Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On June 28, 2023, Sigilon Therapeutics, Inc., a Delaware corporation
(“Sigilon” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with Eli Lilly and Company, an Indiana corporation (“Parent”), and Parent’s wholly owned subsidiary, Shenandoah Acquisition
Corporation, a Delaware corporation (“Purchaser”).
Pursuant to the Merger Agreement, and upon the terms and subject to
the conditions thereof, Purchaser will commence a tender offer (the “Offer”) to purchase any and all of the issued and outstanding
shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), of the Company in exchange
for (a) $14.92 per Share, net to the stockholder in cash, without interest (the “Closing Amount”), plus (b) one contingent
value right per Share (each, a “CVR”), which represents the contractual right to receive up to three contingent payments for
an aggregate of up to $111.64 per CVR, net to the stockholder in cash, without interest and less any tax withholding, upon the achievement
of certain specified milestones in accordance with the terms and subject to the conditions of the Contingent Value Rights Agreement (the
“CVR Agreement”) to be entered into between Parent and an agent selected by Parent and reasonably acceptable to the Company
(the “Rights Agent”) (the Closing Amount plus one CVR, collectively, or any higher amount per Share paid pursuant to the Offer,
the “Offer Price”).
Following the consummation of the Offer, and subject to the terms and
conditions of the Merger Agreement, Purchaser will merge with and into the Company as provided in the Merger Agreement (the “Merger”),
with the Company being the surviving corporation. The Merger Agreement contemplates that the Merger will be effected pursuant to Section
251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without
a stockholder vote promptly following consummation of the Offer. At the effective time of the Merger (the “Effective Time”),
each Share (other than (i) Shares held in the treasury of the Company or owned by Parent, Purchaser or any direct or indirect wholly owned
subsidiary of Parent or Purchaser or (ii) Shares that are held by stockholders who are entitled to and properly demand appraisal for such
Shares in accordance with Section 262 of the DGCL) will be cancelled and converted into the right to receive the Offer Price from Purchaser
(the “Merger Consideration”).
The obligation of Parent and Purchaser to consummate the Offer is subject
to the condition that there be validly tendered and not validly withdrawn prior to the expiration of the Offer a number of Shares that,
together with the number of Shares, if any, then owned beneficially by Parent and Purchaser (together with their wholly owned subsidiaries)
would represent a majority of the Shares outstanding as of the consummation of the Offer (the “Minimum Tender Condition”).
The Minimum Tender Condition may not be waived by Purchaser without the prior written consent of the Company. The obligation of Purchaser
to consummate the Offer is also subject to other customary conditions. In addition, the obligation of Purchaser to consummate the Offer
is conditioned upon, among other things, the accuracy of the representations and warranties of the Company (subject to certain materiality
exceptions), and material compliance by the Company with its covenants under the Merger Agreement. Consummation of the Offer is not subject
to a financing condition.
The Merger Agreement provides for the following treatment of the Company’s
equity awards:
| · | Company Stock Options (whether vested or unvested) will be cancelled in exchange for (i) a cash amount equal to the difference, if
any, between $14.92 and the applicable exercise price plus (ii) one CVR per share underlying the option; provided that options
with an exercise price that equals or exceeds $14.92 will be cancelled for no consideration; |
| · | Restricted stock unit (“RSU”) awards (whether vested or unvested) will be cancelled in exchange for (i) a cash amount
equal to $14.92 per share underlying the RSU award plus (ii) one CVR per share underlying the RSU award; and |
| · | The existing offering period under the Company’s Employee Stock Purchase Plan (“ESPP”) will continue in accordance
with its terms, except that if the Effective Time occurs prior to last day of the existing offering period, the offering period will be
shortened so that the exercise date for the offering period will occur prior to the Effective Time and employees participating in the
existing offering period will be entitled to purchase shares under the ESPP on the earlier exercise date in accordance with their elections
for such offering period and the terms of the ESPP and the ESPP will be terminated. |
The Merger Agreement also provides that each warrant of the Company
(“Company Warrant”) will be cancelled in exchange for the right to receive a cash amount equal to the difference between $14.92
and the applicable exercise price plus one CVR per share underlying the warrant; provided that warrants with an exercise price that equals
or exceeds $14.92 per share will be cancelled for no consideration.
The Merger Agreement includes customary representations, warranties
and covenants of the Company, Parent and Purchaser. The Company has agreed, among other things, to use commercially reasonable efforts
to operate its business in the ordinary course until the time at which the Purchaser irrevocably accepts for purchase all Shares validly
tendered (and not validly withdrawn) pursuant to the Offer (the “Acceptance Time”) and not to engage in specified types of
transactions during such period. The Company has also agreed to customary non-solicitation restrictions, including not to initiate, solicit,
knowingly facilitate or engage in discussions with third parties regarding other proposals for alternative business combination transactions
involving the Company or change the recommendation of the Company Board of Directors (“Company Board”) to the Company’s
stockholders regarding the Offer, in each case, except as otherwise permitted by the Merger Agreement, including to
enter into an alternative transaction that constitutes a Superior Proposal (as defined in the Merger Agreement) in compliance with
the Company Board’s fiduciary duties under applicable law and subject to payment of a termination fee (described below).
The Merger Agreement also includes customary termination provisions
for both the Company and Parent, including, among others, the right of both parties to terminate for failure to consummate the Offer on
or before October 28, 2023. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, the Company
will be required to pay the Parent a termination fee of $1,325,000 (including under specified circumstances in connection with the Company’s
entry into an agreement with respect to a Superior Proposal or the Company Board’s change of recommendation in favor of the Offer).
The Company Board has unanimously (i) determined that the Merger Agreement
and the transactions contemplated thereby are advisable, fair to and in the best interests of, the Company and its stockholders, (ii)
duly authorized and approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its
covenants and other obligations thereunder and the consummation of the transactions contemplated by the Merger Agreement upon the terms
and subject to the conditions set forth therein, (iii) resolved that the Merger Agreement and the transactions contemplated thereby will
be governed by and effected under Section 251(h) and other relevant portions of the DGCL and (iv) resolved to recommend to holders of
the Shares to accept the Offer and tender their Shares pursuant to the Offer.
The foregoing summary of the principal terms of the Merger Agreement
does not purport to be complete and is qualified in its entirety by reference to the full copy of the Merger Agreement, which is filed
as Exhibit 2.1 hereto and is incorporated herein by reference. The summary and the copy of the Merger Agreement are intended to provide
information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about the
Company in its public reports filed with the U.S. Securities and Exchange Commission (the “SEC”). The assertions embodied
in the representations and warranties included in the Merger Agreement were made solely for purposes of the contract among the Company,
Purchaser and Parent and are subject to important qualifications and limitations agreed to by the Company, Purchaser and Parent in connection
with the negotiated terms, including being qualified by confidential disclosures made for the purposes of allocating contractual risk
between the parties. Moreover, some of those representations and warranties were made as of a specified date, may be subject to a contractual
standard of materiality different from those generally applicable to the Company’s SEC filings or may have been used for purposes
of allocating risk among the Company, Purchaser and Parent rather than establishing matters as facts. Investors should not rely on the
representations and warranties or any description of them as characterizations of the actual state of facts of the Company, Parent, Purchaser
or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and
warranties may change after the date of the Merger Agreement, and this subsequent information may or may not be fully reflected in public
disclosures by the Company or Parent.
Tender and Support Agreement
On June 28, 2023, in connection with the execution and delivery of
the Merger Agreement, Flagship Ventures Fund, V L.P. and Flagship Pioneering Special Opportunities Fund II, L.P. (together, the “Support
Stockholders”), solely in their respective capacities as stockholders of the Company, each entered into a tender and support agreement
(collectively, the “Tender and Support Agreement”) with Parent and Purchaser, pursuant to which each Support Stockholder agreed,
among other things, (i) to tender all of the Shares held by such Support Stockholder in the Offer, subject to certain exceptions (including
the valid termination of the Merger Agreement), (ii) to vote against other proposals to acquire the Company and (iii) to certain other
restrictions on its ability to take actions with respect to the Company and its Shares. The Support Stockholders collectively beneficially
own approximately 32% of the outstanding Shares.
Contingent Value Right Agreement
At or prior to the Acceptance Time, Purchaser, Parent and the Rights
Agent will enter into the CVR Agreement. Each holder of Shares, holders of Company Restricted Stock Units, holders of Company Stock Options
(other than Company Stock Options that have an exercise price that equals or exceeds the Closing Amount) and holders of Company Warrants
(other than Company Warrants that have an exercise price that equals or exceeds the Closing Amount) will become entitled to receive up
to three cash payments, each such payment being contingent upon, and subject to, the achievement of the applicable milestones (the “Milestones”)
prior to the earlier of the applicable Milestone Expiration (as defined in the CVR Agreement) and termination of the CVR Agreement. The
CVRs are contractual rights only and not transferable except under certain limited circumstances, will not be certificated or evidenced
by any instrument and will not be registered with the SEC or listed for trading. The CVRs will not have any voting or dividend rights
and will not represent any equity or ownership interest in Parent, Purchaser or Company or any of their affiliates.
Each CVR represents a right to receive the following cash payments,
without interest and less any applicable tax withholding (the “Milestone Payments”) if the following Milestones are achieved:
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First Dosing Milestone: $4.06 per CVR, payable upon the occurrence of the first human being patient being dosed with a product in a Phase I clinical trial prior to July 31, 2027; |
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First Registration Purposes: Dosing Milestone $26.39 per CVR, payable upon the occurrence of the first patient being dosed with a product in a pivotal trial prior to the December 31, 2028; and |
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Marketing Authorization Milestone: $81.19 per CVR, payable upon the occurrence of marketing authorization for a product in (a) the United States, (b) Japan or (c) three of France, the United Kingdom, Italy, Spain and German prior to December 31, 2031. |
There can be no assurance that any Milestone will be achieved prior
to its expiration or termination of the CVR Agreement, or that payment will be required of Parent with respect to any Milestone.
The foregoing description of the CVR Agreement is qualified in all
respects by reference to the full text of the form of the agreement, a copy of which is attached as Exhibit 10.1 hereto and incorporated
by reference herein.
