Research Collaboration And License Agreement

EXHIBIT NO. 10.5


CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.


RESEARCH COLLABORATION AND LICENSE AGREEMENT


between


MERCK FROSST CANADA & CO.,


And


NITROMED, INC.


RESEARCH COLLABORATION AND LICENSE AGREEMENT


THIS AGREEMENT effective as of the date of last signature (the "Effective Date") between MERCK FROSST CANADA & CO., a corporate entity existing pursuant to the laws of Nova Scotia ("MERCK") a wholly-owned subsidiary of Merck & Co., Inc., a corporation organized and existing under the laws of New Jersey and NITROMED, INC., a corporation organized and existing under the laws of Delaware ("NITROMED").


WITNESSETH:


WHEREAS, NITROMED has developed NITROMED Know-How (as hereinafter defined) and has rights to Patent Rights (as hereinafter defined);


WHEREAS, MERCK and NITROMED desire to enter into a research collaboration to develop Licensed Products (as hereinafter defined) upon the terms and conditions set forth herein;


WHEREAS, MERCK desires to obtain a license under the Patent Rights and NITROMED Know-How, upon the terms and conditions set forth herein and NITROMED desires to grant such a license;


NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the parties hereby agree as follows:


ARTICLE I
DEFINITIONS


Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:


1.1 The term "Affiliate" shall mean (i) any corporation or business entity
of which fifty percent (50%) or more of the securities or other
ownership interests representing the equity, the voting stock or
general partnership interest are owned, controlled or held, directly or
indirectly, by MERCK or NITROMED; or (ii) any corporation or business
entity which, directly or indirectly, owns, controls or holds fifty
percent (50%) (or the maximum ownership interest permitted by law) or
more of the securities or other ownership interests representing the
equity, the voting stock or, if applicable, the general partnership
interest, of MERCK or NITROMED.


1.2 The term "Calendar Quarter" shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30, September
30 and December 31.


1.3 The term "Calendar Year" shall mean each successive period of twelve
(12) months commencing on January 1 and ending on December 31.


1.4 The term "Change of Control" shall mean the occurrence of any of the
following:


1


(a) An acquisition of any voting securities of NITROMED (the
"Voting Securities") by any "Person" (as the term "person" is
used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than fifty percent (50%) of the combined
voting power of NITROMED's then-outstanding Voting Securities;
or


(b) The consummation of:


(i) A merger, consolidation or reorganization (1) with or
into NITROMED or a direct or indirect subsidiary of
NITROMED or (2) in which securities of NITROMED are
issued (a "Merger"), unless such Merger is a
"Non-Control Transaction." A "Non-Control
Transaction" shall mean a Merger in which the
stockholders of NITROMED immediately before such
Merger own directly or indirectly immediately
following such Merger at least fifty percent (50%) of
the combined voting power of the outstanding voting
securities of (x) the surviving corporation, if there
is no parent corporation or (y) if there is one or
more than one parent corporation, the ultimate parent
corporation;


(ii) A complete liquidation or dissolution of NITROMED; or


(iii) The sale or other disposition of all or substantially
all of the assets of NITROMED and its Affiliates
taken as a whole to any Person.


Notwithstanding the foregoing, for purposes of subsection (a), (b)(i)
and (iii) above, a Change of Control shall be deemed to exist only if
the acquiror (together with any of its affiliates), in its most
recently completed fiscal year, had total sales of pharmaceutical
products in excess of [**] dollars ($[**]).


1.5 The term "Combination Product" shall mean a Licensed Product that
includes [**].


1.6 The term "Commercially Reasonable Efforts" shall mean with respect to
the efforts to be expended by a Party with respect to any objective,
reasonable, diligent, good faith efforts to accomplish such objective
as such Party would normally use to accomplish a similar objective
under similar circumstances, it being understood and agreed that with
respect to the research, development or commercialization of any
NO-Enhanced COX-2 Compound or Licensed Product, such efforts shall be
substantially equivalent to those efforts and resources commonly used
by a Party for a product owned by it or to which it has rights, which
product is at a similar stage in its development or product life and is
of similar market potential taking into account efficacy, safety,
approved labeling, the competitiveness of alternative products in the
marketplace, the patent and other proprietary position of the product,
the likelihood of regulatory approval given the regulatory structure
involved, the profitability of the product including the royalties
payable to licensors of patent or other intellectual property rights,
alternative products and other relevant factors. Commercially
Reasonable Efforts shall be determined on a


2


market-by-market and indication-by-indication basis for a particular
product, and it is anticipated that the level of effort will change
over time, reflecting changes in the status of the Licensed Product and
the market(s) involved.


1.7 The term "Committee" shall mean the joint research and development
committee described in Section 2.4.1.


1.8 The term "Competitive Product" shall mean product(s) containing the
same active ingredient(s) as the Licensed Product would be considered
substitutable for Licensed Product and [**] as measured by
prescriptions or other similar information in the country of sale.


1.9 The term "Control" shall mean with respect to any (a) item of
information, including, without limitation, NITROMED Know-How, or (b)
intellectual property right, the possession (whether by ownership in
whole or in part or license, other than pursuant to this Agreement) by
a Party of the ability to grant to the other Party access and/or a
license as provided herein under such item or right without violating
the terms of any agreement or other arrangements with any Third Party.


1.10 The term "COX-2 Compound" shall mean any compound that [**] as measured
in the human whole blood assays as described in Brideau et al., Inflamm
Res 45:68-74 (1996).


1.11 The term "Development Work" shall mean preclinical and clinical drug
development activities, including test method development and stability
testing, toxicology, formulation, quality assurance/quality control
development, statistical analysis, clinical studies and regulatory
affairs, product approval and registration.


1.12 The term "Field" shall mean [**].


1.13 The term "First Commercial Sale" shall mean, with respect to any
Licensed Product, the first sale for end use or consumption of such
Licensed Product in a country after all required approvals, excluding
pricing approvals, have been granted by the governing health authority
of such country.


1.14 The term "Full Time Equivalent" or "FTE" shall mean the equivalent of a
full-time scientist's work time over a twelve-month period (including
normal vacations, sick days and holidays). The portion of an FTE year
devoted by a scientist to the Research Program shall be determined by
dividing the number of days during any twelve (12) month period devoted
by such employee to the Research Program by the total number of working
days during such twelve-month period.


1.15 The term "FTE Rate" shall mean [**] dollars ($[**]) per FTE. The FTE
Rate shall include all personnel, equipment, reagents and all other
expenses including support staff and overhead for or associated with an
FTE.


1.16 The term "Improvement" shall mean any enhancement in the manufacture,
formulation, ingredients, preparation, presentation, means of delivery,
dosage or packaging of the Licensed Product.


3


1.17 The term "Indication" shall mean the use in the treatment and/or
prevention of diseases, conditions or disorders involving each of [**].


1.18 The term "Joint Information and Inventions" shall have the meaning set
forth in Section 2.7.


1.19 The term "Licensed Product(s)" shall mean preparations in final form,
either as a fixed combination or intended for concomitant
administration, for sale by prescription, over-the-counter or any other
method for all uses in the Field, which contain a NO-Enhanced COX-2
Compound including, without limitation, any Combination Product.


1.20 The term "Major European Market" shall mean any one of the following
countries: the United Kingdom, France, Germany, Italy or Spain.


1.21 The term "Major Market" shall mean any one of the following countries:
United States, Japan, the United Kingdom, France, Germany, Italy or
Spain.


1.22 The term "Marketing Approval" shall mean any and all approvals
(including price and reimbursement approvals), licenses, registrations,
or authorizations of the European Union or any country, federal, state
or local regulatory agency, department, bureau or other government
entity that is necessary for the manufacture, use, storage, import,
transport and/or sale of a Licensed Product for human use in such
jurisdiction and following which the Licensed Product may be legally
sold in such jurisdiction.


1.23 The term "MERCK Information and Inventions" shall have the meaning set
forth in Section 2.7.


1.24 The term "MERCK Know-How" shall mean all secret, substantial and
identified information and materials, including but not limited to,
discoveries, Improvements, processes, formulas, data, inventions,
know-how and trade secrets, patentable or otherwise, which, during the
Research Program Term, are (i) Controlled by MERCK, (ii) are not
generally known, and (iii) in MERCK's reasonable opinion are required
by NITROMED in the performance of its obligations under the Research
Program.


1.25 The term "NDA" shall mean a New Drug Application and all amendments and
supplements thereto filed with the FDA (as more fully defined in 21 CFR
314.5 et seq.), or the equivalent application filed with any equivalent
agency or governmental authority outside the United States (including
any supra-national agency such as in the European Union) requiring such
filing, including all documents, data, and other information concerning
a pharmaceutical product which are necessary for gaining regulatory
approval to market and sell such pharmaceutical product.


1.26 The term "Net Sales" shall mean the gross invoice price of Licensed
Product sold by MERCK, its affiliates or sublicensees (which term does
not include distributors which are not Affiliates of MERCK, its
Affiliates or sublicensees) to a Third Party after deducting, if not
previously deducted, in the amount invoiced or received:


(a) trade and quantity discounts;


4


(b) returns, rebates and allowances;


(c) chargebacks and other amounts paid on sale or dispensing of
Licensed Product;


(d) retroactive price reductions that are actually allowed or
granted;


(e) a fixed amount equal to three percent (3%) of the amount
invoiced to cover bad debt, sales or excise taxes, early
payment cash discounts, and additional special transportation,
custom duties, and other governmental charges; and


(f) the standard inventory cost of devices or delivery systems
used for dispensing or administering Licensed Product which
accompany Licensed Product as it is sold.


In the case of any sale of the Licensed Product(s) for consideration
other than cash, such as barter or countertrade, Net Sales shall be
calculated on the fair market value of the consideration received. In
the event the Licensed Product is sold as part of a Combination
Product, the Net Sales from the Combination Product, for the purposes
of determining royalty payments, shall be determined by multiplying the
Net Sales of the Combination Product during the applicable royalty
reporting period, by the fraction, A/A+B, where A is the average sale
price of the Licensed Product when sold separately in finished form and
B is the average sale price of the other product(s) included in the
Combination Product when sold separately in finished form, in each case
during the applicable royalty reporting period or, if sales of both the
Licensed Product and the other product(s) did not occur in such period,
then in the most recent royalty reporting period in which sales of both
occurred. In the event that such average sale price cannot be
determined for both the Licensed Product and all other products(s)
included in the Combination Product, Net Sales for the purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of the Combination Product by the fraction of C/C+D where C is
the fair market value of the Licensed Product and D is the fair market
value of all other pharmaceutical product(s) included in the
Combination Product. In such event, MERCK shall in good faith make a
determination of the respective fair market values of the Licensed
Product and all other pharmaceutical products included in the
Combination Product, and shall notify NITROMED of such determination
and provide NITROMED with data to support such determination. NITROMED
shall have the right to review such determination and supporting data,
and to notify MERCK if it disagrees with such determination. If
NITROMED does not agree with such determination and if the Parties are
unable to agree in good faith as to such respective fair market values,
then such matter shall be resolved in accordance with Section 9.6.


1.27 The term "NITROMED Indemnified Parties" shall have the meaning set
forth in Section 6.4.


1.28 The term "NITROMED Information and Inventions" shall have the meaning
set forth in Section 2.7.


1.29 The term "NITROMED Know-How" shall mean all secret, substantial and
identified information and materials, including but not limited to,
discoveries, Improvements, processes, formulas, data, inventions,
know-how and trade secrets, patentable or


5


otherwise, which during the Research Program Term (i) are Controlled by
NITROMED , (ii) are not generally known and (iii) are reasonably
necessary or useful to MERCK in connection with the Research Program
within the Field or the research, development, manufacture, marketing,
use of sale of Licensed Products in the Territory.


1.30 The term "NO" shall mean nitric oxide.


1.31 The term "NO-Enhanced COX-2 Compound" shall mean [**].


1.32 The term "NO-COX-2 Compound" shall mean [**].


1.33 The term "NO-donor" shall mean [**].


1.34 The term "Other Indication" shall mean the use in the treatment and/or
prevention of diseases, conditions or disorders other than the
categories (i), (ii) and (iii) in Section 1.17 or those specifically
set out therein.


1.35 The term "Party" shall mean MERCK or NITROMED; "Parties" shall mean
MERCK OR NITROMED. As used in this Agreement, references to Third
Parties do not include a Party or its Affiliates.


1.36 The term "Patent Rights" shall mean any and all patents and patent
applications in the Territory (which for the purposes of this Agreement
shall be deemed to include certificates of invention and applications
for certificates of invention) which during the Research Program Term
and for one (1) year thereafter are Controlled by NITROMED, including,
but not limited to, those listed on Attachment 1.36, which: (i) claim,
cover or relate to NO-Enhanced COX-2 Compounds or Licensed Products; or
(ii) are divisions, continuations, continuations-in-part, reissues,
renewals, extensions, supplementary protection certificates, utility,
models and the like of any such patents and patent applications and
foreign equivalents thereof.


1.37 The term "Phase I Studies" shall mean a human clinical trial in any
country that is intended to initially evaluate the safety and/or
pharmacological effect of a NO-Enhanced COX-2 Compound or Licensed
Product in subjects or that would otherwise satisfy requirements of 21
CFR 312.21(a), or its foreign equivalent.


1.38 The term "Phase III Studies" shall mean a pivotal human clinical trial
in any country the results of which could be used to establish safety
and efficacy of a NO-Enhanced COX-2 Compound or Licensed Product as a
basis for a NDA or that would otherwise satisfy requirements of 21 CFR
312.21(c), or its foreign equivalent.


1.39 The term "Project Leader" shall have the meaning set forth in Section
2.4.3.


1.40 The term "Proprietary Information" shall mean all MERCK Know-How,
NITROMED Know-How, and all other scientific, clinical, regulatory,
marketing, financial and commercial information or data, whether
communicated in writing or oral or by sensory detection, which is
provided by one Party to the other Party in connection with this
Agreement.


6


1.41 The term "Research Information and Inventions" shall mean NITROMED
Information and Inventions, MERCK Information and Inventions and Joint
Information and Inventions.


1.42 The term "Research Plan" shall have the meaning set forth in Section
2.1.


1.43 The term "Research Program" means the collaborative research effort
between the Parties hereto to develop NO-Enhanced COX-2 Compounds and
Licensed Products as set forth in Article II and Attachment 2.1.


1.44 The term "Research Program Term" shall have the meaning set forth in
Section 2.8.


1.45 The term "Royalty Period" shall have the meaning set forth in Section
5.4.1.


1.46 The term "Safety Assessment Candidate" or "SAC" shall mean a
NO-Enhanced COX-2 Compound for human use with a scientific data package
that at MERCK's sole discretion is evaluated and approved by the Merck
Safety Assessment Review Committee or its successor as a development
candidate for safety testing prior to initiation of clinical trials.


1.47 The term "Status Notice" shall mean a notice provided by NITROMED to
MERCK that (a) requests that [**] MERCK with respect to a specific
[**]; (b) requests that [**] Merck with respect to [**] with respect to
a specified Indication or (c) requests that [**] MERCK with respect to
[**] that is not being pursued by MERCK (or on its behalf) and for
which NITROMED has [**] for conducting such research. For purpose of
this Section 1.47 a [**] must be based on data existing at the time any
such notice is provided.


1.48 The term "Territory" shall mean all of the countries in the world.


1.49 The term "Third Party(ies)" shall mean any person(s) or entity(ies)
other than MERCK, NITROMED or their respective Affiliates.


1.50 The term "Valid Patent Claim" means a claim of (a) any patent
application within the Territory included within Patent Rights and/or
Research Information and Inventions that has been pending less than six
(6) years from the earliest date on which such patent application
claims priority and such patent claim has not have been cancelled,
withdrawn or abandoned , or (b) an issued and unexpired patent included
within the Patent Rights and/or Research Information and Inventions,
which has not been revoked or held unenforceable or invalid by a
decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed with the time allowed for
appeal, and which has not been disclaimed, denied or admitted to be
invalid or unenforceable through reissue or disclaimer or otherwise.


7


ARTICLE II
RESEARCH PROGRAM


2.1 GENERAL. NITROMED and MERCK shall engage in the Research Program upon
the terms and conditions set forth in this Agreement. The activities to
be undertaken in the course of Research Program are set forth in the
"Research Plan" (Attachment 2.1) which may be amended from time to time
upon the mutual written agreement of the Parties.


2.2 NITROMED SPECIFIC RESPONSIBILITIES. Under the direction of the
Committee, NITROMED shall make available scientific and managerial
personnel with sufficient expertise and experience necessary to
undertake NITROMED's responsibilities, as set forth in the Research
Plan and in the following sentence. In particular, NITROMED shall
devote to the Research Program [**] FTEs for the [**] year of the
Research Program Term and [**] FTEs for the [**] year and [**] FTEs for
the [**] year of the Research Program Term, all of which shall be
funded by MERCK according to Section 5.1 hereof. It is understood that
the Parties through mutual agreement may increase the numbers of FTEs
devoted to the Research Program in the second and third years.


2.3 MERCK SPECIFIC RESPONSIBILITIES. MERCK shall be responsible for
performing all Development Work necessary to obtain Marketing Approvals
for Licensed Products in certain countries in the Territory pursuant to
MERCK's obligation under Section 3.4. NITROMED acknowledges and agrees
that MERCK may use its Affiliates or Third Parties to perform certain
of its obligations under this Agreement from time to time. MERCK shall,
during the Research Program Term, keep NITROMED advised of its
activities under this Section 2.3 through MERCK's Committee
representatives during each quarterly meeting, pursuant to Section
2.4.2.


2.4 COMMITTEE. The Parties hereby establish a Committee to facilitate the
Research Program as follows:


2.4.1 COMPOSITION OF THE COMMITTEE. The Research Program shall be conducted
under the direction of a joint research committee (the "Committee")
comprised of three (3) named representatives of MERCK and three (3)
named representatives of NITROMED. Each Party shall appoint its
respective representatives to the Committee from time to time, and may
substitute one or more of its representatives, in its sole discretion,
effective upon notice to the other Party of such change. These
representatives shall have appropriate technical credentials,
experience and knowledge, and ongoing familiarity with the Research
Program. Additional representatives or consultants may from time to
time, by mutual consent of the Parties, be invited to attend Committee
meetings, subject to compliance with Section 4.1. The Committee shall
be chaired by a representative of MERCK. Decisions of the Committee
shall be made by a majority of the members. In the event that the
Committee cannot or does not, after good faith efforts, reach agreement
on an issue within thirty (30) days after the issue is first referred
to it, such issue shall be referred for resolution to the Chief
Executive Officer (or a senior executive officer designated by such
CEO) of each Party. In the event such officers, after good faith
efforts, cannot come to a resolution, the resolution and/or course of
conduct shall be [**];


8


provided, however, any such resolution and/or course of conduct shall ...