MILE MetroMile Inc

Item 8.01. Other Events

This is a supplement to the Definitive Proxy Statement on Schedule 14A filed by Metromile, Inc., a Delaware corporation (“Metromile” or the “Company”), with the Securities and Exchange Commission (the “SEC”) on December 29, 2021 (the “Definitive Proxy Statement”) that was first mailed to Metromile stockholders in connection with the solicitation of proxies for use at a special meeting of stockholders of Metromile (the “Special Meeting”) to be virtually held on February 1, 2022, at 9:00 a.m., Pacific Time, at www.virtualshareholdermeeting.com/MILE2022SM.

The purpose of the Special Meeting is to consider and vote on a proposal to adopt the Agreement and Plan of Merger and Combination, dated as of November 8, 2021 (as it may be amended from time to time, the “Merger Agreement”), by and among Metromile, Lemonade, Inc. (“Lemonade”), Citrus Merger Sub A, Inc., a wholly owned subsidiary of Lemonade, and Citrus Merger Sub B, LLC, a wholly owned subsidiary of Lemonade (the “Merger Proposal”).  Upon the terms and subject to the conditions set forth in the Merger Agreement, (i) Acquisition Sub I will merge with and into Metromile, with Metromile continuing as the surviving entity (the “Initial Surviving Corporation”) (the “first merger”) and (ii) the Initial Surviving Corporation will then merge with and into Acquisition Sub II, with Acquisition Sub II continuing as the surviving entity and as a wholly owned subsidiary of Lemonade (the “second merger” and, together with the first merger, the “mergers”).

The Definitive Proxy Statement is amended and supplemented by, and should be read as part of, and in conjunction with, the information set forth in this Current Report on Form 8-K. To the extent that information set forth herein differs from or updates information contained in the Definitive Proxy Statement, the information contained herein supersedes the information contained in the Definitive Proxy Statement. Capitalized terms used but not defined herein have the meanings set forth in the Definitive Proxy Statement.

As previously disclosed, on December 21, 2021, December 23, 2021 and December 29, 2021, Metromile received letters on behalf of purported stockholders of Metromile, in each case stating the stockholder’s belief that the Definitive Proxy Statement contained in the Form S-4 filed by Lemonade with the SEC on December 14, 2021 (the “Form S-4”), omitted material information with respect to the transaction and demanding that Metromile make additional and supplemental disclosures regarding the transaction prior to the Metromile special meeting. One letter also requested to inspect certain of Metromile’s books and records pursuant to Section 220 of the Delaware General Corporation Law based on allegations of suspected wrongdoing in connection with Metromile’s sale process. On January 10, 2022, Metromile received another letter on behalf of another purported stockholder stating that stockholder’s belief that the Form S-4 omitted material information with respect to the transaction, demanding that Metromile make additional and supplemental disclosures regarding the transaction prior to the Metromile special meeting, and requesting to inspect certain of Metromile’s books and records pursuant to Section 220 based on allegations of suspected wrongdoing in connection with Metromile’s sale process.

As previously disclosed, another purported stockholder of Metromile filed a complaint in the Southern District of New York alleging Metromile’s disclosures with respect to the transaction were incomplete and requesting injunctive relief to prevent the consummation of the Mergers, unless certain allegedly material information is disclosed. That complaint was brought by the plaintiff individually and is captioned Villareal v. Metromile, Inc. et al., Case No. 1:21-cv-11045 (S.D.N.Y.). Additional purported stockholders filed similar complaints on December 30, 2021, January 10, 2022, January 11, 2022, January 13, 2022, January 14, 2022, and January 17, 2022. These lawsuits were brought by the plaintiffs individually and are captioned: Patel v. Metromile, Inc. et al., Case No. 1:3:21-cv-10068 (N.D. Cal.); McKellar v. Metromile, Inc. et al., Case No. 1:22-cv-00214 (S.D.N.Y.); Prados v. Metromile, Inc. et al., Case No. 2:22-cv-00100 (D.N.J.); Bushansky v. Metromile, Inc. et al., Case No. 3:22-cv-00180 (N.D. Cal.); Bacchi v. Metromile, Inc. et al., Case No. 1:22-cv-00056 (D. Del.); Blake v. Metromile, Inc. et al., Case No. 2:22-cv-00165 (E.D. Pa.); Wheeler v. Metromile, Inc. et al., Case No. 1:22-cv-00055 (D. Del.); Wilhelm v. Metromile, Inc. et al., Case No. 1:22-cv-00061 (D. Del.); Carlisle v. Metromile, Inc. et al., Case No. 1:22-cv-00404 (S.D.N.Y.).

Metromile believes the allegations contained within the demand letters and complaint are without merit and that no further disclosure is required by applicable rule, statute, regulation or law beyond that already made. However, in order to preclude any efforts to delay the closing of the mergers, avoid nuisance and alleviate the costs, distractions, risks and uncertainties inherent in litigation, Metromile has determined to voluntarily supplement the Definitive Proxy Statement with certain supplemental disclosures (the “Supplemental Disclosures”) as described in the following section entitled “Supplemental Disclosures to the Definitive Proxy Statement” in this Current Report on Form 8-K (“Current Report”). Nothing in this Current Report shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Metromile specifically denies all allegations by the purported Metromile stockholders that any additional disclosure was or is required. Metromile’s board of directors continues to recommend that Metromile stockholders vote “FOR” the merger proposal and the adjournment proposal at the Special Meeting.

Supplemental Disclosures to the Definitive Proxy Statement

The following supplemental information should be read in conjunction with the Definitive Proxy Statement, which should be read in its entirety. All page references are to pages in the Definitive Proxy Statement, and terms used below, unless otherwise defined, have the meaning set forth in the Definitive Proxy Statement. Underlined text shows text being added to a referenced disclosure in the Definitive Proxy Statement, and deleted text is stricken through.

The second sentence of the below paragraph on page 82 of the Definitive Proxy Statement under the section “The Mergers — Background of the Mergers” is amended and supplemented to read as follows:

On August 16, 2021, Mr. Preston contacted representatives of Party B regarding a potential strategic transaction involving the EBS business. A non-disclosure agreement on customary terms was executed by Metromile and Party B on August 23, 2021 (which non-disclosure agreement did not contain a standstill provision), and representatives of Metromile and Party B met later that day to discuss a potential strategic transaction involving the EBS business. On August 26, 2021, representatives of Party B contacted Mr. Preston to confirm that Party B was not interested in pursuing a transaction with Metromile involving the EBS business.

The third sentence of the below paragraph on page 83 of the Definitive Proxy Statement under the section “The Mergers — Background of the Mergers” is amended and supplemented to read as follows:

On August 26, 2021, the Metromile board of directors held a meeting at which members of Metromile senior management and representatives of Cooley LLP (“Cooley”), Metromile’s corporate counsel, and Allen & Company were also present. At that meeting, Mr. Preston provided an update on the discussions with Lemonade and his preliminary conversations with Party A and Party B. The Metromile board of directors also approved and formalized the formation of the strategic committee and further approved that the strategic committee would be responsible for decisions regarding the identification of third parties that would be included in Metromile’s outreach to potential strategic partners, and for providing Metromile’s management team and advisors with direction, guidance and oversight regarding any process involving potential strategic alternatives; provided that and that the strategic committee would not enter into exclusivity with a potential strategic partner without approval from the full Metromile board of directors, and any final determination with respect to price and other material terms of a potential strategic transaction would be reserved for the full Metromile board of directors., nor negotiate on price, without the Metromile board of directors’ input and direction. Representatives of Cooley also provided the Metromile board of directors with an overview of its fiduciary duties in the context of the exploration of potential strategic alternatives. In order to enable Metromile to better understand potential alternatives available to it in light of the inbound interest from Lemonade and the preliminary conversations with Party A, Allen & Company suggested that Metromile consider contacting selected third parties that might be interested in a strategic transaction with Metromile and could potentially provide long-term value to Metromile’s stockholders. Allen & Company noted that, given the small group of potential strategic partners that might be considered viable candidates, a tailored strategic approach to certain potential counterparties could provide Metromile with a sense of the potential strategic alternatives available to it in the near term and discussed with the Metromile board of directors certain potential companies (in addition to Lemonade and Party A) that could be considered. After discussion, the Metromile board of directors approved approaching certain additional companies, taking into account, among other factors, the strategic fit for Metromile’s business, the rationale for a potential transaction and the perceived likelihood of engaging in discussions regarding a potential strategic transaction that could be actionable in the near term, in order to gauge their interest in a potential strategic transaction with Metromile. The Metromile board of directors also indicated its desire that Metromile’s management team continue to engage in discussions with Lemonade and Party A.

The last sentence of the below paragraph on page 85 of the Definitive Proxy Statement under the section “The Mergers — Background of the Mergers” is amended and supplemented to read as follows:

On September 27, 2021, the strategic committee held a meeting with members of Metromile senior management and representatives of Kirkland, Allen & Company and Cooley. Mr. Preston and Allen & Company updated the strategic committee on the conversations with Party A and its financial advisor, noting that, while Party A indicated that it was interested in exploring a potential strategic transaction with Metromile, Party A previously mentioned that it was considering another potential transaction as a priority and was significantly behind in its assessment of potential synergies and due diligence process relative to Lemonade. Metromile’s senior management team indicated that they would continue to encourage Party A to advance its due diligence review of Metromile. Allen & Company also updated the strategic committee on the progress of Metromile’s outreach to the additional companies approved by the Metromile board of directors at its August 26, 2021 meeting, and that all such companies had declined to proceed with discussions with Metromile and its representatives regarding a potential strategic transaction with Metromile. Allen & Company also updated the strategic committee on the progress of Metromile’s outreach to Party C, indicating that Party C had not yet indicated if it was interested in engaging in discussions regarding a strategic transaction with Metromile. Allen & Company also provided an overview of selected analysts’ perspectives on Lemonade and certain financial information relating to Lemonade and Metromile. The strategic committee then discussed potential responses to Lemonade’s term sheet and Lemonade’s September 18 23, 2021 verbal non-binding indication of interest to acquire Metromile at an exchange ratio equal to one share of Lemonade common stock for every 18 shares of Metromile common stock and, after such discussion, instructed Allen & Company to submit a counterproposal to Lemonade on behalf of Metromile for a transaction with an exchange ratio that reflected approximately 20-25% premium to Metromile’s current market price (or an exchange ratio of one share of Lemonade common stock for every 14.4-15.0 shares of Metromile common stock).

The third and fourth sentences of the disclosure on page 100 of the Definitive Proxy Statement under the section “Opinion of Metromile’s Financial Advisor — Financial Analysis — Discounted Cash Flow Analyses — Metromile” is amended and supplemented to read as follows:

Allen & Company calculated implied terminal values for Metromile by applying, based on Allen & Company’s professional judgment, to Metromile’s fiscal year 2031 estimated net operating profit after tax for its insurance operations a selected range of net operating profit after tax multiples of 16.0x to 19.0x and applying to Metromile’s fiscal year 2031 estimated net operating profit after tax for its insurance operations and revenue for its enterprise business operations a selected revenue multiple of 6.5x to Metromile’s fiscal year 2031 estimated revenue for its enterprise business operations. The present values (as of September 30, 2021) of the cash flows and terminal values were then calculated using a selected range of discount rates of 8.5% to 9.5% derived from a weighted average cost of capital calculation.

The third and fourth sentences of the disclosure on page 101 of the Definitive Proxy Statement under the section “Opinion of Metromile’s Financial Advisor — Financial Analysis — Discounted Cash Flow Analyses — Lemonade” is amended and supplemented to read as follows:

Allen & Company calculated implied terminal values for Lemonade by applying, based on Allen & Company’s professional judgment, to Lemonade’s fiscal year 2031 estimated net operating profit after tax a selected range of net operating profit after tax multiples of 16.0x to 19.0x to Lemonade’s fiscal year 2031 estimated net operating profit after tax. The present values (as of September 30, 2021) of the cash flows and terminal values were then calculated using a selected range of discount rates of 8.0% to 9.0% derived from a weighted average cost of capital calculation.

The disclosure on page 104 of the Definitive Proxy Statement under the section “Certain Financial Forecasts Utilized by Metromile in Connection with the Mergers — October Metromile Forecasts” is amended and supplemented by including additional line items and related footnotes as follows:

The disclosure on pages 104 of the Definitive Proxy Statement under the section “Certain Financial Forecasts Utilized by Metromile in Connection with the Mergers — Extrapolated Lemonade Forecasts” is amended and supplemented by including additional line items and related footnotes as follows: