RELEASE AND LICENSE AGREEMENT

“[    *    ]” = omitted, confidential material, which material has been separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.

RELEASE AND LICENSE AGREEMENT

THIS RELEASE AND LICENSE AGREEMENT (the “ Agreement ”) is made and entered into as of October 22, 2008 (the “ Effective Date ”) by and between ZymoGenetics, Inc. having offices at 1201 Eastlake Avenue East, Seattle, WA 98102-3702 (“ ZymoGenetics ”), and Bristol-Myers Squibb Company , a Delaware corporation having offices at Route 206 & Province Line Road, Princeton, NJ 08543 (“ BMS ”).

RECITALS

WHEREAS, BMS has commercialized the drug product ORENCIA ^® (abatacept) for therapeutic use in humans;

WHEREAS, ZymoGenetics owns and controls certain patent rights relating to fusion proteins, including U.S. Patent Nos. 6,018,026 and 5,843,725;

WHEREAS, ZymoGenetics filed the Pending Action against BMS in the United States District Court for the District of Delaware, Case No. 06-500-SLR, alleging claims relating to infringement of U.S. Patent Nos. 6,018,026 and 5,843,725;

WHEREAS, BMS denied infringing U.S. Patent Nos. 6,018,026 and 5,843,725, and alleged U.S. Patent Nos. 6,018,026 and 5,843,725 were invalid; and

WHEREAS, ZymoGenetics and BMS desire to enter into this Agreement as an amicable and final business resolution to the Pending Action.

NOW, THEREFORE, in consideration of the promises and the mutual covenants recited herein, the Parties agree as follows.

ARTICLE 1

DEFINITIONS

The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the meaning set forth below or, if not listed below, the meaning designated in places throughout this Agreement.

1.1 “ Abatacept ” means the fusion protein known as abatacept, and any pharmaceutical product containing such protein, including the pharmaceutical product containing abatacept, which is a fusion protein that consists of [    *    ] , being sold by BMS under the trademark ORENCIA ^® .

1.2 “ Affiliate ” means any Person that (directly or indirectly) through one or more intermediaries, controls, is controlled by, or is under common control with the Party specified. For the purposes of this definition, “control” shall mean the possession, direct or indirect, of the power to cause the direction of the management and policies of a Person, whether through ownership of fifty percent (50%) or more of the voting securities of such Person, by contract or otherwise.

1.3 “ Belatacept ” means the fusion protein known as belatacept (also known as BMS-224818 and LEA29Y), which is a fusion protein that consists of [    *    ] , and any pharmaceutical product containing such protein.

1.4 “ BMS Released Parties ” and “ BMS Releasor ” means BMS’ agents, servants, attorneys, employees, officers, directors, Affiliates, predecessors, successors, assigns, licensors, transferees (including but not limited to Sublicensees), representatives and all persons and entities acting by, through, under, or in concert with them or any of them.

1.5 “ Business Day ” means a day other than Saturday, Sunday or any day on which commercial banks located in New York, New York are authorized or obligated by applicable laws to close.

1.6 “ Controlled ” means, with respect to any patent, patent application or other intellectual property rights, possession by ZymoGenetics or any of its Affiliates of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to grant the license, sublicense, release or covenant not to sue (as applicable) to BMS as provided for in this Agreement without violating the terms of any agreement in effect as of the Effective Date with any Third Party.

1.7 “ Designee ” means BMS collaborators or Sublicensees.

1.8 “ Dollar ” or “ $ ” means the lawful currency of the United States.

1.9 “ Effective Date ” shall have the meaning set forth in the preamble of this Agreement.

1.10 “ Field ” means the diagnosis, treatment, control or prevention of any human disease, disorder or condition.

1.11 “ Licensed Patents ” means (a) U.S. Patent Nos. 6,018,026 and 5,843,725; (b) any foreign counterpart of U.S. Patent Nos. 6,018,026 and/or 5,843,725; (c) any patent issuing anywhere in the world from any application (including, but not limited to, divisionals, continuations, continuations-in-part and renewals) claiming priority (directly or indirectly) to U.S. Patent Nos. 6,018,026 or 5,843,725, or any patent or application from which U.S. Patent Nos. 6,018,026 or 5,843,725 claims priority; (d) any patents anywhere in the world that are registrations, reissues, renewals, reexaminations, confirmations, supplementary protection certificates or extensions of any of clauses (a), (b) or (c); and (e) any progeny of the foregoing.

1.12 “ Licensed Product ” means any pharmaceutical product or compound or biologic, including but not limited to Abatacept and Belatacept.

1.13 “ Patents ” means, to the extent Controlled by ZymoGenetics or any of its Affiliates, any (a) patents and patent applications in any country or jurisdiction Controlled by ZymoGenetics or any of its Affiliates as of the Effective Date; (b) any patent issuing anywhere in the world from any application (including, but not limited to, divisionals, continuations, continuations-in-part and renewals) claiming priority (indirectly or directly) to any of the foregoing or claiming priority (indirectly or directly) to a patent or patent application from which any of the foregoing claims priority; (c) any patents anywhere in the world that are registrations, reissues, renewals, reexaminations, confirmations, supplementary protection certificates or extensions of any of clauses (a) or (b); and (d) any application for any of the foregoing.

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1.14 “ Party ” means either ZymoGenetics or BMS. “ Parties ” means collectively ZymoGenetics and BMS.

1.15 “ Pending Action ” means the action pending as of the Effective Date between the Parties in the United States District Court for the District of Delaware, Case No. 06-500-SLR (including Case No. 06-500-SLR-MPT), relating to U.S. Patent Nos. 6,018,026 and 5,843,725.

1.16 “ Person ” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture company, governmental authority, association or other entity.

1.17 “ Released IP ” means (i) the Patents and (ii) any other intellectual property rights Controlled by ZymoGenetics as of the Effective Date.

1.18 “ Sublicensee ” means any Third Party which is licensed by BMS or any of its Affiliates to make, have made, use, sell, have sold, offer for sale, import and/or export Abatacept or Belatacept.

1.19 “ Territory ” means the entire world.

1.20 “ Third Party ” means any Person other than ZymoGenetics and its Affiliates and BMS and its Affiliates.

1.21 “ ZymoGenetics Releasors ” and “ ZymoGenetics Released Parties ” means ZymoGenetics’ agents, servants, attorneys, employees, officers, directors, Affiliates, predecessors, successors, assigns, licensors, transferees, representatives and all persons and entities acting by, through, under, or in concert with them or any of them.

ARTICLE 2

LICENSE GRANT AND RELEASE

2.1 License . In consideration of and subject to the terms and conditions of this Agreement, ZymoGenetics hereby grants to BMS a fully paid-up, royalty-free, perpetual, nonexclusive, worldwide license, with the right to grant sublicenses to its Affiliates and Designees, under the Licensed Patents to make, have made, use, sell, have sold, offer for sale, import and/or export Licensed Product in the Territory in the Field.

2.2 No Other License . Other than the license granted in Section 2.1, no other license to any other intellectual property of ZymoGenetics is granted herein. For clarity, this Section 2.2 shall not limit Section 2.3.

2.3 Release and Non-Assertion .

(a) In consideration of and subject to the terms and conditions of this Agreement, ZymoGenetics and ZymoGenetics Releasors hereby forever release BMS and the BMS Released Parties, from any and all claims, demands and rights of action that ZymoGenetics and ZymoGenetics Releasors may have, now or in the future, on account of any direct or indirect infringement of the Licensed Patents. In consideration of and subject to the terms and conditions of this Agreement, ZymoGenetics and ZymoGenetics Releasors hereby forever release BMS and the BMS Released Parties, from any and all intellectual property claims, demands and rights of action that ZymoGenetics and ZymoGenetics

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Releasors may have, now or in the future, based on the Released IP, with respect to Abatacept and/or Belatacept, including but not limited to any and all claims, demands and rights of action that ZymoGenetics and ZymoGenetics Releasors may have, now or in the future, on account of any direct or indirect infringement of any Released IP as a result of the manufacture, use, offer for sale, sale, importation and/or exportation of Abatacept and/or Belatacept.

(b) ZymoGenetics and ZymoGenetics Releasors covenant, subject to the terms and conditions of this Agreement, not to either directly or indirectly make, file or maintain any claim, demand, lawsuit, action or cause of action, of whatever kind or character, now or in the future, in law or in equity against BMS or any BMS Released Parties, jointly or severally, which claim, demand, lawsuit, action or cause of action asserts direct or indirect infringement of the Licensed Patents. ZymoGenetics and ZymoGenetics Releasors covenant, subject to the terms and conditions of this Agreement, not to either directly or indirectly make, file or maintain any intellectual property claim, demand, lawsuit, action or cause of action, of whatever kind or character, now or in the future, in law or in equity, based on the Released IP, with respect to Abatacept and/or Belatacept against BMS or any BMS Released Parties, jointly or severally, including but not limited to any claim, demand, lawsuit, action or cause of action that asserts direct or indirect infringement of any Released IP by the manufacture, use, offer for sale, sale, importation and/or exportation of Abatacept and/or Belatacept.

(c) ZymoGenetics and ZymoGenetics Releasors hereby forever release BMS and the BMS Released Parties from any and all claims asserted in the Pending Action, and any and all claims that could have been asserted in the Pending Action and that are reasonably related to the issues to be decided in the Pending Action.

2.4 Release by BMS . BMS and the BMS Releasors hereby forever release ZymoGenetics and the ZymoGenetics Released Parties from any and all claims asserted in the Pending Action, and any and all claims that could have been asserted in the Pending Action and that are reasonably related to the issues to be decided in the Pending Action.

2.5 Covenant by BMS . BMS and the BMS Releasors covenant, subject to the terms and conditions of this Agreement, not to either directly or indirectly make, file or maintain any claim, demand, lawsuit, action or cause of action, of whatever kind or character, now or in the future, in law or in equity challenging the validity or patentability or scope of the Licensed Patents.

2.6 No Further Obligations . ZymoGenetics is under no obligation to file, prosecute, defend or maintain the Licensed Patents or the Released IP or to bring or prosecute actions or suits against any Third Party for infringement of any of the Licensed Patents or the Released IP.

2.7 Stipulation Of Dismissal . ZymoGenetics and BMS shall, within five (5) Business Days of ZymoGenetics’ receipt of payment pursuant to Article 3, cause their respective counsel to execute and file in the Pending Action a stipulation of dismissal of all claims and counterclaims with prejudice, pursuant to Rule 41(a), Fed. R. Civ. P., in the form attached hereto as Exhibit A . Each Party shall bear its own costs and fees associated with the Pending Action and no request, motion, petition or otherwise for such fees and/or costs shall be made to the court.

ARTICLE 3

PAYMENTS

3.1 Payments . Within fifteen (15) calendar days after the Effective Date, BMS shall pay to ZymoGenetics a payment in the amount of twenty-one million Dollars ($21,000,000) in accordance

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with Section 3.2. No other payments shall be payable by BMS to ZymoGenetics under this Agreement in consideration for the licenses, releases and rights granted by ZymoGenetics to BMS under this Agreement.

3.2 Wire Transfer . Payment under this Agreement shall be in Dollars, and unless notified by ZymoGenetics in writing before payment is due, shall be made by wire transfer pursuant to Section 3.1 to:

Bank of America

Acct: [    *    ]

ABA: [    *    ]

ARTICLE 4

REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS

4.1 Mutual Representations and Warranties . Each Party represents and warrants to the other Party that: (i) it has all requisite corporate power and authority to enter into this Agreement and to perform its obligations under this Agreement; (ii) execution of this Agreement and the performance by such Party of its obligations hereunder have been duly authorized; (iii) this Agreement is legally binding and enforceable on each Party in accordance with its terms; and (iv) the performance of this Agreement by it does not create a breach or default under or conflict with any other agreement or obligation to which it is a party, or violate any applicable law, order, rule or regulation.

4.2 Representations and Warranties of ZymoGenetics . ZymoGenetics represents and warrants to BMS that:

(a) ZymoGenetics has the full right, power, and corporate authority to enter into this Agreement and to make the covenants and grant the licenses, releases and rights set forth in this Agreement, and that this Agreement is enforceable against it in accordance with its terms; and

(b) ZymoGenetics is owner of all right, title and interest in and to the Licensed Patents and has the full legal right, power and ability to grant the licenses, releases and rights with respect to the Licensed Patents to BMS as set forth in this Agreement; and

(c) ZymoGenetics is not as of the Effective Date and will not thereafter become a party to any agreement or other binding commitment or obligation of any kind, the terms of which (i) conflict with the covenants and obligations of ZymoGenetics (including the grant to BMS of the licenses, releases and rights under Article 2) under this Agreement or (ii) diminish limit or impair the ability of ZymoGenetics to perform its covenants and obligations (including the grant to BMS of the licenses, releases and right