or other equipment required by reason of special electrical, heating, cooling or ventilating requirements of equipment used by Tenant at the Premises. High power usage equipment includes without limitation, mainframe or mini-computers, multiple servers, and any machines which operate on 220-volt circuits. Tenant shall not install or operate high power usage equipment on the Premises without Landlord’s prior written consent, which may be refused unless (i) Tenant confirms in writing its obligation to pay the additional charges necessitated by such equipment and such equipment does not adversely affect operation of the Building, and (ii) the Building electrical capacity will not be exceeded. In no event shall Tenant allow the use of any space heaters or other portable heating unit at the Premises.
D. Utility Providers . Notwithstanding anything to the contrary in this Lease, Landlord shall have the sole, exclusive, and absolute right to determine, select, change, and contract with utility company or companies that will provide electricity and other basic utility service, except for telecommunication services, to the Building, , Property, Center, and Premises. If permitted by law, during the Term of this Lease, Landlord shall have the right at any time, and from time to time, to either contract for services from a different company or companies providing electricity or other basic utility service (each such company hereinafter an “Alternative Service Provider”) or continue to contract for service from the service provider(s) that is providing such utility service to the Building,, Property, Center, or Premises at the Commencement Date (each the “Existing Service Provider”). Tenant shall cooperate with Landlord, the Existing Service Provider, and any alternate Service Provider at all times and, as reasonably necessary, shall allow Landlord, the Existing Service Provider, and any Alternate Service Provider access to the Building’s utility lines, plumbing, feeders, risers, wiring, and any other machinery or utility access ways within the Premises.
 
10

SECTION 7: DEPOSITS
Prior to execution of this Lease, Tenant has deposited with Landlord the Deposit in the amount set forth in Section 1(K). This money represents a security deposit (“Security Deposit”) for the performance by the Tenant of the provisions of this Lease, in the amount identified in Section 1(K). Tenant acknowledges that the Security Deposit has been paid to Landlord, in substantial part because of Tenant’s intention to allow its employees to bring pet dogs and cats to work with them to the Premises. As such, the Security Deposit may be applied to Landlord for customary cleaning purposes and for the purpose of ridding the Premises of offensive odors, stains, and other undesirable effects of the occupancy of the Premises by dogs and cats, including, to the extent reasonably necessary and without limitation, cleaning or replacing carpet and flooring, repainting and/or re-drywalling, and odor removal or treatment. If Tenant is in default, Landlord may use the Security Deposit or any portion of them to cure the default or compensate Landlord for any damage resulting from Tenant’s default. On demand, Tenant shall immediately pay to Landlord the sum necessary to restore the Security Deposit to the amount initially deposited with Landlord. If Tenant is not in default at the expiration or termination of the Lease, or any extension thereof, Landlord shall return the Security Deposit to Tenant within thirty (30) days. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not a trustee. Landlord may maintain such sums separate and apart from Landlord’s general funds or may commingle them with Landlord’s general or other funds. Landlord is not required to pay Tenant interest on such sums, or any portion thereof. In the event this Lease is terminated before its normal expiration date, any rent paid for any period beyond the expiration date will be considered an additional Security Deposit. The Security Deposit and any required replenishment thereof shall be Additional Rent.
SECTION 8: USE, COMPLIANCE WITH LAWS AND RULES, PETS
A. Use of Premises and Compliance With Laws . Tenant shall use the Premises solely for the purposes set forth in Section 1 and for no other purpose without obtaining the prior written consent of Landlord, which shall not be unreasonably withheld for uses consistent with Landlord’s then existing use criteria for the Building. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises or with respect to the suitability of the Premises or the Building for the conduct of Tenant’s business, nor has Landlord agreed to undertake any modification, alteration, or improvement to the Premises or the Building, except as provided in writing in this Lease. Tenant acknowledges that Landlord may from time to time, at its sole discretion, make such modifications, alterations, repairs, deletions, or improvements to the Building, Property, or Center as Landlord may deem necessary or desirable, without compensation or notice to Tenant, provided that such alterations, repairs, deletions, or improvements shall not materially adversely affect Tenant’s use of the Premises or common areas of the Building or Tenant’s ingress and egress to and use of the parking area utilized by Tenant and in no event shall Landlord be liable for any consequential damages. Tenant shall promptly comply with all Laws affecting the Premises and the Building, as well as the Rules (defined below), and to any reasonable modifications to the Rules as Landlord may adopt from time to time. Tenant acknowledges that, except for Landlord’s obligations pursuant to Sections 9 and 30, Tenant is solely responsible for ensuring that the Premises comply with any and all Laws applicable to Tenant’s specialized use of and conduct of business on the Premises (as compared to general office use), and that Tenant is solely responsible for any alterations or improvements that may be required by such Laws, now existing or hereafter adopted, provided, however, that in no event shall Tenant be required to make or reimburse Landlord for any structural changes to the Building or any changes to the unexposed portions of the Systems and Equipment. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything in the Premises that will in any way increase the premiums paid by Landlord on its insurance related to the Building or which will in any way increase the premiums for fire or casualty insurance carried by other tenants in the Building. Tenant will not perform any act or carry on any practices that may injure the Premises or the Building that may be a nuisance or menace to other tenants in the Building or that shall in any way interfere with the quiet enjoyment of such other tenants. Tenant shall not do anything on the Premises which will overload any existing parking or service to the Premises. Tenant shall promptly give notice to Landlord of any violation of Laws pertaining to the Premises or the Building of which Tenant becomes aware. Tenant shall not resell any telecommunications services, satellite capacity, electricity, or other utility or service.
 
11

B. Rules . Tenant shall comply with the rules set forth in Rider One attached hereto (the “Rules”) in addition to all other terms of this Lease. Landlord shall have the right, by written notice to Tenant or by posting at the Building, to reasonably amend such Rules and supplement the same with other reasonable non-discriminatory Rules relating to the Building, Property, or Center, or the promotion of safety, care, efficiency, cleanliness or good order therein. Nothing herein shall be construed to give Tenant or any other Person any claim, demand or cause of action against Landlord arising out of the violation of such Rules by any other tenant or visitor of the Building , Property, or Center, or out of the enforcement, modification or waiver of the Rules by Landlord in any particular instance.
C. Pets . Tenant has requested Landlord to allow Tenant’s employees to bring dogs and cats to the Premises, Property, and Center. In connection with that request, Tenant has provided Landlord with its internal standards for allowing pets at its workplace, entitled “Guidelines for Pets in Our Workplace” (the “Tenant’s Pet Guidelines” ). Tenant represents and warrants to Landlord that Tenant’s Pet Guidelines shall remain in full force and effect in their form as of the date of this Lease throughout the Initial Term and any Option Term, without material change. Landlord is willing to grant its permission to Tenant to allow only its employees to bring dogs and cats to the Premises, Property, and Center, subject to the following conditions, which shall be in addition to and not in derogation of Tenant’s Pet Guidelines:
(a) Tenant and Tenant’s employees shall at all times follow the Tenant’s Pet Guidelines;
(b) Tenant and Tenant’s employees shall at all times contain all pets within the Premises or, if not in the Premises, on a leash and under control of the owner;
(c) Tenant and Tenant’s employees shall properly and immediately pick up, clean up, and dispose of all pet waste at the Premises, Property, or Center;
(d) Tenant and Tenant’s employees shall not permit any pet to enter the premises of Landlord or of any other Tenant;
(e) Only pets with all vaccinations and flea treatments up-to-date shall be permitted at the Premises, Property, and Center;
(f) Tenant and Tenant’s employees shall not permit any violations of any applicable laws or regulations concerning animals, including without limitation Seattle Municipal Code, Title 9, Animals;
(g) Tenant and Tenant’s employees shall not allow any “dangerous animal,” as that term is defined in Seattle Municipal Code 9.25.02.G, or any animal that displays aggression to or threatens any person or other animal on the Premises, Property, or Center;
(h) Tenant shall at all times maintain the Premises free of any pet damage;
(i) Tenant and Tenant’s employees shall not allow any pet to become a nuisance or to annoy any other tenants of Landlord or neighbors to the Center, whether through barking, whining, other noise, behavior, or otherwise;
(j) Landlord shall have at all times the right to designate portions of the Property and Center in which pets shall be prohibited or within which pets must be confined;
(k) In addition to an not in derogation of all other indemnities contained herein, Tenant shall indemnify, defend, and hold harmless Landlord, its directors, officers, agents, employees, and contractors, from and against any claim, loss, damage, suit or other proceeding, settlement, cost, or other expense of any nature whatsoever, including without limitation attorneys’ and other experts’ fees and costs (“Claims”), arising from or related to the presence or behavior of any pet that Tenant or any Tenant’s employee or agent has permitted at the Premises, Property, or Center or which has escaped from the Premises, Property, or Center. The foregoing indemnity covers actions brought by Tenant’s own employees and it is specifically and expressly intended to constitute a waiver of Tenant’s immunity under Washington’s Industrial Insurance Act, RCW Title 51, to the extent necessary to provide Landlord with a full and complete indemnity from claims made by Tenant and its employees, to the extent provided herein.
 
12

SECTION 9: MAINTENANCE AND REPAIRS
Unless expressly provided otherwise in this Lease, and in addition to the provisions of Section 6(A)(vi), Landlord shall maintain, in good condition, the common areas of the Building, if any, the structural parts of the Building which shall include only the foundations, bearing and exterior walls, exterior windows, exterior doors, subflooring, gutters, downspouts, and the roof of the Building and the Building Systems and Equipment; provided, in the event any such replacements, repairs or maintenance are caused by or result from Tenant’s excessive or improper use or occupation thereof or which are caused by or result from the negligence or improper conduct of Tenant, its agents, employees or invitees, the cost of such repairs shall be paid solely by Tenant and Tenant shall pay the cost thereof within ten (10) days of notice from Landlord, subject to the waiver of claims and waiver of subrogation provisions of Section 11 hereof. Except as provided above, and subject to Section 10 of this Lease, Tenant shall maintain and repair the Premises in neat, clean, sanitary and good condition, including, without limitation, maintaining and repairing all interior walls, ceilings, interior doors, interior windows and fixtures, Premises’ specific systems and equipment, and accessible interior plumbing serving the Premises (not including plumbing within walls, ceiling, or floor) as well as any damage to the Building,, Center or Premises caused by Tenant, its agents, employees or invitees, the latter subject to the waiver of claims and waiver of subrogation provisions of Section 11. If Tenant shall fail to keep and preserve the Premises in said condition and state or repair, Landlord may, at its option (but with no obligation) put or cause the same to be put into the condition and state of repair agreed upon, and in such case Tenant, on demand, shall pay the cost thereof.
SECTION 10: ALTERATIONS AND LIENS
A. Alterations . Subsequent to the completion of any Landlord’s Work pursuant to Section 2, if any, Tenant shall not attach any fixtures, equipment or other items to the Premises, or paint or make any other additions, changes, alterations, repairs or improvements (collectively hereinafter “Alterations”) to the Premises, Building , Property, or Center without Landlord’s prior written consent, which with respect to Alterations to the Premises will not be unreasonably withheld so long as Tenant is not then in default of this Lease (beyond any applicable cure period). For any proposed work in excess of $5,000 or that involves any Alterations to the structure of the Building or the Systems and Equipment, Landlord may condition its consent on Tenant’s delivery to Landlord of a letter of credit or completion bond in the amount of 50% of the estimated cost of the Alterations, conditioned upon Tenant’s timely completion of the work and payment of all persons having lien rights on account of the work. If Landlord consents to any Alterations, Landlord may post notices of nonresponsibility in accordance with law. Any Alterations so made shall remain on and be surrendered with the Premises upon expiration or earlier termination of this Lease, except that Landlord may, within thirty (30) days before expiration of this Lease or within thirty (30) days after earlier termination of this Lease elect to require Tenant to remove any or all Alterations at Tenant’s sole cost and expense; provided, however, at the time Tenant submits plans for requested Alterations to Landlord for Landlord’s approval, Tenant may request Landlord to identify which Alterations Landlord may require Tenant to remove at the termination of or expiration of this Lease, and Landlord shall make such identification simultaneous with its approval (if any) of the Alterations. If Landlord elects to require removal of Alterations, then at its own and sole cost Tenant shall restore the Premises to the condition prior to the installation of the alteration (reasonable wear and tear, condemnation and casualty damage excepted), before the last day of the term or within thirty (30) days after notice of its election is given, whichever is later. If after receiving Landlord’s consent to any alteration, Tenant changes or modifies its planned alteration, Tenant shall obtain Landlord’s consent to all such changes and modifications. Landlord consents to all of Tenant’s Alterations to the Premises in existence on the date of this Lease.
B. Performance . In the event Landlord consents in writing to Tenant’s requested alteration of the Premises, Tenant shall only contract with a contractor approved by Landlord for the construction of such Alterations, shall secure all appropriate governmental approvals, and permits, and shall complete such Alterations with due diligence, in a neat, clean, good and workmanlike manner and in strict compliance with the plans and specifications approved by Landlord. All such construction shall be performed in a manner which shall not interfere with the occupancy of the other tenants of the Building. All cost, expenses and fees related to or arising from construction of any alteration shall be paid by Tenant prior to delinquency. Landlord may impose additional reasonable conditions and rules respecting the manner and times in which such alteration work may be performed. Upon termination of the Lease or surrender of all or a portion of the Premises, Tenant shall assign to Landlord any warranties that Tenant has received for any space or equipment surrendered. Tenant shall maintain records of the cost of its improvements and Alterations for at least six (6) years and shall provide them to Landlord upon request.
 
13

C. Liens . Tenant shall pay all costs for Alterations when due. Tenant shall keep the Property, Center, Building, Premises and this Lease free from any mechanic’s, materialman’s, architect’s, engineer’s or similar liens or encumbrances, and any claims therefore, or stop or violation notices, in connection with any alteration. Tenant shall remove any such claim, lien or encumbrance, or stop or violation notices of record, by bond or otherwise within ten (10) days after notice by Landlord. If Tenant fails to do so, such failure shall constitute a default by Tenant, and Landlord may, in addition to any other remedy, pay the amount (or any portion thereof) or take such other action as Landlord deems necessary to remove such claim, lien or encumbrance, or stop or violation notices, without being responsible for investigating the validity thereof. The amount so paid and costs incurred by Landlord shall be deemed Additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord’s title to, or any Lender’s interest in, the Building, Property, Center or Premises to any such claims, liens or encumbrances, or stop or violation notices, whether claimed pursuant to statute or other Law or express or implied contract.
SECTION 11: INSURANCE AND WAIVER OF SUBROGATION
A. Insurance . During the term of this Lease, Tenant at its sole cost and expense shall continuously maintain the following types of insurance coverages: (i) Property Damage Insurance for the protection of Tenant and Landlord, as their interests may appear, covering all of Tenant’s improvements and Alterations to the premises, Tenant’s personal property, business records, fixtures and equipment, and other insurable risks in an amount not less than the full insurance replacement cost of such property and the full insurable value of such other interests of Tenant, with coverages that also include “Building and Personal Property”, and (ii) Worker’s Compensation Insurance (if applicable) in the amounts required by statute together with Employer Liability Insurance with bodily injury by each accident with limits of at least $2,000,000, bodily injury by disease with limits of at least $2,000,000, and an aggregate bodily injury limit of at least $2,000,000; and (iii) Commercial General Liability Insurance with limits of $2,000,000 each occurrence, and in the aggregate, with coverage for death and bodily injury, property damage or destruction (including loss of use), product liability and completed operations, and contractually assumed liabilities. All insurance required to be carried by Tenant hereunder shall name Landlord and Landlord’s Lender (if any) as additional insureds (provided as to Landlord’s Lender only that Tenant is given advance notice of the name and address of Landlord’s Lender). Additionally, all insurance required to be provided by Tenant under this Lease: shall be issued by insurance companies authorized to do business in the State of Washington with a financial rating of at least an “A-” status as rated in the most recent edition of Best’s Key Rating guide; shall be issued as a primary policy; shall be on an occurrence basis; and shall contain an endorsement requiring at least thirty (30) days prior written notice of cancellation to Landlord and Landlord’s Lender (if any), before cancellation or change in coverage, scope, or amount of any policy. Tenant shall deliver evidence of insurance in the form of an ACORD Form or equivalent of or copy of such policy together with evidence of payment of all current premiums to Landlord within thirty(30) days of execution of this Lease. Any evidence of insurance shall designate Tenant as the insured, specify the Premises location, list Landlord (and its Lender, if any) as additional insureds, and list Landlord with Landlord’s current address as “Certificate Holder.” If Tenant fails to provide the required evidence of insurance within the time required, Landlord shall have the right, but not the obligation, to obtain the evidence directly from the Tenant’s insurance broker. Tenant shall take all necessary steps to renew all insurance at least thirty (30) days prior to such insurance expiration dates and shall provide Landlord a copy of the renewed policy or evidence thereof, prior to said policy’s expiration date. If Tenant fails at any time to maintain the insurance required by this Lease, and fails to cure such default within five (5) business days of written notice from Landlord then, in addition to all other remedies available under this Lease and applicable law, Landlord may purchase such insurance on Tenant’s behalf and the cost of such insurance shall be Additional Rent due within ten (10) days of written invoice from Landlord to Tenant. Notwithstanding the foregoing, Tenant may comply with its insurance obligations hereunder by endorsement to any blanket policy of insurance carried by Tenant. Landlord may change the requirements of this Section 11 upon written notice to Tenant to conform to any requirements of any Landlord’s Lender or insurance provider.
 
14

During the term of this Lease, Landlord shall maintain a policy or policies of “all-risk” or “special causes of loss” property insurance covering all improvements on the Property including the Building in an amount of not less than one hundred percent (100%) of the full insurable replacement cost of the Building. Such insurance shall contain an agreed valuation provision in lieu of any co-insurance clause.
B. Waiver of Claims and Subrogation . Landlord and Tenant release and relieve the other, and waive the entire right of recovery for loss or damage to property located within or constituting a part or all of the Premises, the Building, Property, or Center to the extent that the loss or damage is actually covered by insurance carried by either party and in force at the time of such loss or damage or would have been covered under a typical “all risk” or “special causes of loss” casualty policy of insurance had the damaged party maintained such coverage, excluding from such waiver only deductibles under such policies in the maximum amount of $10,000. This waiver applies whether or not the loss is due to the negligent acts or omissions of Landlord or Tenant, or their respective officers, directors, employees, agents, contractors, or invitees. Each of Landlord and Tenant shall have their respective property insurers endorse the applicable insurance policies to reflect the foregoing waiver of claims, provided, however, that the endorsement shall not be required if the applicable policy of insurance permits the named insured to waive rights of subrogation on a blanket basis, in which case the blanket waiver shall be acceptable.
SECTION 12: CASUALTY DAMAGE
In the event twenty-five percent (25%) or less of the Building shall be destroyed or rendered untenantable, either wholly or in part, by fire or other casualty, and the Premises shall be unaffected, then Landlord shall restore the Building to as near its previous condition as is reasonably possible, provided that sufficient insurance proceeds are available to Landlord to pay the cost of restoration, and provided further that if the Premises are unaffected by the fire or other casualty, Landlord shall have no right to terminate this Lease. In the event more than twenty-five percent (25%) of the Building or any portion of the Premises shall be destroyed or rendered untenantable, either wholly or in part, by fire or other casualty, Landlord may, at its option, restore the Building or Premises to as near their previous condition as is reasonably possible and in the meantime the Rent shall be abated in the same proportion as the untenantable portion of the Premises bears to the whole thereof, provided, such abatement shall apply only to the extent the Premises are untenantable for the purposes permitted under this Lease and not used by Tenant as a result thereof. Except as provided above, unless Landlord, within twenty (20) days after the receipt of insurance proceeds on account of the casualty, shall notify Tenant of its election to so restore, this Lease shall thereupon terminate and end, provided, if in Landlord’s reasonable estimation the Premises cannot be restored within one hundred eighty (180) days following such destruction, Landlord shall notify Tenant and Tenant may terminate this Lease (regardless of Landlord’s intent to restore) by delivery of notice to Landlord within thirty (30) days of Landlord’s notice. Such restoration by Landlord shall not include replacement of furniture, equipment, or other items that do not become part of the Building or any improvements to the Premises in excess of those provided for in the allowance for building standard items. Tenant agrees that the abatement of Rent as provided above shall be Tenant’s sole and exclusive recourse in the event of such damage, and Tenant waives any other rights Tenant may have under applicable Law to perform repairs or terminate the Lease by reason of damage to the Building or Premises.
SECTION 13: CONDEMNATION
If twenty-five percent (25%) or more of the rentable area of the Premises shall be taken by power of eminent domain or condemned by a competent authority or by conveyance in lieu thereof for public or quasi-public use (“Condemnation”), including any temporary taking for a period of one year or longer, then either Landlord or Tenant may elect to terminate this Lease on the date possession for such use is so taken. If: (i) less than twenty-five percent (25%) of the Premises is taken, but the taking includes or affects a material portion of the Building, Property, or Center, or the economical operation thereof; (ii) less than twenty-five percent (25%) of the Premises is taken and in the reasonable judgment of Landlord the remaining Premises are not usable for the business of Tenant, or (iii) the taking is temporary but will be in effect for more than ninety (90) days, then in either such event, Landlord may elect to terminate this Lease upon at least thirty (30) days’ prior notice to Tenant. The parties further agree that: (a) if this Lease is terminated, all Rent shall be apportioned as of the date of such termination or the date of such taking, whichever shall first occur, (b) if the taking is temporary, Rent shall not be abated for the period of the taking, but Tenant may seek a condemnation award therefore (and the Term shall not be extended thereby), and (c) if this Lease is not terminated but any part of the Premises is permanently taken, the Rent shall be proportionately abated based on the square footage of the Premises so taken. Landlord shall be entitled to receive
 
15

the entire award or payment in connection with such Condemnation and Tenant hereby assigns to Landlord any interest therein for the value of Tenant’s unexpired leasehold estate or any other claim and waives any right to participate therein, and Tenant shall make no claim against Landlord for termination of the leasehold interest or interference with Tenant’s business. Tenant, however, shall have the right to claim damages from the condemning authority for a temporary taking of the leasehold as described above, for moving expenses and any taking of Tenant’s personal property and for the interruption to Tenant’s business, but only if such damages are awarded separately in the eminent domain proceeding and not as part of the damages recovered by Landlord.
SECTION 14: ASSIGNMENT AND SUBLETTING
A. Consent Required . Except as otherwise provided in this Lease, Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed, subject to the provisions of Section 14(E), assign this Lease or any interest therein, or sublet the Premises or any part thereof, or hypothecate or otherwise encumber the leasehold interest, or permit the use of the Premises by any party other than Tenant or otherwise transfer this Lease (collectively “transfer” ). Subject to the other provisions of this Section 14, such consent shall be entirely discretionary with Landlord. Consent to one such transfer shall not destroy or waive this provision, and all subsequent transfers shall likewise be made only upon obtaining prior written consent of Landlord. Subtenants or assignees shall become directly liable to Landlord for all obligations of Tenant hereunder, without relieving Tenant of any liability.
B. Intentionally Omitted .
C. Costs . Whether or not Landlord consents to a proposed transfer (or exercises its right to recapture), Tenant shall reimburse Landlord on demand for any and all actual reasonable out-of-pocket costs, not to exceed $1,500, that may be incurred by Landlord in connection with any proposed transfer including, without limitation, the cost of investigating the acceptability of the proposed transferee and Landlord’s reasonable attorneys’ fees incurred in connection with each proposed transfer.
D. Notice . Any notice or request to Landlord with respect to a proposed assignment or sublease shall contain the name of the proposed assignee or subtenant (collectively “transferee” ), the nature of the proposed transferee’s business to be conducted at the Premises, and the terms and provisions of the proposed transfer. Tenant shall also provide Landlord with a copy of the proposed transfer documents when available and such financial and other information with respect to the proposed transferee and transfer that Landlord may reasonably require.
E. Consent . In the event of a proposed transfer, Landlord will not unreasonably withhold its consent thereto if (a) Tenant is not then in default of this Lease (beyond any applicable cure period), (b) the proposed transferee will continuously occupy and use the Premises for the term of the transfer, (c) the use by the proposed transferee will be general office use, (d) the proposed transferee is reputable and of sound financial condition, (e) the transfer will not directly or indirectly cause Landlord to be in breach of any contractual obligation, and (f) the proposed transferee is not an existing tenant or subtenant of any other premises located on the Property or Center, provided, however, in the event that no comparable space to that which Tenant seeks to assign or sublet is otherwise available at the Center, as determined by Landlord in its reasonable discretion, then this condition (f) shall not apply. In all other cases, Landlord may withhold consent in its sole discretion. Landlord shall respond to any written request for consent to assignment, subletting or other transfer requiring Landlord’s consent under this Lease as soon as reasonably possible and in any case within ten (10) business days after Tenant’s request. If Landlord requires additional documents or information to facilitate Landlord’s evaluation of the proposed transfer, Landlord shall so notify Tenant within such ten (10) business day period, specifying in reasonable detail the additional documents or information requested, and Landlord shall have ten (10) business days following receipt of all of the information so requested in which to respond to Tenant’s request for Landlord’s consent. If Landlord disapproves of any proposed transfer, Landlord shall so notify Tenant in writing within such ten (10) business day period, setting forth in reasonable detail the basis for Landlord’s disapproval.
F. Terms . Any option(s) granted to Tenant in this Lease or any option(s) granted to Tenant in any amendments to this Lease, to the extent that said option(s) have not been exercised, shall terminate and be voided in the event this Lease is assigned, or any part of the Premises is sublet, or Tenant’s interest in the Premises is otherwise transferred (other than pursuant to a Permitted Transfer), unless otherwise agreed to by Landlord.
 
16

G. Permitted Transfers . Notwithstanding anything to the contrary in this Section 14, Tenant shall have the right, without Landlord’s consent, but upon ten (10) days prior notice to Landlord, to assign this Lease or sublet all or any part of the Premises to any parent, subsidiary, or affiliate of Tenant or to any person, firm, corporation, or other entity which shall be controlled by, under the control of, or under common control with Tenant, or any entity into which Tenant may be merged or consolidated or which purchases all or substantially all of the assets of Tenant (“Permitted Transfer”). Control as used in the preceding sentence means the direct or indirect ownership or right to vote of more than fifty percent (50%) of the voting securities of an entity, or possession of the ownership or control of the management rights and duties of the entity’s affairs.
H. Subletting or Assignment of Other Tenant’s Leases . Without the prior written consent of Landlord, which shall not be unreasonably withheld, Tenant shall not accept an assignment of another tenant’s lease of premises in the Building, Property, or Center and shall not sublet any premises from another tenant in the Building, Property, or Center.
I. Breach of Section 14 . In the event that Tenant is in breach of its obligation to obtain Landlord’s consent to any assignment or subletting, Tenant shall be in immediate default under this Lease without the requirement of notice from Landlord or any opportunity to cure the default.
J. Confidentiality of Assignment and Sublease . Tenant shall keep confidential the terms of any assignment or sublease to which Landlord consents and shall cause and direct its directors, officers, shareholders, partners, members, principals, employees, attorneys and other professionals, and agents to keep such terms confidential.
SECTION 15: PERSONAL PROPERTY, RENT AND OTHER TAXES
Tenant shall pay prior to delinquency all taxes, charges or other governmental impositions assessed against, levied upon or otherwise imposed upon or with respect to all fixtures, furnishings, personal property, systems and, equipment owned or installed exclusively by or for Tenant and located in or exclusively serving the Premises. Whenever possible, Tenant shall cause all such items to be assessed and billed separately from the other property of Landlord. In the event any such items shall be assessed and billed with the other property of Landlord, Tenant shall pay Landlord its share of such taxes, charges or other governmental impositions within ten (10) days after Landlord delivers a statement and a copy of the assessment or other documentation showing the amount of impositions applicable to Tenant’s property. Tenant shall pay any rent tax, sales tax, service tax, transfer tax, value added tax, or any other applicable tax on the Rent, utilities, or services herein, the privilege of renting, using, or occupying the Premises, or collecting Rent therefrom, or otherwise respecting this Lease or any other document entered into by the parties in connection herewith, excluding, however, any excess profits taxes, business and occupation taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes applied or measured by Landlord’s general or net income (as opposed to rents, receipts, or income attributable to operations at the Building).
SECTION 16: LANDLORD’S REMEDIES
A. Default . The occurrence of any one or more of the following events shall constitute a “Default” by Tenant and shall give rise to Landlord’s remedies set forth in Section 16(B) below: (i) failure to make when due any payment of Rent, unless such failure is cured within five (5) business days after written notice from Landlord; (ii) failure to observe or perform any term or condition of this Lease other than the payment of Rent (or the other matters expressly described herein), unless such failure is cured within any period of time following notice expressly provided with respect thereto in other Sections hereof, or otherwise within a reasonable time, but in no event more than thirty (30) days following notice from Landlord (provided, if the nature of Tenant’s failure is such that more time is reasonably required in order to cure, Tenant shall not be in Default if Tenant commences to cure promptly within such period and thereafter diligently pursues its completion); (iii) abandonment and vacation of the Premises (failure to occupy and operate the Premises for fifteen (15) consecutive business days while in monetary default
 
17

under this Lease shall conclusively be deemed an abandonment and vacation); (iv) (a) Tenant, or any guarantor or any unreleased assignor of this Lease (“Guarantor”), filing by or for reorganization or arrangement under any Law relating to bankruptcy or insolvency (unless, in the case of a petition filed against Tenant or such Guarantor, the same is dismissed within thirty (30) days; or (b) Tenant’s or any Guarantor’s insolvency or failure, or admission of an inability, to pay debts as they mature; or (v) Tenant’s failure to obtain Landlord’s consent before assigning the Lease or subletting all or a portion of the Premises. Additionally, if Tenant violates the same term or condition of this Lease on three (3) occasions during any twelve (12) month period, Landlord shall have the right to exercise all remedies for any violations of the same term or condition during the next twelve (12) months without providing further notice or an opportunity to cure. The notice and cure periods provided herein are intended to satisfy any and all notice requirements imposed by Law on Landlord and are in lieu of, and not in addition to, any notice and cure periods provided by Law; provided, Landlord may elect to comply with such notice and cure periods provided by Law. In the event of Tenant’s default hereunder, and in addition to any other amounts or remedies Landlord may be entitled to, Landlord shall be entitled to recover from Tenant all of Landlord’s costs and reasonable attorneys’ fees incurred in enforcing this Lease or otherwise arising from Tenant’s default.
B. Remedies . If a Default occurs, Landlord shall have the rights and remedies hereinafter set forth to the extent permitted by Law, which shall be distinct, separate and cumulative with and in addition to any other right or remedy allowed under any Law or other provision of this Lease:
1. Landlord may terminate Tenant’s right to possession without termination of this Lease, or Landlord may terminate this Lease and Tenant’s right to possession, at any time following a Default; provided, no act of Landlord other than giving notice to Tenant with express statement of termination shall terminate this Lease or Tenant’s right to possession. Acts of maintenance, efforts to relet the premises, or the appointment of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a termination of tenant’s right to possession. Upon termination of Tenant’s right to possession, Landlord shall have the right to reenter the Premises and recover from Tenant in addition to any other monies provided herein or at Law; (a) the Worth of the unpaid Rent that had been earned by Landlord at the time of termination of Tenant’s right to possession; (b) the Worth of the amount of the unpaid Rent that had been earned after the date of termination of Tenant’s right to possession through the expiration of the Lease Term; (c) the unamortized portion of the cost to the Landlord of Landlord’s Work which shall be amortized over the Initial Term of the Lease at an interest rate equal to the prime rate (as published by the Wall Street Journal) plus two percent (2%) per annum adjusted as of the first day of each calendar quarter during the Lease Term; and (d) all other expenses incurred by Landlord on account of Tenant’s Default, including without limitation any Costs of Reletting (defined below) and Landlord’s reasonable attorneys’ fees and collection costs. The “Worth” as used for item (a) above is to be computed by allowing interest at the rate of twelve percent (12%) to accrue on all such unpaid Rent (or such lesser rate required by Law, if any). The Worth as used for item (b) above is to be computed by discounting the amount of Rent at the discount rate of the Federal Reserve Bank of San Francisco at the time of termination of Tenant’s right of possession.
2. In the event of any such reentry by Landlord, Landlord may, at Landlord’s option, require Tenant to remove from the Premises any of Tenant’s property located thereon. If Tenant fails to do so, Landlord shall not be responsible for the care or safekeeping thereof and may remove any of the same from the Premises and place the same elsewhere in the Building or in storage in a public warehouse at the cost, expense, and risk of Tenant with authority to the warehouseman to sell the same in the event that Tenant shall fail to pay the cost of transportation and storage, all in accordance with the rules and regulations applicable to the operation of a public warehouseman’s business. In any and all such cases of reentry Landlord may make any repairs in, to, or upon the Premises which may be necessary, desirable, or convenient, and Tenant hereby waives any and all claims for damages which may be caused or occasioned by such reentry or to any property in or about the Premises or any part thereof.
3. Landlord may bring suits for amounts owed by Tenant hereunder or any portions thereof, as the same accrue or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord’s right to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought for any amount not theretofore reduced to judgment. Landlord may pursue one or more remedies against Tenant and need not make an election of remedies. All rent and other consideration paid by any replacement tenants shall be applied at Landlord’s option; (i) first, to the Costs of Reletting (defined below), (ii) second, to the payment of all costs and reasonable attorneys’ fees of enforcing this
 
18

Lease against Tenant or any Guarantor, (iii) third, to the payment of all interest and service charges accruing hereunder, (iv) fourth, to the payment of Rent theretofore accrued, and (v) with the residue, if any, to be held by Landlord and applied to the payment of Rent and other obligations of Tenant as the same become due (and with any remaining residue to be retained by Landlord). “Costs of Reletting” shall include without limitation, all reasonable costs and expenses incurred by Landlord for any repairs, or other matters necessary to prepare the Premises for another tenant, brokerage commissions, advertising costs, attorneys’ fees, and any economic incentives given to enter leases with replacement tenants; provided, however, Costs of Reletting related to alterations in connection with reletting shall be limited to the amount that would be reasonably necessary to restore the Premises to the condition required by Section 22 of this Lease and provided further that any brokerage commissions or other concessions shall be amortized over the entire term of any replacement lease and the amount included in the Costs of Reletting shall be limited to the amount attributable to the period beginning on the date of the applicable Default and ending on the expiration date of the initial term of this Lease. With respect to reletting the Premises, Landlord shall only be required to use reasonable efforts that do not exceed such efforts Landlord generally uses to lease other space in the Building, Landlord may continue to lease other portions of the Building or other projects owned or managed by Landlord in the same vicinity before reletting all or a portion of the Premises, and Landlord shall not be required to relet at rental rates less than Landlord’s then-existing rates for new leases or terms less favorable to Landlord than those contained herein. The times set forth herein for the curing of Defaults by Tenant are of the essence of this Lease.
SECTION 17: SUBORDINATION, ATTORNMENT AND LENDER PROTECTION
A. Subject to subsection 2 of this Section, this Lease is subject and subordinate to all Mortgages now or hereafter placed upon the Center, Property, Building, Premises, or any interest of Landlord therein, and all other recorded encumbrances, and matters of public record applicable to the Center, Property, Building, or, Premises as of the date of this Lease. Whether before or after any foreclosure or power of sale proceedings are initiated or completed by any Lender or a deed in lieu thereof is granted (or any ground lease is terminated), Tenant agrees upon written request of any such Lender or any purchaser at such sale, to attorn and pay Rent to such party, and recognize such party as Landlord (provided such Lender or purchaser shall agree not to disturb Tenant’s occupancy so long as Tenant does not Default hereunder, on a form customarily used by, or otherwise reasonably acceptable to, such party). However, in the event of attornment, no Lender shall be: (i) liable for any act or omission of Landlord (arising prior to such Lender becoming Landlord under such attornment) or (ii) liable for any security deposit or bound by any prepaid Rent not actually received by such Lender. Any Lender may elect to make this Lease prior to the lien of its Mortgage by written notice to Tenant, and if the Lender of any prior Mortgage shall require, this Lease shall be prior to any subordinate Mortgage; such elections shall be effective upon written notice to Tenant, or shall be effective as of such earlier or later date set forth in such notice. Tenant agrees to give any Lender by certified mail, return receipt requested, a copy of any notice of default served by Tenant upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of service on Tenant of a copy of an assignment of leases, or otherwise) of the address of such Lender. Tenant further agrees that if Landlord shall have failed to cure such default within the time permitted Landlord for cure under this Lease, any such Lender whose address has been provided to Tenant shall have an additional period of thirty (30) days in which to cure (or such additional time as may be required due to causes beyond such Lender’s control, including time to obtain possession of the Property by appointment of receiver, power of sale or judicial action). Should any current or prospective Lender require a modification or modifications to this Lease which will not cause an increased cost or otherwise change the rights, obligations, or remedies of Tenant hereunder, Tenant agrees that this Lease shall be so modified. Except as expressly provided to the contrary herein, the provisions of this Section shall be self-operative; however Tenant shall execute and deliver, within fifteen (15) days after requested, such commercially reasonable documentation as Landlord or any Lender may request from time to time, whether prior to or after a foreclosure or power of sale proceeding is initiated or completed, a deed in lieu thereof is delivered, or a ground lease is terminated, in order to further confirm or effectuate the matters set forth in this Section in recordable form. Tenant hereby waives the provisions of any Law (now or hereafter adopted) which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease or Tenant’s obligations hereunder if foreclosure or power of sale proceedings are initiated, prosecuted, or completed.
B. Landlord shall cause the lender under any Mortgage upon the Center, Property, Building or Premises existing as of the date of this Lease to execute and deliver to Tenant a commercially reasonable non-disturbance agreement within 30 days after the date of this Lease. As a condition to Tenant’s agreement hereunder
 
19

SECTION 18: ESTOPPEL CERTIFICATES
Tenant shall from time to time, within fifteen (15) days after written request from Landlord, execute, acknowledge, and deliver a statement certifying: (i) that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification and certifying that this Lease as so modified, is in full force and effect (or specifying the ground for claiming that this Lease is not in force and effect), (ii) the dates to which the Rent has been paid, and the amount of any Security Deposit, (iii) that Tenant is in possession of the Premises, and paying Rent on a current basis with no offsets, defenses or claims, or specifying the same if any are claimed, (iv) that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord or Tenant which are pertinent to the request, or specifying the same if any are claimed, and (v) certifying such other matters as Landlord may reasonably request, or as may be requested by Landlord’s current or prospective Lenders, insurance carriers, auditors, and prospective purchasers (and including a comparable certification statement from any subtenant respecting its sublease). Tenant and any subtenant shall make these certifications on any form reasonably requested by Landlord’s current or prospective Lenders, insurance carriers, auditors, and prospective purchasers. Any such statement may be relied upon by any such parties. If Tenant shall fail to execute and return such statement or object within the time required herein, then Tenant shall be conclusively deemed to have agreed with the matters set forth in such statement if Tenant has failed to execute and return such statement or object thereto within three (3) business days after one (1) additional written notice from Landlord requesting such response.
SECTION 19: RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full rights to control the Property and Center (which rights may be exercised without subjecting Landlord to claims for constructive eviction, abatement of Rent, damages or other claims of any kind), including more particularly, but without limitation, the following rights:
A. General Matters . To (i) upon reasonable prior notice to Tenant, change the name or street address of the Building, Property, or Center or street address designation of the Premises, provided Landlord reimburses Tenant for costs Tenant incurs in connection therewith for reprinting business cards, stationery, etc., (ii) install and maintain signs on the exterior and interior of the Building, Property, or Center, and grant any other person the right to do so, (iii) retain at all times, and use in appropriate instances, keys to all doors within and into the Premises, (iv) grant to any person the right to conduct any business or render any service at the Property or Center, whether or not the same are similar to the use permitted Tenant by this Lease, (v) grant any person the right to use separate security personnel and systems respecting access to their premises, (vi) have access for Landlord and other tenants of the Building to any mail chutes located on the exterior of the Premises according to the rules of the United States Postal Service (and to install or remove such chutes), and (vii) in case of fire, invasion, insurrection, riot, civil disorder, emergency or other dangerous condition, or threat thereof, and upon reasonable prior notice to Tenant (or upon no notice in the event of emergency): (a) limit access to the Building, Property, Center, or Premises, (b) shut down elevator service, (c) activate elevator emergency controls, and (d) otherwise take such action or preventative measures deemed necessary by Landlord for the safety of tenants of the Building , Property, or Center or the protection of the Building, Property, or Center and other property located thereon or therein (but this provision shall impose no duty on Landlord to take such actions, and no liability for actions taken in good faith).
B. Access to Premises . To enter the Premises, without such entry constituting an actual or constructive eviction, in order to: (i) inspect, (ii) supply services to be provided Tenant hereunder, (iii) show the Premises to current and prospective Lenders, insurers, purchasers, brokers, and governmental authorities at any time during the Term and to show the Premises to prospective tenants at any time during the last six (6) months of the Term, (iv) decorate, remodel, or alter the Premises if Tenant shall abandon the Premises at any time, or shall vacate the same during the last one hundred twenty (120) days of the Term (without thereby terminating this Lease), and (v) perform any work or take any other actions under Section 19(C) below, or exercise other rights of Landlord under this Lease or applicable Laws. However, Landlord shall: (a) provide reasonable advance written or oral notice of at least twenty-four (24) hours to Tenant’s on-site manager or other appropriate person for matters which will
 
20

involve a significant disruption to Tenant’s business (except in emergencies, in which case Landlord shall have the right to enter at any time without prior notice to Tenant), (b) take reasonable steps to minimize disruption to Tenant’s business, and following completion of any work, return Tenant’s leasehold improvements, fixtures, property and equipment to the original locations and condition to the fullest extent reasonably possible, and (c) not materially change the configuration or reducing the square footage of the Premises, unless required by Laws or other causes beyond Landlord’s reasonable control (and in the event of any permanent material reduction, the Rent and other rights and obligations of the parties based on the square footage of the Premises shall be proportionately reduced). Tenant shall not place partitions, furniture, or other obstructions in the Premises which may prevent or impair Landlord’s access to the Systems and Equipment for the Property or the systems and equipment for the Premises. If Tenant requests that any such access occur before or after Landlord’s regular business hours and Landlord approves, Tenant shall pay all overtime and other additional costs in connection therewith.
C. Changes To The Property, or Center . To: (i) paint and decorate, (ii) perform repairs or maintenance, (iii) make replacements, restorations, renovations, Alterations, additions, and improvements, structural or otherwise, in and to the Building , Property, or Center or any part thereof, including any adjacent building, structure, facility, land, street, or alley, or change the uses thereof (including changes, reductions, or additions of corridors, entrances, doors, lobbies, parking facilities, and other areas, structural support columns and shear walls, elevators, stairs, escalators, mezzanines, solar tint windows or film, kiosks, planters, sculptures, displays, and other amenities and features therein, and changes relating to the connection with or entrance into or use of the Building , Property, or Center or any other adjoining or adjacent building or buildings, now existing or hereinafter constructed), and (iv) to change Building standard specifications. In connection with such matters, Landlord may among other things erect scaffolding, barricades and other structures, open ceilings, close entry ways, restrooms, elevators, stairways, corridors, parking, and other areas and facilities, and take such other actions as Landlord deems appropriate. However, Landlord shall (a) take reasonable steps to minimize or avoid any denial of or interference with access to the Premises except when necessary on a temporary basis, and (b) in connection with entering the Premises shall comply with Section 19(B) above.
SECTION 20: LANDLORD’S RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease required to be performed by Landlord, Landlord shall not be deemed to be in default hereunder nor subject to any claims for damages of any kind, unless such failure shall have continued for a period of thirty (30) days after notice thereof by Tenant (provided, if the nature of Landlord’s failure is such that more time is reasonably required in order to cure, Landlord shall not be in default if Landlord commences to cure within such period and thereafter diligently proceeds to cure such failure to completion). If Landlord shall default and fail to cure as provided herein, Tenant shall have such rights and remedies as may be available to Tenant under applicable Laws, subject to the other provisions of this Lease; provided, Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent, or terminate this Lease, except as expressly provided herein, and Tenant hereby expressly waives the benefit of any Law to the contrary.
SECTION 21: RELEASE AND INDEMNITY
A. Indemnity . Except as otherwise provided in this Lease and except to the extent caused by the negligence or willful misconduct of, Tenant shall indemnify, defend (using legal counsel reasonably acceptable to Landlord) and save Landlord and its property manager (if any) harmless from all claims, suits, losses, damages, fines, penalties, liabilities, and expenses (including Landlord’s reasonable attorneys’ fees and other costs incurred in connection with claims, regardless of whether such claims involve litigation) resulting from any actual or alleged injury (including death) of any person or from any actual or alleged loss of or damage to any property arising out of or in connection with (i) Tenant’s occupation, use, or improvement of the Premises, or that of its employees, agents or contractors, provided, however, that Tenant shall have no obligation to indemnify Landlord for and Tenant shall have no liability for the acts or omissions of any co-tenants, their licensees, or other persons or occupants of the Building, Property, or Center, (ii) Tenant’s breach of its obligations hereunder, or (iii) any act or omission of Tenant or any subtenant, licensee, assignee or concessionaire of Tenant, or of any officer, agent, employee, guest, or invitee of Tenant, or of any such entity in or about the Premises. This indemnity with respect to acts or omissions during the term of this Lease shall survive termination or expiration of this Lease. The foregoing indemnity covers
 
21

actions brought by Tenant’s own employees and it is specifically and expressly intended to constitute a waiver of Tenant’s immunity under Washington’s Industrial Insurance Act, RCW Title 51, to the extent necessary to provide Landlord with a full and complete indemnity from claims made by Tenant and its employees, to the extent provided herein. Tenant shall promptly notify Landlord of casualties or accidents occurring in or about the Premises. LANDLORD AND TENANT ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS SECTION 21 AND OF SECTIONS 8 AND 21 WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.
B. Release . Tenant hereby full and completely waives and releases all claims against Landlord for any losses or other damages sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises, including but not limited to: any defect in or failure of Building equipment; any failure to make repairs; any defect, failure, surge in, or interruption of project facilities or services; any defect in or failure of Common Areas; broken glass; water leakage; the collapse of any Building component; any claim or damage resulting from Landlord’s repair, maintenance, or improvements to any portion of the Building, Property, or Center; or any act, omission, or negligence of co-tenants, licensees or any other persons or occupants of the Building, Property, or Center; provided only, that the release contained in this Section 21(B) shall not apply to claims for actual damage to persons or property (excluding consequential damages such as lost profits) resulting directly and solely from: (i) Landlord’s negligence or willful misconduct; or (ii) Landlord’s breach of its express obligations under this Lease which Landlord has not cured within a reasonable time after receipt of written notice of such breach from Tenant.
C. Limitation on Indemnity . In compliance with RCW 4.24.115 as in effect on the date of this Lease, to the extent that and only to the extent that this Lease constitutes a contract for construction of improvements to real property, all provisions of this Lease pursuant to which Tenant (the “Indemnitor”) agrees to indemnify Landlord (the “Indemnitee”) against liability for damages arising out of bodily injury to persons or damage to property relative to the construction, alteration, repair, addition to, subtraction from, improvement to, or maintenance of, any building, road, or other structure, project development, or improvement attached to real estate, including the Premises, (i) shall not apply to damages caused by or resulting from the sole negligence of the Indemnitee, its agents or employees, and (ii) to the extent caused by or resulting from the concurrent negligence of (a) the Indemnitee or the Indemnitee’s agents or employees, and (b) the Indemnitor or the Indemnitor’s agents or employees shall apply only to the extent of the Indemnitor’s negligence; provided, however, the limitations on indemnity set forth in this Section 21 shall automatically and without further act by either Landlord or Tenant be deemed amended so as to remove any of the restrictions contained in this Section 21 no longer required by then-applicable Law.
D. Definitions . As used in any Section of this Lease establishing indemnity or release of Landlord, “Landlord” shall include Landlord, its shareholders, partners, members, directors, officers, agents, employees, and contractors, and “Tenant” shall include Tenant and any person or entity claiming through Tenant.
E. Landlord Indemnity . Landlord shall indemnify, defend (using legal counsel reasonably acceptable to Tenant) and save Tenant and its agents, employees and contractors harmless from all claims, suits, losses, damages, fines, penalties, liabilities, and expenses (including Landlord’s reasonable attorneys’ fees and other costs incurred in connection with claims, regardless of whether such claims involve litigation) resulting from any actual or alleged injury (including death) of any person or from any actual or alleged loss of or damage to any property to the extent arising out of or in connection with any breach of Landlord’s obligations under this Lease or any negligence or willful misconduct of Landlord, its agents contractors or employees. This indemnity with respect to acts or omissions during the term of this Lease shall survive termination or expiration of this Lease. The foregoing indemnity covers actions brought by Landlord’s own employees and it is specifically and expressly intended to constitute a waiver of Landlord’s immunity under Washington’s Industrial Insurance Act, RCW Title 51, to the extent necessary to provide Tenant with a full and complete indemnity from claims made by Landlord and its employees, to the extent provided herein.
 
22

SECTION 22: RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant’s right of possession, Tenant shall vacate and surrender possession of the entire Premises in the same condition as delivered to Tenant, ordinary wear and tear, condemnation, and casualty damage excepted, shall surrender all keys and key cards, and any parking transmitters, stickers, or cards, to Landlord, and shall remove all personal property and office trade fixtures that may be readily removed without damage to the Premises or Property. “Ordinary wear and tear” shall not include the undesirable effects of the occupancy of the Premises by dogs and cats. Accordingly, Tenant shall take reasonable measures to rid the Premises of pet damage, including without limitation offensive odors and stains, including, to the extent reasonably necessary and without limitation, cleaning or replacing carpet and flooring, repainting and/or re-drywalling, and odor removal or treatment and shall return the Premises to Landlord free of such effects. All improvements, fixtures (other than Tenant’s trade fixtures) and other items installed by Tenant or Landlord under or with respect to this Lease, shall be the property of Tenant during the Term of this Lease, but at the expiration or earlier termination of this Lease all such improvements, fixtures, and other items shall become Landlord’s property, and shall remain upon the Premises (unless Landlord timely elects otherwise in accordance with the applicable provisions of this Lease as to Alterations other than the initial tenant improvements in which event Tenant shall remove the same at its sole cost as described below), all without compensation, allowance, or credit to Tenant. If prior to such termination or within three (3) months thereafter Landlord by notice directs Tenant to remove such items, and subject to the terms of Section 10(A). of this Lease, Tenant shall promptly remove such of the foregoing items as are designated in such notice and restore the Premises to the condition prior to the installation of such items in a good and workmanlike manner. If Tenant shall fail to perform any repairs or restoration, or fail to remove any items from the Premises required hereunder, Landlord may do so, but shall not be required to do so, and Tenant shall pay Landlord’s charges therefore upon demand. If Tenant has failed to perform required restoration within thirty (30) days after notice thereof from Landlord or the expiration date of the term of the Lease, if later, then Tenant shall be considered to be holding over and shall pay to Landlord holdover rent as prescribed in Section 23. All property removed from the Premises by Landlord pursuant to any provisions of this Lease or any Law may be handled or stored by Landlord at Tenant’s expense, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. All property not removed from the Premises or retaken from storage by Tenant within thirty (30) days after expiration or earlier termination of this Lease or Tenant’s right to possession, shall at Landlord’s option be conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. Unless prohibited by applicable Law, Landlord shall have a lien against such property for the costs incurred in removing and storing the same. Tenant hereby waives any statutory notices to vacate or quit the Premises upon expiration of this Lease.
SECTION 23: HOLDING OVER
Time is of the essence of the Tenant’s obligation to vacate the Premises upon the termination of the Lease. Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord one hundred fifty percent (150%) of the amount of Rent payable by Tenant during the last month of the Lease Term prorated on a per diem basis for each day Tenant shall fail to vacate or surrender possession of the Premises or any part thereof after expiration or earlier termination of this Lease, together with all damages sustained by Landlord on account thereof. Tenant shall pay such amounts on demand, and, in the absence of demand, monthly in advance. The foregoing provisions, and Landlord’s acceptance of any such amounts, shall not serve as permission for Tenant to hold-over, nor serve to extend the Term (although Tenant shall remain a tenant-at-sufferance bound to comply with all provisions of this Lease). Landlord shall have the right at any time after expiration or earlier termination of this Lease, or Tenant’s right to possession, to reenter and possess the Premises and remove all property and persons therefrom, and Landlord shall have such other remedies for holdover as may be available to Landlord under other provisions of this Lease or applicable Laws. The foregoing provisions of this Section 23 notwithstanding, Tenant shall have the right to holdover for two (2) months beyond the end of the Lease Term at its then current Rent upon written notice to Landlord given at least three (3) months prior to the end of the Lease Term; provided, however, that thereafter Tenant shall have no right to occupy the Premises and the other provisions of this Section 23 shall then apply.
SECTION 24: NOTICES
Except as expressly provided to the contrary in this Lease, every notice or other communication to be given by either party to the other with respect hereto or to the Premises, Building, , Property, or Center, shall be in writing and shall not be effective for any purpose unless the same shall be served personally, or by national air courier service, or United States certified mail, return receipt requested, postage prepaid, to the parties at the addresses set forth in Section 1, or such other address or addresses as Tenant or Landlord may from time to time designate by
 
23

notice given as provided above. Every notice or other communication hereunder shall be deemed to have been given as of the third business day following the date of such mailing (or as of any earlier date evidenced by a receipt from such national air courier service or the United States Postal Service) or immediately if personally delivered. Notices not sent in accordance with the foregoing shall be of no force or effect until received by the foregoing parties at such addresses required herein. Landlord’s counsel or Landlord’s agent may give any notice on behalf of Landlord.
SECTION 25: REAL ESTATE BROKERS
Tenant represents that Tenant has dealt only with the Broker designated in Section 1 (whose commission, if any, shall be paid by Landlord pursuant to the terms set out below) or, if no person is designated in Section 1, with no person or entity, as broker, agent, or finder in connection with this Lease, and agrees to indemnify and hold Landlord harmless from all damages, judgments, liabilities, and expenses (including reasonable attorneys’ fees) arising from any claims or demands of any other broker, agent, or finder with whom Tenant has dealt for any commission or fee alleged to be due in connection with its participation in the procurement of Tenant or the negotiation with Tenant of this Lease. Landlord agrees to indemnify and hold Tenant harmless from all damages, judgments, liabilities, and expenses (including reasonable attorneys’ fees) arising from any claims or demands of any broker, agent, or finder (other than the Broker) with whom Landlord has dealt for any commission or fee alleged to be due in connection with this Lease or in the representation of Landlord in connection with this Lease. Landlord and Tenant recognize that it is possible that they may hereafter make additional agreements regarding further extension or renewal of this Lease or a new lease or leases for all or one or more parts of the Premises or other space in the Building (or other portions of the Property, or Center or other buildings managed by Landlord) for a term or terms commencing after the Commencement Date of this Lease. It is also possible that Landlord and Tenant may hereafter modify this Lease to add additional space or to substitute other space for all or a portion of the Premises. In the event any such additional agreements, modifications to this Lease, or new leases are made, Landlord shall have no obligation to pay any commission or other compensation to any broker or other party engaged by Tenant (including the brokers designated in Section 1) with respect to negotiating or representing Tenant in such matters, regardless of whether under the circumstances such person is or is not regarded by law as an agent of Landlord, and Tenant shall indemnify and hold Landlord harmless from any claim for such compensation. Nothing in this Section 25 shall be construed to require or otherwise obligate Landlord to consider or make any of the above-described additional agreements, modifications to this Lease, or new lease. Landlord shall pay Tenant’s Broker a total commission ( “Commission” ) in the amount of five percent (5.0%) of the Base Rent payable by tenant over the Initial Term of this Lease. One-half of said Commission shall be paid in full within ten (10) days of the execution by Landlord and Tenant of this Lease and Tenant’s payment to Landlord of all Deposits due under this Lease, and the balance shall be paid in full upon Landlord’s receipt of Tenant’s first payment of Base Rent (other than any deposit) in good funds, without further invoice or notice by Tenant’s Broker. The parties agree, and Landlord hereby acknowledges, that in the event Landlord fails to pay all or any portion of the Commission amount due Tenant’s Broker as provided herein within thirty (30) days of when the same is due pursuant to this Section 25, Tenant shall have the right but not the obligation, upon ten (10) days prior written notice to Landlord, and without penalty or being deemed in breach of this Lease, to pay the amount of Commission due by Landlord to Tenant’s Broker, and in the event Tenant does pay all or any portion of the Commission, Tenant shall be entitled to an abatement of Base Rent and any Additional Rent under this Lease for the amount of Commission it pays to Tenant’s Broker until said Commission payment is fully accounted for by abated rent hereunder. Landlord shall pay Landlord’s broker a commission pursuant to the terms of a separate agreement between them.
SECTION 26: NO WAIVER
No provision of this Lease will be deemed waived by either party unless expressly waived in writing and signed by the waiving party. No waiver shall be implied by delay or any other act or omission of either party. No waiver by either party of any provision of this Lease shall be deemed a waiver of such provision with respect to any subsequent matter relating to such provision, and Landlord’s consent or approval respecting any action by Tenant shall not constitute a waiver of the requirement for obtaining Landlord’s consent or approval respecting any subsequent action. Acceptance of Rent by Landlord directly or through any agent or lock-box arrangement shall not constitute a waiver of any breach by Tenant of any term or provision of this Lease (and Landlord reserves the right to return or refund any untimely payments if necessary to preserve Landlord’s remedies). No acceptance of a lesser
 
24

amount of Rent shall be deemed a waiver of Landlord’s right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the full amount due. The acceptance of Rent or of the performance of any other term or provision from, or providing directory listings or services for, any person or entity other than Tenant shall not constitute a waiver of Landlord’s right to approve any Transfer. No delivery to, or acceptance by, Landlord or its agents or employees of keys, nor any other act or omission of Tenant or Landlord or their agents or employees, shall be deemed a surrender, or acceptance of a surrender, of the Premises or a termination of this Lease, unless stated expressly in writing by Landlord.
SECTION 27: SAFETY AND SECURITY DEVICES, SERVICES, AND PROGRAMS
The parties acknowledge that safety and security devices, services, and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant’s property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law.
SECTION 28: TELECOMMUNICATION LINES
A. Telecommunication Lines . No telecommunication or computer lines shall be installed within or without the Premises without Landlord’s prior consent in accordance with Section 10, which consent shall not be unreasonably withheld or delayed. Landlord disclaims any representations, warranties, or understandings concerning Landlord’s Building computer systems, if any, or the capacity, design, or suitability of Landlord’s riser lines, Landlord’s main distribution frame ( “MDF” ) or related equipment. If there is, or will be, more than one tenant on any floor, at any time, Landlord may allocate, and periodically reallocate, connections to the terminal block based on the proportion of square feet each tenant occupies on such floor, or in the type of business operations or requirements of such tenants, in Landlord’s reasonable discretion. Landlord may arrange for an independent contractor to review Tenant’s requests for approval to install any telecommunication or computer lines, monitor, or supervise Tenant’s installation, connection, and disconnection of any such lines, and provide other such services, or Landlord may provide the same. In each case, all such work shall be performed in accordance with Section 10. Tenant shall be permitted to utilize the DSL, ISDN, Tier 1, and Tier 3 cabling and wireless fiber available within or to the Building, if any, upon entering into any user agreement with the provider(s) thereof.
B. Limitation of Liability . Unless due to Landlord’s intentional misconduct or negligent acts, Landlord shall have no liability for damages arising, and Landlord does not warrant that the Tenant’s use of any telecommunication or computer lines or systems (“Lines”) will be free, from the following (collectively called “Line Problems”): (i) any eavesdropping, wire-tapping, or theft of long distance access codes by unauthorized parties, (ii) any failure of the Lines to satisfy Tenant’s requirements, or (iii) any capacitance, attenuation, cross-talk, or other problems with the Lines, any misdesignation of the Lines in the MDF room or wire closets, or any shortages, failures, variations, interruptions, disconnections, loss, or damage caused by or in connection with the installation, maintenance, replacement, use, or removal of any other Lines or equipment at the Building, Property, or Center by or for other tenants at the Property, Center, or Building, by any failure of the environmental conditions at or the power supply for the Building to conform to any requirements of the Lines or any other problems associated with any Lines or by any other cause. Under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of any Rent or other charges under the Lease, or relieve Tenant from performance of Tenant’s obligations under the Lease as amended herein. Landlord in no event shall be liable for any loss of profits, business interruption, or other consequential damage arising from any Line Problems.
 
25

SECTION 29: HAZARDOUS SUBSTANCES, DISRUPTIVE ACTIVITIES
A. Hazardous Substances, Presence and Use of Hazardous Substances . Tenant shall not, without Landlord’s prior written consent at Landlord’s sole discretion, keep on or around the Premises, Building,, Property, or Center, for use, disposal, treatment, generation, storage, or sale, any substances designed as, or containing components designated as, a “hazardous substance,” “hazardous material,” “hazardous waste,” regulated substance” or “toxic substance,” other than commonly used office supplies, such as toner, and household or office cleaning supplies (collectively referred to as “Hazardous Substances” ). With respect to any such Hazardous Substances, Tenant shall: (i) comply promptly, timely, and completely with all Laws for reporting, keeping, and submitted manifests, and obtaining and keeping current identification numbers; (ii) submit to Landlord true and correct copies of all reports, manifests, and identification numbers at the same time as they are required to be and/or are submitted to the appropriate governmental authorities; (iii) within five (5) days of Landlord’s request, submit written reports to Landlord regarding Tenant’s use, storage, treatment, transportation, generation, disposal, or sale of Hazardous Substances and provide evidence satisfactory to Landlord of Tenant’s compliance with all applicable Laws; (iv) allow Landlord or Landlord’s agent or representative to come on the Premises at all times to check Tenant’s compliance with all applicable Laws; (v) comply with minimum levels, standards, or other performance standards or requirements which may be set forth or established for certain Hazardous Substances (if minimum standards or levels are applicable to Hazardous Substances present on the Premises, such levels or standards shall be established by an on-site inspection by the appropriate governmental authorities and shall be set forth in an addendum to this Lease); and (vi) comply with all applicable Laws regarding the proper and lawful use, sale, transportation, generation, treatment, and disposal of Hazardous Substances.
B. Cleanup Costs, Default and Indemnification .
1. Tenant shall be fully and completely liable to Landlord for any and all cleanup costs, and any and all other charges, fees, penalties (civil and criminal) imposed by any governmental authority with respect to Tenant’s use, disposal, transportation, generation, and/or sale of Hazardous Substances, in or about the Premises, Building, , Property, or Center.
2. Tenant shall fully indemnify, defend and, save harmless Landlord and Landlord’s Lender, if any, from any and all of the costs, fees, penalties, and charges assessed against or imposed upon Landlord (as well as Landlord’s and Landlord’s Lender’s attorneys’ fees and costs) as a result of Tenant’s use, disposal, transportation, generation, and/or sale of Hazardous Substances.
3. Upon Tenant’s default under this Section 29, in addition to the rights and remedies set forth elsewhere in this Lease, Landlord shall be entitled to the following rights and remedies: (i) at Landlord’s option, to terminate this lease immediately; and/or (ii) to recover any and all damages associated with the default, including, but not limited to cleanup costs and charges, civil and criminal penalties and fees, loss of business and sales by Landlord and other tenants of the Building, Property, or Center, any and all damages and claims asserted by third parties, and Landlord’s attorneys’ fees and costs.
C. Disruptive Activities . Tenant shall not: (1) produce, or permit to be produced, any intense glare, light, or heat except within an enclosed or screened area and then only in such manner that the glare, light, or heat shall not, outside the Premises, be materially different than the light or heat from other sources outside the Premises; (2) create, or permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation, or requirement; (3) create, or permit to be created, any floor or ground vibration that is materially discernable outside the Premises; (4) transmit, receive, or permit to be transmitted or received, any electromagnetic, microwave, or other radiation which is harmful or hazardous to any person or property in or about the Premises, Building, , Property, or Center; or (5) create, or permit to be created, any noxious odor that is disruptive to the business operations of any other tenant in the Building, Property, or Center.
D. Interior Air and Building Quality . Landlord shall have no liability whatsoever for the quality of interior air in the Building, for any “sick building syndrome” or other similar conditions affecting or claimed to be affecting the health or working conditions of Tenant or any persons in the Building, or from any claim of damage to person or property relating to or concerning the presence of mold in the Building. Tenant
 
26

acknowledges that it is necessary for Tenant to keep the Premises clean and free of moisture and to take other measures to prevent mold and mildew from accumulating within the Premises. Tenant shall regularly clean and dust the Premises, including without limitation vacuuming and cleaning any carpeting in the Premises as necessary, shall remove visible moisture accumulation on windows, walls, and other surfaces as soon as reasonably possible, and shall remove from the Premises Tenant’s personal property that may be sources of mold or mildew. Tenant shall not block or cover any of the heating, ventilation, or air conditioning ducts in the Premises. Tenant shall immediately report to the Landlord: (i) any evidence of a water leak or excessive moisture in the Premises; (ii) any evidence of mold- or mildew-like growth in the Premises that cannot be removed by simply applying a common household cleaner and wiping the area (which Tenant shall perform); (iii) any failure or malfunction in the heating, ventilation, or air conditioning system in the Premises; (iv) any inoperable doors or windows; (v) repeated complaints of respiratory ailments or eye irritation by persons occupying the Premises; or (vi) any notice from a governmental authority of complaints of indoor air quality at the Premises. If Tenant discovers the existence of any mold or conditions referred to above, Tenant will notify Landlord and Landlord shall retain an industrial hygienist or other professional mold consultant to conduct an inspection and prepare a report for Tenant and Landlord. Any remediation plan shall be subject to the approval of Landlord, which approval will not be unreasonably withheld or delayed. If the inspection report concludes that mold is present in the Premises and such presence is not due to actions, omissions or negligence of Tenant, Landlord will be responsible for the cost of such inspection and the cost of remediation. If the inspection report concludes that mold is present in the Premises due to actions, omissions or negligence of Tenant, Tenant will be responsible for the cost of such inspection and the cost of remediation to the extent of Tenant’s responsibility for the presence of mold at or within the Premises. If the inspection report concludes that mold is present in the Premises, Landlord will hire a contractor that specializes in mold remediation to prepare a remediation plan for the Premises and upon Landlord’s approval of the plan, the contractor will promptly carry out the work contemplated in the plan in accordance with applicable Laws. To the extent required by applicable state or local health or safety requirements, occupants and visitors to the Premises will be notified of the conditions and the schedule for the remediation. The contractor performing the remediation will provide a written certification to Landlord and Tenant that the remediation has been completed in accordance with applicable Laws.
SECTION 30: DISABILITIES ACTS
Tenant, at its sole cost, shall be responsible for compliance with the Americans With Disabilities Act of 1990 (42 U.S.C. §12101 et seq.) and regulations and guidelines promulgated thereunder ( “ADA” ), and any similarly motivated state and local Laws, as the same may have been amended and supplemented from time to time (collectively referred to herein as the “Disabilities Acts” ) with respect to (1) all Alterations made to the Premises or any other acts of Tenant after the Commencement Date, (2) all requirements of Disability Laws that relate to the employer-employee relationship or that are necessitated by the special needs of any employee, agent, visitor or invitee of Tenant and that are not required to be provided generally, including, without limitation, requirements related to auxiliary aids and graphics installed by or on behalf of Tenant (other than Base Building Signage), and (3) all requirements of Disability Laws that relate to private restrooms constructed by or at the special request of Tenant. Landlord, at its sole cost, shall be responsible for compliance with Disability Laws with respect to the Premises and the work contemplated in the Tenant Improvement Agreement and the Common Areas (including restrooms located upon full floors leased by Tenant). Neither party shall be in default under this Section 16(b) for its failure to comply with Disability Laws so long as the responsible party is either contesting in good faith, and by legal means, the enforcement of Disability Laws, or is undertaking diligent efforts to comply with Disability Laws.
SECTION 31: DEFINITIONS
(A) “Building” shall mean the structure (or the portion thereof operated by Landlord) identified in Section 1 within which the Premises are located.
(B) “Center” shall mean the real property legally described in Exhibit A-1 of this Lease together with all landscaping, improvements and personal property located thereon and related to the Building and other buildings and improvements or their operation or maintenance.
 
27

(C) “Default Rate” shall mean twelve percent (12%) per annum, or the highest rate permitted by applicable Law, whichever shall be less.
(D) “Holidays” shall mean all federal holidays, and holidays observed by the State of Washington, including New Year’s Day, President’s Day, Memorial Day, Independence Day, Labor Day, Veterans’ Day, Thanksgiving Day, Christmas Day, and to the extent of utilities or services provided by union members engaged at the Property or Center, such other holidays observed by such unions.
(E) “Landlord” shall mean only the landlord from time to time, except for purposes of any provisions defending, indemnifying and holding Landlord harmless hereunder, “Landlord” shall include past, present, and future landlords and their respective partners, beneficiaries, trustee, officers, directors, employees, shareholders, principals, agents, affiliates, successors and assigns.
(F) “Law” or “Laws” shall mean all federal, state, county and local governmental and municipal laws (including without limitation Disabilities Acts), statutes, ordinances, rules, regulations, codes, decrees, orders and other such requirements, applicable equitable remedies and decisions by courts in cases where such decisions are considered binding precedents in the State of Washington, and decisions of federal courts applying the Laws of such State, at the time in question. “Laws” also shall include the requirements of any insurance company regulations or requirements, utility company requirements, and recorded declarations. This Lease shall be interpreted and governed by the Laws of the State of Washington.
(G) “Lender” shall mean the holder of any Mortgage at the time in question, and where such Mortgage is a ground lease, such term shall refer to the ground Landlord (and the term “ground lease” although not separately capitalized is intended throughout this Lease to include any superior or master lease).
(H) “Mortgage” shall mean all mortgages, deeds of trust, ground leases or other such encumbrances now or hereafter placed upon the Property, Center, Building or Premises, or any part thereof or interest therein, and all renewals, modifications, consolidations, replacements or extensions thereof, and all indebtedness now or hereafter secured thereby and all interest thereon.
(I) “Premises” shall mean the area within the Building identified in Section 1 and Exhibit B. Possession of areas necessary for utilities, services, safety and operation of the Building, including the Systems and Equipment, fire stairways, perimeter walls, space between the finished ceiling of the Premises and the slab of the floor or roof of the Building thereabove, and the use thereof together with the right to install, maintain, operate, repair and replace the Systems and Equipment, including any of the same in, through, under or above the Premises in locations that will not materially interfere with Tenant’s use of the Premises, are hereby excepted and reserved by Landlord, and not demised to Tenant.
(J) “Property” shall mean the real property legally described in Exhibit A of this Lease together with all landscaping, improvements and personal property located thereon and related to the Building and other buildings and improvements or their operation or maintenance.
(K) “Rent” shall have the meaning specified therefore in Section 4.
(L) “Systems and Equipment” shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply light, heat, ventilation, air conditioning and humidity, or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life/safety systems or equipment, or any elevators, escalators or other mechanical, electrical, electronic, computer or other systems or equipment for the, Property or Center, except to the extent that any of the same serves particular tenants exclusively (and “systems and equipment” without capitalization shall refer to such of the foregoing items serving particular tenants exclusively).
(M) “Tenant” shall be applicable to one or more persons or entities as the case may be, the singular shall include the plural, and if there be more than one Tenant, the obligations thereof shall be joint and several. When used in the lower case, “tenant” shall mean any other tenant, subtenant or occupant of the Building, Property, or Center.
 
28

(N) If applicable to this Lease, “Tenant’s Share” of Expenses and Taxes pursuant to Section 4 shall be the percentage set forth in Section 1, but if the rentable area of the Premises or Center shall change, Tenant’s Share shall thereupon become the rentable area of the Premises divided by the rentable area of the Center, excluding any parking facilities, subject at all times to adjustment under Section 4. Tenant acknowledges that the “rentable area of the Premises” under this Lease includes the usable area, without deduction for columns or projections, multiplied by a load or convention factor, to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler, and service rooms and closets, restrooms, and other public, common, and service areas, all as reasonably determined by Landlord. Except as provided expressly to the contrary herein, the “rentable area of the Center” shall include all rentable area of all space leased or available for lease at the buildings comprising the Center which Landlord may reasonable re-determine from time to time, to reflect re-configurations, additions, or modifications, to the Center, but in no event shall Tenant’s Share increase.
SECTION 32: EFFECTIVENESS OF LEASE
This Lease shall be effective and binding upon Landlord and Tenant upon execution and delivery of this Lease by both Landlord and Tenant.
SECTION 33: MISCELLANEOUS
A. Captions and Interpretation . The captions of the Sections and Paragraphs of this Lease are for convenience of reference only and shall not be considered or referred to in resolving questions of interpretation. Tenant acknowledges that it has read this Lease and that it has had the opportunity to confer with counsel in negotiating this Lease; accordingly, this Lease shall be construed neither for nor against Landlord or Tenant, but shall be given a fair and reasonable interpretation in accordance with the meaning of its terms. The neuter shall include the masculine and feminine, and the singular shall include the plural. The term “including” shall be interpreted to mean “including, but not limited to.”
B. Survival of Provisions . All obligations (including indemnity, Rent, and other payment obligations) or rights of either party arising during or attributable to the period prior to expiration or earlier termination of this Lease shall survive such expiration or earlier termination.
C. Severability . If any term or provision of this Lease or portion thereof shall be found invalid, void, illegal, or unenforceable generally or with respect to any particular party, by a court of competent jurisdiction, it shall not affect, impair or invalidate any other terms or provisions of the remaining portion thereof, or its enforceability with respect to any other party.
D. Short Form Lease . Neither this Lease nor any memorandum of lease or short form lease shall be recorded by Tenant, but Landlord or any Lender may elect to record a short form of this Lease, in which case Tenant shall promptly execute, acknowledge and deliver the same on a form prepared by Landlord or such Lender. In the event any short form of this Lease or other document evidencing this Lease is recorded, upon or any time after the expiration or early termination of this Lease and request of either Landlord or Tenant, the other party shall execute a release or other appropriate document in recordable form, evidencing that this Lease has expired or terminated.
E. Light, Air and Other Interests . This Lease does not grant any legal rights to “light and air” outside the Premises nor any particular view visible from the Premises, nor any easements, licenses or other interests unless expressly contained in this Lease.
F. Authority . If Tenant is any form of corporation, partnership, limited liability company or partnership, association or other organization, Tenant and all persons signing for Tenant below hereby represent that this Lease has been fully authorized and no further approvals are required, and Tenant is duly organized, in good standing, and legally qualified to do business in the Premises (and has any required certificates, licenses, permits and other such items).
 
29

G. Partnership Tenant . If Tenant is a partnership, all current and new general partners shall be jointly and severally liable for all obligations of Tenant hereunder and as this Lease may hereafter be modified, whether such obligations accrue before or after admission of future partners or after any partners die or leave the partnership. Tenant shall cause each new partner to sign and deliver to Landlord written confirmation of such liability, in form and content satisfactory to Landlord, but failure to do so shall not avoid such liability.
H. Financial Statements . Tenant shall, within ten (10) days after requested from time-to-time (not more than once per calendar year), deliver to Landlord Tenant’s most current standard annual financial statements (including balance sheets and income/expense statements).
I. Successors and Assigns; Transfer of Property and Security Deposit . Each of the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties’ respective heirs, executors, administrator, guardians, custodians, successors, and assigns, subject to Section 14 respecting Transfers and Section 17 respecting rights of Lenders. Subject to Section 17, if Landlord shall convey or transfer the Property or Center or any portion thereof in which the Premises are contained to another party, such party shall thereupon be and become landlord hereunder and shall be deemed to have fully assumed all of Landlord’s obligations under this Lease accruing during such party’s ownership, including the return of any Security Deposit (provided Landlord shall have turned over such Security Deposit to such party), and Landlord shall be free of all such obligations accruing from and after the date of conveyance or transfer.
J. Rent and Taxes . In addition to the provisions of Section 15, all rent due Landlord herein is exclusive of any sales or tax based on rents or tax upon this Lease or tax measured by the number of employees of Tenant or the area of the Premises or any similar tax or charge. If any such tax or charge be hereafter enacted, Tenant shall reimburse to Landlord the amount thereof with each monthly Base Rent payment. If it shall not be lawful for Tenant to so reimburse Landlord, the monthly Base Rent payable to Landlord under this Lease shall be revised to net Landlord the same net rental after imposition of any such tax or charge upon Landlord as would have been payable to Landlord prior to the imposition of such tax or charge. Tenant shall not be liable to reimburse Landlord any federal income tax or other income tax of a general nature applicable to Landlord’s income.
K. Limitation of Landlord’s Liability . Tenant agrees to look solely to Landlord’s interest in the Building and any rents, issues or profits therefrom for the enforcement of any judgment, award, order, or other remedy under or in connection with this Lease or any related agreement, instrument, or document or for any other matter whatsoever relating thereto or to the Premises, Building, Property, or Premises. This limitation of Landlord’s liability shall apply not only to claims arising from the express terms of the Lease, but also to claims of any kind whatsoever arising from the relationship between the parties or any rights and obligations they may have relating to the Property, the Center, the Lease, or anything related to either. Under no circumstances shall any present or future, direct or indirect, principals or investors, general or limited partners, officers, directors, shareholders, trustees, beneficiaries, participants, advisors, managers, employees, agents or affiliates of Landlord, or of any of the other foregoing parties, or any of their heirs, successors, or assigns have any liability for any of the foregoing matters.
L. Signage . Landlord agrees to provide Tenant, at Landlord’s sole cost, Building standard signage in a manner consistent with other tenants in the Building on the Building directory board and at the entrance to Tenant’s suite.
M. Confidentiality . Tenant shall keep the content and all copies of this Lease, related documents, or amendments now or hereafter entered, and all proposals, materials, information, and matters relating thereto strictly confidential, and shall not disclose, disseminate, or distribute any of the same, or permit the same to occur, except to the extent reasonably required for proper business purposes by Tenant’s employees, attorneys, insurers, auditors, lenders, real estate consultants, brokers, and transferees (and Tenant shall obligate any such parties to whom disclosure is permitted to honor the confidentiality provisions hereof), and except as may be required by Law or court proceedings.
N. Attorneys’ and Other Professionals’ Fees . In any litigation or other proceeding arising under, concerning, or related to this Lease, the prevailing party, as determined by the tribunal, shall be entitled to recover from the other its attorneys’ actual and reasonable fees and costs, its accountants’ actual and reasonable fees and costs, and any its other professionals’ actual and reasonable fees and costs, in the amount determined by the tribunal, at trial, in arbitration, on appeal, or in bankruptcy.
 
30

O. Further Assurances . Tenant agrees to execute such other documents that Landlord reasonably requests to correct errors in this Lease or to otherwise achieve the intent of the parties.
P. Tenant’s Cooperation . Tenant agrees to cooperate with Landlord in any governmental proceeding in which Tenant’s assistance is necessary or desirable for Landlord, the Building, Property, or Center to qualify for any governmental benefit, including without limitation any property tax abatement program or property tax protest, reduction, or refund action.
Q. Landlord’s Representations . Tenant acknowledges that Landlord has made no covenants, representations, or warranties concerning the Premises, the Building, Property, or Center not expressly set forth in this Lease. Landlord shall not be liable under any theory of implied warranty, representation, or covenant.
R. Waiver of Liens; Landlord Liens . Landlord expressly waives and relinquishes any landlord’s lien, rights of levy or distraint, claim, security interest or other interest Landlord may now or hereafter have in or with respect to any of the improvements, trade fixtures, furnishings or personal property of Tenant, and agrees to execute and deliver such commercially reasonable waiver documents as Tenant’s lender(s) may request from time to time.
SECTION 34: GUARANTY
If a guarantor is named in Section 1.L. of this Lease, then Landlord’s performance of its obligations hereunder, including without limitation the delivery of the Premises to Tenant, shall be conditioned upon Tenant’s delivery to Landlord, upon execution of this Lease, of the Guaranty attached hereto as Exhibit D, fully executed by Guarantor.
SECTION 35: ENTIRE AGREEMENT
This Lease, together with the Riders, Exhibits, and other documents listed in Section 1 (which collectively are hereby incorporated where referred to herein and made a part hereof as though fully set forth), contains all the terms and provisions between Landlord and Tenant relating to the matters set forth herein and no prior or contemporaneous agreement or understanding pertaining to the same shall be of any force or effect, except any such contemporaneous agreement specifically referring to and modifying this Lease, signed by both parties. Neither this Lease, nor any Riders or Exhibits referred to above may be modified, except in writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first set forth above.

LANDLORD:	  	TENANT:	
		
C. D. STIMSON COMPANY, a Washington corporation	  	AMERICAN PET INSURANCE COMPANY , a New York corporation	
				
By:	  	/s/ Thomas S. Bayley	  	By:	  	/s/ Howard E. Rubin	
	  	Thomas S. Bayley, President	  		  		
 
31

LANDLORD ACKNOWLEDGEMENT

STATE OF WASHINGTON	  	)	  		
	  	)	  	ss.	
County of King	  	)	  		
I, the undersigned, a Notary Public, in and for the County and State aforesaid, do hereby certify that THOMAS S. BAYLEY , personally known to me to be the PRESIDENT of C. D. STIMSON COMPANY, a Washington corporation, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that in such capacity of said corporation being authorized so to do, he executed the foregoing instrument on behalf of said corporation, by subscribing the name of such corporation by himself as such officer, as a free and voluntary act, and as the free and voluntary act and deed of said corporation, as partner or agent for the Landlord designated in the foregoing instrument, for the uses and purposes therein set forth.
Given under my hand and official seal this 30 th day of August, 2011.

	 		 	/s/ Ellen Mohl Barouh	
	 		 	NOTARY PUBLIC	
	 		 		 		
	 		 	Ellen Mohl Barouh	
	 		 	[Printed Name]	
	 		 	Residing at     Seattle, WA	
	 		 	My commission expires:     July 31, 2014	

TENANT ACKNOWLEDGEMENT

STATE OF WASHINGTON	  	)	  		
	  	)	  	ss.	
County of King	  	)	  		
On this 30 th day of August, 2011, before me a Notary Public duly authorized in and for the said County in the State aforesaid to take acknowledgements personally appeared Howard Rubin, known to me to be the COO of AMERICAN PET INSURANCE COMPANY, a New York corporation, being the entity described in the foregoing instrument, and acknowledged that as such officer, being authorized so to do, (s)he executed the foregoing instrument on behalf of said limited liability company by subscribing the name of such limited liability by himself/herself as such officer and caused the seal, if any, of said limited liability company to be affixed thereof, as his free and voluntary act, and as the free and voluntary act of said limited liability company, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.

	 		 	/s/ Kelsey K. Miyoshi	
	 		 	NOTARY PUBLIC	
	 		 		 		
	 		 	Kelsey K. Miyoshi	
	 		 	[Printed Name]	
	 		 	Residing at     Seattle, WA	
	 		 	My commission expires:     May 25, 2014	

	 		 		 		
 
32

EXHIBIT A
(LEGAL DESCRIPTION OF PROPERTY)
Lot W of Short Subdivision No. 3008464, Recorded July 16, 2009, at Book 264, pages 219-226, under King County Recorder’s No. 20090716900015.
 
33

EXHIBIT A-1
(LEGAL DESCRIPTION OF CENTER)
Lots R, S, T, V, W, X, Y, and Z of Short Subdivision No. 3008464, Recorded July 16, 2009, at Book 264, pages 219-226, under King County Recorder’s No. 20090716900015.
 
34

EXHIBIT B
(DRAWING OF PREMISES)

 
35

EXHIBIT C
(PARKING)

 
36

EXHIBIT D
(WORK LETTER)
American Pet Insurance Company
REFERENCE: Work Letter Agreement
In accordance with the provisions of Section 2 of your Lease dated as of August 29 th , 2011 (the “Lease” ), with the undersigned Landlord, the “Tenant Improvement Work” (as hereinafter defined) to the Premises shall be completed substantially in accordance with the following:
 
1.	GENERAL INTENT AND PROCEDURE	
1.1 It is the intent of this Work Letter Agreement that Tenant shall be permitted reasonable freedom in the interior design and layout of Tenant’s Premises so long as the same is (a) consistent with Landlord’s policies; (b) comparable to, and reasonably consistent with, Building Standard materials and finishes or otherwise approved by Landlord, (c) consistent with Landlord’s structural requirements, (d) complies with all applicable Laws (as defined in the Lease) including applicable City of Seattle building codes and other governmental rules, regulations, and policies, and (e) complies with sound architectural and construction practice, and provided further that no material interference is caused to the operation of the Building’s mechanical, heating, cooling, electrical systems, or structure or other Building operations or functions. Capitalized terms used herein, and not otherwise defined herein, shall have the meaning defined in the Lease which definitions are incorporated herein by reference.
1.2 All improvements and alterations (including without limitation all finishes) proposed to be made to the Premises, and all contractors and subcontractors proposed to be used with respect to such improvements or alterations, must be approved in advance by Landlord. All improvements and alterations so approved by Landlord are referred to as the “Tenant Improvement Work.” Except as expressly provided otherwise herein (or in the Lease), all provisions of the Lease respecting alterations or improvements to the Premises shall apply to the Tenant Improvement Work and are incorporated herein by reference.
 
2.	COST OF TENANT IMPROVEMENT WORK	
2.1 Landlord TurnKey Improvements (Landlord’s Work ). Landlord shall construct the improvements to the office space, as such improvements are identified on the final space plan approved by Landlord and Tenant and attached hereto as Schedule 1, including therein the Scope of Work dated August 29 th , 2011 (the “Final Space Plan” ) at Landlord’s sole cost and expense (such work “Landlord’s Work.” Costs to be paid by Landlord as part of Landlord’s Work shall include: all actual construction costs related to Landlord’s Work; architectural fees and permit fees related to Landlord’s Work; Landlord’s space planning expenses related to the Final Space Plan as the same may be amended from time-to-time; Landlord’s project management expenses; and all taxes related to Landlord’s Work. Provided , Landlord shall not be required to incur expenses for any improvements or alterations not expressly set forth on the Final Space Plan. The cost of (i) any improvements or alterations not expressly set forth on the Final Space Plan and (ii) any changes requested by or arising by or through Tenant to the work set out on the Final Space Plan shall be subject to Section 2.2 of this Agreement and shall be at Tenant’s sole cost and expense. Landlord shall, at Landlord’s sole cost and expense, repair any defects in Landlord’s Work for a period of one year following substantial completion thereof. Landlord hereby assigns, or agrees to assign as necessary, on a non-exclusive basis, to Tenant all warranties and guaranties by all contractors, subcontractors and vendors performing or supplying materials for Landlord’s Work from and after the date that is one year after substantial completion of Landlord’s Work. Landlord shall notify Tenant upon substantial completion of Landlord’s Work. Upon such notice, Landlord and Tenant shall inspect the Premises and prepare an agreed punchlist of any items remaining for completion ( “Punchlist Items” ). Landlord shall use commercially reasonable efforts to complete any Punchlist Items within thirty (30) days after preparation of the agreed list and in any case all such Punchlist Items shall be completed within ninety (90) days after preparation of the agreed list.
 
37

2.2 Other Improvements and Excess Costs . Any other Tenant Improvement Work not set forth on the Final Space Plan and all changes required by Tenant to the Tenant Improvement Work set out on the Final Space Plan, shall be at Tenant’s sole cost and expense and shall be subject to all other provisions of this Work Letter Agreement. Any and all costs (without exception) owed by Tenant shall be paid by Tenant within thirty (30) business days after receipt of an invoice therefore. Costs of such Tenant Improvement Work shall include all design, administration, and construction costs incurred in approving and constructing such Tenant Improvement Work including without limitation the following: the actual construction cost of the work charged by the TI Contractor; any and all costs of space planning, design, and Landlord review and approval thereof (including any architectural and engineering fees incurred by Landlord); Landlord’s costs of contract administration and project management; any and all operation, insurance premium, maintenance, tax, utility or other fees and costs arising from the work charged by the TI Contractor or any other vendor; any costs resulting from modifications required by governmental agencies to meet building or environmental codes charged by the TI Contractor; and any costs resulting from modifications to Building Systems and Equipment resulting from such Tenant Improvement Work charged by the TI Contractor, excluding costs necessary to bring Building Systems and Equipment into compliance with applicable City of Seattle building codes.
2.3 Plan Schedule . After mutual execution of this Lease, Landlord shall proceed to prepare construction plans and specifications (the “Working Drawings and Specifications”), which shall be consistent with the Final Space Plan. Upon completion, Landlord shall present the Working Drawings and Specifications to Tenant for approval, which approval shall not be unreasonably withheld or delayed. Landlord shall then construct Landlord’s Work in substantial accordance with the Working Drawings and Specifications, and the cost of Landlord’s Work and any other Tenant Improvement Work, shall be paid in accordance with Sections 2.1 and 2.2 above. Any changes requested by Tenant to the Final Space Plan, or to the Working Drawings and Specifications, shall be at Tenant’s sole cost and shall be paid in accordance with Section 2.2 above. If completion of Landlord’s Work (including preparation of final plans and specifications) is delayed due to Tenant’s Delay, then the date reasonably determined by Landlord as the date upon which Landlord’s Work should have been substantially complete shall be extended by the number of days caused by Tenant’s Delay as reasonably determined by Landlord, without change to the Commencement Date of this Lease. As used herein, “Tenant Delay” means (i) Tenant’s failure to approve, within the time periods specified herein, any matter requiring Tenant’s approval under this Work Letter or if no time periods are specified herein, within a reasonable time period considering the nature of the matter requiring Tenant’s approval or within the time period specified in any written notice from Landlord concerning the matter; (ii) Tenant’s request for changes in the Working Drawings and Specifications, Final Space Plan, or Scope of Work, provided that Landlord shall provide Tenant with Landlord’s good faith estimate of the length of any delay which may be caused by such changes requested by Tenant; (iii) any postponement of construction at Tenant’s request; or (iv) any intentional interference by Tenant or Tenant’s employees, agents, or contractors.
2.4 Tenant’s Work . Subject to the requirements of Section 10 of the Lease, Tenant acknowledges that it will be responsible for performing, at its sole cost and expense and independently of Landlord’s Work and the Improvement Allowance any other work not specifically called out in this Work Letter as Landlord’s Work (“Tenant’s Work”): Installation of Tenant’s telephone and computer cabling and systems; installation of Tenant’s security system; installation of cubicles or office partitions; and all other work.
 
3.	COMPLETION, TERM AND RENTAL COMMENCEMENT DATE	
Subject to the provisions of Section 3 of this Lease, the Term and Tenant’s obligations for the payment of rent under the Lease commences on the Commencement Date set forth in Section 1 of the Lease.
 
4.	CONSTRUCTION BY LANDLORD’S APPROVED CONTRACTOR	
Tenant agrees that, unless otherwise set forth in this Work Letter Agreement, all construction work in the Premises shall be performed by a Tenant Improvement Contractor (“TI Contractor”) designated by Landlord. The TI Contractor shall perform such work in a good and workmanlike manner and shall construct the improvements in the Premises substantially in accordance with the applicable code requirements and the approved Working Drawings and Specifications. Landlord shall cause the TI Contractor to diligently pursue completion of the construction work in the Premises.
 
38

5.	ADMINISTRATION BY LANDLORD’S ARCHITECT	
Tenant agrees that all plans, specifications, or design criteria shall be approved in advance by Landlord’s designated architect or other representative (“Landlord’s architect”). Tenant, at Tenant’s expense, may utilize an alternative architect for Tenant’s design purposes, provided that all designs and plans are reviewed and approved by Landlord’s architect, and Tenant provides Landlord’s architect with all drawings and specifications in a format designated by Landlord’s architect.
 
6.	PROJECT MANAGER	
Landlord has designated a “Project Manager” who shall be responsible for the implementation of all Tenant Improvement Work to be performed by Landlord in the Premises. With regard to all matters involving such Tenant Improvement Work, Tenant shall communicate with the Project Manager rather than with the TI Contractor or any subcontractor. Landlord shall not be responsible for any statement, representation or agreement made between Tenant and the TI Contractor or any subcontractor. It is hereby expressly acknowledged by Tenant that such TI Contractor is not Landlord’s agent and has no authority whatsoever to enter into agreements on Landlord’s behalf or otherwise bind Landlord. The Project Manager will furnish Tenant with notices of substantial completion, cost estimates for Tenant Improvement Work, Landlord’s approvals or disapprovals of all plans and drawings and changes thereto.
Tenant shall designate a representative (“Tenant’s Representative”) who shall have authority to act for Tenant in all matters relating to the Tenant Improvement Work and who shall be available continuously during the construction project.
 
7.	NOTICES; DEFAULT	
Any notice, statement advice, approval, consent or other communication required or permitted to be given by either party to the other pursuant to this Work Letter Agreement shall be given in the manner set forth in Section 1 and 24 of the Lease. A default by Tenant of any obligation hereunder shall constitute a default by Tenant under the Lease, and upon default of Tenant in payment of any sum to be paid by Tenant pursuant to this Work Letter Agreement, Landlord shall (in addition to all other remedies) have all the rights as in the case of default by Tenant in payment of Rent under the Lease.
The foregoing Work Letter Agreement correctly sets forth our understanding as of the date first hereinabove set forth.

LANDLORD:
 
C. D. STIMSON COMPANY , a Washington corporation	 		 	TENANT:
 
AMERICAN PET INSURANCE COMPANY, a New York corporation	
					
By:	 	/s/ Thomas S. Bayley	 		 	By:	 	/s/ Howard E. Rubin	
	 	Thomas S. Bayley, President	 		 		 	C.O.O.	

39

SCHEDULE 1 TO WORK LETTER – FINAL SPACE PLAN
(FINAL FLOOR PLAN)
 
40

 

41

 

42

SCHEDULE 1 TO WORK LETTER
(SCOPE OF WORK – LANDLORD’S WORK – August 29 th , 2011)
 
1.	Develop and define project scope and specifications;	
 
2.	Develop project schedule, select contractor, obtain permits as required;	
 
3.	Protect existing surfaces and finishes during construction, including floor coverings;	
 
4.	Demolish existing walls as per the Final Space Plan, including removal of interior trim, wallboard, and framing, and dispose of all demolition debris;	
 
5.	Frame new walls, soffits, door openings, and architectural details as per the Final Space Plan;	
 
6.	Replace interior trim as needed to match existing trim	
 
7.	Patch wallboard as needed;	
 
8.	Interior painting of new walls to match paint on existing walls;	
 
9.	Replace flooring as needed to tie in with existing flooring;	
 
10.	Modify drop ceiling as needed per Final Space Plan;	
 
11.	Adjust venting to match new spaces, per Final Space Plan;	
 
12.	Demolish existing electrical as required per Final Space Plan;	
 
13.	Provide new lighting, electrical circuits for new space as per Final Space Plan; and	
 
14.	Provide electrical service and connection to Tenant provided workstations per Final Space Plan.	
 
43

EXHIBIT E
EXISTING RIGHTS TO SPACE AT SALMON BAY CENTER
1. Pacific Studio, Inc. has the option to acquire the warehouse space adjacent to its current premises upon expiration of current tenant’s lease.
 
44

RIDER ONE
RULES
(1) Access to Property. On Saturdays, Sundays and Holidays, and on other days between the hours of 6:00 P.M. and 5:00 A.M. the following day, or such other hours as Landlord shall reasonably determine from time to time, access to and within the Property and Center may be restricted and access gained pursuant to such security procedures Landlord may impose, provided, however, Tenant and its employees shall have access to the Premises 24 hours per day, 7 days per week, 365 days per year. Landlord retains the right to control and prevent access to the Property and Center by persons engaged in activities which are illegal or violate these Rules, or whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation, and interests of the Property and Center and its tenants (and Landlord shall have no liability in damages for such actions taken in good faith). No Tenant and no employee or invitee of Tenant shall enter areas reserved for the exclusive use of Landlord, its employees, or invitees or other persons. Tenant shall keep doors to corridors and lobbies closed except when persons are entering or leaving.
(2) Signs. Tenant shall not paint or display any sign or other matter on any part of the outside or inside of the Building, or on the Property or Center, or on any part of the inside of the Premises which can be seen from the outside of the Premises without the prior consent of Landlord. Landlord shall prescribe the suite number and identification sign for the Premises (which shall be prepared and installed by Landlord). Landlord reserves the right to remove at Tenant’s expense all matter not so installed or approved without notice to Tenant.
(3) Window and Door Treatments. Tenant shall not place anything near the glass of any door, partition, wall, or window which may be unsightly from outside the Premises, and Tenant shall not place or permit to be placed any item of any kind on any window ledge or on the exterior walls. Blinds, shades, awnings, or other forms of inside or outside window ventilators or similar devices, shall not be placed in or about the outside windows or doors in the Premises except to the extent they are first approved by Landlord. Tenant shall not install or remove any solar tint film from the windows.
(4) Lighting and General Appearance of Premises. Landlord reserves the right to approve in writing all internal lighting that may be visible from outside the Premises. The appearance of the portion of the Premises visible from outside the Premises shall at all times have a neat, professional, attractive, first class office appearance.
(5) Property, Trade Names, Likeness, Trademarks. Tenant shall not in any manner use the name of the Center for any purpose, or use any trade names or trademarks used by Landlord, any other tenant, or its affiliates, or (except when marketing the Premises for sublease or assignment) any picture or likeness of the Building or Center for any purpose other than that of the business address of Tenant, in any letterheads, envelopes, circulars, notices, advertisements, containers, wrapping, or other material.
(6) Deliveries and Removals. Furniture, freight, and other large or heavy items, and all other deliveries may be brought into the Properly and Center only at times and in the manner designated by Landlord, and always at the Tenant’s sole responsibility and risk. Any hand-carts used at the Property or Center shall have rubber wheels and side guards, and no other material handling equipment may be brought upon the Property or Center without Landlord’s prior written approval.
(7) Outside Vendors. Vendors must use service entrances, upon reasonable request of Landlord.
(8) Overloading Floors; Vaults. Tenant shall not overload any floor or part thereof in the Premises or Building, including any public corridors or elevators therein bringing in or removing any large or heavy items, and Landlord may prohibit, or direct and control the location and size of, safes and all other heavy items and require at Tenant’s expense supplementary supports of such material and dimensions as Landlord may deem necessary to properly distribute the weight.
 
45

(9) Locks and Keys . Tenant shall use such standard key system designated by Landlord on all keyed doors to and within the Premises, excluding any permitted vaults or safes (but Landlord’s designation shall not be deemed a representation of adequacy to prevent unlawful entry or criminal acts, and Tenant shall maintain such additional insurance as Tenant deems advisable for such events). Tenant shall not attach or permit to be attached additional locks or similar devices to any door or window, change existing locks or the mechanism thereof, or make or permit to be made any keys for any door other than those provided by Landlord. If more than two keys for one lock are desired, Landlord will provide them without charge. In the event of loss of any keys furnished by Landlord, Tenant shall pay Landlord’s reasonable charges therefore. The term “key” shall include mechanical, electronic or other keys, cards, and passes. Landlord shall not be liable for the consequences of admitting by pass key or refusing to admit to the Premises the Tenant, Tenant’s agent or employees or other persons claiming the right of entrance.
(10) Utility Closets and Connections. Landlord reserves the right to control access to and use of, and monitor and supervise any work in or affecting, the “wire” or telephone, electrical, plumbing or other utility closets, the Systems and Equipment, and any changes, connections, new installations, and wiring work relating thereto (or Landlord may engage or designate an independent contractor to provide such services). Tenant shall obtain Landlord’s prior written consent for any such access, use, and work in each instance. Tenant shall have no right to use any broom closets, storage closets, janitorial closets, or other such closets, rooms and areas whatsoever. Tenant shall not install in or for the Premises any equipment which requires more electric current than Landlord is required to provide under this Lease, without Landlord’s prior written approval, and Tenant shall ascertain from Landlord the maximum amount of load or demand for or use of electrical current which can safety be permitted in and for the Premises, taking into account the capacity of electric wiring in the Property and the Premises and the needs of tenants of the Property and Center, and shall not in any event connect a greater load than such safe capacity.
(11) Plumbing Equipment. The toilet rooms, urinals, wash bowls, drains, sewers and other plumbing fixtures, equipment and lines shall not be misused or used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein.
(12) Trash. All garbage, refuse, trash, and other waste shall be kept in the kind of container, placed in the areas, and prepared for collection in the manner and at the times and places specified by Landlord, subject to Lease provisions respecting Hazardous Materials. Landlord reserves the right to require that Tenant participate in any recycling program designated by Landlord.
(13) Alcohol, Drugs, Food, and Smoking. Landlord reserves the right to exclude or expel from the Property or Center any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules. Tenant shall not at any time manufacture or sell any spirituous, fermented, intoxicating, or alcoholic liquors on the Premises, nor permit the same to occur. Tenant and its employees shall not smoke tobacco on any part of the Property or Center (including exterior areas) except those areas, if any, that are designated or approved as smoking areas by Landlord. One or more designated areas shall be adjacent to the Premises. Landlord shall inform Tenant upon request of the location of the designated areas.
(14) Use of Common Areas; No Soliciting. Tenant shall not use the common areas, including areas adjacent to the Premises, for any purpose other than ingress and egress, and any such use thereof shall be subject to the other provisions of this Lease, including these Rules. Without limiting the generality of the foregoing, Tenant shall not allow anything to remain in any passageway, sidewalk, court, corridor, stairway, entrance, exit, elevator, parking or shipping area, or other area outside the Premises. Tenant shall not use the common areas to canvass, solicit business or information from, or distribute any item or material to, other tenants or invitees of the Property or Center. Tenant shall not make any room-to-room canvass to solicit business or information or to distribute any item or material to or from other tenants of the Property or Center and shall not exhibit, sell or offer to sell, use, rent or exchange any products or services in or from the Premises unless ordinarily embraced within the Tenant’s use of the Premises expressly permitted in the Lease.
(15) Energy and Utility Conservation. Tenant shall not waste electricity, water, heat or air conditioning, or other utilities or services, and agrees to cooperate fully with Landlord to assure the most effective and energy efficient operation of the Property and Center and shall not allow the adjustment (except by Landlord’s authorized Property personnel) of any controls. Tenant shall not obstruct, alter, or impair the efficient operation of
 
46

the Systems and Equipment, and shall not place any item so as to interfere with air flow. Tenant shall keep corridor doors closed. If reasonably requested by Landlord (and as a condition to claiming any deficiency in the air-conditioning or ventilation services provided by Landlord), Tenant shall on extreme sun days use blinds or drapes in the Premises to reduce direct sunlight.
(16) Unattended Premises. Before leaving the Premises unattended, Tenant shall close and security lock all doors or other means of entry to the Premises and shut off all lights and water faucets in the Premises (except heat to the extent necessary to prevent the freezing or bursting of pipes).
(17) Going-Out-Of Business Sales and Auctions. Tenant shall not use, or permit any other party to use, the Premises for any distress, fire, bankruptcy, close-out, “lost our lease”, or going-out-of-business sale or auction. Tenant shall not display any signs advertising the foregoing anywhere in or about the Premises. This prohibition shall also apply to Tenant’s creditors.
(18) Labor Harmony. Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment, or labor and employment practices that, in Landlord’s good faith judgment, may cause strikes, picketing, or boycotts or disturb labor harmony with the workforce or trades engaged in performing other work, labor, or services in or about the Property or Center.
(19) Prohibited Activities. Tenant shall not: (i) use strobe or flashing lights in or on the Premises, (ii) install or operate any internal combustion engine, boiler, machinery, refrigerating, heating or air conditioning equipment in or about the Premises, (iii) use the Premises for housing, lodging, or sleeping purposes or for the washing of clothes, (iv) place any radio or television antennae other than inside of the Premises, (v) operate or permit to be operated any musical or sound producing instrument or device which may be heard outside the Premises, (vi) use any source of power other than electricity, (vii) operate any electrical or other device from which may emanate electrical, electromagnetic, energy, microwave, radiation, or other waves or fields which may interfere with or impair radio, television, microwave, or other broadcasting or reception from or in the Property, Center, or elsewhere, or impair or interfere with computers, faxes or telecommunication lines or equipment at the Property, Center, or elsewhere, or create a health hazard, (viii) bring or permit any vehicle, or dog (except in the company of a blind person or except where specifically permitted) or other animal or bird in the Premises or Building, (ix) make or permit objectionable noise, vibration, or odor to emanate from the Premises, (x) do anything in or about the Premises, Property, or Center that is illegal, immoral, obscene, pornographic, or anything that may in Landlord’s good faith opinion create or maintain a nuisance, cause physical damage to the Premises, Property, or Center, interfere with the normal operation of the Systems and Equipment, impair the appearance, character or reputation of the Premises, Property, or Center, create waste to the Premises, Property, or Center cause demonstrations, protests, loitering, bomb threats, or other events which may require evacuation of the Building, Property, or Center, (xi) advertise or engage in any activities which violate any code of ethics or licensing requirements of any professional or business organization, (xii) throw or permit to be thrown or dropped any item from any window or other opening in the Premises or Building, (xiii) use the Premises for any purpose, or permit upon the Premises, Property, or Center anything, that may be dangerous to persons or property (including firearms or other weapons (whether or not licensed or used by security guards) or any explosive or combustible items or materials) (xiv) place vending or game machines in the Premises, except vending machines for employees which shall be at Tenant’s sole cost and expense and only upon prior notice to and consent of Landlord, (xv) adversely affect the indoor air quality of the Premises, Building, Property, or Center, (xvi) use the Premises for cooking or food preparation other than preparation of coffee, tea, and similar beverages, or customary microwave use, for Tenant and its employees, or (xvii) do or permit anything to be done upon the Premises, Property, or Center in any way tending to disturb, bother, annoy, or interfere with Landlord or any other tenant at the Property or Center or the tenants of neighboring property, or otherwise disrupt orderly and quiet use and occupancy of the Property or Center.
(20) Transportation Management. Tenant shall comply with all present or future programs intended to manage parking, transportation or traffic in and around the Property and Center, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization, or any other transportation-related committees or entities.
 
47

(21) Parking. The following Rules shall apply to the parking area at the Property and Center (“Parking Area”):
(i) Except as otherwise provided in this Lease, parking shall be available in areas designated by Landlord from time to time. Except for parking spaces specifically reserved, parking for Tenant and its employees and visitors shall be on a “first come, first served,” unassigned basis, in common with Landlord and other tenants at the Property and Center, and their employees and visitors, and other Persons to whom Landlord shall grant the right or who shall otherwise have the right to use the same. Landlord reserves the right to reserve specific spaces for small and other size cars, disabled persons, and other tenants, customers of tenants, or other parties.
(ii) In case of any violation of these rules, Landlord may refuse to permit the violator to park, and may remove the vehicle owned or driven by the violator from the Property or Center without liability whatsoever, at such violator’s risk and expense. Landlord reserves the right to temporarily close all or a portion of the Parking Area in order to make repairs or perform maintenance services, or to alter, modify, restripe, or renovate the same, or any other reason beyond Landlord’s reasonable control. In the event access is denied other than temporarily for any reason, Landlord will make reasonable efforts to provide alternate parking.
(iii) Tenant shall have access to the parking lot twenty-four hours per day, seven days per week. Cars must be parked entirely within the stall lines, and only small or other qualifying cars may be parked in areas reserved for such cars; all directional signs, arrows and speed limits must be observed; spaces reserved for disabled persons must be used only by vehicles properly designated; washing, waxing, cleaning or servicing of any vehicle is prohibited; every parker is required to park and lock his own car, except to the extent that Landlord adopts a valet parking system; parking is prohibited in areas: (a) not striped or designated for parking, (b) aisles, (c) where “no parking” signs are posted, (d) on ramps, and (e) loading areas and other specially designated areas. Delivery trucks and vehicles shall use only those areas designated therefore.
(22) Responsibility for Compliance. Tenant shall be responsible for ensuring compliance with these Rules, as they may be reasonably amended, by Tenant’s employees and as applicable, by Tenant’s agents, invitees, contractors, subcontractors, and suppliers. Tenant shall cooperate with any reasonable program or requests by Landlord to monitor and enforce the Rules, including providing vehicle numbers and taking appropriate action against such of the foregoing parties who violate these provisions.
 
48

Exhibit 21.1
List of Subsidiaries of Trupanion, Inc.

Subsidiary	  	Incorporation	
American Pet Insurance Company	  	United States, New York	
Trupanion Managers USA, Inc.	  	United States, Arizona	
Trupanion Brokers Ontario, Inc.	  	Canada, Ontario	

Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated February 28, 2014 (except as to the fourth paragraph of Note 18, as to which the date is May 1, 2014) in the Registration Statement (Form S-1) and the related Prospectus of Trupanion, Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Seattle, Washington
June 16, 2014