Exhibit 10.2

 

September 24, 2009

 

Incyte Corporation

Experimental Station

Route 141 & Henry Clay Road

Building E336

Wilmington, DE 19880

 

Ladies and Gentlemen:

 

Reference is hereby made to the $160,000,000 aggregate principal amount of the
4.75% Convertible Senior Notes due 2015 (the “Notes”) of Incyte Corporation (the
“Company”) which Baker/Tisch Investments, L.P., Baker Bros. Investments II,
L.P., 667, L.P., Baker Brothers Life Sciences, L.P. and 14159, L.P.
(collectively, the “Baker Brothers”) have agreed to purchase. Capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
indenture relating to the Notes by and between the Company and U.S. Bank
National Association, as trustee, to be dated as of closing date of the sale and
issuance the Notes (the “Indenture”). In consideration of the mutual covenants
and agreements of the parties herein, the Baker Brothers and the Company agree
as follows:

 

1.               Transfer Restrictions.  The Baker Brothers, on behalf of
themselves and each affiliate or other person subject to aggregation with any of
the Baker Brothers under Section 13(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) and the rules promulgated thereunder (“Section 13(d)”) or
any person who may form a “group” with the Baker Brothers within the meaning of
Section 13(d) (collectively, the “BB Group”) agrees that, so long as any of the
Baker Brothers or any member of the BB group is an “affiliate” of the Company as
such term is defined in Rule 144 of the Securities Act of 1933, as amended (the
“Securities Act”) no member of the BB Group shall sell any Notes or shares of
the Company’s common stock (“Common Stock”) issuable upon conversion of the
Notes that constitute “restricted securities” under Rule 144 other than
(i) pursuant to an effective registration statement under the Securities Act, 
(ii) pursuant to the exemption from registration provided by Rule 144 (if
available) or (iii) to persons who agree to be bound by the transfer
restrictions applicable to such member of the BB Group.

 

2.               Registration Rights. Following the closing of the sale and
issuance of the Notes to the Baker Brothers, the Company agrees to provide the
registration rights as set forth below in this Section 2, subject to the terms
and conditions contained herein.

 

A.           Shelf Registration. The Company agrees that, upon written request
by the Baker Brothers, it shall, as soon as reasonably practicable, prepare and
file with the Securities and Exchange Commission (“SEC”) a registration
statement for an offering to be made on a delayed or continuous basis pursuant
to Rule 415 of the Securities Act registering the resale from time to time by
the Baker Brothers of all of the Registrable Securities (a “Shelf Registration
Statement”); provided, however, that the

 

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Company will have the right to postpone the effectiveness of any such Shelf
Registration Statement in accordance with Section 2(C) below. Upon filing of the
Shelf Registration Statement, the Company shall use commercially reasonable
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as soon as reasonably practicable, but in no event
earlier than the date that is six (6) months following the last date of the
original issuance of the Notes, and to keep such Shelf Registration Statement
continuously effective during the Effectiveness Period as defined in
Section 2(B) below.  For purposes of this letter agreement, “Registrable
Securities” shall mean the Notes and any shares of the Company’s common stock
issued upon conversion thereof, any shares of the Company’s common stock issued
upon conversion of the Company’s Series A Preferred Stock that may be issued
upon conversion of the Notes, and any security issued with respect thereto upon
any stock dividend, split or similar event, that are held by the Baker Brothers
or any member of the BB Group.  The Shelf Registration Statement shall be on
Form S-3 or another appropriate form permitting registration of the Registrable
Securities for resale in accordance with the methods of distribution elected by
the Baker Brothers and set forth in the Shelf Registration Statement; provided,
however that in no event shall such method of distribution take the form of an
underwritten offering of the Registrable Securities without the prior written
consent of the Company.  If a Shelf Registration Statement covering resales of
the Registrable Securities ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all securities registered
thereunder shall have been resold pursuant thereto), the Company shall use its
commercially reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within thirty (30)
days of such cessation of effectiveness amend the Shelf Registration Statement
in a manner reasonably expected to obtain the withdrawal of the order suspending
the effectiveness thereof, or file an additional Shelf Registration Statement so
that all Registrable Securities outstanding as of the date of such filing are
covered by a Shelf Registration Statement.  If a new Shelf Registration
Statement is filed pursuant to this Section 2(A), the Company shall use its
commercially reasonable efforts to cause the new Shelf Registration Statement to
become effective as soon as reasonably practicable after such filing and to keep
the new Shelf Registration Statement continuously effective until the end of the
Effectiveness Period.

 

B.             Effectiveness Period. Subject to the limitations set forth in
section 2(C) below, the Company shall be obligated to use its commercially
reasonable efforts to keep a Shelf Registration Statement filed pursuant
Section 2(A) effective until the earlier to occur of the following: (i) at such
time as all Registrable Securities held by the Baker Brothers have been sold
pursuant to a Shelf Registration Statement or other effective registration
statement or Rule 144 or (ii) at such time as all Registrable Securities held by
the Baker Brothers are eligible to be sold without any volume or manner of sale
restrictions pursuant to Rule 144 (the “Effectiveness Period”).

 

C.             Suspension Period. Notwithstanding anything to the contrary in
this Section 2, upon notice to the Baker Brothers, the Company may suspend the
use or the effectiveness

 

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of the Shelf Registration Statement for a period of up to thirty (30) days in
any three (3) month period or ninety (90) days in any in any twelve (12) month
period (the “Suspension Period”) if the Board of Directors of the Company
determines that there is a valid business purpose for suspension of the Shelf
Registration Statement; provided, that in the case of a probable financing,
acquisition, recapitalization, business combination or other similar
transaction, the Company shall have the right to extend the Suspension Period by
up to an additional fifteen (15) days in any three (3) month period.  In the
event the Company exercises its rights under the preceding sentence, the Baker
Brothers agree to suspend, immediately upon their receipt of the notice referred
to above, their use of any preliminary prospectus, prospectus or any amendment
or supplement thereto in connection with any sale or offer to sell Registrable
Securities. The Company shall promptly notify the Baker Brothers when the
Registration Statement may once again be used or is effective. In addition to
restrictions on resales during the Suspension Period as described above, for so
long as any member of the BB Group is an affiliate of the Company, no member of
the BB Group shall be allowed to transfer or sell any of its Registrable
Securities pursuant to the Shelf Registration Statement at any time when either
(i) any blackout period under the Company’s insider trading policy is in effect
or (ii) any member of the BB Group is in possession of any material non-public
information with respect to the Company.

 

D.            Expenses. The Company shall bear all fees and expenses incurred in
connection with the performance by the Company of its obligations under
Section 2 of this letter agreement.  Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and the SEC and (y) of
compliance with federal and state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Shelf Registration
Statement, any preliminary prospectus, prospectus or any amendments or
supplements thereto, any, securities sales agreements and other documents
relating to the performance of and compliance with this Section 2, (iv) all fees
and disbursements relating to the qualification of the Indenture under
applicable securities laws, (v) the fees and disbursements of counsel for the
Company in connection with any Shelf Registration Statement, (vi) fees and
disbursements of the Trustee and its counsel and of the registrar and transfer
agent for the Common Stock, (vii) Securities Act liability insurance obtained by
the Company in its sole discretion and (viii) the fees and disbursements of the
independent registered public accounting firm of the Company and of any other
Person or business whose financial statements are included or incorporated or
deemed to be incorporated by reference in a Shelf Registration Statement. 
Notwithstanding the provisions of this Section 2(D), the Baker Brothers shall
pay any broker’s commission, agency fee or underwriter’s discount or commission
in connection with the sale of the Registrable Securities under a Shelf
Registration Statement.

 

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E.              Indemnification.

 

(a)          The Company agrees to indemnify, to the extent permitted by law,
the Baker Brothers and each of their officers, directors, managers, members,
partners and each other Person who controls any of the Baker Brothers (within
the meaning of the Securities Act), as applicable, against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any Shelf Registration Statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by the Baker Brothers expressly for use
therein or by the Baker Brothers’ failure to deliver a copy of the Shelf
Registration Statement or any preliminary prospectus, prospectus or any
amendments or supplements thereto after the Company has furnished the Baker
Brothers with a sufficient number of copies of the same.

 

(b)         The Baker Brothers agree to indemnify, to the extent permitted by
law, the Company and its officers and directors, as applicable, against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any Shelf Registration
Statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, solely to the extent the same are caused by or contained in any
information furnished in writing to the Company by the Baker Brothers expressly
for use therein.

 

(c)          A person entitled to indemnification hereunder (the “indemnified
party”) shall (A) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any indemnified party’s right to
indemnification hereunder to the extent such failure has not prejudiced the
indemnifying party) and (B) unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified party and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.

 

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(d)         The indemnification provided for under this agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director, manager, member, partner or
controlling person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company’s indemnification is unavailable for any reason. Such provisions
shall provide that the liability amongst the various persons shall be allocated
in such proportion as is appropriate to reflect the relative fault of the such
persons in connection with the statements or omissions which resulted in losses
(the relative fault being determined by reference to, among other things, which
person supplied the information giving rise to untrue statement or omission and
each person’s relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission) and, only if such
allocation is not respected at law, would other equitable considerations, such
as the relative benefit received by each person from the sale of the securities,
be taken into consideration.

 

3.               Blocker Provisions.

 

A.           Notwithstanding any provision of the Notes or the Indenture to the
contrary, any Conversion Notice with respect to the Notes delivered by or on
behalf of the Baker Brothers or any member of the BB Group shall be deemed
automatically not to have been so delivered by such person to the extent, but
only to the extent, the delivery of any shares of Common Stock or any other
security otherwise deliverable upon such conversion would result in the BB Group
having “beneficial ownership” as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder (“Beneficial Ownership”) of Common
Stock or any other class of any equity security (other than an exempted
security) that is registered pursuant to Section 12 of the Exchange Act (a
“Class”) in excess of 19.999% of the number of outstanding shares of the Common
Stock or such Class (the “19.999% Ownership Limitation”).  Any purported
delivery to any member of the BB Group of a number of shares of Common Stock or
any other security upon conversion of the Notes shall be void and have no effect
to the extent, but only to the extent, that after such delivery, the BB Group
would have Beneficial Ownership of Common Stock or any such Class in excess of
the 19.999% Ownership Limitation.

 

B.             Notwithstanding Section 3(A) or any provision of the Notes or the
Indenture to the contrary, during any period of time in which the BB Group’s
Beneficial Ownership of Common Stock or any other Class (without reference to
the Notes held by the BB Group)  is less than 10%,  any Conversion Notice with
respect to the Notes delivered by or on behalf of the Baker Brothers or any
member of the BB Group shall be deemed automatically not to have been so
delivered by such person to the extent, but only to the extent, the delivery of
any shares of Common Stock or any other security otherwise deliverable upon such
conversion would result in the BB Group having Beneficial Ownership of Common
Stock or any other Class in excess of 9.999% of the number of outstanding shares
of the Common Stock or such Class (the “9.999% Ownership Limitation”).  During
any such period of time in which the BB Group’s

 

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Beneficial Ownership of Common Stock or any other Class is less than 10%
(without reference to the Notes held by the BB Group), any purported delivery to
any member of the BB Group of a number of shares of Common Stock or any other
security upon conversion of the Notes shall be void and have no effect to the
extent, but only to the extent, that after such delivery, the BB Group would
have Beneficial Ownership of Common Stock or any such Class in excess of the
9.999% Ownership Limitation.

 

C.             The Baker Brothers, on behalf of the BB Group, shall inform the
Company on or prior to the date that any member of the BB Group delivers any
Conversion Notice with respect to the Notes of the number of shares of Common
Stock or any other relevant Class then beneficially owned by the BB Group.

 

D.            The Company agrees to instruct the Trustee to take such steps as
may be reasonably necessary to effectuate the foregoing arrangements in this
Section 3.

 

4.               The rights provided to the Baker Brothers and any other member
of the BB Group and its or their affiliates as contained in this letter
agreement may not be assigned without the prior consent of the Company. This
letter agreement shall be binding upon and shall be inure to the benefit of the
parties hereto and their respective permitted assigns, and no other person shall
have any rights or obligations hereunder.

 

5.               This letter agreement constitutes the full and entire
understanding of the agreement between the parties hereto with regard to the
subject matter contained herein and supersedes all prior oral or written
agreements to understandings with respect to the subject matter hereof.

 

6.               This letter agreement and construed in accordance with the laws
of the State of New York.

 

This letter agreement may be executed in multiple counterpart copies, each of
which shall be considered an original and all of which shall constitute one and
the same instrument binding on all parties.

 

 

 

Very truly yours,

 

 

 

BAKER/TISCH INVESTMENTS, L.P.

 

 

 

By:

Baker/Tisch Capital, L.P.,

 

 

its general partner

 

By:

Baker/Tisch Capital (GP), LLC,

 

 

its general partner

 

 

 

 

 

 

By:

/s/ Julian Baker

 

Name: Julian Baker

 

Title: Managing Member

 

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BAKER BROS. INVESTMENTS II, L.P.

 

 

 

By:

Baker Bros. Capital, L.P.,

 

 

its general partner

 

By:

Baker Bros. Capital (GP), LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ Julian Baker

 

Name: Julian Baker

 

Title: Managing Member

 

 

 

 

 

667, L.P.

 

 

 

 

 

By:

Baker Bros. Capital, L.P.,

 

 

its general partner

 

By:

Baker Bros. Capital (GP), LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ Julian Baker

 

Name: Julian Baker

 

Title: Managing Member

 

 

 

 

 

Baker Brothers Life Sciences, L.P.

 

 

 

 

 

By:

Baker Brothers Life Sciences Capital, L.P.

 

 

its general partner

 

By:

Baker Brothers Life Sciences Capital (GP), LLC

 

 

its general partner

 

 

 

 

 

By:

/s/ Julian Baker

 

Name: Julian Baker

 

Title: Managing Member

 

 

 

 

 

14159, L.P.

 

 

 

 

 

By:

14159 Capital, L.P.

 

 

its general partner

 

By:

14159 Capital (GP), LLC

 

 

its general partner

 

 

 

 

 

By:

/s/ Julian Baker

 

Name: Julian Baker

 

Title: Managing Member

 

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Agreed to on September 24, 2009 by:

 

 

 

INCYTE CORPORATION

 

 

 

 

 

By:

/s/ Patricia A. Schreck

 

Name: Patricia A. Schreck

 

Title: Executive Vice President and General Counsel

 

 

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