Exhibit 10.2

EMPLOYMENT AGREEMENT

This AGREEMENT, dated May 1, 2006, is between ZymoGenetics, Inc., a Washington
corporation (“Company”) and Michael J. Dwyer (“Executive”).

1. Employment. Company will employ Executive and Executive will accept
employment as Senior Vice President, Marketing & Sales, of the Company.
Executive accepts employment upon the terms and conditions contained in this
Agreement and for the period (hereinafter called the “Term of Employment”)
specified in Section 3 below.

2. Duties. Executive shall, during the Term of Employment, serve the Company
under the direction of the President of the Company. Executive shall perform the
duties of his position faithfully, diligently and competently and to the best of
his ability, and shall devote his full business time to his employment.
Executive shall perform such other duties as are assigned to him by the
President or the Board of Directors of the Company. Executive may devote
reasonable periods of time to (a) engaging in personal investment activities,
(b) serving on the Board of Directors of other corporations with the consent of
the Compensation Committee of the Board, if such service would not otherwise be
prohibited by Section 7 hereof, and (c) engaging in charitable or community
service activities, so long as none of the foregoing additional activities
materially interfere with Executive’s duties under this Agreement.

3. Term of Employment; Termination.

Executive’s Term of Employment shall be two years from the date of this
Agreement, unless extended or earlier terminated as provided below.

(a) Termination or Extension of Term of Employment By Company

The Company shall employ Executive, for a period commencing on the date hereof
and terminating as follows:

(i) Two years from the date hereof, if at least thirty (30) days prior to such
date either the Company or Executive has, at its election, notified the other in
writing that this Agreement shall terminate on such date. If notice of
termination is not given, this Agreement shall be deemed to extend from year to
year. It can then be terminated by written notice at least thirty (30) days
prior to the annual renewal date.

(ii) With or without “Cause” (as defined below), Company may terminate the
employment of Executive at any time upon giving “Notice of Termination” (as
defined below).

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(b) By Executive

Executive may terminate his employment at any time, for any reason, upon giving
Notice of Termination.

(c) Automatic Termination

This Agreement and Executive’s employment hereunder shall terminate
automatically upon the death or total disability of Executive. The term “total
disability” as used herein shall mean Executive’s inability to perform the
duties set forth in paragraph 1 hereof for a period or periods aggregating
ninety (90) calendar days in any 12-month period as a result of physical or
mental illness, loss of legal capacity or any other cause beyond Executive’s
control, unless Executive is granted a leave of absence by the Board of
Directors of Company. Executive and Company hereby acknowledge that Executive’s
ability to perform the duties specified in paragraph 2 hereof is of the essence
of this Agreement. Termination hereunder shall be deemed to be effective (a) at
the end of the calendar month in which Executive’s death occurs or
(b) immediately upon a determination by the Board of Directors of Company of
Executive’s total disability, as defined herein.

(d) Notice

The term “Notice of Termination” shall mean at least thirty (30) days’ written
notice of termination, by either party, of Executive’s employment, during which
period Executive’s employment and performance of services will continue;
provided, however, that Company may, upon notice to Executive and without
reducing Executive’s compensation during such period, excuse Executive from any
or all of his duties during such period. Such a reduction in duties shall not
constitute “good reason” for voluntary termination so as to trigger termination
payments in accordance with subparagraph 4.2. The effective date of the
termination (the “Termination Date”) of Executive’s employment hereunder shall
be the date on which such 30-day period expires.

4. Termination Payments

In the event of termination of the employment of Executive, all compensation and
benefits set forth in this Agreement shall terminate except as specifically
provided in this paragraph 4:

4.1 Termination by Company

(a) Upon termination by Company, Company shall pay Executive any unpaid annual
base salary which has accrued for services already performed as of the
Termination Date.

 

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(b) If Company terminates Executive’s employment without Cause, as defined
below, Executive shall be entitled to receive termination payments equal to
twelve (12) months annual base salary. The termination payments shall be
calculated according to Executive’s base salary as of the date of Notice of
Termination and the termination payments will be paid semi-monthly in equal
parts in accordance with the same time schedule that Company or a “Successor
Company” (as defined in the Stock Option Agreement and incorporated by reference
herein) makes its customary payroll. Company or a Successor Company may deduct
customary withholdings including social security, federal and state income
taxes, and state disability insurance from these severance payments; however,
any and all such obligations shall be Executive’s responsibility. Company will
issue and file appropriate Form 1099 or similar tax documents in connection with
any termination payments. The termination payments described in this paragraph
are expressly contingent upon Executive’s full compliance with the terms of his
Employee Inventions and Proprietary Information Agreement with Company (the
“Inventions Agreement”), a copy of which is attached hereto. In the event
Executive were to materially breach this Inventions Agreement, his right to any
termination payments under this paragraph shall be extinguished, Company (and
any Successor Company) shall cease payments, and Executive shall immediately
return to Company or to any Successor Company any severance payments already
made. If Executive is terminated by either Company or any Successor Company for
Cause, Executive shall not be entitled to receive any of the foregoing benefits,
other than those set forth in clause (a) above.

4.2 Termination by Executive

In the case of the termination of Executive’s employment by Executive for “good
reason,” as defined below, Executive shall be entitled to the termination
payments as set forth in clauses 4.1(a) and (b). In the case of termination of
Executive’s employment by Executive for any other reason, Executive shall not be
entitled to any termination payments or accelerated vesting benefit, other than
as set forth in clause 4.1(a), above.

4.3 Termination as a Result of Death or Total Disability

In the event of termination of Executive’s employment pursuant to subparagraph
3(c), Executive or his estate shall be paid the compensation set forth in clause
4.1(a) and shall not be entitled to any of the benefits under clauses 4.1(b).

4.4 “Good Reason”

“Good reason” shall mean the occurrence of any of the following events, without
the consent of the Executive:

 

  a)

a demotion or other material reduction in the nature or status of Executive’s
responsibilities; provided, however, that a change in the person or office to

 

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which Executive reports, without a corresponding reduction in duties, status and
responsibilities, shall not constitute “good reason;”

 

  b) a non-voluntary reduction in the Executive’s annual base salary;

 

  c) requirement by a Successor Company that the Executive relocate his
principal place of employment to a location that is more than 50 miles from the
principal place of employment where Executive was employed; or

 

  d) the failure of Company to obtain a satisfactory agreement from any
Successor Company to assume and perform the obligations under this Agreement
within thirty (30) calendar days after the consummation of a merger,
consolidation, sale or similar transaction;

 

  e) following a Change in Control (as defined in subsection 4.6 hereof), the
Executive ceases to hold the position of Senior Vice President, Marketing &
Sales of the parent or combined entity resulting from such Change in Control; or

 

  f) even if there is no Change in Control, but the Company enters into a
merger, partnership or similar transaction, which results in a person other than
the Executive becoming Senior Vice President, Marketing & Sales of the new
combined entity.

4.5 Cause

Wherever reference is made in this Agreement to termination being with or
without Cause, “Cause” shall include, without limitation, the occurrence of one
or more of the following events:

 

  a) willful misconduct, insubordination, or dishonesty in the performance of
Executive’s duties or other knowing and material violation of Company’s or a
Successor Company’s policies and procedures in effect from time to time which
results in a material adverse effect on Company or a Successor Company;

 

  b) willful actions (or intentional failures to act) in bad faith by Executive
with respect to Company or a Successor Company that materially impair Company’s
or a Successor Company’s business, goodwill or reputation;

 

  c) conviction of Executive of a felony involving an act of dishonesty, moral
turpitude, deceit or fraud, or the commission of acts that could reasonably be
expected to result in such a conviction; or

 

  d) any material violation by Executive of Executive’s Inventions Agreement
with Company.

 

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4.6 Change in Control

As used herein, a “Change in Control” shall mean:

 

  a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”), other than any one or more Series B Investor
(as defined in the ZymoGenetics Series B Preferred Stock Purchase Agreement
October 20, 2000), either directly or indirectly through one or more affiliated
entities (collectively “Series B Purchasers”), of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (x) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection 4.6(a), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
(B) any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B), and (C) of subsection 4.6(b); or

 

  b)

Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination: (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries), (B) no Person (excluding (1) any one or more Series B Purchasers,
(2) any corporation resulting from such Business Combination, or (3) any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such

 

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Business Combination were members of the incumbent board of the Company at the
time of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

 

  c) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

5. Compensation and Fringe Benefits.

(a) The Company shall, during the Term of Employment, pay to the Executive as
compensation for the performance of his duties and obligations a salary of
$275,000 per annum. This compensation is subject to annual review and
adjustment, as appropriate in the judgment of the Company. The compensation
payable pursuant to this Section 5(a) shall be payable in equal semi-monthly
installments on the last day of each such pay period.

(b) The Executive shall be enrolled and participate in any retirement, group
insurance and other fringe benefit plans and arrangements which are applicable
to the similarly situated personnel of the Company and in effect from time to
time, if the Executive is eligible therefor, in each case in accordance with and
subject to the provisions thereof.

(c) Stock Options

(i) Executive has been granted a ten-year stock option under the Company’s 2001
Stock Incentive Plan which allows Executive to purchase 200,000 shares of the
Company’s common stock.

(ii) Executive shall be eligible to receive future grants of stock options
pursuant to the Company’s stock-based bonus program;

(iii) Executive shall be eligible to receive future periodic (i.e., non
bonus-related) grants under the Company’s stock incentive programs; and

(iv) If Executive’s employment is terminated on or after a Change in Control (as
defined in subsection 4.6 above), Executive’s stock options, restricted stock
and performance shares shall fully vest on the date of termination.

(d) Executive will also receive the following executive perquisites for the
duration of this contract:

(i) Company-paid term life insurance policy in the amount of $200,000; and

(ii) Company-paid use of either a laptop computer or personal computer, to be
upgraded biennially at the time this contract is renewed; and

 

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(iii) Company-paid annual executive health physical, to be administered by a
physician selected by the Company; and

(iv) Company-paid expenses for a residential phone and cellular phone.

6. Expenses. All travel and other reasonable expenses incident to the rendering
of service by the Executive hereunder will be paid by the Company. If such
expenses are paid in the first instance by the Executive, the Company will
reimburse him upon presentation of proper expense accounts. Reimbursement
requests, along with supporting documentation, should be submitted within sixty
(60) days of incurring the expense.

7. Non-competition.

(a) Upon termination of Executive’s employment with the Company for any reason,
and for a period of twelve (12) consecutive months after leaving his employment
with the Company, Executive will not directly or indirectly work or otherwise
engage in research, manufacture, sale or distribution of any product, method or
matter:

(i) For any business, whose commercial efforts are in competition with the
products manufactured or marketed by the Company during Executive’s employment
with the Company or under research or development by the Company during
Executive’s employment with the Company (and on which the Company has expended
at least $500,000); or

(ii) For any research institution whose research efforts pertain to the same
products manufactured or marketed by the Company during Executive’s employment
with the Company or under research or development by the Company during
Executive’s employment with the Company (and on which the Company has expended
at least $500,000), unless the Executive is not involved in any manner in the
design, conduct or supervision of such research efforts, or unless such research
is being conducted solely for scientific and not for commercial purposes. The
executive shall be deemed to be connected with a business if such business is
carried on by partnership in which he is a general or limited partner,
consultant or employee, or a corporation or association of which he is a
shareholder, officer, director, employee, member, consultant or agent; provided,
that nothing herein shall prevent the purchase or ownership by the Executive of
shares of less than 1% of the outstanding shares in a publicly or privately held
corporation.

Said twelve (12) months’ period shall commence on the day on which the Executive
actually leaves his employment with the Company, even if this date is prior to
the expiration of any given notice of termination.

 

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(b) The Company’s Board of Directors may, at its own discretion, by express or
written consent, release the Executive from the restriction in paragraph 6(a).

(c) For a period of one (1) year after the employment of the Executive is
terminated for any reason, Executive will not directly or indirectly, either for
Executive’s account or as representative or agent for any other person, firm,
corporation or entity, solicit the services of, or entice away, any Executive of
the Company, or the Executive of any company affiliated with the Company.

(d) In the event that Executive during said period described in paragraph 6(a)
violates any of the Executive’s obligations towards the Company, including but
not limited to the Executive accepting a position with a competing enterprise or
Executive violating terms of paragraph 6(c), payment of Severance or Salary
Continuation shall cease automatically without notice, regardless of whether the
Company takes legal action or otherwise tries to enforce its rights. The Company
reserves all rights it may have under contract or law to relief or damages in
addition to termination of the above-described payments.

8. Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the Company and the Executive and their respective heirs, legal or personal
representatives, successors and assigns.

9. Rights of Assignment or Delegation. This Agreement is personal to the
Executive and shall not be assignable. Company may assign its rights hereunder
to (a) any corporation resulting from any merger, consolidation, or other
reorganization to which Company is a party or (b) any corporation, partnership,
association, or other person to which Company may transfer all or substantially
all of the assets in business of Company existing at such time. All the terms
and provisions of this Agreement shall be binding upon and shall inure to the
benefit and be enforceable by the parties hereto and their respective successors
and permitted assigns.

10. Waiver. No delay or failure by any party in exercising, protecting or
enforcing any of its rights, titles, interests, or remedies hereunder and no
course of dealing or performance with respect thereto, shall constitute a
waiver. The express waiver by a party of any right, title, interest, or remedy
in a particular instance or circumstance shall not constitute a waiver in any
other instance or circumstance. All rights and remedies shall be cumulative and
not exclusive or any rights or remedies.

11. Arbitration. Any controversies or claims arising out of or relating to this
Agreement shall be finally and fully settled by arbitration of the City of
Seattle, Washington in accordance with the Employment Arbitration Rules of the
American Arbitration Association then in effect (the “AAA Rules”), conducted by
one arbitrator, mutually agreed upon by Company and Executive or chosen in
accordance with the AAA Rules, except the parties thereto shall have any right
to discovery would be

 

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permitted by the Federal Rules of Civil Procedure for a period of 90 days
following the commencement of such arbitration and the arbitrator shall resolve
any dispute which arises in connection with such discovery. The prevailing
parties shall be entitled to costs, expenses, reasonable attorneys’ fees, and
judgment upon the award rendered by the arbitrator. The award may be entered in
any court having jurisdiction.

12. Amendments in Writing. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent to any departure by
either party, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated, or discharged and assigned by Company
and Executive. Each such amendment, modification, waiver, termination, or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted, or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in agreement in writing and signed
by Company and Executive.

13. Notices. Any notice required or desired to be given hereunder shall be in
writing and shall be deemed sufficiently given when delivered or when mailed by
first class certified or registered mail, postage prepaid, to the party for whom
intended at the following address:

To the Company:

Dr. Bruce L. A. Carter

President and CEO

ZymoGenetics, Inc.

1201 Eastlake Avenue East

Seattle, WA 98102

 

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To the Executive:

Michael J. Dwyer

Senior Vice President, Marketing & Sales

82 Oxford Place

Hillsborough, NJ 08844

or to such other address, as to either party, as such party shall from time to
time designate by like notice to the other.

14. Entire Agreement. This Agreement will, upon the commencement of the Term of
Employment, supersede all prior agreements between the Executive and the
Company, except the Employee Inventions and Proprietary Information Agreement
dated May 2, 2006, and any such prior agreements and the terms and conditions
thereof shall hereafter be null, void and of no effect.

15. Governing Law. This Agreement is made under and shall be governed by and
construed in accordance with the internal laws of the State of Washington.

16. Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable in any jurisdiction, for any reason, including without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect and such jurisdiction shall be liberally construed in order to carry out
the intent of the parties as nearly as may be possible, (b) such invalidity,
illegality, or unenforceability shall not effect the validity, legality or
enforceability of any other provision, and (c) any court or arbitrator having
jurisdiction there over shall have the power to reform such provision to the
extent necessary for such provision to be enforceable under applicable law.

17. Multiple Copies. This Agreement may be executed in two or more counterparts
of like tenor and effect, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

 

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ZYMOGENETICS, INC. By:   /s/ Bruce L.A. Carter  

Dr. Bruce L.A. Carter, President, CEO and

Chairman

 

EXECUTIVE: /s/ Michael J. Dwyer Michael J. Dwyer

 

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