Item 1.01. Entry into a Material Definitive Agreement.
On November 8, 2021, Metromile, Inc., a Delaware corporation ("Metromile"),
entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and
among Metromile, Lemonade, Inc., a Delaware corporation ("Lemonade"), Citrus
Merger Sub A, Inc., a Delaware corporation and a wholly owned subsidiary of
Lemonade ("Acquisition Sub I"), and Citrus Merger Sub B, LLC, a Delaware limited
liability company and a wholly owned subsidiary of Lemonade ("Acquisition Sub
II"). The board of directors of Metromile (the "Metromile Board") and the board
of directors of Lemonade have each unanimously approved the Merger Agreement.
Pursuant to and on the terms and conditions set forth in the Merger Agreement,
(i) Acquisition Sub I will merge with and into Metromile (the "First Merger,"
and the effective time of the First Merger, the "First Effective Time"), with
Metromile continuing as the surviving entity (the "Initial Surviving
Corporation") in the First Merger, and (ii) the Initial Surviving Corporation
will merge with and into Acquisition Sub II (the "Second Merger," and together
with the First Merger, the "Mergers"), with Acquisition Sub II as the surviving
entity and as a wholly owned subsidiary of Lemonade.
At the First Effective Time, each share of common stock of Metromile, par value
$0.0001 per share ("Metromile Common Stock"), issued and outstanding immediately
prior to the First Effective Time, will be converted into the right to receive
0.05263 (the "Exchange Ratio") validly issued, fully paid and non-assessable
shares of common stock of Lemonade, par value $0.00001 per share ("Lemonade
Common Stock").
At the First Effective Time, (i) each Metromile stock option that is held by an
individual who, as of November 8, 2021, was not employed or providing services
to Metromile or its subsidiaries shall be cancelled and converted into the right
to receive an amount in cash, without interest, equal to (A) (1) the Lemonade
stock price multiplied by the Exchange Ratio (the "Per Metromile Share Price")
less (2) the per share exercise price thereof, multiplied by (B) the total
number of shares of Metromile Common Stock subject to such option; (ii) each
other Metromile stock option shall be assumed by Lemonade and converted into a
corresponding option with respect to Lemonade Common Stock (with the number of
shares and exercise price thereof equitably adjusted based on the Exchange
Ratio); (iii) each award of Metromile restricted stock units that (A) is held by
any non-employee director of Metromile or (B) subject to performance vesting
conditions shall be cancelled and converted into the right to receive an amount
in cash, without interest, equal to (1) the Per Metromile Share Price multiplied
by (2) the number of shares of Metromile Common Stock subject to such award (in
the case of any award subject to performance vesting conditions, based on actual
performance as determined by the Compensation Committee of the Board of
Directors of Metromile prior to the First Effective Time); (iv) each other award
of Metromile restricted stock units shall be assumed by Lemonade and converted
into a corresponding award with respect to Lemonade Common Stock (with the
number of shares subject to such award equitably adjusted based on the Exchange
Ratio); and (v) each Metromile warrant exercisable for Metromile Common Stock
shall be assumed by Lemonade and converted into a corresponding warrant
denominated in shares of Lemonade Common Stock (with the number of warrants and
exercise price being adjusted based on the Exchange Ratio). Except as otherwise
set forth above, each Metromile stock option, restricted stock unit award, and
warrant assumed by Lemonade shall continue to have the same terms and conditions
as applied immediately prior to the First Effective Time.
The consummation of the Mergers is subject to the satisfaction or waiver of
certain closing conditions, including, among others (i) the effectiveness of the
registration statement on Form S-4 registering the shares of Lemonade Common
Stock issuable in the Mergers and absence of any stop order or proceedings by
the U.S. Securities and Exchange Commission ("SEC") with respect thereto; (ii)
the adoption of the Merger Agreement by holders of a majority of the outstanding
shares of Metromile Common Stock; (iii) the expiration or earlier termination of
any applicable waiting period of review under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (iv) receipt of other material regulatory
consents and approvals; (v) the approval for listing on the NYSE of the shares
of Lemonade Common Stock to be issued pursuant to the Merger Agreement; (vi) the
absence of governmental restraints or prohibitions preventing the consummation
of the Mergers; (vii) subject to specified materiality standards, the truth and
accuracy of the representations and warranties made by each party; (viii) the
compliance with or performance by the other party in all material respects of
the covenants in the Merger Agreement; and (ix) the absence of a material
adverse effect on each party.
Metromile has agreed, subject to certain exceptions with respect to unsolicited
proposals, not to directly or indirectly solicit competing acquisition proposals
or to enter into discussions concerning, or provide confidential information in
connection with, any unsolicited alternative acquisition proposals.
Additionally, the Metromile Board is required to recommend the adoption of the
Merger Agreement to its stockholders, subject to certain exceptions. Prior to
the approval of the transaction-related proposals by the Metromile stockholders,
the Metromile Board may change its recommendation in response to an unsolicited
proposal for an alternative transaction, if the Metromile Board determines in
good faith after consultation with its outside legal counsel and financial
advisor that the proposal constitutes a "Company Superior Proposal" (as defined
in the Merger Agreement), and that failure to take such action would reasonably
be expected to be inconsistent with their fiduciary duties to Metromile and its
stockholders under applicable law, subject to complying with certain procedures
set forth in the Merger Agreement. Prior to the approval of the
transaction-related proposals by the Metromile stockholders, the Metromile Board
may also change its recommendation if a "Company Intervening Event" (as defined
in the Merger Agreement) occurs, and the Metromile Board determines in good
faith after consultation with its outside legal counsel and financial advisor
that failing to change its recommendation would reasonably expected to be
inconsistent with its fiduciary duties, subject to complying with certain
procedures set forth in the Merger Agreement.
Metromile and Lemonade have each made customary representations and warranties
in the Merger Agreement for transactions of this nature. The Merger Agreement
also contains customary covenants and agreements, including covenants and
agreements relating to (i) the conduct of each of Metromile's and Lemonade's
business between the date of the signing of the Merger Agreement and the closing
date of the Mergers and (ii) the efforts of the parties to cause the Mergers to
be completed, including actions which may be necessary to obtain the required
regulatory consents and approvals for the transaction.
The Merger Agreement may be terminated by each of Metromile and Lemonade in
certain limited circumstances, including, among others, (i) by mutual written
consent; (ii) if the Mergers have not consummated by August 8, 2022 (subject to
a 3-month extension to November 8, 2022 in the event that certain regulatory
closing conditions remain outstanding); (iii) if any restraint having the effect
of preventing the consummation of the Mergers has become final and
non-appealable; (iv) if stockholders of Metromile fail to adopt the Merger
Agreement; and (v) due to a material breach by the other party of any its
representations, warranties, or covenants in the Merger Agreement (which is not
cured within 30 days after written notice of such breach) which would result in
the closing conditions not being satisfied.
In addition, Lemonade may terminate the Merger Agreement if (i) the Metromile
Board withholds, changes or fails to reaffirm its recommendation to approve the
Mergers; or (ii) if Metromile materially breaches its no-solicitation or
stockholder meeting covenants in the Merger Agreement.
The Merger Agreement further provides that, upon termination of the Merger
Agreement under specific circumstances, Metromile may be required to pay
Lemonade a termination fee equal to $12,500,000.
The Merger Agreement contains representations, warranties and covenants that the
respective parties made to each other as of the date of such agreement or other
specific dates. The assertions embodied in those representations, warranties and
covenants were made for purposes of the contract among the respective parties
and are subject to important qualifications and limitations agreed to by the
parties in connection with negotiating such agreement. The representations,
warranties and covenants in the Merger Agreement are also modified in important
part by the underlying disclosure schedules which are not filed publicly and
which are subject to a contractual standard of materiality different from that
generally applicable to stockholders and were used for the purpose of allocating
risk among the parties rather than establishing matters as facts. Metromile does
not believe that these schedules contain information that is material to an
investment decision. Investors are not third-party beneficiaries under the
Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the parties thereto or any of their respective
subsidiaries or affiliates. This description of the Merger Agreement does not
purport to be complete and is qualified in its entirety by the terms and
conditions of the Merger Agreement, a copy of which is attached hereto as
Exhibit 2.1 and is incorporated herein by reference.
Additional Agreements
Voting and Support Agreements
Contemporaneously with the execution of the Merger Agreement, certain
stockholders of Metromile holding approximately 11.3% of the outstanding shares
of Metromile Common Stock, including all members of the Metromile Board and
certain officers (the "Stockholders"), entered into voting and support
agreements (the "Voting and Support Agreements") with Lemonade, pursuant to
which the Stockholders agreed to, among other things, vote all of their shares
in Metromile ("Voting Shares") (i) in favor of the adoption of the Merger
Agreement and approval of the Mergers and other transactions contemplated by the
Merger Agreement? (ii) in favor of any adjournment or postponement recommended
by Metromile with respect to any Company stockholders meeting to the extent
permitted or required pursuant to the Merger Agreement; (iii) against any
alternative acquisition proposal or transaction; (iv) against any merger, sale
of substantial assets or liquidation of Metromile; and (v) against any proposal,
action or agreement that would reasonably be expected to impede, interfere with,
delay or postpone, prevent or otherwise impair the Mergers or the other
transactions contemplated by the Merger Agreement.
The Voting and Support Agreements generally prohibit the Stockholders from
transferring, or permitting to exist any liens on, their Voting Shares prior to
the consummation of the Mergers, other than for certain standard permitted
transfers, including, among others, for estate planning and pursuant to a Rule
10b5-1 trading plan. The Voting and Support Agreements will terminate upon the
earliest to occur of (i) the mutual agreement of Lemonade and the Stockholder
party thereto, (ii) the closing of the Mergers, and (iii) the termination of the
Merger Agreement in accordance with its terms.
The foregoing description of the Voting and Support Agreements does not purport
to be complete and is qualified in its entirety by reference to the full text of
the Voting and Support Agreements, a copy of the form which is attached hereto
as Exhibit 10.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
2.1 Agreement and Plan of Merger, dated November 8, 2021, by and among
Lemonade, Inc., Citrus Merger Sub A, Inc., Citrus Merger Sub B, LLC and
Metromile, Inc.
10.1 Form of Voting and Support Agreement by and among Lemonade, Inc. and
certain stockholders of Metromile, Inc.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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METROMILE, INC. 