Document:

Royalty Agreement

 EXHIBIT 10.4 
 ROYALTY AGREEMENT 
 This ROYALTY AGREEMENT (this “Agreement”), dated
June 26, 2008, is made by and between Deerfield Private Design Fund, L.P., a Delaware limited partnership (“Design Fund”), and Deerfield Private Design International, L.P., a British Virgin Islands limited partnership
(“Design International” and together with Design Fund, “Deerfield”) and ZymoGenetics, Inc., a Washington corporation (“ZymoGenetics”). 
 Background Statement 
 ZymoGenetics is a pharmaceutical company that holds
Department of Health and Human Services U.S. License No. 1758 (including all supplements, the “Recothrom License”) to manufacture Thrombin topical (Recombinant) powder for solution for topical use labeled with the proprietary
name RECOTHROMTM. Deerfield and ZymoGenetics have entered into a Facility Agreement, dated as of the date hereof, pursuant to which Deerfield will lend funds to ZymoGenetics pursuant to the terms and conditions set forth therein (as amended,
supplemented and replaced from time to time, the “Facility Agreement”). As part of the consideration for Deerfield entering into the Facility Agreement, ZymoGenetics has agreed to pay Deerfield a royalty on future sales of Recothrom
Products pursuant to the terms and conditions set forth herein. 
 Statement of Agreement 
 The Parties agree as follows: 
 1. Definitions.
Capitalized terms shall have the meaning set forth in this section. Unless the context requires otherwise, words in the singular include the plural, words in the plural include the singular, and words importing any gender shall be applicable to all
genders. If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). 
 (a) “Affiliate” means with respect to any Person, each other Person that directly or indirectly, through one or more intermediaries, owns or controls, is controlled by or is under common control with,
such Person. For the purpose of this Agreement, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by
contract or otherwise. 
 (b) “Agreement” has the meaning set forth in the introductory paragraph. 
 (c) “Business Day” means any day other than Saturday, Sunday or a day on which banks in the City of New York are authorized or required
to be closed. 
 (d) “Cash and Cash Equivalents” has the meaning given such term in the Facility Agreement. 
 (e) “Deerfield” has the meaning set forth in the introductory paragraph. 

 (f) “Deerfield ZG” has the meaning set forth in Section 2(i). 
 (g) “Disbursement” has the meaning given such term in the Facility Agreement. 
 (h) “Earnings Report” means, during any period when ZymoGenetics has a class of securities registered in the United States, the Form
10-Q filed by ZymoGenetics following each of the first three Quarters of its fiscal year and the Form 10-K filed by ZymoGenetics following the fourth Quarter of its fiscal year. 
 (i) “Facility Agreement” has the meaning set forth in the Background Statement. 
 (j) “Facility Units” means, as of any date of determination, the number of Total Disbursements (i.e., 0, 1, 2, 3 or 4) less any
Disbursement that has been fully repaid. For purposes of determining when a Disbursement has been fully repaid, all payments by ZymoGenetics made in respect of the Loan, including interest thereon, shall be deemed to be applied (i) first to all
accrued interest on the Disbursement being repaid and (ii) then to the unpaid principal amount of such Disbursement. Payments shall be applied to interest and principal of Disbursements sequentially in the order that the Disbursements have been
made to ZymoGenetics. Notwithstanding the foregoing, and solely for purposes of the determination of the Facility Units, the number of Facility Units shall be deemed to be equal to zero (0) for each day within the Royalty Term during which
Deerfield is in breach of its obligation to make a Disbursement under the Facility Agreement. 
 (k) “Facility Units
Average” means, with respect to any Quarter, the mean number of Facility Units outstanding in such Quarter, to be calculated by dividing (i) the sum of the number of Facility Units outstanding as of 5:00 p.m. (New York City time) on
each day of such Quarter by (ii) the number of days in such Quarter, the result of such calculation being rounded to the nearest one-hundredth and a result ending in five one-thousandths being rounded down. 
 (l) “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any municipal, local,
city or county government, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 
 (m) “Interest Rate” has the meaning given such term in the Facility Agreement. 
 (n)
“Legal Requirement” means any statute, law, treaty, rule, regulation, guidance, approval, order, decree, writ, injunction or determination of any Governmental Authority, court or arbitrator of competent jurisdiction; and, with
respect to any Person, includes all such Legal Requirements applicable or binding upon such Person, its business or the ownership or use of any of its assets. 
 (o) “Lien” means any reservations of title, mortgage, claim, lien, security interest, pledge, hypothecation, escrow, charge, option or other restriction or encumbrance of any kind. 
 (p) “Loan” has the meaning given such term in the Facility Agreement. 
  

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 (q) “Material Reduction in Net Sales” means any injunction, settlement, consent or other
agreement described in Section 6 (an “Infringement Event”) that results in (i) the immediate cessation of all or substantially all Net Sales of Recothrom Products, which cessation is expected to last for at least
three (3) months, (ii) aggregate Net Sales for the two (2) consecutive Quarters immediately following such Infringement Event being less than seventy-five percent (75%) of the aggregate Net Sales for the comparable two
(2) Quarters in the preceding fiscal year, provided such Infringement Event occurs on or after July 1, 2009 or (iii) aggregate Net Sales for the two (2) consecutive Quarters immediately following such Infringement Event
being less than seventy-five percent (75%) of the aggregate Net Sales for the two (2) consecutive Quarters immediately preceding such Infringement Event, provided such Infringement Event occurs prior to July 1, 2009.

 (r) “Net Sales” means, for any relevant period, the gross amount invoiced for Recothrom Products sold to third parties in
bona fide, arm’s length transactions by or on behalf of ZymoGenetics, its Affiliates and all direct or indirect assignee or licensee of ZymoGenetics’ rights in the Recothrom Intellectual Property or Recothrom Regulatory Rights, less
customary deductions determined without duplication in accordance with ZymoGenetics’ (or, as applicable, any such Affiliate’s, assignee’s or licensee’s) standard accounting methods as generally and consistently applied for:
(i) applicable sales credits (as described below), (ii) payments or rebates incurred, or reserves and allowances, pursuant to programs of any Governmental Authority, (iii) freight charges, transit insurance and other transportation
costs, and (iv) to the extent included in the gross amount invoiced, sales, use and excise taxes. Applicable sales credits means credits or discounts, or reserves and allowances, deducted from the gross amount invoiced for: (A) customer
returns, returned goods allowances, rejected goods and damaged goods not covered by insurance, (B) cash or terms discounts, (C) direct to customer discount or customer rebate programs, including wholesaler fees for service, (D) third
party rebates and chargebacks, including group purchasing organization admin fees, (E) trade show discounts and stocking allowances, (F) price adjustments on customer inventories following price changes, (G) product recalls,
(H) discount card programs, and (I) amounts credited for uncollectible amounts. Bona fide, arm’s length transactions shall not include (y) sales for resale of Recothrom Products among ZymoGenetics and its Affiliates and
direct or indirect assignees and licensees (although subsequent resale of such Recothrom Products may constitute bona fide, arm’s length transactions) or (z) sales of Recothrom Products for development, clinical, regulatory or
compassionate use purposes. Net Sales shall not include sales of Recothrom Products for use outside the United States, its territories and possessions. 
 (s) “Party” means either ZymoGenetics or Deerfield, and “Parties” means both ZymoGenetics and Deerfield. 
 (t) “Person” means any natural person, corporation, limited liability company, partnership, association, trust, organization, Governmental Authority or other legal entity. 
 (u) “Quarter” means a fiscal quarter of ZymoGenetics. 
 (v) “Recothrom Intellectual Property” means all inventions, patents, patent applications, trade secrets, know-how, technical data, laboratory results, clinical results, manufacturing methods,
copyrights, trademarks and other data, know-how and intellectual 

  

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property controlled by ZymoGenetics that are necessary to develop, manufacture, have manufactured, promote, distribute, import, offer for sale, and sell the
Recothrom Products in the United States, its territories and possessions. 
 (w) “Recothrom License” has the meaning set
forth in the Background Statement. 
 (x) “Recothrom Products” means all products that are now or may hereafter be approved
for manufacture under the Recothrom License for sale in the United States, its territories and possessions. 
 (y) “Recothrom
Regulatory Rights” means the Recothrom License and all other license, permits, approvals, codes, certifications and other authorizations or identifiers granted or required by any Governmental Authority required to manufacture, have
manufactured, promote, distribute, import, sell, offer for sale and sell the Recothrom Products. 
 (z) “Royalty” has the
meaning set forth in Section 2(a). 
 (aa) “Royalty Cap” has the meaning set forth in Section 2(e).

 (bb) “Royalty Term” has the meaning set forth in Section 2(d). 
 (cc) “Total Disbursements” means the total number of Disbursements made at any time pursuant to the Facility Agreement, without giving
effect to any full or partial repayment of Disbursements. 
 (dd) “Transfer” means any sale, assignment, conveyance of
rights, deed of trust, Lien, license, sublicense, seizure or other transfer of any sort, voluntary or involuntary, including by operation of law. 
 (ee) “ZymoGenetics” has the meaning set forth in the introductory paragraph. 
 2. Royalty. 
 (a) Royalty Amount. In consideration of Deerfield entering into the Facility Agreement, ZymoGenetics shall pay Deerfield, subject to the Royalty
Cap, for every Quarter falling within any part of the Royalty Term a royalty (the “Royalty”) equal to the product of (i) the Facility Units Average for such Quarter and (ii) two percent (2%) of Net Sales made in such
Quarter. 
 (b) Payment of the Royalty. No later than forty-five days following the end of each of the first three Quarters of
Zymogenetics’ fiscal year, and no later than two Business Days following the date ZymoGenetics files its Earnings Report for the fourth Quarter of its fiscal year, ZymoGenetics shall pay to Deerfield the Royalty for such Quarter. On the same
day it makes a Royalty payment pursuant to this Section 2(b), ZymoGenetics shall deliver to Deerfield a written statement showing all Net Sales during such Quarter and ZymoGenetics’ computation of the Royalty. All Royalty payments
shall be made by wire transfer of immediately available funds to each account designated in writing by Deerfield for each of the two payees pursuant to Section 2(c) no later than five Business Days prior to the date such Royalty payment
shall be 

  

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due. Deerfield shall be responsible for and shall bear any taxes levied upon the Royalty and any other payments received by Deerfield under this Agreement
and ZymoGenetics may withhold such taxes from any Royalty or such other payments if ZymoGenetics is either required to do so under applicable tax laws or directed to do so by an agency of the United States government. 
 (c) Allocation between Design Fund and Design International. Unless otherwise agreed by all Parties, each payment of the Royalty shall be
allocated and paid thirty-eight and three tenths percent (38.3%) to Design Fund and sixty-one and seven tenths percent (61.7%) to Design International, in each case rounded to the nearest cent ($0.01). 
 (d) Royalty Term. The obligation of ZymoGenetics to make Royalty payments pursuant to this Agreement shall begin on the date of the first
Disbursement under the Facility Agreement and terminate thereafter upon the earlier of the full repayment of all Disbursements made or capable of being made under the Facility Agreement or the termination of this Agreement pursuant to
Section 6 (such period being the “Royalty Term”). Termination of this Agreement shall not terminate the obligation of ZymoGenetics, or its Affiliate, licensee or assignee, to pay any Royalty accrued prior to termination.

 (e) Royalty Cap. The total Royalty payments to be made by ZymoGenetics pursuant to this Agreement (the “Royalty
Cap”) shall not exceed: 
 (i) forty-five million dollars ($45,000,000) if the Total Disbursements is four;

 (ii) thirty-six million two hundred and fifty thousand dollars ($36,250,000) if the Total Disbursements is three;

 (iii) twenty-seven million five hundred thousand dollars ($27,500,000) if the Total Disbursements is two; or 
 (iv) eighteen million seven hundred and fifty thousand dollars ($18,750,000) if the Total Disbursements is one. 
 The Royalty Cap shall be recalculated each time the Total Disbursements increases. If the Royalty Cap has been reached then ZymoGenetics shall make no further Royalty
payments unless and until the Royalty Cap increases, at which time ZymoGenetics shall recommence making Royalty payments on subsequent Net Sales until the aggregate amount of Royalty payments reaches the increased Royalty Cap. 
 (f) Delinquent Royalty Payments. Any Royalty not paid when due shall bear interest at a rate of one and one-half percent (1.5%) per month,
compounded monthly. 
 (g) Audit Right. Upon not less than fourteen days written notice, Deerfield shall have the right to audit the
books and records of ZymoGenetics relating to sales of Recothrom Products for the purpose of determining the correctness of ZymoGenetics’ computation and payment of the Royalty. Such audit may not be conducted more than once in any calendar
year and shall be conducted during normal business hours by a national public accounting firm selected by Deerfield at its cost and reasonably acceptable to ZymoGenetics, provided that such accounting firm enters into a reasonable confidentiality
agreement prior to commencing any such audit. 

  

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ZymoGenetics shall provide such accounting firm with access to all pertinent books and records and shall reasonably cooperate with such accounting
firm’s efforts to conduct such audits. If there has been an underpayment of the aggregate Royalty due for the period being audited of more than the greater of $25,000 or five percent (5%) of the amount due for the period, ZymoGenetics
shall reimburse Deerfield for the reasonable out-of-pocket costs (including accountants’ fees) incurred by Deerfield pursuant to this Section 2(g). In the event Deerfield claims that any such audit reveals an underpayment of the Royalty,
Deerfield will make the audit papers for the relevant period available to ZymoGenetics. 
 (h) Assignment or Sublicense by
ZymoGenetics. During the Royalty Term, ZymoGenetics shall continue to pay, or cause to be paid, the Royalty on all Net Sales by all direct or indirect licensees and assignees of the Recothrom Intellectual Property and Recothrom Regulatory
Rights, and the provisions of this Section 2 shall apply to all such Net Sales as if made directly by ZymoGenetics. 
 (i)
Assignment of Right to Receive Royalty. Each of Design Fund and Design International shall have the right to (i) assign all of its rights under this Agreement, including, without limitation, the right to receive the Royalty payments
hereunder, to Deerfield ZG Corporation, a Delaware corporation (“Deerfield ZG”), and (ii) require ZymoGenetics, pursuant to Section 2(b), to pay the Royalty allocated to Design Fund or Design International, as
applicable, to Deerfield ZG, provided Deerfield ZG is and remains an Affiliate of Deerfield. 
 3. Covenants of ZymoGenetics. 
 (a) Promotion of Recothrom Products. ZymoGenetics shall take all commercially reasonable and appropriate actions, at no cost or expense to
Deerfield, to manufacture or have manufactured, package, label, promote, distribute, offer for sale and sell Recothrom Products throughout the Royalty Term throughout the United States (but not necessarily its territories or possessions).

 (b) Maintenance of Intellectual Property and Regulatory Rights. ZymoGenetics shall take all commercially reasonable actions, at no
cost or expense to Deerfield, to obtain and maintain all Recothrom Intellectual Property and Recothrom Regulatory Rights necessary to manufacture or have manufactured, package, label, promote, distribute, offer for sale and sell Recothrom Products
throughout the Royalty Term throughout the United States (but not necessarily its territories or possessions). 
 (c) No Transfer Without
Consent. During the Royalty Term, ZymoGenetics shall not Transfer any of its right, title or interest in or to the Recothrom Intellectual Property or Recothrom Regulatory Rights without the prior written consent of Deerfield, which consent may
be conditioned upon any transferee assuming the obligation to pay the Royalty on all Net Sales by such Person and its direct and indirect assignees and licensees; provided, however, such prior written consent shall not be required
(i) if a licensee agrees to pay the Royalty due hereunder on all of its Net Sales and the Net Sales of its direct and indirect assignees and licensees and Deerfield is named a third party beneficiary under such license with respect to such
Royalty payment; (ii) for the direct or indirect license of Recothrom Intellectual Property solely for products or uses other than Recothrom Products; (iii) for the direct or indirect license of 

  

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Recothrom Intellectual Property or Recothrom Regulatory Rights to make, have made, use, promote, import, offer to sell or sell Recothrom Products solely on
behalf of, or for the benefit of, ZymoGenetics or its direct or indirect assignees and licensees; or (iv) for a Transfer permitted by Section 7(f). 
 4. Representations and Warranties of ZymoGenetics. ZymoGenetics represents and warrants to Deerfield, as of the date hereof, that: 
 (a) Organization. ZymoGenetics is a corporation duly organized, validly existing and in good standing under the laws of Washington. ZymoGenetics has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as is now being conducted. 
 (b) Authority; Execution; Enforceability.
ZymoGenetics has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, and the execution and delivery of this Agreement and the performance of all of its obligations hereunder have been
duly authorized by ZymoGenetics. This Agreement has been duly executed and delivered by ZymoGenetics and constitutes the legal, valid and binding obligation of ZymoGenetics, enforceable against ZymoGenetics in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally. 
 (c) No Violation. The signing, delivery and performance of this Agreement by ZymoGenetics is not prohibited or limited by, and will not result in
the breach of or a default under, any provision of the articles of incorporation, bylaws or other formation documents of ZymoGenetics, any material agreement or instrument binding on ZymoGenetics or any Legal Requirement applicable to ZymoGenetics,
except for such prohibitions, limitations, defaults or Legal Requirements as would not prevent consummation by ZymoGenetics of the transactions contemplated hereby or the performance by ZymoGenetics of any of its obligations hereunder. The
execution, delivery and performance of this Agreement by ZymoGenetics, and ZymoGenetics’ compliance with the terms and conditions hereof, do not and will not conflict with or result in a breach of any of the terms and conditions of or
constitute a default, with or without the passage of time and the giving of notice, under any material contract or other instrument or obligation binding or affecting ZymoGenetics, Recothrom Products, Recothrom Intellectual Property or Recothrom
Regulatory Rights. 
 (d) Financial Condition. No insolvency proceeding of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, has been commenced by or against ZymoGenetics or any of its assets or properties, nor has any such proceeding been threatened. ZymoGenetics does not
contemplate and has not taken any action in contemplation of the institution of any such proceeding. 
 (e) Regulatory Rights and
Intellectual Property. ZymoGenetics owns or holds a valid license to use the Recothrom Intellectual Property (including, without limitation, U.S. Patents 5,476,777, 5,502,034, and 5,527,692), the Recothrom License and the Recothrom Regulatory
Rights. To the best of its knowledge, ZymoGenetics’ efforts to manufacture or have 

  

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manufactured, package, label, promote, distribute, offer for sale and sell Recothrom Products throughout the United States, its territories and possessions
do not violate any Legal Requirement or infringe the valid and enforceable intellectual property rights of any Person. 
 5. Representations and
Warranties of Deerfield. Deerfield represents and warrants to ZymoGenetics that: 
 (a) Organization. Each of Design Fund and
Design International is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of Design Fund and Design International has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as is now being conducted. 
 (b) Authority; Execution;
Enforceability. Each of Design Fund and Design International has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, and the execution and delivery of this Agreement and the
performance of all of its obligations hereunder have been duly authorized by each of Design Fund and Design International. This Agreement has been duly executed and delivered by each of Design Fund and Design International and constitutes the legal,
valid and binding obligation of each such Person, enforceable against each such Person in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general
application relating to or affecting creditors’ rights generally. 
 (c) No Violation. The signing, delivery and performance of
this Agreement by each of Design Fund and Design International is not prohibited or limited by, and will not result in the breach of or a default under, any provision of the certificate of incorporation, bylaws or other formation documents of such
Persons, or of any material agreement or instrument binding on either of such Persons or of any Legal Requirement applicable to such Persons, except for such prohibitions, limitations, defaults or Legal Requirements as would not prevent consummation
by either of such Persons of the transactions contemplated hereby or the performance by such Persons of any of its obligations hereunder. The execution, delivery and performance of this Agreement by each of Design Fund and Design International, and
each such Person’s compliance with the terms and conditions hereof, do not and will not conflict with or result in a breach of any of the terms and conditions of or constitute a default, with or without the passage of time and the giving of
notice, under any material contract or other instrument or obligation binding or affecting Design Fund or Design International. 
 6. Termination;
Increase in Interest Rate. 
 In the event that during the Royalty Term (i) a court of competent jurisdiction issues an injunction or
ZymoGenetics, or its Affiliate, licensee or assignee, enters into any settlement, consent or other agreement and (ii) such injunction, settlement, consent or other agreement (y) prevents such Person from manufacturing or selling Recothrom
Products in any product market in any part of the United States, its territories and possessions on the basis that such activity infringes the intellectual property rights of any other Person and (z) causes a Material Reduction in Net Sales,
ZymoGenetics shall provide written notice to Deerfield within forty-five days 

  

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following the determination of such Material Reduction in Net Sales. Upon written notice to ZymoGenetics given not later than forty-five days following the
receipt of a written notice from ZymoGenetics of a Material Reduction in Net Sales, Deerfield may elect to terminate this Agreement and cause the Interest Rate under the Facility Agreement to be increased, effective as of the determination of such
Material Reduction in Net Sales, to (A) 9.75% per annum during any Quarter in which the aggregate amount of Cash and Cash Equivalents of ZymoGenetics is equal to or greater than $50,000,000 as of the last day of the immediately preceding
Quarter or (B) 11.75% per annum during any Quarter in which the aggregate amount of Cash and Cash Equivalents of ZymoGenetics is less than $50,000,000 as of the last day of the immediately preceding Quarter. If Deerfield elects to
terminate this Agreement and increase the Interest Rate pursuant to this Section 6, such election shall constitute Deerfield’s sole and exclusive remedy under the Financing Documents for such infringement. 
 7. General Provisions. 
 (a) Independent
Contracting Parties. The Parties are not joint venturers, partners, principal and agent, master and servant, or employer and employee, and have no relationship other than as independent contracting parties. Neither Party shall be a legal
representative of the other or have the power to bind or obligate the other in any manner. 
 (b) Amendment and Modification. This
Agreement may be amended, modified or supplemented only by an instrument in writing signed by the Party against whom such amendment, modification or supplement is sought to be enforced. 
 (c) Waiver of Compliance; Consents. The rights and remedies of the Parties are cumulative and not alternative and may be exercised concurrently or
separately. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege shall
preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (i) no waiver that may be given by a Party shall be applicable
except in the specific instance for which it is given, and (ii) no notice to or demand on one Party shall be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action
without notice or demand as provided in this Agreement. Any consent required or permitted by this Agreement is binding only if in writing. 
 (d) Notices. All notices, consents, waivers, acceptances, rejections and other communications hereunder shall be in writing and shall be (i) delivered by hand, (ii) sent by facsimile transmission, or (iii) sent
certified mail or by a nationally recognized overnight delivery service, charges prepaid, to the address set forth below (or such other address for a Party as shall be specified by like notice): 
  

					
	 If to Deerfield, to
	  	Deerfield Management	  	
		  	780 Third Avenue, 37th Floor	  	
		  	New York, New York 10017	  	
		  	Attention: James E. Flynn	  	
		  	Facsimile: (212) 573-8111	  	

  

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	 Copy to:
	  	Robinson, Bradshaw & Hinson, P.A.	  	
		  	101 North Tryon Street, Suite 1900	  	
		  	Charlotte, North Carolina 28246	  	
		  	Attention: David J. Clark	  	
		  	Facsimile: (704) 373-3990	  	
			
	 If to ZymoGenetics, to:
	  	ZymoGenetics, Inc.	  	
		  	1201 Eastlake Avenue East	  	
		  	Seattle, Washington 98101	  	
		  	Attention: Chief Financial Officer	  	
		  	Facsimile: (206) 442-6580	  	
			
	 Copy to:
	  	ZymoGenetics, Inc.	  	
		  	1201 Eastlake Avenue East	  	
		  	Seattle, Washington 98101	  	
		  	Attention: General Counsel	  	
		  	Facsimile: (206) 442-6678	  	

 Each such notice or other communication shall be deemed to have been duly given and to be effective (x) if
delivered by hand, immediately upon delivery if delivered on a Business Day during normal business hours and, if otherwise, on the next Business Day; (y) if sent by facsimile transmission, immediately upon confirmation that such transmission
has been successfully transmitted on a Business Day before or during normal business hours and, if otherwise, on the Business Day following such confirmation, or (z) if sent by certified mail or a nationally recognized overnight delivery
service, on the day of delivery if delivered during normal business hours on a Business Day and, if otherwise, on the first Business Day after delivery. Notices and other communications sent via facsimile must be followed by notice delivered by hand
or by certified mail or overnight delivery service as set forth herein within five Business Days. 
 (e) Publicity. No Party shall
issue any press release or any other form of public disclosure regarding the existence of this Agreement or the terms hereof, or use the name of another Party hereto in any press release or other public disclosure, without the prior written consent
of the other Party, except (i) for a press release announcing the execution of this Agreement, which will be mutually approved by the Parties, (ii) for those disclosures and notifications contemplated by this Agreement or containing
information previously approved for disclosure by the other Party, (iii) as required by any Legal Requirement and solely to the extent necessary to satisfy such Legal Requirement and (iv) as required by the rules of any securities exchange
on which any securities of a Party are traded. 
 (f) No Assignment. This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by ZymoGenetics without Deerfield’s prior written consent except
(i) in connection with a merger, consolidation or reorganization of ZymoGenetics in which the surviving entity assumes all of ZymoGenetics’ obligations hereunder, (ii) to a purchaser of all or substantially all of ZymoGenetics’
assets that relate to the subject matter of this Agreement if such purchaser assumes all of ZymoGenetics’ obligations hereunder, or (iii) without any release of 

  

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ZymoGenetics’ obligations hereunder, to an Affiliate of ZymoGenetics. Subject to the terms of Section 2(i), Deerfield shall not assign this
Agreement or its rights hereunder except to an Affiliate of Deerfield or to any Person that purchases all or substantially all of the assets of Deerfield. 
 (g) Governing Law. The execution, interpretation and performance of this Agreement, and any disputes with respect to the transactions contemplated by this Agreement, shall be governed by the internal laws and
judicial decisions of the State of New York applicable to contracts made and to be performed entirely within the State of New York. 
 (h)
Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein, unless the invalidity of any such provision substantially deprives either Party of the practical benefits intended to be
conferred by this Agreement. Notwithstanding the foregoing, any provision of this Agreement held invalid, illegal or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable, and the
determination that any provision of this Agreement is invalid, illegal or unenforceable as applied to particular circumstances shall not affect the application of such provision to circumstances other than those as to which it is held invalid,
illegal or unenforceable. 
 (i) Construction. Each Party acknowledges that it and its attorneys have been given an equal opportunity
to negotiate the terms and conditions of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party or any similar rule operating against the drafter of an agreement shall not be
applicable to the construction or interpretation of this Agreement. 
 (j) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed on signature pages exchanged by facsimile, in which event each Party shall promptly
deliver to the other such number of original executed copies as the other Party may reasonably request. 
 (k) Entire Agreement. This
Agreement constitutes the entire agreement and understanding of the Parties hereto in respect of the subject matter hereof. This Agreement supersedes all prior agreements, understandings, promises, representations and statements between the Parties
and their representatives with respect to the Royalty contemplated by this Agreement. 
 [Signature Page Follows] 
  

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 IN WITNESS WHEREOF, the Parties have caused this Royalty Agreement to be executed by their duly
authorized representatives as of the date first set forth above. 
  

			
	DEERFIELD PRIVATE DESIGN FUND, L.P.
		
	By:	 	 /s/ James E. Flynn

	Name:	 	James E. Flynn
	Title:	 	General Partner
	
	DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.
		
	By:	 	 /s/ James E. Flynn

	Name:	 	James E. Flynn
	Title:	 	General Partner
	
	ZYMOGENETICS, INC.
		
	By:	 	 /s/ James A. Johnson

	Name:	 	James A. Johnson
	Title:	 	 Executive Vice President &
 Chief Financial
Officer

  

 12Registration Rights Agreement

 EXHIBIT 10.5 
 REGISTRATION RIGHTS AGREEMENT 
 REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June 26,
2008, by and between ZYMOGENETICS, INC., a Washington corporation (the “Company”), and Deerfield Private Design Fund, L.P. (“Deerfield Private Design”) and Deerfield Private Design International, L.P. (“Deerfield
Private Design International” and together with Deerfield Private Design, the “Buyer”). 
 WHEREAS: 
 A. In connection with the Facility Agreement by and between the parties hereto of even date herewith (the “Facility Agreement”), the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to the Buyer Warrants in the amount described in the Facility Agreement, where each of the Warrants is exercisable into shares of the Company’s common stock, no par
value per share (the “Common Stock”), each upon the terms and conditions and subject to the limitations and conditions set forth in the Warrants, all subject to the terms and conditions of the Facility Agreement; and 
 B. To induce the Buyer to execute and deliver the Facility Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws, 
 NOW, THEREFORE, In consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company
and the Buyer hereby agree as follows: 
 1. DEFINITIONS. 
 a. As used in this Agreement, the following terms shall have the following meanings: 
 (i) “Buyer” means the purchaser of Warrants
pursuant to the Facility Agreement specified on the signature page hereof, and any permitted transferee or assignee who agrees to become bound by the provisions of this Agreement in accordance with Section 10 hereof. 
 (ii) “Filing Deadline,” for each Registration Statement required to be filed hereunder, shall mean a date that is thirty (30) calendar days following the
date the applicable Warrant is issued. 
 (iii) “Registration Deadline” shall mean the earlier of (i) the date that is ninety (90) days
after the date that the applicable Registration Statement is actually filed or (ii) the date that is ninety (90) days after the applicable Filing Deadline. 
 (iv) “Warrant(s)” means the warrants issued by the Company pursuant to the Facility Agreement. 
 (v)
“Register,” “Registered,” and “Registration” refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on a continuous basis, and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the
“SEC”). 
 (vi) “Registrable Securities,” for a given Registration, means (a) any shares of Common Stock (the “Warrant
Shares”) issued or issuable upon exercise of or otherwise pursuant to the Warrants (without giving effect to any limitations on exercise set forth in the Warrants), (b) any shares of capital stock issued or issuable as a dividend on or in
exchange for or otherwise with respect to any of the foregoing, (c) any other shares of Common Stock issuable pursuant to the terms of the Facility Agreement or this Registration Rights Agreement, and (d) any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. Securities will cease to be Registrable Securities when (A) they have been effectively registered under the 

  

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Securities Act and disposed of in accordance with the registration statement covering them; (B) they are transferred pursuant to Rule 144 or an
exemption from registration under the Securities Act; or (C) they have been otherwise transferred and new certificates for them not bearing a restrictive legend have been issued by the Company and the Company shall not have “stop
transfer” instructions against them. 
 (vii) “Registration Statement(s)” means a registration statement(s) of the Company under the
Securities Act required to be filed hereunder and for purposes of Section 7 hereof, shall include a Shelf Registration Statement provided under Section 4(c) of the Warrants. 
 2. REGISTRATION. 
 a. MANDATORY REGISTRATION. Following the date of issuance of any Warrants pursuant to the
Facility Agreement, the Company shall prepare, and, on or prior to the applicable Filing Deadline (as defined above) file with the SEC a Registration Statement (the “Mandatory Registration Statement”) on Form S-3 (or, if Form S-3 is not
then available, on such form of Registration Statement as is then available to effect a registration of the Registrable Securities, subject to the consent of the Buyer, which consent will not be unreasonably withheld) covering the resale of the
Registrable Securities issued on the applicable Issuance Date (as defined below) which Registration Statement, to the extent allowable under the Securities Act and the rules and regulations promulgated thereunder (including Rule 416), shall state
that such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon exercise of or otherwise pursuant to the Warrants to prevent dilution resulting from stock splits, stock
dividends, or similar transactions. The number of shares of Common Stock initially included in such Registration Statement shall be no less than the aggregate number of Warrant Shares that are then issuable upon exercise of or otherwise pursuant to
the Warrants issued on the Issuance Date (as defined herein), without regard to any limitation on the Buyer’s ability to exercise the Warrants and the Company acknowledges that the number of shares initially included in each Registration
Statement represents a good faith estimate of the maximum number of shares issuable upon exercise of or otherwise pursuant to the Warrants issued on the applicable Issuance Date and shall be amended if not sufficient in the good faith estimate of
the Company. Each Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to (and subject to the approval, which shall not be unreasonably withheld, of) the
Buyer and its counsel prior to its filing or other submission. 
 b. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall determine to file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option, stock
purchase, or other employee benefit plans), the Company shall send to Buyer written notice of such determination and, if within ten (10) days after the effective date of such notice, the Buyer shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable Securities the Buyer requests to be registered (only if such securities are not yet registered), except that if, in connection with any underwritten public offering for the
account of the Company, the managing underwriter(s) thereof shall impose a limitation on the number of Registrable Securities which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other
factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Buyer has
requested inclusion hereunder as the underwriter shall permit; 
 PROVIDED, HOWEVER, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of which are not entitled by contract to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and 
 PROVIDED, FURTHER, HOWEVER, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the contractual right to include such securities in the Registration Statement other than holders of securities entitled to inclusion of their securities in such Registration Statement
by reason of demand registration rights. No right to registration of Registrable Securities under this Section 2(b) shall be construed to limit any registration required under Section 2(a) 

  

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hereof. If an offering in connection with which the Buyer is entitled to registration under this Section 2(b) is an underwritten offering, then the
Buyer shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement and the underwriting agreement in
such offering, on the same terms and conditions as other shares of Common Stock included in such underwritten offering (including, without limitation, execution of an agreement with the managing underwriter or agent limiting the sale or distribution
such Buyer may make of shares of Common Stock or any securities convertible or exchangeable or exercisable for such shares of the Company, except as part of such registration). Notwithstanding anything to the contrary set forth herein, the
registration rights of the Buyer pursuant to this Section 2(b) shall only be available in the event the Company fails to timely file, obtain effectiveness or maintain effectiveness of any Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement. 
 3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations: 
 a. The Company shall prepare promptly, and file with the SEC as soon as
practicable after each date that any Warrants are issued under the Facility Agreement (each an “Issuance Date”) (but no later than the applicable Filing Deadline), a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use reasonable best efforts to cause each such Registration Statement relating to Registrable Securities to become effective as soon as possible after such filing, but in any event shall cause
each such Registration Statement relating to Registrable Securities to become effective no later than the Registration Deadline, and shall keep the Registration Statement current and effective pursuant to Rule 415 at all times until such date as is
the earlier of (i) the date on which all of the Registrable Securities for such Registration Statement have been sold and (ii) the date on which all of the Registrable Securities for such Registration Statement (in the opinion of counsel
to the Buyer) may be immediately sold to the public without registration or restriction (including without limitation as to volume by each holder thereof) under the Securities Act (the “Registration Period”), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements
therein not misleading. 
 b. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to each
Registration Statement and the prospectus used in connection with each Registration Statement as may be necessary to keep each Registration Statement current and effective at all times during the Registration Period, and, during such period, comply
with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by each Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set forth in each Registration Statement. In the event that on any Trading Day (as defined below) (the “Registration Trigger Date”) the number of shares available
under the Registration Statements filed pursuant to this Agreement is insufficient to cover all of the Registrable Securities issued or issuable upon exercise of or otherwise pursuant to the Warrants, the Company shall amend the applicable
Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover the total number of Registrable Securities so issued or issuable (without giving effect to any limitations on
exercise contained in the Warrants or limitations on conversion or exercise) as of the Registration Trigger Date as soon as practicable, but in any event within thirty (30) days after the Registration Trigger Date, or as promptly as practicable
if the Company is required to increase its authorized shares (based on the Exercise Price (as defined in the applicable Warrants) of the Warrants, and other relevant factors on which the Company reasonably elects to rely). The Company shall use its
reasonable best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof, but in any event the Company shall cause such amendment and/or new Registration Statement to
become effective within sixty (60) days of the Registration Trigger Date or as promptly as practicable in the event the Company is required to increase its authorized shares. “Trading Day” shall mean any day on which the Common Sock
is traded for any period on the NASDAQ Global Select Market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. 
 c. The Company shall furnish to the Buyer and its legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of each Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in 

  

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the case of a Registration Statement referred to in Section 2(a), each letter written by or on behalf of the Company to the SEC or the staff of the SEC,
and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment),
and (ii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as the Buyer may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Buyer. The Company will immediately notify the Buyer by facsimile of the effectiveness of each Registration Statement or any post-effective amendment. The Company will promptly respond to any and all comments
received from the SEC, with a view towards causing each Registration Statement or any amendment thereto to be declared effective by the SEC as soon as practicable and shall file an acceleration request as soon as practicable, but no later than three
(3) business days, following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that any such Registration Statement or any amendment thereto will not be subject to review. 
 d. The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by the Registration Statements under such other
securities or “blue sky” laws of such jurisdictions in the United States as the Buyer shall reasonably request, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. 
 e. As promptly as practicable after becoming aware of
such event, the Company shall notify the Buyer of the happening of any event, of which the Company has knowledge, as a result of which the prospectus included in any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use reasonable best efforts promptly to prepare a supplement or amendment to any Registration Statement to
correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to the Buyer as the Buyer may reasonably request. 
 f. The Company shall use reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify the Buyer who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof. 
 g. The Company shall permit a single firm of counsel designated by the Buyer to review such Registration Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof), at Buyer’s own cost, a reasonable period of time prior to their filing with the SEC (but not less than five (5) business days prior to filing) and shall not file any document in a
form to which such counsel reasonably objects and will not request acceleration of such Registration Statement without prior notice to such counsel. 
 h.
The Company shall hold in confidence and not make any disclosure of information concerning the Buyer provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws or rules of any
securities exchange of trading market on which the Company’s securities are then listed or traded, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Buyer is sought in or by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Buyer prior to making such disclosure, and allow the Buyer, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 
  

 4 

 i. The Company shall use reasonable best efforts to cause all the Registrable Securities covered by each Registration
Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, and,
if listed on a national exchange, to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. (“FINRA”) as such with respect to such Registrable Securities. 
 j. The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the
initial Registration Statement. 
 k. The Company shall cooperate with the Buyer who holds Registrable Securities being offered and the managing underwriter
or underwriters with respect to an applicable Registration Statement, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to such
Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Buyer may reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Buyer may request, and, within three (3) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause
legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the Buyer) an appropriate instruction and an opinion of such counsel in the form required by the transfer agent in order to issue
the Registrable Securities free of restrictive legends. 
 l. At the request of the Buyer, the Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration Statement and any prospectus used in connection with the Registration Statement as may be necessary in order to change the plan of distribution set forth in such Registration
Statement. 
 m. The Company shall not, and shall not agree to, allow the holders of any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof without the consent of the Buyer. In addition, the Company shall not offer any securities for its own account or the account
of others in any Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof without the consent of the Buyer. 
 n. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Buyer of Registrable Securities pursuant to a Registration Statement. 
 o. The Company shall use reasonable best efforts to comply with all applicable laws related to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection therewith (including without limitation the Securities Act and the Exchange Act and the rules and regulations promulgated by the SEC). 
 p. FINRA Rule 2710 Filing; Broker Compensation. If required by the Financial Industry Regulatory Authority, Inc. Corporate Financing Department, the Company shall
promptly effect a filing with FINRA pursuant to FINRA Rule 2710 with respect to the public offering contemplated by resales of securities under the Registration Statement (an “Issuer Filing”), and pay the filing fee required by such Issuer
Filing. The Company shall use commercially reasonable efforts to pursue the Issuer Filing until FINRA issues a letter confirming that it does not object to the terms of the offering contemplated by the Registration Statement. 
 q. Notwithstanding anything to the contrary herein, at any time after any Registration Statement has been declared effective by the SEC, the Company may delay or suspend
the effectiveness of any Registration Statement or the use of any prospectus forming a part of the Registration Statement due to the non-disclosure of material, non-public information concerning the Company, the disclosure of which at the time is
not in its best interest of the Company in the good faith opinion of the Company (a “Grace Period”); provided, that the Company shall promptly notify the Buyer in writing of the existence of a Grace Period in conformity with the
provisions of this Section 3(q) and the date on which the Grace Period will begin (such notice, a “Commencement Notice”); and, provided further, that no Grace Period shall exceed forty-five (45) days, and such Grace
Periods shall not exceed an aggregate total of sixty (60) days during any 360-day period. For purposes of determining the length of a Grace Period above, the Grace 

  

 5 

 
Period shall begin on and include the date specified by the Company in the Commencement Notice and shall end on and include the date the Buyer receives
written notice of the termination of the Grace Period by the Company (which notice may be contained in the Commencement Notice). The provisions of Section 3(e) hereof shall not be applicable during any Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by Section 3(e) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. 
 r. Notwithstanding anything to the contrary herein, a delay in the effectiveness of a Registration Statement caused solely by the filing of a request for confidential
treatment shall not be deemed a breach of the Company’s obligations set forth herein and in such event the Registration Deadline shall be deemed extended to the date that is ten (10) Business Days after the date the SEC agrees to
allow confidential treatment pursuant to such request or the date such request is withdrawn by the Company, as applicable. 
 4. OBLIGATIONS OF THE
BUYER. In connection with the registration of the Registrable Securities, the Buyer shall have the following obligations: 
 a. It shall be a condition
precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of the Buyer that the Buyer shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At least five (5) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify the Buyer of the information the Company
requires from each Buyer. The Buyer must provide such information to the Company at least three (3) business days prior to the first anticipated filing date of such Registration Statement if such Buyer elects to have any Registrable Securities
included in the Registration Statement. 
 b. The Buyer, by the Buyer’s acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless the Buyer has notified the Company in writing of the Buyer’s election to exclude all of the Buyer’s
Registrable Securities from such Registration Statement. 
 c. In the event of an underwritten offering pursuant to Section 2(b) in which any
Registrable Securities are to be included, the Buyer agrees to enter into and perform the Buyer’s obligations under an underwriting agreement, in reasonable form, including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities, unless the Buyer has notified the Company in writing
of the Buyer’s election to exclude all of the Buyer’s Registrable Securities from such Registration Statement. 
 d. The Buyer agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e) or 3(f) or the commencement of a Grace Period, the Buyer will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until the Buyer’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the Company, the Buyer shall
deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Buyer’s possession, of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. 
 e. The Buyer agrees that it will not effect any disposition or other transfer of the Registrable Securities that would
constitute a sale within the meaning of the Securities Act other than transactions exempt from the registration requirements of the Securities Act or pursuant to, and as contemplated in, the Registration Statement, and that it will promptly notify
the Company of any material changes in the information set forth in the Registration Statement furnished by or regarding the Buyer or its plan of distribution. 
 5. REGISTRATION FAILURE. In the event of a Registration Failure (as defined in the Warrants), the Buyer shall be entitled to the applicable Failure Payments (as defined in the Warrants) and such other rights as set forth in the
Warrants. 
  

 6 

 6. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualification fees, printers and accounting fees, and the fees and disbursements of counsel for
the Company (but not including fees and disbursements for counsel for the Buyer) shall be borne by the Company. 
 7. INDEMNIFICATION. In the event
any Registrable Securities are included in a Registration Statement under this Agreement: 
 a. The Company will indemnify, hold harmless and defend
(i) the Buyer, (ii) the directors, officers, partners, managers, members, employees, agents and each person who controls any Buyer within the meaning of the Securities Act or the Exchange Act, if any, (iii) any underwriter (as defined
in the Securities Act) for the Buyer in connection with an underwritten offering pursuant to Section 2(b) hereof, and (iv) the directors, officers, partners, employees and each person who controls any such underwriter within the meaning of
the Securities Act or the Exchange Act, if any (each, an “Indemnified Person”), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect thereof, “Claims”) to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not
misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement
contained in this Section 7(a) shall not apply (A)(i) to a Claim arising out of or based upon a Violation to the extent that such Violation occurs in reliance upon and in conformity with information furnished in writing to the Company by any
Indemnified Person for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto, or (ii) to the extent due to the failure of Buyer to timely deliver any amendment or supplement to
the Registration Statement or prospectus (whether preliminary or final), including any corrected prospectus, timely made available by the Company pursuant to Section 3(c); or (B) to any amounts paid in settlement of any Claim effected
without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the Buyer pursuant to Section 10. 
 b. Promptly after receipt by an Indemnified Person
under this Section 7 of notice of the commencement of any action (including any governmental action), such Indemnified Person shall, if a Claim in respect thereof is to be made against the Company under this Section 7, deliver to the
Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and
the Indemnified Person, as the case may be. 
 PROVIDED, HOWEVER, that an Indemnified Person shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the Company, if, in the reasonable opinion of counsel for the Buyer, the representation by such counsel of the Indemnified Person and the Company would be inappropriate due to actual or potential differing
interests between such Indemnified Person and any other party represented by such counsel in such proceeding. In the event of a potential differing interests scenario, the Company shall pay for only one separate legal counsel for the Indemnified
Persons, and such legal counsel shall be selected by Buyer. 
  

 7 

 PROVIDED FURTHER, the failure to deliver written notice to the Company within a reasonable time of the
commencement of any such action shall not relieve the Company of any liability to the Indemnified Person under this Section 7, except to the extent that the Company is actually prejudiced in its ability to defend such action. The
indemnification required by this Section 7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense as such expense, loss, damage or liability is incurred and is due and payable. 
 c. The Buyer will indemnify, hold harmless and defend (i) the Company, and (ii) the directors, officers, partners, managers, members, employees, or agents of
the Company, if any (each, a “Company Indemnified Person”), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, “Indemnity Claims”) to which any of them may become subject insofar as such Indemnity Claims arise out of or are based upon (x) any Violation, which occurs due to the
inclusion by the Company in a Registration Statement of false or misleading information about the Buyer, where such information was furnished in writing to the Company by the Buyer for the purpose of inclusion in such Registration Statement or
(y) any Violation described in Section 7(a) which was corrected pursuant to any subsequent amendment or supplement to the Registration Statement or prospectus (whether preliminary or final) that was timely made available by the Company to
the Buyer pursuant to Section 3(c) before any pertinent sale by the Buyer, such corrected amendment or supplement to the Registration Statement or prospectus was not timely delivered to the applicable purchaser and the timely delivery of such
amendment or supplement would have constituted a complete defense to the claim asserted. Notwithstanding anything herein to the contrary, (a) the indemnity agreement contained in this Section 7(c) shall not apply to amounts paid in
settlement of any Indemnity Claim if such settlement is effected without the prior written consent of the Buyer which consent shall not be unreasonably withheld or delayed; and (b) the Buyer shall be liable under this Section 7(c) for only
that amount of an Indemnity Claim as does not exceed the net amount of proceeds received by the Buyer as a result of the sale of Registrable Securities pursuant to the applicable Registration Statement. This indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of a Company Indemnified Person. 
 d. Promptly after receipt by a Company Indemnified Person
under this Section 7 of notice of the commencement of any action (including any governmental action), such Company Indemnified Person shall, if an Indemnity Claim in respect thereof is to be made against the Buyer under this Section 7,
deliver to the Buyer a written notice of the commencement thereof, and the Buyer shall have the right to participate in, and, to the extent the Buyer so desires, to assume control of the defense thereof with counsel mutually satisfactory to the
Buyer and the Company Indemnified Person, as the case may be. 
 PROVIDED, HOWEVER, that a Company Indemnified Person shall have the right to retain
its own counsel with the reasonable fees and expenses to be paid by the Buyer, if, in the reasonable opinion of counsel for the Company, the representation by such counsel of the Company Indemnified Person and the Buyer would be inappropriate due to
actual or potential differing interests between such Company Indemnified Person and any other party represented by such counsel in such proceeding. In the event of a potential differing interests scenario, the Buyer shall pay for only one separate
legal counsel for the Company Indemnified Persons, and such legal counsel shall be selected by Company. 
 PROVIDED FURTHER, the failure to deliver
written notice to the Buyer within a reasonable time of the commencement of any such action shall not relieve the Buyer of any liability to the Company Indemnified Persons under this Section 7, except to the extent that the Buyer is actually
prejudiced in its ability to defend such action. The indemnification required by this Section 7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense as such expense, loss, damage or
liability is incurred and is due and payable. 
 8. CONTRIBUTION. To the extent any indemnification by the Company or Buyer is prohibited or limited
by law, each of the Company and the Buyer agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 7 to the fullest extent permitted by law, based upon a comparative fault
standard; PROVIDED, HOWEVER, that (i) no Person that is guilty of fraudulent misrepresentation (within the meaning Section 11(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person who
was not guilty of fraudulent misrepresentation; and (ii) contribution by the Buyer shall be limited in amount to the net amount of proceeds received by the Buyer from the sale of the Registrable Securities pursuant to the applicable
Registration Statement. 
  

 8 

 9. REPORTS UNDER THE 1934 ACT. With a view to making available to the Buyer the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Buyer to sell securities of the Company to the public without registration the Company agrees to: 
 a. make and keep public information available, as those terms are understood and defined in Rule 144; 
 b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing
of such reports and other documents is required for the applicable provisions of Rule 144; and 
 c. furnish to the Buyer so long as the Buyer owns
Registrable Securities, promptly upon written request, (i) a written statement by the Company that it has complied with the reporting requirements of the Securities Act and the Exchange Act as required for applicable provisions of Rule 144,
(ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Buyers to sell such
securities pursuant to Rule 144 without registration. 
 10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be automatically
assignable by the Buyer to any transferee of all or any portion of the Registrable Securities if: (i) the Buyer agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred or assigned, and (iii) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence, the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions contained herein. In the event that the Buyer transfers all or any portion of its Registrable Securities pursuant to this Section 10, the Company shall have at least ten
business (10) days to file any amendments or supplements necessary to keep the Registration Statement current and effective pursuant to Rule 415, and the commencement date of any Event of Failure (as defined in the Warrants) or Event of Default
(as defined in the Warrants) under the Warrants caused thereby will be extended by ten business (10) days. 
 11. AMENDMENT OF REGISTRATION
RIGHTS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written
consent of the holders of a majority of the Registrable Securities and the Company. Any amendment or waiver effected in accordance with this Section 11 shall be binding upon the Buyer and the Company. 
 12. MISCELLANEOUS. 
 a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record or beneficially through a “street name” holder such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. 
 b. Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally
or by courier (including a recognized overnight delivery service) or by facsimile and shall be effective five days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each case addressed to a party. The addresses for such communications shall be: 
  

 9 

 If to the Company: 
 Zymogenetics, Inc. 
 1201 Eastlake Avenue East 
 Seattle, WA 98102 

			
	Fax:	  	(206) 442-6608
	Attn:	  	James A. Johnson, Chief Financial Officer

 With copy to: 
 Perkins Coie LLP 
 1201 Third Avenue, Suite 4800 
 Seattle, WA 98101 

			
	Fax:	  	(206) 359-9000
	Attn:	  	James R. Lisbakken

 If to a Buyer: 
 c/o
Deerfield Capital, L.P. 
 780 Third Avenue, 37th Floor 
 New York, New York 10017 

			
	Fax:	  	(212) 599-1248
	Attn:	  	Alexander Karnal

 With a copy to: 
 Katten Muchin Rosenman LLP 
 575 Madison Avenue 
 New
York, New York 10022 

			
	Fax:	  	(212) 940-8776
	Attn:	  	Mark I. Fisher, Esq.
		  	Elliot Press, Esq.

 Each party shall provide notice to the other party of any change in address. 
 c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof. 
 d. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an
action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding. 
  

 10 

 e. This Agreement, the Warrants, the Royalty Agreement (as defined in the Facility Agreement) and the Facility Agreement
(including all schedules and exhibits to such documents) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the Warrants, the Royalty Agreement and the Facility Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof
and thereof. 
 f. Subject to the requirements of Section 10 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. 
 g. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. 
 h. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. 
 i. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 
 j. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for breach of its obligations hereunder will be inadequate and agrees, in the event of a breach or threatened breach by the Company of any of the
provisions hereunder, that the Buyer shall be entitled, in addition to all other available remedies in law or in equity, to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required. 
 k. The language used in
this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 
 l. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 m. In the event a Buyer shall sell or otherwise transfer any of such holder’s Registrable Securities, each transferee shall be allocated a pro rata
portion of the number of Registrable Securities included in a Registration Statement for such transferor. 
 n. There shall be no oral modifications or
amendments to this Agreement. This Agreement may be modified or amended only in writing. 
 [Remainder of page left intentionally blank]

 [Signature page follows] 
  

 11 

 IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the 26th
day of June, 2008. 
  

									
	COMPANY:	 		 	BUYER:
	ZYMOGENETICS, INC.	 		 	DEERFIELD PRIVATE DESIGN FUND, L.P.
					
	By:	 	 /s/ James A. Johnson
	 		 	By:	 	 /s/ James E. Flynn

	Name:	 	James A. Johnson	 		 	Name:	 	James E. Flynn
	Title:	 	Executive Vice President & Chief Financial Officer	 		 	Title:	 	General Partner
				
		 		 		 	DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.
					
		 		 		 	By:	 	 /s/ James E. Flynn

		 		 		 	Name:	 	James E. Flynn
		 		 		 	Title:	 	General Partner

  

 12

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