Trupanion, Inc 8-K, filed Oct 29, 2020
Trupanion, Inc. (TRUP)
8-K
2020-10-29
For: 2020-10-26
View Original
Added on
April 11, 2026
About this 8-K
Trupanion, Inc filed this 8-K on October 29, 2020, reporting on events of October 26, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 3.02: Unregistered sale of equity
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2020
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including zip code)
(855 ) 727 - 9079
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On October 26, 2020, Trupanion, Inc. (the “Company”) entered into a Strategic Alliance Agreement (the “Alliance Agreement”), Stock Purchase Agreement (the “Purchase Agreement”), and Shareholder Agreement (the “Shareholder Agreement”) with Aflac Incorporated (“Aflac”). The Purchase Agreement provides for the private placement of up to 3,636,364 shares of the Company’s common stock, $0.00001 par value per share (“Shares”), at a purchase price of $55.00 per Share. The Shares will be subject to a minimum holding period of three years, as described below (the “Lock Up”). The aggregate gross proceeds are expected to be approximately $200 million with net proceeds to the Company of approximately $192.5 million, after deducting estimated placement agent fees payable by the Company (the “Transaction”). Guggenheim Securities, LLC acted as placement agent for the Transaction.
The first closing of the Transaction occurred concurrently with the execution of the Purchase Agreement on October 26, 2020, pursuant to which Aflac purchased 1,090,909 Shares. The purchase and sale of the balance of the Shares will occur in a single closing (the “Milestone Closing”) following the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), but before March 31, 2021, and subject to certain other terms and conditions set forth in the Purchase Agreement.
Alliance Agreement
The Alliance Agreement sets forth the structure for a distribution alliance between the parties (the “Alliance”). This includes (i) responsibilities of Aflac relating to brand, access and distribution, (ii) responsibilities of the Company relating to marketing, product development and middle and back office functions, (iii) the intended go-to-market approach, (iv) the economic assumptions, and (v) the intended timing. The parties have agreed to negotiate in good faith and to act reasonably with each other in order to agree on such terms as are necessary to fully implement the Alliance.
Pursuant to the Alliance Agreement, Aflac has agreed not to develop or offer any pet insurance products on its U.S. proprietary enrollment platform that would compete with the Company’s products, and the Company has agreed not to develop with a third party any worksite employee benefit regarding its pet insurance in the United States or Japan. Aflac and the Company have also agreed to work exclusively with each other to develop opportunities in Japan’s pet insurance marketplace through December 31, 2021, subject to two six-month extensions.
Purchase Agreement
The Purchase Agreement contains customary closing conditions and representations and warranties by the Company and Aflac. The Purchase Agreement also includes certain covenants of the Company applicable until the earlier of the Milestone Closing or the termination of the Purchase Agreement. Such covenants include certain restrictions on the Company’s ability, without Aflac’s consent, to (i) amend the organizational documents of the Company and its subsidiaries, (ii) redeem or repurchase Company capital stock, (iii) create new securities that represent the right to receive capital stock of the Company, (iv) issue dividends, and (v) effect a liquidation, merger or consolidation of the Company and certain of its subsidiaries.
Shareholder Agreement
Pursuant to the Shareholder Agreement, Aflac has agreed to certain standstill obligations, including to limit its ownership of Company equity to less than 10% of the outstanding shares of Company common stock and not to otherwise take certain actions that may result in a change in control of the Company, subject to certain exceptions and termination events.
The Shareholder Agreement further provides that if the Company proposes to issue any shares of common stock, subject to the exceptions and qualifications set forth in the Shareholder Agreement, Aflac has the preemptive right to purchase a number of shares that would allow Aflac to maintain its ownership percentage.
The Shareholder Agreement sets forth the Lock Up, pursuant to which Aflac will not sell or transfer any of the Shares for a period of three years, subject to certain exceptions.
The Shareholder Agreement also requires that the Company prepare and file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, covering the resale of the Shares. The Company has agreed to file such Registration Statement with the SEC by December 31, 2020 or, if the Milestone Closing occurs prior to such date, as soon as reasonably practicable following the Milestone Closing, and to keep such Registration Statement effective until Aflac no longer holds any shares of the Company’s common stock acquired in the Transaction or pursuant to its preemptive rights.
The foregoing descriptions of the Alliance Agreement, Purchase Agreement, and Shareholder Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the forms of the Purchase Agreement, Alliance Agreement, and Shareholder Agreement, which are filed as, respectively, Exhibits 10.1, 10.2, and 10.3 hereto.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 above is incorporated into this Item 3.02 by reference.
The purchase and sale of the Shares is in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), set forth under Section 4(a)(2) of the Securities Act and the regulations promulgated thereunder relating to sales by an issuer not involving any public offering and in reliance on similar exemptions under applicable state laws. Neither this Current Report on Form 8-K nor the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy the securities described herein.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits | |||||||
| Exhibit No. | Description | |||||||
| Stock Purchase Agreement, dated as of October 26, 2020 by and between Trupanion, Inc. and Aflac Incorporated. | ||||||||
| Strategic Alliance Agreement, dated as of October 26, 2020 by and between Trupanion, Inc. and Aflac Incorporated. | ||||||||
| Shareholder Agreement, dated as of October 26, 2020 by and between Trupanion, Inc. and Aflac Incorporated. | ||||||||
| Press release dated October 29, 2020. | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | |||||||
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements based upon the Company’s current expectations. Forward-looking statements include, without limitation, all statements relating to (i) whether the Milestone Closing occurs, (ii) the Lock Up, (iii) the Registration Statement, and (iv) the Alliance. Forward-looking statements are subject to risks and uncertainties, and the Company’s actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of such risks and uncertainties, which include, without limitation, risks and uncertainties associated with HSR Act approval, the satisfaction of other closing conditions related to the Transaction, the ability of the parties to reach agreement on the terms necessary to fully implement the Alliance, market conditions, and other matters. There can be no assurance that the Company will be able to complete the Milestone Closing on the terms described herein or in a timely manner, if at all, or to fully implement the Alliance. You should not place undue reliance on forward-looking statements, which apply only as of the date of this Current Report on Form 8-K. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TRUPANION, INC. | |||||
By: | /s/ Tricia Plouf | ||||
Name: Tricia Plouf | |||||
Title: Chief Financial Officer | |||||
Date: October 29, 2020
Exhibit 10.1
STOCK PURCHASE AGREEMENT
between
TRUPANION, INC.
and
AFLAC INCORPORATED
dated as of October 26, 2020
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE I | ||||||||
| DEFINITIONS | ||||||||
| Section 1.01 | Definitions | 1 | ||||||
| Section 1.02 | Interpretation | 6 | ||||||
| ARTICLE II | ||||||||
| AGREEMENT TO SELL AND PURCHASE | ||||||||
| Section 2.01 | Sale and Purchase | 6 | ||||||
| Section 2.02 | Closings | 7 | ||||||
| Section 2.03 | Mutual Conditions to Each Party's Obligations | 7 | ||||||
| Section 2.04 | Conditions to Purchaser's Obligations | 8 | ||||||
| Section 2.05 | Conditions to Company's Obligations | 8 | ||||||
| Section 2.06 | Company Closing Deliverables | 9 | ||||||
| Section 2.07 | Purchaser Closing Deliverables | 9 | ||||||
| ARTICLE III | ||||||||
| REPRESENTATIONS AND WARRANTIES OF COMPANY | ||||||||
| Section 3.01 | Organization and Existence | 10 | ||||||
| Section 3.02 | Authorization | 11 | ||||||
| Section 3.03 | Consents | 11 | ||||||
| Section 3.04 | Noncontravention | 11 | ||||||
| Section 3.05 | Shares | 12 | ||||||
| Section 3.06 | Capitalization | 12 | ||||||
| Section 3.07 | Financial Statements | 13 | ||||||
| Section 3.08 | No Undisclosed Liabilities | 14 | ||||||
| Section 3.09 | Company Filings | 14 | ||||||
| Section 3.10 | No Material Adverse | 14 | ||||||
| Section 3.11 | Taxes | 14 | ||||||
| Section 3.12 | Absence of Proceedings | 15 | ||||||
| Section 3.13 | Compliance with Laws | 15 | ||||||
| Section 3.14 | Insurance Subsidiaries | 16 | ||||||
| Section 3.15 | Benefit Plans | 17 | ||||||
| Section 3.16 | Labor and Employment | 18 | ||||||
| Section 3.17 | Material Contracts | 18 | ||||||
| Section 3.18 | Properties and Assets | 19 | ||||||
| Section 3.19 | Environmental Compliance | 19 | ||||||
| Section 3.20 | Intellectual Property | 19 | ||||||
| Section 3.21 | Privacy and Cybersecurity | 20 | ||||||
| Section 3.22 | Foreign Corrupt Practices Act | 21 | ||||||
| Section 3.23 | OFAC | 21 | ||||||
| Section 3.24 | Money Laundering Laws | 21 | ||||||
| Section 3.25 | Sale of Securities | 22 | ||||||
| Section 3.26 | Listing and Maintenance Requirements | 22 | ||||||
| Section 3.27 | Investment Company Act | 22 | ||||||
| Section 3.28 | No Broker's Fees | 22 | ||||||
| Section 3.29 | Exclusive Representations and Warranties | 22 | ||||||
| ARTICLE IV | ||||||||
| REPRESENTATIONS AND WARRANTIES OF PURCHASER | ||||||||
| Section 4.01 | Organization and Existence | 23 | ||||||
| Section 4.02 | Authorization | 23 | ||||||
| Section 4.03 | Consents | 24 | ||||||
| Section 4.04 | Noncontravention | 24 | ||||||
| Section 4.05 | Certain Fees | 24 | ||||||
| Section 4.06 | Unregistered Securities | 24 | ||||||
| Section 4.07 | Ownership of Common Stock | 26 | ||||||
| Section 4.08 | Financing | 26 | ||||||
| ARTICLE V | ||||||||
| COVENANTS | ||||||||
| Section 5.01 | Interim Operations | 26 | ||||||
| Section 5.02 | Efforts Prior to Milestone Closing | 27 | ||||||
| Section 5.03 | Supplemental Listing | 28 | ||||||
| Section 5.04 | Reservation of Common Stock | 28 | ||||||
| Section 5.05 | Further Assurances | 28 | ||||||
| ARTICLE VI | ||||||||
| MISCELLANEOUS | ||||||||
| Section 6.01 | Termination | 28 | ||||||
| Section 6.02 | Fees and Expenses | 30 | ||||||
| Section 6.03 | Exclusive Representations and Warranties | 30 | ||||||
| Section 6.04 | Survival of Provisions | 30 | ||||||
| Section 6.05 | No Waiver; Modifications in Writing | 31 | ||||||
| Section 6.06 | Binding Effect; Assignment | 31 | ||||||
| Section 6.07 | Confidentiality; Publicity | 31 | ||||||
| Section 6.08 | Notices | 32 | ||||||
| Section 6.09 | Entire Agreement | 33 | ||||||
| Section 6.10 | Specific Performance | 33 | ||||||
| Section 6.11 | Governing Law; Submission to Jurisdiction | 34 | ||||||
| Section 6.12 | Waiver of Jury Trial | 34 | ||||||
| Section 6.13 | Execution in Counterparts | 34 | ||||||
| Section 6.14 | No Recourse | 35 | ||||||
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 26, 2020 (this “Agreement”), is entered into by and between Trupanion, Inc., a Delaware corporation (“Company”), and Aflac Incorporated, a Georgia corporation (“Purchaser” and, together with Company, the “Parties”).
WHEREAS, at the applicable Closing (as defined below), and subject to the terms and conditions of this Agreement, Company desires to sell and issue to Purchaser, and Purchaser desires to purchase from Company, the applicable Shares (as defined below) as set forth herein; and
WHEREAS, at the Initial Closing (as defined below), the Parties will execute and deliver a Shareholder Agreement, in substantially the form attached hereto as Exhibit A (the “Shareholder Agreement”).
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, the following terms have the meanings indicated below:
“Action” means any claim, action, suit, arbitration, inquiry, grievance, proceeding, hearing, investigation, or administrative decision-making or rulemaking process.
“Affiliate” means, with respect to a specified Person, any other Person, whether now in existence or hereafter created, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Aggregate Purchase Price” means, collectively, the Initial Closing Purchase Price and the Milestone Closing Purchase Price.
“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.
“APIC” means American Pet Insurance Company, an insurance company organized under the laws of the State of New York.
“Board” means the Board of Directors of Company.
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“Business Day” means any day other than a Saturday, a Sunday or any federal holiday or day on which banking institutions in New York, New York are authorized or required by Law or other governmental action to close.
“Closing” means, as applicable, the Initial Closing or the Milestone Closing.
“Closing Date” means, as applicable, the Initial Closing Date or the Milestone Closing Date.
“Code” means the Internal Revenue Code of 1986.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock, par value $0.00001 per share, of Company.
“Company” shall have the meaning specified in the introductory paragraph of this Agreement.
“Company Balance Sheet” shall have the meaning specified in Section 3.07.
“Company Financial Statements” shall have the meaning specified in Section 3.07.
“Company Projections” shall have the meaning specified in Section 3.29.
“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed of trust, loan, instrument, lease, license, commitment or other arrangement, understanding, undertaking, commitment or obligation, whether written or oral.
“Disclosure Schedule” has the meaning set forth in the introductory paragraph of Article III.
“Effect” shall have the meaning specified in the definition of Material Adverse Effect.
“Exchange Act” means the Securities Exchange Act of 1934, and the rules and regulations of the Commission promulgated thereunder.
“Fraud” means actual, not constructive, common law fraud (under the Laws of the State of Delaware).
“GAAP” means generally accepted accounting principles and practices in the United States of America as of the period presented.
“Governmental Authority” means any supranational, national, state, municipal, local or foreign government; any instrumentality, subdivision, court, administrative agency or commission or other authority thereof (including a national securities exchange or other self-regulatory body); or any quasi-governmental, arbitration or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations promulgated thereunder.
“Initial Closing” shall have the meaning specified in Section 2.02.
“Initial Closing Purchase Price” means $59,999,995, which shall equal $55.00 per share of Common Stock.
“Initial Closing Shares” means 1,090,909 shares of Common Stock.
“Insurance Laws” means all applicable Laws regulating the business and products of insurance and all applicable Governmental Orders and directives of insurance regulatory authorities.
“Insurance Subsidiaries” means APIC and Wyndham Insurance Company (SAC) Limited, Segregated Account AX.
“Intellectual Property” means any and all intellectual property rights, including all U.S. and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof, (ii) trademarks, service marks, names, corporate names, trade names, domain names, logos, slogans, trade dress, design rights, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (iii) copyrights and copyrightable subject matter, (iii) rights in computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, technology supporting the foregoing, and all documentation, including user manuals and training materials, related to any of the foregoing, (iv) trade secrets and all other confidential information, ideas, know-how, inventions, proprietary processes, formulae, models, and methodologies, (v) rights of publicity, privacy, and rights to personal information, and (vii) all applications and registrations, and any renewals, extensions and reversions, for the foregoing.
“Law” means any applicable supranational, domestic, foreign, federal, state or local order, writ, injunction, judgment, settlement, award, decree, statute, law (including common law), rule or regulation, including any Governmental Order.
“Material Adverse Effect” means any circumstance, fact, condition, change, development, occurrence, event or effect (each, an “Effect”) that, individually or in the aggregate, is materially adverse to (a) the business, condition (financial or otherwise), assets, liabilities, operations or results of operations of Company and its Subsidiaries, taken as a whole or (b) Company’s ability to perform its obligations under, and consummate the transactions contemplated by, the Transaction Documents, except for any Effect resulting from: (i) changes in the economy or the financial, securities or currency markets in the United States or elsewhere in the world (including changes in prevailing foreign exchange rates or interest rates), (ii) changes generally affecting the industries in which Company and its Subsidiaries operate, (iii) generally applicable changes in Law or in GAAP, accounting standards or interpretations thereof, in each case, after the date hereof, (iv) weather-related events, epidemic, pandemic or disease outbreaks, or escalations of hostilities or acts of war or terrorism, (v) the announcement or the existence of this Agreement or the transactions contemplated hereby, (vi) changes
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(in and of themselves) in the share price or trading volume of the Common Stock (but not the underlying cause thereof) or (vii) the failure (in and of itself) of Company to meet projections or forecasts (but not the underlying causes thereof), except, with respect to clauses (i)-(iv), to the extent that any such Effect has a disproportionate impact on the business of Company and its Subsidiaries relative to other businesses in the industries in which Company and its Subsidiaries operate (in which case, only the incremental disproportionate impact may be taken into account in determining whether there has been a Material Adverse Effect, to the extent such Effect is not otherwise excluded from being taken into account by clauses (i)-(viii) of this definition).
“Milestone” means the applicable waiting period (including any extensions thereof) under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated.
“Milestone Closing” shall have the meaning specified in Section 2.02.
“Milestone Closing Purchase Price” means $140,000,025, which shall equal $55.00 per share of Common Stock.
“Milestone Closing Shares” means 2,545,455 shares of Common Stock.
“NASDAQ” means The NASDAQ Stock Market LLC.
“Organizational Documents” means, with respect to a particular Person (other than a natural person), the certificate or articles of incorporation, certificate or articles of organization, certificate of formation, bylaws, limited liability company agreement, limited partnership agreement, operating agreement or similar organizational document or agreement, as applicable, of such Person.
“Parties” shall have the meaning specified in the introductory paragraph of this Agreement.
“Permits” shall have the meaning specified in Section 3.14.
“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, Governmental Authority or any agency, instrumentality or political subdivision thereof or any other form of entity.
“Producers” means the agents, general agents, sub-agents, brokers, wholesale brokers, independent contractors, consultants, insurance solicitors, producers or other Persons who solicit, negotiate or sell insurance Contracts issued or assumed by any Insurance Subsidiary.
“Purchaser” shall have the meaning specified in the introductory paragraph of this Agreement.
“Representatives” means, with respect to a specified Person, the officers, directors, managers, employees, agents, counsel, accountants, investment bankers, and other representatives of such Person.
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“SEC Disclosure” means the disclosure included in the SEC Reports, but excluding any risk factor disclosure, forward-looking statements or other disclosures or statements that are similarly non-specific and are predictive and forward-looking in nature contained in any such SEC Report under the heading “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or any other heading and excluding any information set forth in any exhibit thereto.
“SEC Reports” shall have the meaning specified in Section 3.09.
“Securities Act” means the Securities Act of 1933, and the rules and regulations of the Commission promulgated thereunder.
“Shareholder Agreement” shall have the meaning specified in the recitals to this Agreement.
“Shares” means, collectively, the Initial Closing Shares and the Milestone Closing Shares.
“Stockholder” means a holder of shares of Common Stock.
“Strategic Alliance Agreement” means the Strategic Alliance Agreement, dated as of the date hereof, by and between the Company and Purchaser (as may be amended or supplemented from time to time).
“Subsidiary” or “Subsidiaries” means, with respect to any Person, any corporation, partnership, joint venture, limited liability company or other entity (a) of which such Person or a subsidiary of such Person is a general partner or manager or (b) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or Persons performing similar functions with respect to such entity, are directly or indirectly owned by such Person and/or one or more subsidiaries thereof.
“Tax Returns” means any return, declaration, report, election, claim for refund or information return or other statement or form relating to Taxes, filed or required to be filed with any taxing authority, including any schedule or attachment thereto or any amendment thereof.
“Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, intangible property, excise, escheat, sales, use, capital stock, accumulation of earnings, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.
“Transaction” means, collectively, the transactions contemplated by the Transaction Documents.
“Transaction Documents” means, collectively, this Agreement and the Shareholder Agreement.
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Section 1.02 Interpretation.
a.Each of the Parties has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any member by virtue of authorship of any of the provisions of this Agreement.
b.Any reference in this Agreement to $ means U.S. dollars.
c.Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.
d.The division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Article” or “Section” are to the corresponding Article or Section of this Agreement unless otherwise specified. The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereto.
e.The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.
f.The word “including,” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
g.When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. All references to days in this Agreement are to calendar days unless the term “Business Day” is specifically used.
h.The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”
i.Any Contract or Law defined or referred to herein means such Contract or Law as from time to time amended, modified or supplemented, unless otherwise specifically indicated.
j.References to a Person are also to its successors and permitted assigns.
ARTICLE II
AGREEMENT TO SELL AND PURCHASE
Section 2.01 Sale and Purchase.
Subject to the terms and conditions of this Agreement, at the (a) Initial Closing, Company hereby agrees to issue and sell to Purchaser, and Purchaser hereby agrees to purchase from Company, the Initial Closing Shares, and as consideration for the issuance and sale of the Initial Closing
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Shares to Purchaser, Purchaser hereby agrees to pay Company the Initial Closing Purchase Price, and (b) Milestone Closing, Company hereby agrees to issue and sell to Purchaser, and Purchaser hereby agrees to purchase from Company, the Milestone Closing Shares, and as consideration for the issuance and sale of the Milestone Closing Shares to Purchaser, Purchaser hereby agrees to pay Company the Milestone Closing Purchase Price.
Section 2.02 Closings.
a.On the terms of this Agreement, the purchase and sale of the Initial Closing Shares (the “Initial Closing”) shall occur on the date hereof as soon as reasonably practicable following the execution and delivery of this Agreement by the Parties, subject to all of the conditions to the Initial Closing set forth in Section 2.03, Section 2.04 and Section 2.05, as applicable, being satisfied or, to the extent permitted by Law, waived by the Party entitled to the benefit thereof, at such time, and shall be conducted remotely via the electronic exchange of documents and signatures, or at such other place, time and date as Company and Purchaser mutually agree, orally or in writing (the date on which the Initial Closing occurs, the “Initial Closing Date”).
b.The purchase and sale of the Milestone Closing Shares (the “Milestone Closing”) shall occur at 10:00 a.m. (New York City time) on the fifth (5th) Business Day following such date on which all of the conditions to the Milestone Closing set forth in Section 2.03, Section 2.04 and Section 2.05 have been satisfied or, to the extent permitted by Law, waived by the Party entitled to the benefit thereof (other than those conditions that by their nature are to be satisfied at the Milestone Closing, but subject to the satisfaction or waiver of those conditions at such time), and shall be conducted remotely via the electronic exchange of documents and signatures, or at such other time and place as Company and Purchaser mutually agree, orally or in writing (the date on which the Milestone Closing occurs, the “Milestone Closing Date”).
c.At the applicable Closing, Company shall (i) deliver to Purchaser the applicable Shares being purchased by Purchaser at such Closing against payment of the Initial Closing Purchase Price or Milestone Closing Purchase Price, as applicable, therefor by wire transfer of immediately available U.S. funds to an account designated by Company, (ii) instruct Broadridge Corporate Issuer Solutions, Inc. or cause such transfer agent to be instructed, to create a book-entry account for Purchaser and credit Purchaser’s account with the applicable Shares, (iii) deliver to Purchaser evidence reasonably satisfactory to Purchaser of the foregoing and that the applicable Shares have been issued to Purchaser in book-entry form and (iv) take all other actions as may be necessary to issue, sell, transfer and deliver to Purchaser all the applicable Shares in book-entry form.
Section 2.03 Mutual Conditions to Each Party’s Obligations.
The respective obligations of each Party to consummate the purchase and issuance and sale of the applicable Shares at the applicable Closing shall be subject to the satisfaction or waiver by each Party (on behalf of itself in writing, in whole or in part, to the extent permitted by Law) on or prior to the applicable Closing Date of each of the following conditions:
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a.no Law shall have been enacted or promulgated, and no action shall have been taken, by any Governmental Authority that temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the Transaction or makes the Transaction illegal, and no Action is pending that seeks a Governmental Order to such effect; and
b.any applicable waiting period under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated.
Section 2.04 Conditions to Purchaser’s Obligations.
The obligation of Purchaser to consummate the purchase of the applicable Shares shall be subject to the satisfaction on or prior to the applicable Closing Date of each of the following conditions (any or all of which may be waived by Purchaser on behalf of itself in writing, in whole or in part, to the extent permitted by Law):
a.Company shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by Company on or prior to the applicable Closing;
b.(i) each of the Fundamental Representations shall be true and correct in all respects (except for de minimis failures to be true and correct) as of the date hereof and as of the applicable Closing Date with the same effect as though made on and as of such Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date) and (ii) each of the representations and warranties (other than the Fundamental Representations) of Company shall be true and correct (read, for purposes of this Section 2.04(b) only, without giving effect to any qualifier as to “materiality,” “material” or “Material Adverse Effect”) in all respects as of the date hereof and as of the applicable Closing Date with the same effect as though made on and as of such Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except in the case of this clause (ii), where the failure to be true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect;
c.since the date hereof, no Effect shall have occurred which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and
d.Company shall have executed and delivered the closing deliverables described in Section 2.06.
Section 2.05 Conditions to Company’s Obligations.
The obligation of Company to consummate the sale of the applicable Shares to Purchaser shall be subject to the satisfaction on or prior to the applicable Closing Date of each of the following conditions (any or all of which may be waived by Company in writing, in whole or in part, to the extent permitted by Law):
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a.Purchaser shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by Purchaser on or prior to the applicable Closing;
b.Each of the representations and warranties of Purchaser contained in Article IV shall be true and correct on and as of the applicable Closing Date with the same effect as though such representations and warranties had been made on and as of such Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure to be true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Purchaser’s ability to perform its obligations hereunder or to consummate the transactions contemplated hereby; and
c.Purchaser shall have executed and delivered the closing deliverables described in Section 2.07.
Section 2.06 Company Closing Deliverables.
At the applicable Closing, Company shall deliver (or cause to be delivered) the following:
a.at the (i) Initial Closing, the Initial Closing Shares, and (ii) Milestone Closing, the Milestone Closing Shares, free and clear of all liens other than transfer restrictions set forth in the Shareholder Agreement and applicable federal and state securities Laws;
b.a certificate of the Secretary or Assistant Secretary of Company, dated as of the Initial Closing Date, certifying as to and attaching: (i) the Certificate of Incorporation of Company, (ii) the Bylaws of Company, and (iii) the resolutions of the Board authorizing the Transaction Documents and the Transaction, including the issuance of the Shares;
c.a certificate, dated within three (3) Business Days of the Initial Closing Date, from the Secretary of State of the State of Delaware evidencing that Company is in good standing in such jurisdiction;
d.at the Initial Closing, the Shareholder Agreement, which shall have been duly executed by Company;
e.at each of the Initial Closing and Milestone Closing, a certificate, dated the applicable Closing Date and signed by the Chief Executive Officer or the Chief Financial Officer of Company, in his or her capacity as such, stating that the conditions set forth in Sections 2.04(a) and Section 2.04(b) (in the case of each Closing) and Section 2.04(c) (in the case of the Milestone Closing only), have been satisfied;
f.a written legal opinion from DLA Piper LLP (US) addressed to Purchaser dated as of the applicable Closing Date, in form and substance customary for private securities offerings and reasonably acceptable to Purchaser; and
g.any other documents, instruments and writings required to be delivered by Company at the applicable Closing under the Transaction Documents.
Section 2.07 Purchaser Closing Deliverables.
At the applicable Closing, Purchaser shall deliver (or cause to be delivered) the following:
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a.at the (i) Initial Closing, the Initial Closing Purchase Price, and (ii) Milestone Closing, the Milestone Closing Purchase Price, each in immediately available U.S. funds via wire transfer to an account designated by Company;
b.at the Initial Closing, the Shareholder Agreement, which shall have been duly executed by Purchaser;
c.at each of the Initial Closing and Milestone Closing, a certificate, dated the applicable Closing Date and signed by a duly authorized signatory of Purchaser stating that the conditions set forth in Sections 2.05(a) and 2.05(b) have been satisfied; and
d.all other documents, instruments and writings required to be delivered by Purchaser at the applicable Closing under the Transaction Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise (a) disclosed in any SEC Disclosure contained in the SEC Reports prior to the date hereof (it being acknowledged that no such SEC Disclosure contained in the SEC Reports shall be deemed to qualify or modify any of the representations and warranties set forth in Sections 3.01, 3.02, 3.03, 3.04, 3.05, 3.06, 3.25, 3.26, 3.27 and 3.28) and (b) set forth in the confidential disclosure schedule delivered by Company to Purchaser concurrently with the execution of this Agreement (the “Disclosure Schedule”), Company hereby represents and warrants to Purchaser, as of the date hereof and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), as follows:
Section 3.01 Organization and Existence.
a.Each of Company and APIC is a corporation duly organized, validly existing and in good standing in its jurisdiction of organization and has all requisite power and authority to own, lease and operate its properties, and to conduct the businesses currently and customarily carried on by it. Company is duly qualified or licensed to do business and is in good standing in each other jurisdiction where such qualification or licensing is necessary, except in those jurisdictions where the failure to be so qualified or licensed or in good standing would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. True and complete copies of the Organizational Documents of Company are included in the SEC Reports.
b.Each of Company’s Subsidiaries (other than APIC) is a corporation or other legal entity duly organized, validly existing and in good standing in its jurisdiction of organization, has all requisite power and authority to own, lease and operate its properties, and to conduct its business currently and customarily carried on by it and is duly qualified to transact business and is in good standing in each other jurisdiction in which such qualification is necessary, except where the failure to be so qualified or to be in good standing would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
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Section 3.02 Authorization.
Company has all requisite power and authority required to enter into, and perform its obligations under, the Transaction Documents and consummate the Transaction. The execution, delivery and performance by Company of the Transaction Documents and the consummation by Company of the Transaction have been duly authorized by the Board and no other corporate action on the part of Company is necessary to authorize the execution, delivery and performance by Company of this Agreement and the other Transaction Documents and the consummation by Company of the Transaction. This Agreement has been duly executed and delivered by Company. The Transaction Documents constitute, or will constitute when executed, as applicable (assuming the due execution and delivery by each of the other parties hereto and thereto), a valid and legally binding obligation of Company, enforceable against Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).
Section 3.03 Consents.
Except for compliance with and filings under the HSR Act, and the approvals required by the Commission in connection with any registration statement filed under the Shareholder Agreement, no consent or approval of, or filing with, notice to or waiver from any Governmental Authority which has not been obtained or made by Company is required to be obtained or made by Company in connection with the execution and delivery of the Transaction Documents and the consummation by Company of the Transaction. No consent or approval of the Stockholders is required with respect to the issuance of the Shares to Purchaser or the performance by Company of its obligations under the Transaction Documents.
Section 3.04 Noncontravention.
The execution, delivery and performance of the Transaction Documents by Company does not or will not, as applicable, and, subject to any applicable waiting period under the HSR Act relating to the transactions contemplated by this Agreement having expired or been terminated, the consummation by Company of the Transaction will not contravene or violate any provision of (a) the Organizational Documents of Company or any of its Subsidiaries, (b) any Contract to which Company or any of its Subsidiaries is a party or by which Company or any of its Subsidiaries is bound, or result in the termination or acceleration of any material obligation thereunder or the loss of a material benefit thereunder, or entitle any party to accelerate any obligation or indebtedness thereunder, or constitute (with due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) thereunder, or (c) any Law to which Company or any of its Subsidiaries is subject or by which any property or asset of Company or any of its Subsidiaries is bound or affected or result in the creation of any liens upon any property or assets of Company or any of its Subsidiaries except, in the case of clauses (b) and (c), as would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
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Section 3.05 Shares.
The Shares are duly authorized for issuance and sale to Purchaser and, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable, free and clear of any liens (other than transfer restrictions set forth in the Shareholder Agreement and applicable federal and state securities Laws), will be issued in compliance with Law, and will not be issued in breach or violation of any preemptive rights or Contract. Subject to the accuracy of the representations made by Purchaser in Article IV hereof, the Shares will be issued to Purchaser in compliance with applicable exemptions from (a) the registration and prospectus delivery requirements of the Securities Act and (b) the registration and qualification requirements of applicable securities Laws of the states of the United States.
Section 3.06 Capitalization.
a.The authorized capital stock of Company consists of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.00001. Of such authorized capital stock, as of October 20, 2020, (i) 36,511,705 and 35,578,540 shares of Common Stock were issued and outstanding, respectively, (ii) 933,165 shares of Common Stock were held in treasury, (iii) 1,647,041 shares of Common Stock were reserved for issuance in respect of outstanding options to acquire Common Stock, (iv) 764,204 shares of Common Stock were reserved for issuance in respect of settlement of any outstanding awards of restricted stock units or performance stock units with respect to shares of Common Stock, and (v) no shares of preferred stock were issued and outstanding. All outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable, and free of preemptive rights.
b.Except as set forth in Section 3.06(a), as of the date hereof, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of capital stock to which Company or any of its Subsidiaries is a party obligating Company to (i) issue, transfer or sell any shares of capital stock or other equity interests of Company or securities convertible into or exchangeable for such shares or equity interests, (ii) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares of capital stock or other equity interests.
c.Except as set forth in Section 3.06(a), as of the date hereof, Company has no outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the Stockholders on any matter.
d.Except as set forth in Section 3.06(a), as of the date hereof, (i) there are no voting trusts or other agreements or understandings to which Company is a party with respect to the voting of the capital stock or other equity interest of Company and (ii) except as set forth in the Transaction Documents, Company has not granted to any Person the right to require Company to register Common Stock.
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Section 3.07 Financial Statements.
a.Company has delivered to Purchaser (i) the unaudited consolidated balance sheet, together with the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows of Company as of and for the six (6) months ended June 30, 2020 (such balance sheet, the “Company Balance Sheet”), and (ii) the audited consolidated balance sheets, together with the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows of Company as of and for the year ended December 31, 2019. The consolidated balance sheets, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows included in the SEC Reports (collectively, the “Company Financial Statements”) (i) have been prepared in accordance with GAAP consistently applied (other than the adoption of accounting pronouncements described in the notes thereto and, with respect to the unaudited Company Financial Statements, normal recurring year-end adjustments and the absence of footnotes), (ii) have been prepared from (and in accordance with) the books and records of Company and its consolidated Subsidiaries on a consistent basis, (iii) complied in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing, and (iv) fairly present, in all material respects, the financial position and results of operations and cash flow of Company and its Subsidiaries as of the dates thereof or for the periods set forth therein.
b.Company has provided to Purchaser a copy of its preliminary unaudited consolidated balance sheet, together with the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows of Company as of and for the nine (9) months ended September 30, 2020 in draft form (the “Draft Financial Statements”), which Draft Financial Statements Company will form the basis for the consolidated balance sheet, together with the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows, to be filed with the Commission as part of Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2020. The Draft Financial Statements (i) have been prepared in accordance with GAAP consistently applied (other than the adoption of accounting pronouncements described in the notes thereto, normal recurring year-end adjustments and the absence of footnotes), (ii) have been prepared from (and in accordance with) the books and records of Company and its consolidated Subsidiaries on a consistent basis and (iii) fairly present, in all material respects, the financial position and results of operations and cash flow of Company and its Subsidiaries as of September 30, 2020 or for the quarter ended September 30, 2020, as applicable.
c.Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15 or Rule 15d-15 of the Exchange Act). Such disclosure controls and procedures are designed and effective to ensure that material information required to be disclosed in Company’s periodic reports filed or submitted under the Exchange Act is recorded and reported on a timely basis to the individuals responsible for the preparation of Company’s filings with the Commission and other public disclosure documents. Company is and has been in compliance in all material respects with the applicable
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provisions of the Sarbanes-Oxley Act of 2002 and has not identified (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Company’s internal controls over financial reporting.
Section 3.08 No Undisclosed Liabilities.
None of Company or any of its Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) that would be required to be reflected on a consolidated balance sheet prepared in accordance with GAAP consistently applied and which (a) are not reflected or reserved against in the Company Balance Sheet or incurred in the ordinary course of business since the date of the Company Balance Sheet, (b) are not incurred pursuant to the transactions contemplated by this Agreement, or (c) are not, individually or in the aggregate, material to the business or operations of Company.
Section 3.09 Company Filings.
Company has filed or furnished all reports and other documents required to be filed or furnished by Company under the Exchange Act since January 1, 2019 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein being collectively referred to herein as the “SEC Reports”) on a timely basis. The SEC Reports comply in all material respects with the requirements of the Exchange Act and none of the SEC Reports, when filed or furnished (or if amended or superseded by a filing or amendment prior to the date hereof, then at the time of such filing or amendment), contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Since January 1, 2019 to the date hereof, Company has filed all material reports, registrations and statements, together with any required amendments thereto, that were required to be filed to the Commission.
Section 3.10 No Material Adverse Effect. Since December 31, 2019:
a.Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary course of business; and
b.there has not occurred any Effect that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 3.11 Taxes.
a.(i) All material income and other Tax Returns required to be filed by Company and each of its Subsidiaries in any jurisdiction have been duly and timely filed, other than those filings being contested in good faith; (ii) all such Tax Returns are true, correct and complete in all material respects; and (iii) all material Taxes due by Company or any of
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its Subsidiaries have been paid, other than those being contested in good faith and for which adequate reserves in accordance with GAAP have been provided.
b.(i) There are no disputes pending, or claims asserted, for Taxes or assessments upon Company or any of its Subsidiaries for which Company does not have reserves that are adequate under GAAP; (ii) neither Company nor any of its Subsidiaries is (A) a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than (1) such an agreement or arrangement exclusively between or among Company and its Subsidiaries or (2) customary Tax identification or other arrangements contained in credit or other commercial agreements the primary purposes of which does not relate to Taxes) or (B) has any liability for the Taxes of any Person (other than Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502 6 (or any similar provision of state, local or foreign Law); and (iii) neither Company nor any of its Subsidiaries has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
c.Company currently is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended.
d.Within the past two (2) years, none of Company or any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code.
e.Company and each of its Subsidiaries have complied in all material respects with all Laws relating to the withholding of Taxes and have duly and timely withheld from employees’ salaries, wages and other compensation and have paid over to the appropriate taxing authority all material amounts required to be so withheld and paid over.
f.None of Company nor any of its Subsidiaries has received written notice from any Governmental Authority in a jurisdiction in which Company or any of its Subsidiaries does not file Tax Returns that Company or any of its Subsidiaries is or may be subject to material taxation by that jurisdiction that has not since been resolved.
g.APIC is a domestic corporation that is an “insurance company” within the meaning of Section 816(a) of the Code that does not have any “life insurance reserves” within the meaning of Section 816(b) of the Code.
Section 3.12 Absence of Proceedings and Governmental Orders.
There is no (a) Action before or brought by any Governmental Authority, now pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or (b) Governmental Order imposed upon Company or any of its Subsidiaries, in each case, which would, or would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect or that relates to or challenges the validity or propriety of this Agreement, any of the Transaction Documents or the Transaction.
Section 3.13 Compliance with Laws.
Company and each of its Subsidiaries are, and its and their business and operations are, and since January 1, 2019, have been, in compliance with all Laws, including Governmental Orders
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applicable to Company or any of its Subsidiaries, except where any such noncompliance, would not, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 3.14 Insurance Subsidiaries.
a.Except as would not be material to Company, each Insurance Subsidiary is (i) duly licensed or authorized as an insurance company in its jurisdiction of incorporation or organization, and (ii) duly licensed or authorized to transact the business of insurance in each other jurisdiction where it is required to be so licensed or authorized in order to conduct its business as currently conducted. Each Insurance Subsidiary has all other necessary licenses, certifications, permits, registrations, qualifications, franchises, approvals, clearances, exemptions and other regulatory authorizations (“Permits”) of and from all insurance regulatory authorities necessary to conduct its business as currently conducted, except where the failure to have such Permits would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. Neither Company nor any Insurance Subsidiary has received any notification from any insurance regulatory authority to the effect that any additional Permit from any insurance regulatory authority must be obtained by Company or any Insurance Subsidiary to conduct its business as currently conducted. Neither Insurance Subsidiary is commercially domiciled in any other jurisdiction or is otherwise treated as domiciled in a jurisdiction other than that of its incorporation.
b.Since January 1, 2019, each Insurance Subsidiary has (i) filed all annual and quarterly statutory statements, together with all material exhibits, interrogatories, notes, schedules and any actuarial opinions, affirmations or certifications or other supporting documents in connection therewith, in each case required by Law to be filed by such Insurance Subsidiary with its domiciliary regulatory authority on forms prescribed or permitted thereby and (ii) made all other filings required by Insurance Law to be filed by such Insurance Subsidiary with any Governmental Authority except, in the case of clause (ii), where the failure to do so would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. As of its respective filing date, and, if amended, as of the date of the last amendment prior to the date hereof, each such filing complied with Law in all material respects. No Governmental Authority has asserted any material deficiency related to any such filing.
c.Since January 1, 2019, the business of each Insurance Subsidiary (including business, marketing, operations, sales and issuances of insurance Contracts conducted by or through producers) has been conducted in compliance with Insurance Laws in all material respects. Company and each Insurance Subsidiary has filed all notices, reports, documents or other information required to be filed by it with any insurance regulatory authority, except where the failure to do so would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
d.No Insurance Subsidiary is subject to any requirement imposed by a Governmental Authority to maintain specified capital or surplus amounts or levels or is subject to any restriction on the payment of dividends or other distributions on its shares
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of capital stock, except for any such requirements or restrictions imposed by Insurance Laws of general application. No Insurance Subsidiary is subject to any order or decree of any insurance regulatory authority that (i) relates to material marketing, sales, trade or underwriting practices (other than routine correspondence or the terms of prior agreements with insurance regulatory authorities) or (ii) has revoked, suspended or limited or that seeks the revocation, suspension or limitation of any license or other permit issued pursuant to Insurance Laws. No Action is pending or, to the knowledge of Company, threatened that would reasonably be expected to result in the revocation or suspension of any such material license.
e.Since January 1, 2015, the Insurance Subsidiaries have entered into agreements with insurance regulatory authorities in the United States to resolve assertions that certain individuals were not duly licensed to sell, solicit or negotiate insurance products (the “Settlement Agreements”). Except for the Settlement Agreements, to the knowledge of Company, each Producer, at the time such Producer solicited, negotiated or sold any insurance Contract issued or assumed by Insurance Subsidiary, was duly and appropriately appointed by such Insurance Subsidiary or other issuing insurance company, in compliance with Law, to act as a Producer for such Insurance Subsidiary or other issuing insurance company and was duly and appropriately licensed as a Producer (for the type of business sold or produced by such Producer on behalf of such Insurance Subsidiary or other issuing insurance company), in each jurisdiction in which such Producer was required to be so licensed, and no such Producer violated any term or provision of Law relating to the solicitation, negotiation or sale of any insurance Contract issued by such Insurance Subsidiary or other issuing insurance company, except where the failure to be so licensed or any such violations would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
Section 3.15 Benefit Plans.
(i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974 (“ERISA”)) for which Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Code) would have any liability (each, a “Benefit Plan”) has been maintained in compliance in all respects with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no “prohibited transaction” (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Benefit Plan and with respect to any multiemployer plan, within the meaning of Section 3(3) of ERISA (each, a “Multiemployer Plan”), excluding transactions effected pursuant to a statutory or administrative exemption; (iii) each Benefit Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification; (iv) with respect to any Benefit Plan sponsored or maintained by Company or any member of its Controlled Group that is subject to Title IV of ERISA and in the case of each Multiemployer Plan: (A) there is no “accumulated funding deficiency” under Section 412 of the Code or Section 302 of ERISA, (B) no such Benefit Plan is, or, is expected to be, “at-risk” (under Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code), (C) no “reportable event”
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under Section 4043 of ERISA (excluding any such event for which the thirty (30) day notice requirement has been waived under the regulations to Section 4043 of ERISA) has occurred, nor has any event described in Sections 4062, 4063 or 4041 of ERISA occurred, (D) any premiums to the Pension Benefit Guaranty Corporation (“PBGC”) have been timely paid in full, and (E) no unsatisfied liability (other than any premiums to the PBGC) under Title IV of ERISA has been, or is expected to be, incurred by Company or any Subsidiary; and (v) none of the execution and delivery of this Agreement nor the consummation of the Transaction would reasonably be expected to (A) result in any payment (including severance and unemployment compensation, forgiveness of indebtedness or otherwise) becoming due to any current or former director or any employee of Company or any Subsidiary of Company under any Benefit Plan or otherwise, (B) increase any benefits otherwise payable under any Benefit Plan, (C) result in any acceleration of the time of payment, funding or vesting of any such benefits, and (D) result in any breach or violation of, or default under or limit Company’s right to amend, modify, terminate or transfer the assets of, any Benefit Plan, except in each case with respect to the events or conditions set forth in the foregoing clauses (i) through (v), as would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
Section 3.16 Labor and Employment.
None of Company or its Subsidiaries is party to, or bound by, any labor agreement, collective bargaining agreement or any other labor-related agreements or arrangements with any labor union, labor organization or other employee representative body, and no employees of Company or its Subsidiaries are represented by any labor union, labor organization or employee representative body with respect to their employment with Company of its Subsidiaries. Except as would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, Company and its Subsidiaries are, and since January 1, 2019 have been, in compliance with all Laws respecting employment and employment practices. All individuals performing, and who for the six (6) year period preceding Closing have performed, services for Company or its Subsidiaries while classified as independent contractors have been properly so classified for all purposes. To the knowledge of Company, in the last five (5) years, no allegations of sexual harassment have been made against any officer of Company or its Subsidiaries.
Section 3.17 Material Contracts.
Company has described in or filed as exhibits to the SEC Reports all Contracts (including all amendments thereto) that are required to be described or filed in the SEC Reports (collectively, the “Material Contracts”). Each Material Contract (excluding any Benefit Plan) is valid and binding on Company and each of its Subsidiaries party thereto and each other party thereto, and is in full force and effect and enforceable in accordance with its terms, except (a) to the extent that any Material Contract expires or terminates in accordance with its terms and (b) for such failures that would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. As of the date hereof, none of Company nor any of its Subsidiaries is in default under any Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or
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observance of any term, covenant, condition or other obligation contained in any Material Contract to which it is a party, by which it is bound or to which any of its properties or assets is subject, except to the extent any such default would not, individually or in the aggregate, reasonably be expected to be material to Company.
Section 3.18 Properties and Assets.
Company and each of its Subsidiaries have good and marketable title in fee simple to (in the case of real property), or have valid, subsisting and enforceable leases or rights to otherwise use, all real and personal property that are material to the respective businesses of Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects, except for such liens, encumbrances and defects that (a) arise under that certain Loan and Security Agreement, dated as of December 16, 2016 and as amended from time to time, by and among Company, Trupanion Managers USA, Inc., and Pacific West Bank, as a lender and as administrative agent and collateral agent for the lenders party thereto, (b) arise by operation of law, (c) do not materially interfere with the use made and proposed to be made of such property by Company and its Subsidiaries or (d) would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect (the exceptions in clauses (a)-(d), “Permitted Encumbrances”).
Section 3.19 Environmental Compliance.
To the knowledge of Company, Company and its Subsidiaries (a) are, and since January 1, 2019 have been, in compliance with any and all Laws relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (b) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (c) are, and since January 1, 2019 have been, in compliance with all terms of any such permit, license or approval, except where failure to receive or comply with such permits, licenses or other approvals or comply with such Environmental Laws would not, or would not be reasonably expected to, individually or in the aggregate, have a Material Adverse Effect.
Section 3.20 Intellectual Property.
a.Company is the sole and exclusive beneficial and record owner of all registrations and applications for Intellectual Property owned or purported to be owned by Company (collectively, the “Company Registered Intellectual Property”) and Company is the sole and exclusive owner of all other Intellectual Property owned or purported to be owned by Company (including the Intellectual Property created by employees and contractors within the scope of their employment or engagement by Company), free and clear of any liens (other than Permitted Encumbrances). All Company Registered Intellectual Property is subsisting, valid and enforceable in all material respects.
b.Except as would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect:
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i.Company owns, licenses or otherwise has and has had the right to use all Intellectual Property used in the operation of Company’s business;
ii.the operation of Company’s business as currently conducted and as conducted since January 1, 2019 does not infringe, misappropriate or otherwise violate, and has not infringed, misappropriated or otherwise violated, any Intellectual Property of any other Person;
iii.since January 1, 2019, there have been no material Actions pending or, to the knowledge of Company, threatened in writing (including cease and desist letters or requests for a license), against Company alleging infringement, misappropriation or other violation of any Intellectual Property of another Person or challenging the ownership, validity or enforceability of the Company Registered Intellectual Property;
iv.to the knowledge of Company, no Person is infringing, misappropriating or otherwise violating any Intellectual Property owned by or exclusively licensed to Company, and since January 1, 2019, Company has not instituted or threatened in writing any Actions against any Person alleging any infringement, misappropriation or violation of any such Intellectual Property or challenging the ownership, validity or enforceability of any Intellectual Property;
v.Company has taken commercially reasonable actions to protect the confidentiality of trade secrets included in Company’s Intellectual Property and of confidential information of other Persons possessed by Company and, since January 1, 2019, there has been no loss of trade secret rights or confidentiality with respect thereto due to a breach of confidentiality or other act or omission by Company or, to the knowledge of Company, by any Person to which any such information has been provided by Company;
vi.to the knowledge of Company, the software owned, used or held for use by Company (A) includes no malicious code, program or other internal component (e.g., computer virus, computer worm, computer time bomb or similar component) that is intended to damage, destroy, impede the operation of, allow unauthorized access to or alter any such software or present a material risk of disclosure of Company’s confidential information and (B) has not malfunctioned or failed in any manner; and
vii.Company has not used any open source or “copyleft” software in a manner that would (i) require any source code or other components of software owned or developed by or on behalf of Company to be required to be disclosed, licensed, publicly distributed, or dedicated to the public.
Section 3.21 Privacy and Cybersecurity.
a.To the knowledge of Company, Company has complied in all material respects with all Laws, and its own policies, which govern the receipt, collection, compilation, use, storage, processing, sharing, safeguarding, security, disposal, destruction, disclosure or transfer of the personal information of customers or other individuals and similar Laws governing data privacy. Company maintains a written information privacy and security program that contains reasonable measures intended to protect the privacy, confidentiality
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and security of (i) the information technology used by Company, (ii) all confidential information stored therein or transmitted thereby and (iii) personal information held by Company against any (x) loss or misuse, (y) unauthorized or unlawful operations or (z) other act or omission that would reasonably be expected to compromise the security or confidentiality of such items (clauses (x) through (z), a “Security Breach”).
b.Since January 1, 2019, (i) to the knowledge of Company, there has been no Security Breach or other compromise of or relating to any information technology and computer systems, networks, hardware, software, data (including personal information and confidential information), or equipment owned or used by or on behalf of Company, and (ii) Company has not been notified in writing by any third party (including pursuant to any audit) of any such material Security Breach or any material information security deficiency that would reasonably be expected to cause any such material security breach or material disruption to the conduct of the business of Company. Company from time-to-time evaluates its continuity and disaster recovery and backup needs and has implemented commercially reasonable backup disaster recovery technology, plans and policies that reasonably address its assessment of risk and Company reasonably tests and validates such systems, plans and policies.
Section 3.22 Foreign Corrupt Practices Act.
Since January 1, 2019, neither Company nor any of its Subsidiaries, nor any director, officer, agent, employee or other Person acting on behalf of Company or any of its Subsidiaries, has: (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, applicable legislation implementing the Organization for Economic Co-operation and Development Convention on Bribery of Foreign Public Officials in International Business Transactions, or the rules and regulations thereunder or any other similar Law; or (d) made any illegal bribe, payoff, influence payment, kickback or other unlawful payment. Company has instituted and maintains policies requiring continued compliance with the Laws and regulations referenced in clause (c) of this paragraph.
Section 3.23 OFAC.
Since January 1, 2019, neither Company nor any of its Subsidiaries, nor any director, officer, agent, employee or controlled Affiliate of Company or any of its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and Company will not directly or indirectly use the proceeds of the sale of the Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
Section 3.24 Money Laundering Laws.
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Since January 1, 2019, the operations and businesses of Company and its Subsidiaries are and have been conducted at all times in compliance with applicable money laundering laws of all jurisdictions to which Company or its Subsidiaries are subject, and the rules and regulations thereunder issued, administered or enforced by any Governmental Authority (collectively, the “Money Laundering Laws”), and no Action by or before any Governmental Authority involving Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of Company, threatened in writing.
Section 3.25 Sale of Securities.
Assuming the accuracy of the representations and warranties set forth in Section 4.06, the offer, sale and issuance of the Shares pursuant to this Agreement are exempt from the registration and prospectus delivery requirements of the Securities Act. Without limiting the foregoing, neither Company nor any other Person authorized by Company to act on its behalf, has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Shares pursuant to this Agreement, and neither Company nor any Person acting on its behalf has made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering or issuance of the Shares under this Agreement to be integrated with prior offerings by Company for purposes of the Securities Act that would result in none of Regulation D or any other applicable exemption from registration under the Securities Act to be available, nor will Company take any action or steps that would cause the offering or issuance of the Shares under this Agreement to be integrated with other offerings by Company.
Section 3.26 Listing and Maintenance Requirements.
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and listed on NASDAQ, and Company has taken no action designed to, or which is reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from NASDAQ, nor has Company received as of the date hereof any notification that the Commission or NASDAQ is contemplating terminating such registration or listing.
Section 3.27 Investment Company Act.
Company is not required, and upon the issuance and sale of the Shares as herein contemplated and the application of the net proceeds therefrom will not be required, to register as an “investment company” under the Investment Company Act of 1940.
Section 3.28 No Broker’s Fees.
Neither Company nor any of its Subsidiaries is a party to any Contract or understanding with any Person that would give rise to a valid claim against Purchaser or its Affiliates for a brokerage commission, finder’s fee or like payment in connection with the Transaction.
Section 3.29 Exclusive Representations and Warranties.
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Except for the representations and warranties expressly set forth in this Article III, Company hereby expressly disclaims and negates (a) any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity), including with respect to (i) Company or any of Company’s businesses, assets, employees, permits, liabilities, operations, prospects or condition (financial or otherwise) or (ii) any opinion, projection, forecast, statement, budget, estimate, advice or other information (including information with respect to filings with and consents of any Governmental Authority or information with respect to the future revenues, results or operations (or any component thereof), cash flows, financial condition (or any component thereof) or the future business and operations of Company, as well as any other business plan and cost-related plan information of Company), made, communicated or furnished (orally or in writing), or to be made, communicated or furnished (orally or in writing), to Purchaser, its Affiliates or its Representatives, in each case, whether made by Company or any of its Affiliates, Representatives or any other Person (this clause (ii), collectively, “Company Projections”) and (b) all liability and responsibility for any such other representation or warranty or any such Company Projection.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Company as of the date hereof and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date) as follows:
Section 4.01 Organization and Existence.
Purchaser is a corporation duly organized, validly existing and in good standing in its jurisdiction of organization. Purchaser is duly qualified or licensed to do business and is in good standing in each other jurisdiction where the actions required to be performed by it hereunder makes such qualification or licensing necessary, except in those jurisdictions where the failure to be so qualified or licensed or in good standing would not have a material adverse effect on Purchaser’s ability to perform its material obligations hereunder or to consummate the transactions contemplated hereby.
Section 4.02 Authorization.
Purchaser has all requisite power and authority required to enter into the Transaction Documents and consummate the Transaction. The execution, delivery and performance by Purchaser of the Transaction Documents and the consummation by Purchaser of the Transaction have been duly authorized by all necessary corporate action on the part of Purchaser, and no other entity or governing body proceedings or approvals on the part of Purchaser or any direct or indirect equity holders, managers or partners are necessary to authorize the execution, delivery, and performance by Purchaser of the Transaction Documents and the consummation by Purchaser of the Transaction. This Agreement has been duly executed and delivered by Purchaser. The Transaction Documents constitute, or will constitute when executed, as applicable (assuming the
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due execution and delivery by each of the other parties hereto and thereto), a valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).
Section 4.03 Consents.
Except for (a) compliance with and filings under the HSR Act, (b) the approvals required by the Commission in connection with any registration statement filed under the Shareholder Agreement, and (c) the filings required by the Commission in connection with the acquisition of the Shares pursuant to Section 13 of the Exchange Act, no consent or approval of, or filing with, notice to or waiver from any Governmental Authority which has not been obtained or made by Purchaser is required to be obtained or made by Purchaser or its Affiliates in connection with the execution and delivery of the Transaction Documents and the consummation by Purchaser of the Transaction, other than any such consents, approvals or filings the failure of which to obtain or make would not have material adverse effect on Purchaser’s ability to perform its material obligations hereunder or to consummate the transactions contemplated hereby.
Section 4.04 Noncontravention.
The execution, delivery and performance of the Transaction Documents by Purchaser does not or will not, as applicable, and, subject to any applicable waiting period under the HSR Act relating to the transactions contemplated by this Agreement having expired or been terminated, the consummation by Purchaser of the Transaction will not contravene or violate any provision of (a) the Organizational Documents of Purchaser, (b) any Contract to which Purchaser is a party or by which Purchaser is bound, or result in the termination or acceleration of any material obligation thereunder or the loss of a material benefit thereunder, or entitle any party to accelerate any obligation or indebtedness thereunder, or constitute (with due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) thereunder, or (c) any Law to which Purchaser is subject or by which any property or asset of Purchaser is bound or affected or result in the creation of any liens upon any property or assets of Purchaser except, in the case of clauses (b) and (c), as would not, individually or in the aggregate, have a material adverse effect on Purchaser’s ability to perform its material obligations hereunder or to consummate the transactions contemplated hereby.
Section 4.05 Certain Fees.
No fees or commissions are or will be payable by Purchaser to brokers, finders or investment bankers with respect to the purchase of the Shares or the consummation of the transactions contemplated by this Agreement, except for such fees and commissions that will be paid by Purchaser or its Affiliates.
Section 4.06 Unregistered Securities.
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a.Accredited Investor Status; Sophisticated Purchaser. Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act and is able to bear the risk of its investment in the Shares for an indefinite period. Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Shares. Purchaser is able to bear the economic risk of an investment in the Shares and is able to afford a complete loss of such investment.
b.Information. Purchaser has carefully reviewed and considered the SEC Reports, other publicly available information regarding Company, and all other information and materials relating to the business, finances and operations of Company and the offer and sale of the Shares that that it and its Representatives deem necessary to make its decision to enter into the Transaction. Purchaser or its Representatives have been afforded the opportunity to ask questions of Company or its Representatives and receive answers concerning the terms and conditions of the offering and to obtain any additional information which Company possesses or can acquire without unreasonable effort or expense. Purchaser understands and acknowledges that its purchase of the Shares involves a high degree of risk and uncertainty. Purchaser has evaluated the merits and risks of the Transaction and has sought such accounting, financial, legal, tax and other advice as it has considered necessary to make an informed investment decision with respect to its investment in the Shares.
c.Purchase for Own Account, Restricted Securities. Purchaser is purchasing the Shares for its own account and not with a view to distribution in violation of any securities Laws. Purchaser has been advised and understands and acknowledges that the Shares have not been registered under the Securities Act or under the “blue sky” Laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by Law and, subject to the Shareholder Agreement, Company is not required to register the Shares. Purchaser will not sell, transfer or otherwise dispose of the Shares or any interest therein except in a transaction registered pursuant to the provisions of the Securities Act or in a transaction exempt from or not subject to the registration requirements of the Securities Act. Purchaser has been advised of and is aware of the provisions of Rule 144 promulgated under the Securities Act.
d.Legends. Purchaser understands and acknowledges that, until such time as the Shares have been registered pursuant to the provisions of the Securities Act, or the Shares are eligible for resale pursuant to Rule 144 promulgated under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares will bear the following restrictive legend: “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A
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TRANSACTION EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT (WHICH MAY INCLUDE AN OPINION OF COUNSEL) THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.”
e.Reliance Upon Purchaser’s Representations and Warranties. Purchaser understands and acknowledges that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities Laws, and that Company is relying in part upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth in this Agreement in (i) concluding that the issuance and sale of the Shares is a “private offering” and, as such, is exempt from the registration requirements of the Securities Act, and (ii) determining the applicability of such exemptions and the suitability of Purchaser to purchase the Shares.
Section 4.07 Ownership of Common Stock.
Except for the Shares that Purchaser will acquire at the Closing, as of the Closing none of Purchaser or its Affiliates beneficially owns (within the meaning of Section 13(d) of the Exchange Act and the rule promulgated thereunder) any shares of Common Stock, or any securities that are convertible into, or exercisable or exchangeable for, or that represent the right to receive, shares of Common Stock.
Section 4.08 Financing.
Purchaser has (and Purchaser will have as of the Initial Closing Date and, if applicable, the Milestone Closing Date) available or accessible to it sufficient funds, committed capital and credit capacity to consummate the transactions contemplated by this Agreement and required for the satisfaction of all of Purchaser’s obligations under this Agreement, including the payment of the Initial Closing Purchase Price at the Initial Closing and, if applicable, the Milestone Closing Purchase Price at the Milestone Closing and all related fees and expenses. In no event shall the receipt or availability of funds, capital or capacity be a condition to Purchaser’s obligations under this Agreement.
ARTICLE V
COVENANTS
Section 5.01 Interim Operations.
Until the earlier of (i) the Milestone Closing or (ii) the termination of this Agreement pursuant to Section 6.01, without the prior written consent of Purchaser, Company shall not (and shall not permit its Subsidiaries to):
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a.amend the Organizational Documents of Company or any of its Subsidiaries in a manner that could reasonably be expected to affect Purchaser in an adverse manner either as Stockholder or with respect to the rights of Purchaser under any of the Transaction Documents;
b.redeem, repurchase or acquire any capital stock of Company or any of its Subsidiaries, other than repurchases of capital stock from employees, officers or directors of Company or any of its Subsidiaries in the ordinary course of business pursuant to any of Company’s agreements or plans in effect as of the date hereof or its share repurchase program approved by the Board prior to the date hereof;
c.authorize, issue or reclassify any capital stock, or any securities that are convertible into, or exercisable or exchangeable for, or that represent the right to receive capital stock, of Company, other than (i) the authorization and issuance of the Shares as contemplated hereunder and (ii) issuances of capital stock, or any securities that are convertible into, or exercisable or exchangeable for, or that represent the right to receive capital stock, of Company to employees, officers and directors of Company or any of its Subsidiaries in the ordinary course of business pursuant to any of Company’s agreements or plans in effect as of the date hereof;
d.solely with respect to Company, establish a record date for, declare, set aside for payment or pay any dividend on, or make any other distribution in respect of, any shares of its capital stock or other equity or voting interests;
e.liquidate, dissolve, merge, consolidate, restructure, recapitalize or reorganize Company or any Insurance Subsidiary; or
f.authorize, or commit or agree to take, any of the foregoing actions.
Section 5.02 Efforts Prior to Milestone Closing.
a.Subject to Section 5.02(b), prior to the Milestone Closing, each of the Parties shall use its commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to satisfy the Milestone and to consummate the Transaction. In furtherance of the foregoing, no later than five (5) Business Days following the date hereof, each Party shall (i) make, or cause to be made, an appropriate filing under the HSR Act relating to the Transaction, which filing shall request early termination of the applicable waiting period and (ii) reasonably cooperate with the other Party and, subject to reasonable confidentiality considerations, furnish such other Party with such information as may reasonably be requested by such other Party for the purpose of preparing its respective HSR Act filing. The Parties shall keep each other reasonably apprised of developments relating to the HSR Act filings, including by (a) giving each other prompt notice of any communication received from any Governmental Authority relating to the HSR Act filings; (b) providing each other in advance, with a reasonable opportunity for comment thereon, and consider in good faith each other’s comments thereon, drafts of proposed communications with any Governmental Authority relating to the HSR Act filings; (c) give each other reasonable advance notice of any meetings, conferences, or other material communications with a Governmental Authority relating to the HSR Act filings and, unless prohibited by the Governmental Authority, permit the
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other Party (or its Representatives) to attend and participate therein. Purchaser shall pay all administrative filing fees associated with such filings under the HSR Act.
b.Nothing in this Agreement shall require Purchaser or any of its Affiliates to, and, except with the prior written consent of Purchaser, Company shall not take any action to, consent or proffer to divest, sell, convey hold separate, or enter into any license or similar Contract with respect to, or agree to restrict the ownership or operation of, any business or assets of Company, Purchaser, or any of their respective Affiliates. Notwithstanding anything to the contrary herein, in no event shall Purchaser or any of its Affiliates be obligated to litigate, appeal, or participate in the litigation or appeal of any Action, in each case, in connection with or with the intent of obtaining any approval under the HSR Act or any other antitrust Law with respect to the Transaction.
Section 5.03 Supplemental Listing.
Company shall use commercially reasonable efforts to obtain authorization of the listing of the Shares, subject to official notice of issuance. Without limiting the foregoing, as soon as reasonably practicable after the date hereof and in any event prior to the Milestone Closing (if it occurs), Company shall (a) file a supplemental listing application with the NASDAQ to list the Shares and provide to NASDAQ any required supporting documentation, and any other requested information, related to the Shares and (b) ensure that the issuance of the Shares is in compliance with applicable NASDAQ rules and regulations.
Section 5.04 Reservation of Common Stock.
Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance from and after the date hereof, the Milestone Closing Shares.
Section 5.05 Further Assurances.
From time to time after the Closing, without further consideration, each of the Parties shall use its commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated hereby, including by executing and causing to be delivered such other instruments or other documents as may be reasonably requested by a Party for the purpose of carrying out or evidencing any of the transactions contemplated hereby.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Termination.
a.Prior to the Milestone Closing, this Agreement may be terminated:
i.upon the mutual written consent of the Parties;
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ii.by either Company or Purchaser if the Milestone Closing has not occurred on or prior to March 31, 2021 (the “Outside Date”); provided that the right to terminate this Agreement under this Section 6.01(a)(ii) shall not be available to any Party if the breach by such Party of its representations and warranties set forth herein or the failure of such party to perform any of its obligations hereunder has been a principal cause of or resulted in the failure of the Milestone Closing to occur by the Outside Date;
iii.by either Company or Purchaser if the Strategic Alliance Agreement has been terminated in accordance with its terms;
iv.by Purchaser if (A) any of the conditions set forth in Section 2.03 or Section 2.04 shall have become incapable of fulfillment prior to the Outside Date or (B) Company shall have breached any representation or warranty or failed to perform any covenant or agreement set forth in this Agreement that results in the failure of any condition set forth in Section 2.03 or Section 2.04 and such breach or failure is not cured within fifteen (15) days after Company receives notice thereof, and, in each case, such breach or failure to perform shall not have been waived by Purchaser; provided that Purchaser shall not have the right to terminate this Agreement pursuant to this Section 6.01(a)(iv) if Purchaser’s breach of any of its covenants, obligations, representations or warranties set forth in this Agreement gave rise to the failure of such condition;
v.by Company if (A) any of the conditions set forth in Section 2.03 or Section 2.05 shall have become incapable of fulfillment prior to the Outside Date or (B) Purchaser shall have breached any representation or warranty or failed to perform any covenant or agreement set forth in this Agreement that results in the failure of any condition set forth in Section 2.03 or Section 2.05 and such breach or failure is not cured within fifteen (15) days after Purchaser receives notice thereof, and, in each case, such breach or failure to perform shall not have been waived by Company; provided that Company shall not have the right to terminate this Agreement pursuant to this Section 6.01(a)(v) if Company’s breach of any of its covenants, obligations, representations or warranties set forth in this Agreement gave rise to the failure of such condition; or
vi.by Purchaser if the condition set forth in Section 2.04(c) is or becomes unsatisfied prior to the time that the Milestone Closing would have otherwise occurred had such condition set forth in Section 2.04(c) been satisfied (due to the satisfaction or, if permissible, waiver of each of the other conditions set forth in Sections 2.03, 2.04 and 2.05 (other than any conditions that by their nature are to be satisfied at the Milestone Closing)).
b.If this Agreement is terminated pursuant to this Section 6.01, this Agreement shall become void and of no further force and effect, except that the provisions of this Article VI (including, for the avoidance of doubt, Section 6.04 with respect to the Initial Closing in the event that this Agreement is terminated prior to the occurrence of the Milestone Closing) shall remain operative and in full force and effect, unless the Parties execute a writing that expressly (with specific references to the applicable Section or subsection of this Agreement) terminates such rights and obligations as between the Parties. Notwithstanding the foregoing, the termination of this Agreement pursuant to
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this Section 6.01 shall not relieve any Party from liability for damages for Fraud or any intentional misrepresentation of the representations and warranties contained in Article III or Article IV, as applicable, or any willful failure to perform or observe in any material respect any of its agreements or covenants contained herein that are to be performed or observed at or prior to the Closing.
Section 6.02 Fees and Expenses.
All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such fees or expenses.
Section 6.03 Exclusive Representations and Warranties.
Except for the representations and warranties expressly set forth in Article IV, Company specifically acknowledges and agrees that neither Purchaser nor any of its Affiliates, Representatives or any other Person makes, or has made, any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity). Except for the representations and warranties expressly set forth in Article III, Purchaser specifically acknowledges and agrees that neither Company nor any of its Affiliates, Representatives or any other Person makes, or has made, any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity), including with respect to Company or any of Company’s businesses, assets, employees, permits, liabilities, operations, prospects, condition (financial or otherwise) or any Company Projection, and, except in the case of Fraud, hereby expressly waives and relinquishes any and all rights, claims or causes of action (whether in contract or in tort or otherwise, or whether at law (including at common law or by statute) or in equity) (a) based on, arising out of or relating to any such other representation or warranty or any Company Projection or (b) against Company in connection with the accuracy, completeness or materiality of any Company Projection. Purchaser acknowledges and agrees that it has conducted to its satisfaction its own independent investigation of the transactions contemplated hereby (including with respect to Company and its businesses, operations, assets and liabilities) and, in making its determination to enter into this Agreement and proceed with the transactions contemplated hereby, Purchaser has relied on the results of such independent investigation.
Section 6.04 Survival of Provisions.
All of the covenants or other agreements of the Parties contained in this Agreement that by their terms are to be performed following the Initial Closing or the Milestone Closing, as applicable, shall survive the Initial Closing or the Milestone Closing, as applicable, until fully performed or fulfilled, unless and to the extent that non-compliance with such covenants or agreements is waived in writing by the Party entitled to such performance. Except for the representations and warranties set forth in the first sentence of Section 3.01 and Sections 3.02, 3.05, 3.06, 3.25, 3.26 and 3.28 (the “Fundamental Representations”) and in the first sentence of Section 4.01, Section 4.02 and Section 4.05, and any claims or causes of actions thereto, which shall survive the execution and delivery of this Agreement and the Closing and remain operative and in full force and effect until ninety (90) days after the expiration of the applicable statute of limitations,
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the representations and warranties made in Article III and Article IV, and any claims or causes of actions thereto, shall survive and remain operative and in full force and effect until the date that is eighteen (18) months following the Initial Closing Date (or, if the Milestone Closing occurs, the Milestone Closing Date); provided that nothing herein shall relieve any party of liability for any inaccuracy or breach of such representation or warranty to the extent that any good faith allegation of such inaccuracy or breach is made in writing prior to such expiration by a Person entitled to make such claim pursuant to the terms and conditions of this Agreement. For the avoidance of doubt, claims may be made with respect to the breach of any representation, warranty or covenant until the applicable survival period therefor as described above expires. Notwithstanding any other provision set forth in this Agreement, except in the case of Fraud, the maximum liability of Company under or relating to this Agreement to the extent relating to or arising out of any breach of the representations and warranties expressly set forth in this Agreement shall in no event exceed the Initial Closing Purchase Price (or, if the Milestone Closing occurs, the Aggregate Purchase Price).
Section 6.05 No Waiver; Modifications in Writing.
Except as otherwise provided herein, no failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at Law or in equity or otherwise. Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of this Agreement shall be effective unless signed by each of the parties hereto or thereto affected by such amendment, waiver, consent, modification or termination. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement and any consent to any departure from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on a Party in any case shall entitle a Party to any other or further notice or demand in similar or other circumstances.
Section 6.06 Binding Effect; Assignment.
This Agreement shall be binding upon Company, Purchaser and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the Parties and their respective successors and permitted assigns. Neither Party may transfer or assign its rights and obligations under this Agreement without the prior written consent of the other Party.
Section 6.07 Confidentiality; Publicity.
Purchaser acknowledges that the information being provided to it in connection with this Agreement and the consummation of the transactions contemplated hereby is subject to the terms of a Non-Disclosure Agreement, dated as of September 8, 2020, between an Affiliate of Purchaser and Company, the terms of which are incorporated herein by reference. None of
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Purchaser, Company, or any of their respective Affiliates shall make any public announcement or issue any public communication regarding this Agreement or the Transaction, or any matter related to the foregoing, without first obtaining the prior consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed), except if such announcement or other communication is required by Law or legal process (including pursuant to the Exchange Act or the Securities Act or any rules promulgated thereunder or the rules of any national securities exchange), in which case Purchaser or Company, as applicable, shall, to the extent reasonably practicable and permitted by Law, coordinate such announcement or communication with the other Party prior to announcement or issuance, including by providing such other Party a reasonable opportunity to comment on any such announcement or communication; provided, however, that each Party and its Affiliates may make internal announcements regarding this Agreement and the Transaction to their and their Affiliates’ respective directors and officers and employees without the consent of the other Party.
Section 6.08 Notices.
All notices and demands provided for hereunder shall be in writing and shall be given by hand delivery, electronic mail, registered or certified mail, return receipt requested, regular mail, facsimile or air courier guaranteeing overnight delivery to the following addresses:
a.If to Purchaser:
Aflac Incorporated
1932 Wynnton Road
Columbus, GA 31999
Attn: Audrey Boone Tillman
Executive Vice President and General Counsel
Email: atillman@aflac.com
Fax: (706) 596-3577
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Ave. NW
Washington, D.C. 20005
Attention: Richard L. Oliver
Facsimile: (202) 661-0582
Email: richard.oliver@skadden.com
b. If to Company:
Trupanion, Inc.
6100 4th Avenue S, Suite 200
Seattle, Washington 98108
Attention: Gavin Friedman, General Counsel
Email: gavin.friedman@trupanion.com
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with a copy to:
DLA Piper LLP(US)
701 Fifth Ave., Suite 6900
Seattle, Washington 98104
Attention: Trenton C. Dykes and Andrew D. Ledbetter
Facsimile: (206) 494-1776
Email: trent.dykes@us.dlapiper.com and
andrew.ledbetter@us.dlapiper.com
or to such other address as Company or Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered; (ii) when notice is sent to the sender that the recipient has read the message, if sent by electronic mail; (iii) upon actual receipt if sent by registered or certified mail, return receipt requested, or regular mail, if mailed; (iv) when receipt is acknowledged, if sent by facsimile; and (v) upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 6.09 Entire Agreement.
This Agreement, including the Disclosure Schedule, together with the Transaction Documents and the other agreements and documents referred to herein are intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings between the Parties, other than those set forth or referred to herein with respect to the rights granted by Company or any of its Affiliates or Purchaser or any of its Affiliates set forth herein. This Agreement including the Disclosure Schedule, together with the Transaction Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the Parties with respect to such subject matter.
Section 6.10 Specific Performance.
The Parties acknowledge and agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached and that any remedy at law for any breach of the provisions of this Agreement would be inadequate. Accordingly, the Parties acknowledge and agree that each Party shall be entitled to an injunction, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, including the right of a Party to cause the other Party to consummate the Milestone Closing in accordance with Sections 2.01 and 2.02 and the other transactions contemplated by this Agreement, in the courts provided for in Section 6.11, this being in addition to any other remedy to which they are entitled at law or in equity. Each Party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other Party has an adequate remedy at Law or that
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an award of specific performance is not an appropriate remedy for any reason at Law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 6.10 shall not be required to provide any bond or other security in connection with any such injunction.
Section 6.11 Governing Law; Submission to Jurisdiction.
This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), shall be governed by, and construed in accordance with, the internal Laws of the State of Delaware, without reference to the choice of law provisions thereof. All claims, causes of action, suits, actions or proceedings shall be raised to and exclusively determined by the Court of Chancery for the State of Delaware or, if such court disclaims jurisdiction, the U.S. District Court for the District of Delaware or, if such court disclaims jurisdiction, the courts of the State of Delaware, and in each case, any appellate court from any decision thereof, to whose exclusive jurisdiction and venue the Parties unconditionally consent and submit. Service of process in connection with any such claim, cause of action suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
Section 6.12 Waiver of Jury Trial.
THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 6.13 Execution in Counterparts.
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This Agreement may be executed in any number of counterparts and by different Parties in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
Section 6.14 No Recourse.
Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, each Party, by its acceptance of the benefits hereof, covenants, agrees and acknowledges that no Person other than the other Party and its respective successors and permitted assignees shall have any obligation hereunder, and that, except in the case of Fraud, each Party has no rights of recovery against, and no recourse hereunder against, any former, current or future director, officer, agent, advisor, attorney, Representative, Affiliate, manager or employee of the other Party (or any of its successors or assignees), against any former, current or future general or limited partner, manager, member or stockholder of the other Party, or any Affiliate thereof or against any former, current or future director, officer, agent, advisor, attorney, Representative, employee, Affiliate, assignee, general or limited partner, stockholder, manager or member of any of the foregoing, whether by or through attempted piercing of the corporate veil, by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other Law, except that, notwithstanding the foregoing, nothing in this Section 6.14 shall limit the Parties’ rights or remedies under the Shareholder Agreement or in the case of Fraud.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the Parties execute this Stock Purchase Agreement, effective as of the date first above written.
Trupanion, Inc. | ||
| /s/ Darryl Rawlings | ||
Name: Darryl Rawlings | ||
Title Chief Executive Officer | ||
Aflac Incorporated | ||
/s/ Max K. Brodén | ||
Name: Max K. Brodén | ||
Title: Executive Vice President, Chief Financial Officer | ||
Exhibit A
Shareholder Agreement
(See attached)
Exhibit 10.2
Strategic Alliance Agreement
This Strategic Alliance Agreement (this “Agreement”), dated as of October 26, 2020, is entered into by and between Aflac Incorporated (“Aflac”) and Trupanion, Inc. (“Trupanion”) (each, a “Party” and, collectively, the “Parties”).
WHEREAS, pet insurance is a growing, but underpenetrated market in the United States;
WHEREAS, pet insurance industry revenue growth has been healthy and the pet insurance industry is expected to continue to grow at a fast pace due to certain key drivers such as pet care inflation and a growing number of pets in U.S. households;
WHEREAS, the workplace has been relatively slow to adopt pet insurance as a traditional employee benefits offering, but the Parties see pet insurance as a natural product offering within the employee benefit ecosystem;
WHEREAS, the foregoing underlying catalysts have accelerated during 2020 as a result of the COVID-19 pandemic driving pet ownership and a higher percentage of the workforce working from home;
WHEREAS, when assessing the business models of Aflac and Trupanion, there are common strategic characteristics of each Party that give confidence in the formation of a successful strategic alliance, including that both Parties (i) are focused on helping its policyholders with unexpected life events that risks impacting the financial health and welfare of the individual and family, (ii) seek to pay claims promptly and accurately and view the benefit ratio as a key driver of value for the consumer, (iii) are among leaders in their respective businesses of voluntary supplemental health insurance and pet insurance and (iv) have deep relationships; data and technology, brand recognition; and a robust distribution network; and
WHEREAS, the Parties hereby desire to enter into this Agreement to set forth the terms related to the formation of a strategic alliance and capital relationship (the “Alliance”).
NOW, THEREFORE, in consideration of the mutual covenants and premises of this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
Article 1. Capital Relationship Based on Shareholders Agreement
Pursuant to the terms of that certain Stock Purchase Agreement (the “Purchase Agreement”) and that certain Shareholder Agreement (the “Shareholder Agreement”), each dated as of the date hereof and by and among Aflac and Trupanion, Aflac has formed a capital relationship with Trupanion, pursuant to which, subject to the terms and conditions therein, Aflac will acquire approximately 9% of Trupanion’s outstanding common shares.
The purpose of the capital relationship is to establish a framework to generate synergistic benefits via the Alliance with a capital relationship as its foundation.
Article 2. Distribution Alliance Responsibilities
Aflac and Trupanion shall make reasonable efforts to perform their respective Alliance responsibilities in accordance with the following:
Responsibilities of Aflac:
Brand, Access, Distribution
a.Leverage strong broker and benefit technology relationships to assist in negotiations for these partners to load pet product on their platforms
b.Confirm appropriate licensing of Aflac sales professionals
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c.Consult on product design and partner in acquisition capabilities to provide a unique worksite (payroll deducted) product
d.Educate and train brokers and agents on pet insurance product and value proposition
e.Enrollment communication, education, and support
f.Consult on the development of a competitive compensation structure to ensure adoption and sales targets are accomplished
g.Governance and oversight of Alliance
Responsibilities of Trupanion:
Marketing, Product Development, Middle and Back Office
•Support sales training and development on the product value proposition
•Lead development of marketing materials, sales presentations, and communications in partnership with Aflac marketing organization
•Product pricing, design, regulatory filings/approvals
•Manage technology connectivity and data sharing with broker and other platforms, funding necessary costs for development
•Manage operational touchpoints, including:
◦Quoting/Proposals
◦Underwriting/Pricing
◦Enrollment processing
◦Customer onboarding
◦Customer service and call center capabilities
◦Claims processing
◦Commission payments
•Governance and oversight of Alliance
Article 3. Go-To-Market Approach
Marketing and Branding
The Alliance pet insurance product will include both the Aflac and Trupanion name seeking to leverage Aflac’s brand recognition and strength at the worksite with Trupanion’s brand recognition and strong reputation in the pet insurance industry. The marketing teams of Aflac and Trupanion will collaborate to recommend a final name based on consumer testing prior to going to market.
Aflac and Trupanion will reasonably cooperate to identify additional marketing and communication needs to promote Trupanion’s pet insurance product to brokers, employers, employees, and Aflac sales professionals. This includes but is not limited to developing selling presentations, marketing materials for brokers and Aflac sales professionals, enrollment materials including potential digital communication videos, and also any company website updates needed.
Distribution Economic Assumptions
•Aflac distribution network will be compensated for selling and/or generating leads from Aflac.com for Trupanion’s pet insurance product.
•Aflac distribution will receive sales incentives for selling Trupanion’s pet insurance product in conjunction with Aflac’s core products or in Aflac existing cases. Trupanion will work with Aflac and associated technology interfaces.
•Aflac marketing and sales material expenses resulting from the partnership will be covered by Trupanion.
•Beginning on the first (1st) year anniversary of the product launch, Aflac will charge Trupanion a distribution access fee and/or share in excess profits developed by the Alliance.
•Product pricing when taking into account target loss ratio, administrative expense ratio and sales compensation will meet Trupanion’s return expectations.
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A Phased Approach:
Recognizing initial development work required on worksite technology interfaces, worksite product development, compensation design and marketing plans, there will be no initial Alliance-wide target production levels and minimal expectations surrounding sales production in the initial two (2) year period after the date hereof.
Phase 1 (initial 2 years of the Alliance)
•Aflac Broker sold larger employer market. The rationale for focusing first on broker-sold group benefits includes:
◦Larger employers are more likely to offer a more comprehensive benefit package.
◦Larger employers will potentially allow for larger absolute number of pets to be insured per group to assist with simplified pricing and underwriting.
◦Brokers are more likely to be P&C licensed.
◦Critical will be building proper interfaces between Trupanion and Aflac’s premier benefit technology partners for the inclusion of pet insurance product.
•Consumer Markets: Aflac will begin in the first (1st) year following the date hereof to funnel pet insurance leads to Trupanion with digital product installed on Aflac’s platform by the second (2nd) year anniversary of the date hereof.
Phase 2 (years 3-5 of the Alliance)
•Aflac Independent Agent channel. While the Parties see long-term promise in the agent-driven small business market, the Parties have elected to delay this introduction for later in the Alliance for the following reasons:
◦More research needed to identify proper product, pricing, and risk appetite given low number of pets likely to enroll due to group size.
◦Aflac’s independent agents do not traditionally maintain a property and casualty license.
◦Compensation dynamics will play heavily into the Alliance’s ability to be successful (competing relative product compensation, share of mind and cannibalization).
Article 4. Worksite Exclusivity
During the term of this Agreement, Aflac agrees that its U.S. subsidiaries will not develop or offer any pet insurance products on the Aflac U.S. proprietary enrollment platform that would compete with the Trupanion pet insurance products contemplated by this Agreement. Trupanion acknowledges that agents licensed to sell Aflac products in the U.S. are independent contractors and are not limited by the provisions of this Article 4.
During the term of this Agreement, Trupanion agrees not to develop with a third party any worksite employee benefit regarding Trupanion’s pet insurance in the United States or Japan. For the avoidance of doubt, Trupanion may continue to sell its pet insurance directly through non-Aflac appointed brokers into the worksite consistent with its current business with smaller employers.
Article 5. Developing Pet Insurance in Japan
Aflac and Trupanion agree to work exclusively with each other to develop opportunities in Japan’s pet insurance marketplace until the earlier of (i) the termination of this Agreement and (ii) December 31, 2021, subject to two six (6) month extensions if mutually agreed upon by the Parties. Developmental initiatives include:
(1) A Japan distribution, manufacturing, and administrative alliance similar in structure to that of the U.S. alliance between the Parties.
(2) Mutual support and funding of joint ventures, a strategic investment, acquisition, incubation and/or venture investment opportunities.
(3) Joint research and development to properly assess the addressable market and competitive advantages necessary to grow the business.
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Article 6. Alliance Governance
The Alliance shall be subject to the following governance process:
1.Executive Management Meeting
Regular meetings between the President and CFO of Aflac and the President of Aflac U.S. and the CEO, CSO and CFO of Trupanion as the “Executive Management Meeting.” The meeting agenda will be agreed upon in advance by respective leadership focused on addressing critical aspects of the Alliance to drive value for the Parties respective shareholders, resource commitment, and problem resolution.
The Executive Management Meeting will allow Trupanion to provide Aflac as an investor/strategic partner with information, etc. that is reasonably necessary to appropriately protect its investment in a manner consistent with U.S. securities laws and other applicable laws and regulations (including the rules and regulations of financial instruments exchanges and other self-regulatory institutions).
2. Strategic Alliance Committee (The “Committee”)
The Parties will establish key distribution alliance teams holding regular meetings among representative officers, representative directors, etc. of the Parties’ “Strategic Alliance Committee,” expanding the meeting agenda items to those related to the Alliance. The Committee will be focused on the following core areas and develop associated reports and key performance indicators.
3. Leadership Assigned Principal Contact
Capital Relationship: Max Brodén (CFO of Aflac) and Tricia Plouf (CFO of Trupanion)
Distribution Alliance: Rich Williams (Head of U.S. Distribution) and Bob Ruff (Head of Aflac U.S. Growth Strategies) and Margi Tooth, CRO of Trupanion.
Article 7. Agreement Termination
This Agreement shall terminate in any of the cases set forth below:
a.The Parties mutually agree to terminate this Agreement in writing.
b.Either Party (hereinafter referred to as “the Non-Performing Party”) fails to perform a material part of the Non-Performing Party’s responsibilities pursuant to this Agreement and the other Party terminates this Agreement when, despite after delivering written notice of such failure to perform to the Non-Performing Party, such non-performance is not remedied within sixty (60) days of such notice.
c.By either Party upon written notice to the other Party, upon an event related to the non-terminating Party that causes risk to the terminating Party’s brand and/or the non-terminating Party is in non-compliance or poor standing with its regulators.
d.The Shareholder Agreement terminates.
e.The Purchase Agreement terminates prior to the Milestone Closing (as defined therein).
f.By either Party upon written notice to the other Party, if the Schedule of Additional Terms is not agreed to in writing by the Parties on or prior to the one (1) year anniversary of the date hereof, unless such date is extended by mutual written agreement of the Parties.
g.By Trupanion upon written notice to Aflac, in the event (i) of a Change of Control of Aflac, (ii) Aflac ceases to hold, directly or indirectly, a majority of the total American Family Life Assurance Company outstanding shares or a majority of the total American Family Life Assurance Company voting rights or (iii) Aflac disposes of all or substantially all of its assets.
h.By Aflac upon written notice to Trupanion, in the event (i) of a Change of Control of Trupanion, (ii) Trupanion ceases to hold, directly or indirectly, a majority of the total American Pet Insurance Company voting rights or (iii) Trupanion disposes of all or substantially all of its assets.
For purposes of this Agreement, “Change of Control” means, with respect to either Party, any transaction or series of transactions which results in any person, entity or "group" (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) beneficially owning (as defined in Rule 13d-3 under the Exchange Act) voting securities of such Party representing more than 50% of the combined voting power of such Party's then outstanding voting securities after the consummation of such transaction or series of transactions.
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Article 8. Good Faith Consultation
The Parties will make reasonable efforts to promptly resolve any questions that arise regarding the interpretation or operation of this Agreement through good faith discussions.
Article 9. Schedule of Additional Terms
The Parties acknowledge that this Agreement does not contain all matters upon which agreement must be reached in order for the Alliance to be fully implemented and the intent of the Parties with respect thereto to be fully expressed. The Parties covenant and agree to negotiate in good faith and to act reasonably with each other in order to agree on such terms as are necessary to fully implement the Alliance and express the intent of the Parties with respect thereto, which terms shall be set forth on a schedule agreed to in writing by the Parties and attached to this Agreement (the “Schedule of Additional Terms”).
Article 10. Limitation of Liability
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES INCURRED BY THE OTHER PARTY, OR ARISING FROM OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND WHETHER BASED IN CONTRACT, STATUTE OR TORT (INCLUDING NEGLIGENCE, OR ANY OTHER THEORY OF LIABILITY), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT WITH RESPECT TO ARTICLE 9, UNTIL THE SCHEDULE OF ADDITIONAL TERMS SHALL HAVE BEEN AGREED IN WRITING BY THE PARTIES, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR DAMAGES UNDER THIS AGREEMENT IN EXCESS OF $10,000,000.
Article 11. Confidentiality
No non-public information received by or provided to any Party (the “Receiving Party”) in connection with this Agreement, or any non-public information concerning the Trupanion, Aflac or their respective businesses, operations, plans and prospects, may be directly or indirectly (a) disclosed, in whole or in part, or summarized, excerpted from or otherwise referred to, by the Receiving Party or (b) used by the Receiving Party for purposes not contemplated by this Agreement, in each case, without the disclosing Party’s prior written consent. Notwithstanding anything in this Article 11 to the contrary: (i) to the extent required by applicable law or otherwise requested or required by any governmental authority, a Receiving Party may disclose such non-public information without the disclosing Party’s prior written consent; provided that, to the extent permitted by applicable Law, such Receiving Party shall (A) give such other Party prompt prior written notice of such requirement and (B) reasonably cooperate with such other Party to seek a protective order or other appropriate remedies to obtain assurance that confidential treatment will be accorded such non-public information; and (ii) a Receiving Party may disclose such non-public information to its affiliates and its and their directors, officers, employees, accountants, counsel, other advisors, financing providers and representatives (collectively, “Representatives”) to the extent any such Person needs to know such information in connection with the Receiving Party’s rights and obligations under this Agreement; provided that (A) such Receiving Party shall inform any such Representatives of the confidentiality obligations contained in this Article 11, and (B) such Receiving Party shall be responsible for any breach of any such obligations by any such Representative. Except as required by applicable law, the term “non-public information” as used in this Article 11 shall not include information that: (1) at the time of disclosure is, or thereafter becomes, generally available and known to the public other than as a result of, directly or indirectly, any violation of this Article 11 by the Receiving Party or any of its Representatives; (2) at the time of disclosure is, or thereafter becomes, available to the Receiving Party on a non-confidential basis from a third-party source; provided that such third party is not and was not prohibited from disclosing such non-public information to the Receiving Party by a legal, fiduciary or contractual obligation to the disclosing Party; (3) was known by or in the possession of the Receiving Party or its Representatives, as established by documentary evidence, prior to being disclosed by or on behalf of the disclosing Party; or (4) was or is independently developed by the Receiving Party, as established by documentary evidence, without reference to or use of, in whole or in part, any of the disclosing Party’s non-public information. The obligations of any Receiving Party under this Article 11 (x) with respect to the use of non-public information shall survive any termination of this Agreement until the first (1st) year anniversary of the date
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of termination and (y) with respect to the disclosure of non-public information shall survive any termination of this Agreement until the second (2nd) year anniversary of the date of termination.
Article 12 General
1.Entire Agreement. This Agreement, including all schedules hereto which are hereby incorporated by reference, together with the Purchase Agreement and the Shareholder Agreement, constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all previous or contemporaneous agreements, proposals, understandings and representations, whether written or oral, between the Parties with respect to the terms and conditions hereof.
2.Amendment. This Agreement may only be changed, modified or amended in writing and executed by both Parties.
3.Construction. The article or section headings of this Agreement are for purposes of reference only and shall not in any way limit or affect the meaning or interpretation of any of the terms hereof. References to an article or section include references to all subsections of that section or article. For purposes of this Agreement, “include,” “includes,” and “including” are deemed to be followed by the term “without limitation,” and the words “hereof,” “herein,” “hereto” and “hereunder,” and words of similar import shall refer to this Agreement as a whole and not to any specific provision of this Agreement. The Parties agree and acknowledge that this Agreement has been freely negotiated and entered into by each Party and that no court should in any manner construe any ambiguity against the draftsman solely by virtue of its role as draftsman.
4.Severability. If any provision of this Agreement is declared invalid, void or unenforceable by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of the Agreement and such provision shall be construed so as to be enforceable and to give the closest effect to such provision as drafted, and the remainder of this Agreement shall not be affected and shall remain in full force and effect.
5.No Waiver. No waiver of any right shall be effective unless consented to in writing by the Party to be charged with such waiver, and the waiver of any breach or default shall not constitute a waiver of any other right hereunder or any subsequent breach or default.
6.Assignment. Neither Party may assign or otherwise transfer this Agreement or any of its rights or obligations hereunder without the other Party’s prior written consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, subject to paragraph 8 of this Article 12, either Party may, upon written notice to the other Party, assign or transfer this Agreement in its entirety to a party that succeeds to all or substantially all of such Party’s business or assets, whether by sale, merger, operation of law or otherwise; provided that such assignee or transferee agrees in writing to be bound by the terms and conditions of this Agreement. Any attempted assignment or transfer in violation of this paragraph 6 of this Article 12 shall be null and void.
7.Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), shall be governed by, and construed in accordance with, the internal Laws of the State of Delaware, without reference to the choice of law provisions thereof. All claims, causes of action, suits, actions or proceedings shall be raised to and exclusively determined by the Court of Chancery for the State of Delaware or, if such court disclaims jurisdiction, the U.S. District Court for the District of Delaware or, if such court disclaims jurisdiction, the courts of the State of Delaware, and in each case, any appellate court from any decision thereof, to whose exclusive jurisdiction and venue the Parties unconditionally consent and submit. Service of process in connection with any such claim, cause of action suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
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8. Successors and Assigns; No Third Party Beneficiaries. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective permitted successors and assigns. There are no third party
beneficiaries to this Agreement, except as expressly set forth herein.
9. Notices. All notices, demands or other communications provided for or permitted hereunder shall be (a) made
in writing to all Parties and (b) sent by registered or certified first class mail, return receipt requested, email,
facsimile, courier service, overnight mail or personal delivery:
To the Company:
Trupanion, Inc. 6100 4th Avenue S, Suite 200
Seattle, Washington 98108
Attn: Gavin Friedman, General Counsel
Email: gavin.friedman@trupanion.com
To Aflac:
Aflac Incorporated 1932 Wynnton Road
Columbus, GA 31999
Attn: Audrey Boone Tillman
Executive Vice President and General Counsel
Email: atillman@aflac.com
Fax: (706) 596-3577
Any Party may by notice given in accordance with this paragraph 9 of this Article 12 designate another
address or Person for receipt of notices hereunder. All such notices and communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when delivered by commercial courier
or overnight mail, if delivered by commercial courier or overnight mail service; and on the date sent, if sent by
email (which is confirmed by the recipient) or facsimile (which is confirmed by the recipient).
10. Counterparts. This Agreement may be executed in one or more counterparts, by facsimile or otherwise, each
of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature page immediately follows]
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In witness whereof, the undersigned has caused this Agreement to be executed and delivered as of the date first written above.
Trupanion, Inc. | Aflac Incorporated | |||||||
| 6100 4th Avenue South STW 200 | 1932 Wynnton Rd. | |||||||
| Seattle, WA 98108 | Columbus, GA USA | |||||||
| /s/ Darryl Rawlings | /s/ Max K. Brodén | |||||||
Name: Darryl Rawlings | Name: Max K. Brodén | |||||||
Position: Chief Executive Officer | Position: Executive Vice President, Chief Financial Officer | |||||||
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Exhibit 10.3
SHAREHOLDER AGREEMENT
by and between
TRUPANION, INC.
and
AFLAC INCORPORATED
Dated as of October 26, 2020
Table of Contents
| Page | |||||||||||
| ARTICLE I DEFINITIONS | 1 | ||||||||||
| Section 1.1 | Definitions | 1 | |||||||||
| Section 1.2 | Additional Defined Terms | 3 | |||||||||
| Section 1.3 | Interpretation and Construction | 4 | |||||||||
| ARTICLE II STANDSTILL | 5 | ||||||||||
| Section 2.1 | Standstill | 5 | |||||||||
| ARTICLE III PREEMPTIVE RIGHTS | 7 | ||||||||||
| Section 3.1 | Preemptive Rights | 7 | |||||||||
| ARTICLE IV TRANSFERS | 9 | ||||||||||
| Section 4.1 | Transfer Restrictions | 9 | |||||||||
| ARTICLE V REGISTRATION RIGHTS | 11 | ||||||||||
| Section 5.1 | Registration Rights | 11 | |||||||||
| Section 5.2 | Company Faciliation of Sales | 11 | |||||||||
| ARTICLE VI ADDITIONAL COVENANTS | 12 | ||||||||||
| Section 6.1 | Confidentiality | 12 | |||||||||
| Section 6.2 | Further Assurances | 13 | |||||||||
| ARTICLE VII TERMINATION | 13 | ||||||||||
| Section 7.1 | Termination | 13 | |||||||||
| Section 7.2 | Effect of Termination | 14 | |||||||||
| ARTICLE VIII MISCELLANEOUS | 14 | ||||||||||
| Section 8.1 | Notices | 14 | |||||||||
| Section 8.2 | Amendment and Waiver | 15 | |||||||||
| Section 8.3 | Specific Performance | 15 | |||||||||
| Section 8.4 | Headings | 16 | |||||||||
| Section 8.5 | Severability | 16 | |||||||||
| Section 8.6 | Entire Agreement; No Third Party Beneficiaries | 16 | |||||||||
| Section 8.7 | Governing Law; Consent to Jurisdiction; Waiver of Jury Trial | 16 | |||||||||
| Section 8.8 | Successors and Assigns | 17 | |||||||||
| Section 8.9 | Counterparts | 17 | |||||||||
| Section 8.10 | Non-Recourse | 17 | |||||||||
SHAREHOLDER AGREEMENT
This Shareholder Agreement, dated as of October 26, 2020 (this “Agreement”), is entered into by and between Trupanion, Inc., a Delaware corporation (the “Company”), and Aflac Incorporated, a Georgia corporation (“Aflac”). The Company and Aflac each may be referred to in this Agreement individually as a “Party” and collectively as the “Parties.”
WHEREAS, concurrently with the execution of this Agreement, the Parties have entered into that certain Stock Purchase Agreement, dated as of October 26, 2020 (the “Purchase Agreement”), pursuant to which, among other things, subject to the terms and conditions set forth therein, the Company has agreed to issue and sell to Aflac, and Aflac has agreed to purchase and acquire ownership of, 3,636,364 shares (the “Transaction Shares”) of the common stock, par value $ 0.00001 per share, of the Company (the “Company Common Stock”); and
WHEREAS, as a condition to the willingness of the Parties to consummate the transactions contemplated by the Purchase Agreement and in consideration of the other benefits to be obtained by the Parties by virtue of the arrangements described above, the Parties are entering into this Agreement, which sets forth certain terms and conditions regarding, among other things, transfer restrictions and registration rights to which the Transaction Shares and certain other shares of Company Common Stock issued to and acquired by Aflac pursuant hereto will be subject.
NOW, THEREFORE, in consideration of the mutual covenants and premises of this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For purposes of this Agreement:
“Acquired Shares” means, collectively, the Transaction Shares and any Preemptive Rights Shares issued to Aflac.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have correlative meanings. For the avoidance of doubt, none of Trupanion, Inc. or any of its Affiliates (including American Pet Insurance Company) shall be deemed an Affiliate of Aflac hereunder.
“Beneficial Ownership” shall be defined consistent with such term’s meaning under Rule 13d-3 or 13d-5 under the Exchange Act. Other terms of similar import shall have comparable meanings.
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“Business Day” means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York, New York.
“Company Board” means the board of directors of the Company.
“Company Securities” means (i) any shares of capital stock or other equity interests of the Company or of any of its Subsidiaries; (ii) any other securities of the Company or of any of its Subsidiaries granting voting rights; (iii) any warrants, options, convertible or exchangeable securities, subscriptions, calls or other rights (including any preemptive or similar rights, but excluding any such rights granted pursuant to this Agreement) to subscribe for or purchase or acquire any of the securities described in the foregoing clauses (i) and (ii); or (iv) any security, instrument or agreement granting economic rights based upon the value of, or the value of which is determined by reference to any of the securities described in the foregoing clauses (i) through (iii), regardless of whether such security, instrument or agreement is or may be settled in securities, cash or other assets.
“Exchange Act” means the Securities Exchange Act of 1934.
“Governmental Authority” means any supranational, national, federal, state, provincial or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, ministry or other similar body exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established by any of the foregoing to perform any of such functions (including any national securities exchange or the equivalent) with relevant jurisdiction.
“Law” means any federal, state, provincial, local, domestic or foreign law, common law, ordinance, code, statute, rule or regulation of any Governmental Authority.
“Milestone Closing’ shall have the meaning ascribed to such term in the Purchase Agreement.
“NASDAQ” means the NASDAQ Global Market of The NASDAQ Stock Market LLC.
“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, Governmental Authority or any agency, instrumentality or political subdivision thereof or any other form of entity.
“Pre-Issuance Ownership Percentage” means Aflac’s Beneficial Ownership, expressed as a percentage, of the outstanding shares of Company Common Stock as of immediately prior to the applicable issuance of New Securities, excluding any such shares Beneficially Owned by Aflac other than Acquired Shares.
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“Restricted Period” means the period commencing on the date hereof and ending on (i) if the Milestone Closing occurs, the third (3rd) year anniversary of the Milestone Closing or (ii) if the Purchase Agreement terminates prior to the occurrence of the Milestone Closing, the third (3rd) year anniversary of the date hereof.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933.
“Standstill Period” means the period commencing on the date hereof and ending on the date that the Standstill Restrictions terminate pursuant to Section 2.1(b).
“Strategic Alliance Agreement” means the Strategic Alliance Agreement, dated as of the date hereof, by and between the Company and Aflac (as may be amended or supplemented from time to time).
“Subsidiary” means, as to any Person, any corporation or other entity of which: (i) such Person, or a Subsidiary of such Person, is a general partner (if a limited partnership) or managing member (if a limited liability company), or (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries.
Section 1.2 Additional Defined Terms.
The following terms have the meanings set forth in the Sections set forth below:
Term Section
$ 1.3(a)
Acceptance Notice 3.1(b)
Affiliate 1.1
Agreement Preamble
Approved Tender Offer 4.1(a)
Beneficial Ownership 1.1
Business Combination 4.1(a)
Business Day 1.1
Change of Control 2.1(b)(v)
Company Preamble
Company Board 1.1
Company Common Stock Recitals
Company Repurchase Event Section 4.1(a)(i)
Company Securities 1.1
Exchange Act 1.1
Fundamental Transaction 2.1(b)(ii)
Governmental Authority 1.1
Law 1.3(a), 1.1
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Laws 1.3(a)
NASDAQ Rule 3.1(a)
New Securities 3.1(a)
Ownership Cap 2.1(a)
Parties Preamble
Party Preamble
Person 1.1
Preemptive Rights Notice 3.1(b)
Preemptive Rights Shares 3.1(a)
Pre-Issuance Ownership Percentage 1.1
Pre-Notice 3.1(b)
Purchase Agreement Recitals
Receiving Party 6.1
Registration Statement Section 5.1
Representatives 6.1
Restricted Period 1.1
Securities Act 1.1
Shareholder Approval Issuance Section 3.1(g)
Standstill Restrictions 2.1(a)(vii)
Subsequent Offering 4.1(a)
Subsidiary 1.1
Transaction Shares Recitals
Transfer 4.1(a)
U.S. 1.3(a)
Section 1.3 Interpretation and Construction.
a.In this Agreement, except to the extent otherwise provided or that the context otherwise requires: (i) when a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement; (ii) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement; (iii) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”; (iv) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; (v) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (vi) references to a Person are also to its successors and permitted assigns; (vii) the use of “or” is not intended to be exclusive unless expressly indicated otherwise; and (viii) “$” refers to United States (“U.S.”) dollars. References to “Law,” “Laws” or to a particular statute or Law shall be deemed also to include such Laws or statutes as such Laws or statutes are from time to time amended, modified or supplemented, including by succession of comparable successor Laws.
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b.The Parties have participated jointly in the negotiation and drafting of this Agreement with counsel sophisticated in investment transactions. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.
ARTICLE II
STANDSTILL
Section 2.1 Standstill.
a.During the Standstill Period, except with the prior written consent of, or waiver by, the Company or otherwise pursuant to approval by the Company Board, Aflac shall not, and shall not permit any of its controlled Affiliates to, directly or indirectly:
i.acquire or obtain (other than solely as a result of acts taken by the Company, such as share repurchases) any shares of Company Common Stock, which would result in Aflac and its controlled Affiliates collectively Beneficially Owning equal to or in excess of 10% of the outstanding shares of Company Common Stock (the “Ownership Cap”) as reported in the Company’s most recent annual report on Form 10-K filed by the Company with the SEC;
ii.effect, seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist any other Person to effect, seek, offer or propose (whether publicly or otherwise) to effect or participate in (A) any acquisition of Company Securities (other than in accordance with Section 2.1(a)(i)) outstanding from time to time, except as otherwise contemplated by this Agreement; (B) any tender or exchange offer, merger or other business combination involving the Company or any of its Subsidiaries; (C) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its Subsidiaries; or (D) any “solicitation” of “proxies” (as such terms are used in Regulation 14A promulgated under the Exchange Act) of or consents to vote any voting securities of the Company;
iii.except as may be specifically contemplated by this Agreement, form, join or in any way participate in a “group” (as such term is used in Section 13(d)(3) of the Exchange Act) with respect to the Company Securities;
iv.make any public announcement with respect to, or submit an unsolicited proposal for or offer of (with or without condition), any extraordinary transaction involving the Company or its assets or the Company Securities;
v.otherwise act, alone or in concert with others, to seek to control or influence the management of the Company or the Company Board;
vi.take any action which would require the Company to make a public announcement regarding any of the types of matters set forth in Section 2.1(a)(ii)-(v); or
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vii.enter into any agreement with any third party with respect to any of the foregoing (the restrictions set forth in the foregoing clauses (i) through (vii), the “Standstill Restrictions”);
provided that none of the Standstill Restrictions shall prevent, restrict, encumber
or limit in any manner Aflac or any of its controlled Affiliates from exercising
their respective rights, performing their respective obligations or otherwise
consummating the transactions contemplated by this Agreement, the Purchase
Agreement or the Strategic Alliance Agreement, in each case, in accordance with
the terms and provisions hereof and thereof.
b.Notwithstanding the foregoing, the Standstill Restrictions shall terminate upon the occurrence of any of the following events:
i.any Person or “group” (as such term is used in Section 13(d)(3) of the Exchange Act) is or becomes the Beneficial Owner, directly or indirectly, of voting securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding voting securities;
ii.the Company consummates a merger, consolidation, share exchange or other similar transaction (a “Fundamental Transaction”) with any other Person, other than a Fundamental Transaction in which the voting securities of the Company that are outstanding immediately prior to such Fundamental Transaction continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) at least a majority of the combined voting power immediately after such Fundamental Transaction of (i) the Company’s outstanding securities or (ii) the surviving or parent entity’s outstanding securities;
iii.the security holders of the Company approve a plan of complete liquidation or winding-up of the Company;
iv.the sale or disposition (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets is consummated;
v.a change of a majority of the membership of the Company Board (excluding the cumulative effect of departures and appointments of directors approved by the Company Board and any change approved by a majority of the directors serving on the Company Board prior to such change) (each event set forth in the foregoing clauses (i) through (v) occurring after the date of this Agreement, with respect to the Company, shall constitute a “Change of Control”); or
vi.the Company enters into any definitive agreement to consummate, or publicly announces that it plans to, or will engage in a strategic process to, enter into, any Change of Control.
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ARTICLE III
PREEMPTIVE RIGHTS
Section 3.1 Preemptive Rights.
a.If the Company proposes to issue any shares of Company Common Stock (including issuances of shares of Company Common Stock pursuant to exchangeable or convertible securities of the Company or other securities exercisable for shares of Company Common Stock (upon exercise or in accordance with the terms thereof)) or any other securities of the Company carrying voting rights that are entitled to vote together with Company Common Stock (collectively, “New Securities”), Aflac shall have the right to purchase and acquire up to such number of shares of Company Common Stock that would allow Aflac to maintain Beneficial Ownership of the issued and outstanding shares of Company Common Stock, after giving effect to the issuance of the applicable New Securities, that is no less than Aflac’s Pre-Issuance Ownership Percentage (such shares, the “Preemptive Rights Shares”); provided, however, that, subject to Section 3.1(g), Aflac shall not have this purchase and acquisition right to the extent that an issuance of the Preemptive Rights Shares to Aflac would require approval of the shareholders of the Company pursuant to Rule 5635 of the NASDAQ Listing Rules or any successor rule thereof (the “NASDAQ Rule”), unless such shareholder approval is obtained. Notwithstanding the foregoing, to the extent the Company issues securities, other than Company Common Stock, that are exchangeable for, or convertible into, or otherwise exercisable for, shares of Company Common Stock, Aflac shall only be entitled to exercise its right to purchase Preemptive Rights Shares pursuant to this Section 3.1 concurrently with, or as promptly as practicable following, the issuance of the shares of Company Common Stock underlying such securities.
b.In the case of an issuance of New Securities which are exchangeable for, or convertible into, or otherwise exercisable for, shares of Company Common Stock, the Company shall, prior to or concurrently with such issuance of New Securities, deliver a written notice to Aflac (the “Pre-Notice”) (i) stating the Company’s intention to issue such securities, (ii) stating the amount of such securities that the Company proposes to issue in the aggregate and, correspondingly, the number of Preemptive Rights Shares that Aflac could be entitled to purchase or acquire in the future, (iii) informing Aflac that it may have a future right to elect to purchase such Preemptive Rights Shares, which right shall be exercisable upon delivery of a Preemptive Rights Notice (defined below) and (iv) stating the price of such Preemptive Rights Shares based on the issuance price of such New Securities (or if such prices are not clearly identifiable, the formula for determining the price upon exchange, conversion or exercise or, if no such formula is available, such effective price per share as is reasonably determined by the Company in good faith). The Company shall provide the right contemplated by Section 3.1(a) to Aflac by delivering a written notice to Aflac (the “Preemptive Rights Notice”) stating (i) in the case of an issuance of shares of Company Common Stock, (x) the Company’s intention to issue New Securities, (y) the amount of such New Securities that the Company proposes to issue in the aggregate and, correspondingly, the number of Preemptive Rights Shares that
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Aflac is entitled to purchase or acquire and (z) the price of such New Securities (or (1) if such prices are not clearly identifiable, such effective price per share as is reasonably determined by the Company in good faith or (2) in the case of issuances of restricted stock, the fair market value of such restricted stock as determined by the Company in the ordinary course in connection with such issuance) and (ii) in the case of an issuance of Company Common Stock upon the exchange, conversion, or exercise of New Securities described in a Pre-Notice, the amount of such securities that will or have been exchanged, converted or exercised for Company Common Stock and the resulting number of Preemptive Rights Shares that Aflac is entitled to purchase and acquire. Within five (5) Business Days following the delivery of the Preemptive Rights Notice by the Company to Aflac, Aflac may, by delivery of a written notice of acceptance to the Company (the “Acceptance Notice”), elect to purchase all, or any portion, of the Preemptive Rights Shares that Aflac is then entitled to purchase and acquire pursuant to this Section 3.1 for the price (or the price determined by application of any applicable formula) indicated in the Pre-Notice or the Preemptive Rights Notice, as applicable. The delivery of the Acceptance Notice shall be evidence of Aflac’s irrevocable commitment to purchase the number of Preemptive Rights Shares indicated in the Acceptance Notice for the price indicated in the Pre-Notice or the Preemptive Rights Notice, as applicable, and the consummation of the sale and purchase of the Preemptive Rights Shares shall occur concurrently with or as promptly as practicable following the Company’s issuance of the corresponding New Securities.
c.Notwithstanding anything in this Section 3.1 to the contrary, if the amount of New Securities to be issued is for any reason less than the amount that was initially proposed to be issued as indicated in the Preemptive Rights Notice, the Company may (whether before or after Aflac has delivered an Acceptance Notice to the Company) decrease the number of Preemptive Rights Shares that Aflac is entitled to purchase and acquire pursuant to this Section 3.1 to an amount not less than the amount necessary to allow Aflac to maintain (but not exceed) its Pre-Issuance Ownership Percentage after giving effect to the issuance of the applicable New Securities.
d.Notwithstanding anything in this Section 3.1 to the contrary, if the amount of New Securities to be issued is for any reason greater than the amount that was initially proposed to be issued as indicated in the Preemptive Rights Notice, Aflac may, by delivery of an Acceptance Notice (whether or not Aflac has previously delivered an Acceptance Notice to the Company), increase the number of Preemptive Rights Shares it elects to purchase and Aflac elects to acquire pursuant to this Section 3.1 to an amount not less than the amount necessary to allow Aflac to maintain (but not exceed) its Pre-Issuance Ownership Percentage after giving effect to the issuance of the applicable New Securities.
e.Notwithstanding anything in this Section 3.1 to the contrary, Section 3.1(a) shall not apply, and the Company shall have no obligation to sell, and Aflac shall have no right to purchase from the Company and no right to acquire, any shares of Company Common Stock or any other securities of the Company, if the Company proposes to issue New Securities:
i.pursuant to any employee benefits or other compensation plan approved by the Company Board and the shareholders of the Company;
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ii.in connection with any strategic transaction by the Company, whether involving a merger, consolidation, acquisition of assets, sale or exchange of stock, joint venture, other business combination, commercial agreement or otherwise, in each case, pursuant to which any such New Securities are being issued as consideration therefor;
iii.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 Company Board;
iv.upon any stock dividend, stock split or other pro rata distribution, subdivision or combination of securities or other recapitalization of the Company;
v.pursuant to any direct stock purchase and dividend reinvestment plan (or any similar successor plan) of the Company; or
vi.pursuant to the terms of a “poison pill” or other similar shareholder rights plan approved by the Company Board.
f.Upon the Company’s issuance of any Preemptive Rights Shares, such Preemptive Rights Shares shall be (i) validly issued, fully paid and nonassessable and (ii) duly authorized by all necessary corporate action of the Company.
g.In the event that the Company proposes an issuance of New Securities and the full number of Preemptive Rights Shares that would be issued to Aflac pursuant to Section 3.1(a) in connection with such issuance of New Securities would exceed the amount that the Company could issue to Aflac without shareholder approval pursuant to the NASDAQ Rule (a “Shareholder Approval Issuance”), the Company shall use its reasonable best efforts to obtain approval for such Preemptive Rights Shares by the shareholders of the Company for the issuance to Aflac of the Preemptive Rights Shares (it being understood that no Shareholder Approval Issuance will be conditioned on the receipt of approval for issuance to Aflac of the applicable Preemptive Rights Shares); provided that, if shareholder approval of the issuance to Aflac is not obtained, the applicable number of Preemptive Rights Shares shall automatically be decreased to one share of Company Common Stock less than as would require shareholder approval pursuant to the NASDAQ Rule.
h.Notwithstanding anything to the contrary, this Article III shall terminate if the Strategic Alliance Agreement has been terminated in accordance with its terms.
ARTICLE IV
TRANSFERS
Section 4.1 Transfer Restrictions.
a.During the Restricted Period, without the Company’s prior written consent, Aflac shall not (and shall cause its controlled Affiliates not to), directly or indirectly, offer, sell (including any short sale), transfer, assign, hypothecate, pledge, encumber, grant a security interest in, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, grant any option, right or warrant for the sale of, purchase any option or contract to sell, sell any option or contract to purchase, or otherwise dispose of, or grant any rights with respect to (each, a “Transfer”) any
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Acquired Shares or any right, title or interest therein or thereto, or enter into any transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Acquired Shares, whether settled by delivery of such Acquired Shares, in cash or otherwise, or publicly disclose the intention to do any of the foregoing; provided, however, that Aflac may, without the Company’s prior written consent, Transfer such Acquired Shares at any time:
i.as may be necessary, but only to the extent necessary, to cause the aggregate number of shares of Company Common Stock held by Aflac not to exceed the Ownership Cap, including in connection with the Company conducting self-tender offers, share repurchase programs or other repurchases of outstanding shares of Company Common Stock (each, a “Company Repurchase Event”), and for the avoidance of doubt, Aflac shall have the right (but not the obligation) to participate in any such Company Repurchase Event, as applicable, on the same terms and conditions as other shareholders of the Company, and may Transfer up to such number of shares of Company Common Stock to the Company as may be permitted pursuant to the terms of such Company Repurchase Event to the extent necessary to maintain Aflac’s Beneficial Ownership below the Ownership Cap;
ii.in the event that the Strategic Alliance Agreement has been terminated in accordance with its terms;
iii.in the event that the Purchase Agreement has been terminated in accordance with its terms prior to the occurrence of the Milestone Closing;
iv.to any controlled Affiliate of Aflac, if such controlled Affiliate agrees pursuant to a written instrument in form and substance reasonably acceptable to the Company to be bound by the obligations of Aflac under this Agreement as in effect immediately prior to such Transfer;
v.pursuant to an Approved Tender Offer or a Subsequent Offering (each as hereinafter defined); or
vi.following a Change of Control;
provided, further, that, for the avoidance of doubt, a merger, amalgamation, plan of arrangement or consolidation or similar business combination transaction (“Business Combination” in which Aflac is a constituent corporation (or otherwise a party including, for the avoidance of doubt, a transaction pursuant to which a Person acquires all or a portion of Aflac, whether by tender or exchange offer, by share exchange, or otherwise) shall not be deemed to be a “Transfer” of any Acquired Shares or any right, title or interest therein or thereto.
For purposes of this Agreement: “Approved Tender Offer” means a tender offer or Business Combination relating to outstanding shares of Company Common Stock that has been approved or recommended by the Company Board; and “Subsequent Offering” means any subsequent offering period of a completed tender offer for at least a majority of the outstanding shares of Company Common Stock by any third party so long as a majority of the outstanding shares of
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Company Common Stock have been previously tendered to such third party and are not subject to withdrawal.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1 Registration Rights. By December 31, 2020 or, if the Milestone Closing occurs prior to such date, as soon as reasonably practicable following the Milestone Closing (but in no event later than fifteen (15) days thereafter), the Company shall file a shelf registration statement on Form S-3 (or Form S-1 if the Company is then ineligible to file on Form S-3) (the “Registration Statement”) registering the resale of any Acquired Shares held by Aflac, and cause the Registration Statement to become effective and remain effective, including through the filing of a subsequent Form S-3 (or Form S-1 if the Company is then ineligible to file on Form S-3) if such initial filing has expired, until such time as Aflac no longer holds any Acquired Shares, and amend such Registration Statement or such subsequent Form S-3 (or Form S-1 if the Company is then ineligible to file on Form S-3) from time to time as necessary to register any additional Acquired Shares acquired by Aflac after the effective date of such Registration Statement. For the avoidance of doubt, the Registration Statement shall be in the form determined by the Company; provided that the Company shall provide Aflac with a draft of such Registration Statement and any amendment thereto not less than five (5) Business Days prior to the filing thereof and shall consider in good faith any comments provided thereto by Aflac and shall include in such Registration Statement a “Plan of Distribution” section as provided by Aflac. All expenses incident to the Company’s performance of or compliance with its obligations pursuant to this Section 5.1 or otherwise in connection with the Registration Statement (including all registration and filing fees and all fees and expenses payable to any third parties or any Persons retained by the Company) shall be borne by the Company.
Section 5.2 Company Facilitation of Sales.
a.To the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities Act). The Company shall take any such further action as Aflac may reasonably request (including causing the removal of any restrictive legends applicable to the Acquired Shares), all to the extent required from time to time to enable Aflac to sell Acquired Shares without registration under the Securities Act (whether within the limitations of the exemption provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the SEC), in each case, subject to the terms and in accordance with the conditions set forth in this Agreement. If Rule 144(c) is applicable to an unregistered resale of Acquired Shares, upon Aflac’s request in connection with such an unregistered sale, the Company shall deliver to Aflac a written statement as to whether it has complied with the timely filing requirements in the first sentence of this Section 5.2(a).
b.If, at any time, the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company shall, so long as any Acquired Shares Beneficially Owned by Aflac
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shall, at such time, constitute “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, upon the written request of Aflac or a prospective purchaser of any such shares, promptly furnish Aflac or such prospective purchaser the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such shares pursuant to Rule 144A or any similar rule or regulation hereafter adopted by the SEC. The Company shall take such further action as Aflac may reasonably request to the extent from time to time required to enable Aflac to sell such shares in accordance with Rule 144A or any similar rule or regulation hereafter adopted by the SEC.
c.In connection with any proposed sale of Acquired Shares Beneficially Owned by Aflac in excess of $50,000,000, upon the written request of Aflac, the Company will:
i.make available to Aflac (and any prospective purchaser in such proposed sale) during normal business hours access to such information and the Company personnel as reasonably requested by Aflac; provided, however, that the Company need not disclose any non-public information to any such Person unless and until such Person has entered into a confidentiality agreement on customary terms with the Company; and
ii.enter into customary agreements and take such other actions as are reasonably requested by Aflac in order to expedite or facilitate the disposition of the Acquired Shares (including making appropriate representatives of the Company reasonably available to participate in customary marketing activities and furnishing or delivering opinions of counsel or “comfort letters” in customary form).
ARTICLE VI
AdDITIONAL COVENANTS
Section 6.1 Confidentiality.
No non-public information received by or provided to any Party (the “Receiving Party”) in connection with this Agreement, or any non-public information concerning the Company, Aflac or their respective businesses, operations, plans and prospects, may be directly or indirectly (a) disclosed, in whole or in part, or summarized, excerpted from or otherwise referred to, by the Receiving Party or (b) used by the Receiving Party for purposes not contemplated by this Agreement, in each case, without the disclosing Party’s prior written consent. Notwithstanding anything in this Section 6.1 to the contrary: (i) to the extent required by applicable Law or otherwise requested or required by any Governmental Authority, a Receiving Party may disclose such non-public information without the disclosing Party’s prior written consent; provided that, to the extent permitted by applicable Law, such Receiving Party shall (A) give such other Party prompt prior written notice of such requirement and (B) reasonably cooperate with such other Party to seek a protective order or other appropriate remedies to obtain assurance that confidential treatment will be accorded such non-public information; and (ii) a Receiving Party may disclose such non-public information to its Affiliates and its and their directors, officers, employees, accountants, counsel, other advisors, financing providers and representatives (collectively, “Representatives”) to the extent any such Person needs to know such information
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in connection with the Receiving Party’s rights and obligations under this Agreement; provided that (A) such Receiving Party shall inform any such Representatives of the confidentiality obligations contained in this Section 6.1, and (B) such Receiving Party shall be responsible for any breach of any such obligations by any such Representative. Except as required by applicable Law, the term “non-public information” as used in this Section 6.1 shall not include information that: (1) at the time of disclosure is, or thereafter becomes, generally available and known to the public other than as a result of, directly or indirectly, any violation of this Section 6.1 by the Receiving Party or any of its Representatives; (2) at the time of disclosure is, or thereafter becomes, available to the Receiving Party on a non-confidential basis from a third-party source, provided that such third party is not and was not prohibited from disclosing such non-public information to the Receiving Party by a legal, fiduciary or contractual obligation to the disclosing Party; (3) was known by or in the possession of the Receiving Party or its Representatives, as established by documentary evidence, prior to being disclosed by or on behalf of the disclosing Party; or (4) was or is independently developed by the Receiving Party, as established by documentary evidence, without reference to or use of, in whole or in part, any of the disclosing Party’s non-public information. The obligations of any Receiving Party under this Section 6.1 (x) with respect to the use of non-public information shall survive any termination of this Agreement until the first (1st) year anniversary of the date of termination and (y) with respect to the disclosure of non-public information shall survive any termination of this Agreement until the second (2nd) year anniversary of the date of termination.
Section 6.2 Further Assurances.
Each of the Parties shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as may be reasonably required or desirable in order to carry out the intent and accomplish the purposes of this Agreement. Without limiting the generality of the foregoing, (a) the Company covenants and agrees to provide advance written notice to Aflac of any Company Repurchase Event and to promptly respond to any request from Aflac to confirm the number of outstanding shares of Company Common Stock, and (b) Aflac covenants and agrees to promptly (i) provide written notice to the Company of any acquisition of Beneficial Ownership of Company Securities other than the Acquired Shares and (ii) respond to any request from the Company to confirm the number of shares of Company Common Stock as to which Aflac has Beneficial Ownership and the number of Acquired Shares that Aflac no longer owns for any reason.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement shall terminate only:
a.by the mutual written consent of Aflac and the Company; or
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b.upon Aflac disposing of or otherwise ceasing to own, in a manner as permitted by this Agreement, all of the Acquired Shares, without any further action required by any of the Parties.
Section 7.2 Effect of Termination.
If this Agreement is validly terminated in accordance with Section 7.1, this Agreement shall thereafter become void and have no effect, and no Party shall have any liability to the other Parties or any of their respective Affiliates, directors, officers, employees, equityholders, partners, members, agents or representatives in connection with this Agreement, except that such termination will not relieve any Party from liability for any willful and material breach of this Agreement prior to such termination or any breach of Section 6.1 or actual fraud.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices.
All notices, demands or other communications provided for or permitted hereunder shall be (a) made in writing to all Parties and (b) sent by registered or certified first class mail, return receipt requested, e-mail, facsimile, courier service, overnight mail or personal delivery:
To the Company:
Trupanion, Inc.
6100 4th Avenue S, Suite 200
Seattle, Washington 98108
Attn: Gavin Friedman, General Counsel
Email: gavin.friedman@trupanion.com
With a copy (which shall not constitute notice) to:
DLA Piper LLP (US)
701 Fifth Ave., Suite 6900
Seattle, Washington 98104
Attn: Trenton C. Dykes and Andrew D. Ledbetter
Fax: (206) 494-1776
Email: trent.dykes@us.dlapiper.com and
andrew.ledbetter@us.dlapiper.com
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To Aflac:
Aflac Incorporated
1932 Wynnton Road
Columbus, GA 31999
Attn: Audrey Boone Tillman
Executive Vice President and General Counsel
Email: atillman@aflac.com
Fax: (706) 596-3577
With a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, NW
Washington, D.C. 20005
Attn: Richard Oliver
Email: richard.oliver@skadden.com
Fax: (202) 661-0582
Any Party may by notice given in accordance with this Section 8.1 designate another address or Person for receipt of notices hereunder. All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by commercial courier or overnight mail, if delivered by commercial courier or overnight mail service; and on the date sent, if sent by e-mail (which is confirmed by the recipient) or facsimile (which is confirmed by the recipient).
Section 8.2 Amendment and Waiver.
a.Any amendment, supplement or modification of or to any provision of this Agreement shall be effective (i) only if it is made or given in writing and signed by all Parties and (ii) only in the specific instance and for the specific purpose for which made or given. No waiver of any provision of this Agreement or consent in respect of any departure from the terms of any provision of this Agreement shall be effective unless evidenced in writing and executed by the Party providing such waiver or consent.
b.No failure or delay on the part of any Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Parties at law, in equity or otherwise.
Section 8.3 Specific Performance.
The Parties agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not
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performed in accordance with its specific terms or is otherwise breached, including if the Parties fail to take any action required of them hereunder to consummate the transactions contemplated by this Agreement, subject to the terms and conditions of this Agreement. The Parties acknowledge and agree that the Parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, and such right shall be cumulative and in addition to any other remedy to which they are entitled under this Agreement.
Section 8.4 Headings.
The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
Section 8.5 Severability.
If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions of this Agreement shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.
Section 8.6 Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Purchase Agreement are intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings between the Parties with respect to such subject matter. Nothing in this Agreement or the Purchase Agreement, expressed or implied, is intended to confer upon any Person, other than the Parties, any rights or remedies hereunder.
Section 8.7 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), shall be governed by, and construed in accordance with, the internal Laws of the State of Delaware, without reference to the choice of law provisions thereof. All claims, causes of action, suits, actions or proceedings shall be raised to and exclusively determined by the Court of Chancery for the State of Delaware or, if such court disclaims jurisdiction, the U.S. District Court for the District of Delaware or, if such court disclaims jurisdiction, the courts of the State of Delaware, and in each case, any appellate court from any decision thereof, to whose exclusive jurisdiction and venue the Parties unconditionally consent and submit. Service of process in connection with
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any such claim, cause of action suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
Section 8.8 Successors and Assigns.
Except as otherwise provided in this Agreement, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, assigns, heirs, legatees and legal representatives. This Agreement shall not be assignable by any Party without the prior written consent of the other Parties hereto. Any purported assignment without such prior written consent shall be null and void.
Section 8.9 Counterparts.
This Agreement may be executed in one or more counterparts (by facsimile or otherwise), each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.
Section 8.10 Non-Recourse.
Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, each Party agrees and acknowledges, on behalf of itself and its Affiliates, that no Person other than the Company and Aflac (and any of their respective successors and permitted assignees) shall have any obligation hereunder, and that the Parties shall have no rights of recovery against, and no recourse hereunder against, any former, current or future director, officer, agent, advisor, attorney, Representative, Affiliate, manager or employee of the Parties (or any of their respective successors or assignees), against any former, current or future general or limited partner, manager, member or stockholder of the Parties, or any Affiliate thereof or against any former, current or future director, officer, agent, advisor, attorney, Representative, employee, Affiliate, assignee, general or limited partner, stockholder, manager or member of any of the foregoing, whether by or through attempted piercing of the corporate veil, by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable Law.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each Party or a duly authorized officer of each Party as of the date first above written.
Trupanion, Inc. | ||
| /s/ Darryl Rawlings | ||
Name: Darryl Rawlings | ||
Title Chief Executive Officer | ||
Aflac Incorporated | ||
/s/ Max K. Brodén | ||
Name: Max K. Brodén | ||
Title: Executive Vice President, Chief Financial Officer | ||
Exhibit 99.1
Aflac and Trupanion Announce Distribution Alliance and Investment
COLUMBUS, Ga., SEATTLE October 29, 2020 /PRNewswire/-- Aflac Incorporated (NYSE: AFL), a Fortune 200 company that helps provide protection to more than 50 million people in Japan and the U.S., and Trupanion, Inc. (Nasdaq: TRUP), a leader in medical insurance for cats and dogs, are pleased to have entered into an exclusive alliance agreement to sell pet insurance in worksites across the U.S. This alliance will leverage Aflac’s strong brand and broad U.S. worksite distribution network, including its digital Consumer Markets channel, and Trupanion’s expertise and leadership in pet insurance. The companies also have agreed to explore potential opportunities in Japan’s growing pet insurance market. In connection with the alliance agreement, Aflac will purchase an approximate 9% stake in Trupanion to further drive alignment.
“We are pleased to partner with Trupanion, the industry leader in U.S. pet insurance. With pet ownership on the rise and more Americans working from home, we see the opportunity for growth in what we view as a large, underpenetrated market,” said Frederick J. Crawford, president and Chief Operating Officer of Aflac Incorporated. “The alliance will combine Aflac’s brand recognition and broad worksite and direct to consumer distribution in the U.S. with Trupanion’s brand and strong reputation within the pet insurance industry.”
Under the alliance agreement, Aflac will provide access to agent, broker and direct to consumer platform distribution and assistance in worksite product design, marketing and enrollment support. Trupanion will provide marketing, underwriting, and policy administration, including all aspects of policyholder support.
“The distribution alliance will provide for the further enhancement of Aflac’s value proposition by offering broader employee benefits and benefit solutions to our vast network of agents and brokers, as well as to employers and their employees in the U.S.,” said Teresa L. White, president of Aflac U.S. “We believe Trupanion’s offering provides our distribution partners with a benefit solution that they have been seeking from Aflac, and is a great complement to our core supplemental product portfolio.”
"We are excited to enter the worksite through this alliance with Aflac and to have the company as a shareholder," said Darryl Rawlings, founder and CEO of Trupanion. “Our shared long-term commitment is to leverage Aflac’s leadership position and broad distribution in the U.S. to unlock the potential of pet medical insurance being sold at the worksite and directly to consumers. We also look forward to exploring opportunities in Japan, where Aflac insures one in four households.”
Rawlings added, "Aflac is a world-class organization, and we share similar cultures and values. We feel honored to partner with them over the coming years to grow the pet insurance category in the U.S. and build our international footprint."
The transaction will result in Aflac Incorporated investing approximately $200 million in newly issued Trupanion common stock subject to regulatory approvals. The investment terms include a cap on ownership of under 10%, and a minimum holding period, or “lock-up” provision, of three years, subject to certain exceptions.
Raymond James & Associates, Inc. served as financial advisor, and Skadden Arps, Slate, Meagher & Flom LLP as legal advisor, to Aflac Incorporated. Guggenheim Securities served as financial advisor and DLA Piper served as legal advisor to Trupanion.
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ABOUT AFLAC INCORPORATED
Aflac Incorporated (NYSE: AFL) is a Fortune 500 company, helping provide protection to more than 50 million people through its subsidiaries in Japan and the U.S., where it is a leading supplemental insurer by paying cash fast when policyholders get sick or injured. For more than six decades, insurance policies of Aflac Incorporated's subsidiaries have given policyholders the opportunity to focus on recovery, not financial stress. Aflac Life Insurance Japan is the leading provider of medical and cancer insurance in Japan, where it insures 1 in 4 households. Fortune magazine recognized Aflac as one of the 100 Best Companies to Work for in America for 20 consecutive years. For 14 consecutive years, Aflac has been recognized by Ethisphere as one of the World's Most Ethical Companies. In 2020, Fortune included Aflac Incorporated on its list of World's Most Admired Companies for the 19th time, and Bloomberg added Aflac Incorporated to its Gender-Equality Index, which tracks the financial performance of public companies committed to supporting gender equality through policy development, representation and transparency. To learn how to get help with expenses health insurance doesn't cover, get to know us at aflac.com.
ABOUT TRUPANION:
Trupanion is a leader in medical insurance for cats and dogs throughout the United States and Canada. For over two decades, Trupanion has given pet owners peace of mind so they can focus on their pet's recovery, not financial stress. Trupanion is committed to providing pet owners with the highest value in pet medical insurance with unlimited payouts for the life of their pets. Trupanion is listed on NASDAQ under the symbol "TRUP". The company was founded in 2000 and is headquartered in Seattle, WA. Trupanion policies are issued, in the United States, by its wholly-owned insurance entity American Pet Insurance Company and, in Canada, by Omega General Insurance Company. For more information, please visit trupanion.com.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. Aflac and Trupanion desire to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by company officials in communications with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to implementation of the alliance, the exploration of opportunities in Japan, the acquisition of Trupanion equity by Aflac, and future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target,” "outlook" or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac and Trupanion undertake no obligation to update such forward-looking statements.
The companies caution readers that the following factors, in addition to other factors mentioned by either company in its respective SEC filings from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:
•the effects of COVID-19 and any resulting economic effects and government interventions on the companies’ businesses and financial results
•ability to attract and retain qualified sales associates, brokers, employees, and distribution partners
•Trupanion’s significant net losses since inception, ability to achieve or maintain profitability in the future, and ability to maintain its rate of revenue growth
•Trupanion’s ability to grow its member base, including by attracting new members from internet searches and from leads generated from Territory Partners, veterinarians and other third parties, to retain these members, and to recover its member acquisition costs
•events related to the Japan Post investigation and other matters
•competitive environment and ability to anticipate and respond to market trends
•difficult conditions in global capital markets and the economy
•deviations in actual experience from pricing and reserving assumptions
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•ability to continue to develop and implement improvements in information technology systems
•defaults and credit downgrades of investments
•exposure to significant interest rate risk
•concentration of business in Japan
•limited availability of acceptable yen-denominated investments
•applicable tax rates may change
•failure to comply with restrictions on policyholder privacy and information security
•interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems
•catastrophic events including, but not necessarily limited to, epidemics, pandemics (such as the coronavirus COVID-19), tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, terrorism or other acts of violence, and damage incidental to such events
•ability to protect the Aflac and Trupanion brands and the companies' reputations
•extensive regulation and changes in law or regulation by governmental authorities
•foreign currency fluctuations in the yen/dollar exchange rate
•decline in creditworthiness of other financial institutions
•significant valuation judgments in determination of amount of impairments taken on investments
•U.S. tax audit risk related to conversion of the Japan branch to a subsidiary
•Restrictions on subsidiaries' ability to pay dividends to their parent company
•decreases in either company's financial strength or debt ratings
•inherent limitations to risk management policies and procedures
•concentration of either company's investments in any particular single-issuer or sector
•differing judgments applied to investment valuations
•ability to effectively manage key executive succession
•changes in accounting standards
•level and outcome of litigation
•allegations or determinations of worker misclassification in the United States
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Contacts:
Aflac Incorporated:
David A. Young, Analyst and investor contact
706.596.3264 or 800.235.2667 or
dyoung@aflac.com
Catherine H. Blades, Media contact
706.596.3014;
FAX: 706.320.2288 or
cblades@aflac.com
Trupanion:
Laura Bainbridge, Head of Corporate Communications
206.607.1929
InvestorRelations@trupanion.com
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