<PAGE>   1

                                                                    EXHIBIT 10.5

                                                 LICENSE AGREEMENT


         THIS LICENSE AGREEMENT, effective this 31st day of December, 1997 (the
"Effective Date") is entered into by and between Nestec Ltd., a Swiss
corporation having offices at Avenue Nestle 55, 1800 Vevey, Switzerland
("NESTLE") and Transcend Therapeutics Inc., a Delaware corporation ("TTI").

         WHEREAS, Clintec Nutrition Company, an Illinois general partnership
("CLINTEC") was formed by Nestle Clinical Nutrition Inc. (formerly Clinical
Nutrition Holdings, Inc.), a Delaware Corporation ("Nestle Nutrition") and
Clintec International, Inc., a Delaware Corporation ("BAXTER") for the purpose
of combining the clinical nutrition business of NESTLE and BAXTER and their
respective Affiliates;

         WHEREAS, on April 5, 1994 (the "Original Effective Date"), CLINTEC and
TTI (then known as Free Radical Sciences, Inc.) entered into a Contribution
Agreement (the "Contribution Agreement") pursuant to which, among other things,
CLINTEC contributed to TTI various patents, patent applications and other
technology;

         WHEREAS, concurrently with the execution of the Contribution Agreement,
TTI and CLINTEC entered into a License Agreement, effective as of April 5, 1994,
(the "Original License Agreement") pursuant to which, among other things, TTI
granted to CLINTEC a license to use the patents, patent applications and other
technology transferred to TTI pursuant to the Contribution Agreement in the
fields of Clinical Nutrition and Nutrition (as herein defined);

         WHEREAS, Nestle Nutrition and BAXTER have agreed to dissolve CLINTEC
and wind down its affairs in an orderly manner; and

         WHEREAS, in connection with the dissolution of CLINTEC, the parties
desire (i) to terminate the Contribution Agreement and the Original License
Agreement, (ii) to establish separate licensing arrangements with TTI with
respect to the patents, patent applications and other technology covered by the
Original License Agreement and (iii) to make certain other obligations of the
parties under the Original License Agreement and Contribution Agreement direct
obligations of NESTLE or BAXTER to TTI, on the one hand, or of TTI to NESTLE or
BAXTER, on the other hand, in each case, on the terms set forth herein and in a
license agreement to be executed concurrently herewith between TTI and BAXTER or
an Affiliate of BAXTER (the "BAXTER License Agreement").

         NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth below, the parties hereby agree as follows:




<PAGE>   2


1.      DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:

        "Affiliate" shall mean, when used with reference to a specified party,
any party that directly or indirectly through one or more intermediaries
controls or is controlled or is under common control with the specified party.
For purpose of this definition, controls" "is controlled by" and "under common
control with" means the ability to direct the vote of in excess of 50% of the
voting securities of such party.

        "AIDS Drugs" shall have the meaning provided in SECTION 3.2.

        "BAXTER License Agreement" shall have the meaning provided in the
recitals.

        "Clinical Nutrition" shall mean the feeding under professional
supervision of patients requiring special food administration techniques and
devices or nutrients in relation to their medical condition and (for purposes of
this Agreement) shall be deemed to exclude the administration of any product in
which the Compounds (as defined below) (i) exceed 10% by dry weight of the total
content of the amino acids, amino acid precursors and amino acid substrates, or
(ii) exceed 1% by weight volume of the product administered in liquid form to
patients, unless TTI otherwise consents (which consent shall not be unreasonably
withheld). Clinical Nutrition comprises parenteral (defined as administration
intravenously or intraperitoneally) and enteral (defined as administration
orally, through the nasogastric passage or through the jejunum) nutrition for
patient needs in hospitals, nursing homes, extended care facilities and, if
taken under professional supervision, private residences.

        "Clinical Nutrition Products" shall mean products used or that can be
used in the field of Clinical Nutrition. Clinical Nutrition Products include
those products that replete nutritional deficits, return naturally occurring
cellular constituents or cellular products toward or to accepted normal clinical
ranges, ameliorate malnutrition, maintain, or improve nutrition status, offset
negative nitrogen balance or replete energy deficit. In biological systems
Clinical Nutrition Products are handled by known metabolic pathways which may or
may not be altered by disease state or clinical condition.

        "Code" shall have the meaning provided in SECTION 3.2(c).

        "Compound(s)" shall mean any of the molecular entities
L-2-oxothiazolidine-4- carboxylate (Procysteine), its isomers, its esters
(including diesters) and its neutral salts, the cysteine derivative
N-acetyl-cysteine, and glutathione esters (including diesters) including the
alkyl monoesters.

        "Contribution Agreement" shall have the meaning provided in the
recitals.


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<PAGE>   3


        "Cornell License Agreement" shall mean the "Exclusive License Agreement
CRF D-416 and D-520, D-913, D-169, D-1239, D-1258, D-1403, D-1426" by and
between Cornell Research Foundation Inc. ("Cornell") and TTI (formerly Free
Radical Sciences, Inc.) having an effective date of April 5, 1994.

        "Cornell Licensed Patents" shall mean the United States (U.S.) and
non-U.S. patents and patent applications licensed to TTI (formerly Free Radical
Sciences, Inc.) under the Cornell License Agreement.

        "Data" shall mean all data and information resulting from any studies,
including stability, toxicology, preclinical and clinicals, relating to
Compounds that was generated prior to the Original Effective Date.

        "Effective Date" shall have the meaning provided in the recitals.

        "FDA" shall mean the United States Food and Drug Administration.

        "Final Determination" shall have the meaning provided in SECTION 3.2(c).

        "Gross Margin" shall mean Net Sales less the direct cost of goods sold,
which will include royalties paid to Cornell and any other third party for
technology involved in the manufacture, use or sale of the drug.

        "INRA" shall have the meaning provided in SECTION 4.1.

        "INRA Contract" shall have the meaning provided in SECTION 4.1.

        "Interim Determination" shall have the meaning provided in
SECTION 3.2(c).

        "IRS" shall have the meaning provided in SECTION 3.2(c).

        "Joint Firm" shall have the meaning provided in SECTION 3.2(h).

        "Licensed Know-How" shall mean any proprietary right of TTI in existence
as of the Original Effective Date, other than a patent or patent application,
owned by, controlled by, or licensed to TTI with the right to sublicense
relating to Clinical Nutrition or Clinical Nutrition Products.

        "Net Sales" shall mean the gross amount of money billed by TTI to its
customers on sale or use of drugs for FDA approved applications for patients
with AIDS subsequent to April 5, 1994, less (1) trade and/or quantity discounts;
(2) returns and allowances; (3) retroactive price reductions; and (4) five
percent (5%) of the amount billed (less deductions (1) through (3)), to cover
cash discounts, sales and other taxes, transportation, insurance charges,
special packaging and duties.



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<PAGE>   4


        "Nutrition" shall mean the feeding of individuals and shall include all
products not having therapeutic claims and not included in the definition of
Clinical Nutrition that have as their principal purpose providing nutrients to
an individual.

        "Original Effective Date" shall have the meaning provided in the
recitals.

        "Original License Agreement" shall have the meaning provided in the
recitals.

        "Other Compounds" shall mean any other free-radical scavengers which had
been developed or were being developed, as of the Original Effective Date, by or
on behalf of CLINTEC for a primary purpose or use as a pharmaceutical, if any
and which were contributed to TTI pursuant to the Contribution Agreement.

        "Pharmaceutical Applications" shall mean the provision of a medicinal
substance or a drug other than a nutrient with the intent to bypass or to alter
or restore normal in vivo synthesis, metabolic or physiologic state, including
redox status. Generally, medicinal substances or drugs will be synthetic,
specifically isolated or specifically produced and will require an approved drug
license to allow sale and promotion of the claimed indication regardless of the
route of administration. Such medicinal substances or drugs can be administered
alone or with other entities such as nutrients.

        "Tax Authority" shall have the meaning provided in SECTION 3.2(c).

        "Tax Reduction" shall have the meaning provided in SECTION 3.2(c).

        "TTI Firm" shall have the meaning provided in SECTION 3.2(h).

        "TTI Patents" shall mean the U.S. and non-U.S. patents identified on
SCHEDULE A attached hereto including any reissues or reexaminations thereof, as
well as any U.S. or non-U.S. patents that may issue from TTI Patent Applications
(defined below).

        "TTI Patent Applications" shall mean the patent applications identified
on SCHEDULE B attached hereto, as well as any patent application that has been
filed since the Original Effective Date or that is filed after the date of this
Agreement that: is based in whole, or in part, on the invention records
identified on SCHEDULE C; claims priority, at least in part, from a patent
application identified on SCHEDULE B; is based in whole, or in part, on Licensed
Know-How; or is filed as a divisional, continuation, or continuation-in-part of
a patent application identified on SCHEDULE B.



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<PAGE>   5


2.      GRANTS.

        2.1 GRANT TO NESTLE. For good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, TTI grants to NESTLE a
non-exclusive, paid-up, royalty-free license to the Compounds, Other Compounds,
TTI Patents, TTI Patent Applications, and Cornell Patents limited to the field
of Clinical Nutrition and a paid-up, royalty-free non-exclusive license with
respect thereto limited to the field of Nutrition.

        2.2 LIMITATIONS ON FURTHER LICENSES AND USES BY TTI. Except pursuant to
this License Agreement and the Baxter License Agreement, TTI agrees not to
license to any other person or entity or to make, use or sell the Compounds,
Other Compounds, TTI Patents, TTI Patent Applications, and Cornell Patents, in
the field of Clinical Nutrition.

        2.3 DATA AND KNOW-HOW. TTI grants to NESTLE a royalty-free non-exclusive
license to the Licensed Know-How. Additionally, TTI will make available to
NESTLE at no cost to NESTLE, at NESTLE's request all Data for use by NESTLE in
the development and regulatory approvals of Clinical Nutrition Products.

3.      ROYALTY PAYMENTS.

        3.1 ROYALTY FOR CORNELL PATENTS. To the extent any royalty is due and
owing under the Cornell License Agreement in view of NESTLE's sale of Clinical
Nutrition Products under this Agreement, NESTLE agrees to pay the applicable
royalty to Cornell.

        3.2     ROYALTY FOR AIDS DRUGS.

        (a)     From and after the date of this Agreement, TTI shall pay to
        NESTLE in U.S. dollars, within 30 days after the end of each calendar
        quarter after the date of this Agreement, a royalty equal to 5% of TTI's
        Gross Margin on Net Sales of drugs sold by TTI or any subsidiary,
        affiliate, or sublicensee of TTI during such calendar quarter for
        applications for patients with AIDS approved by the FDA (in the case of
        sales in the United States) or approved by any foreign regulatory
        agency, if applicable (in the case of sales outside the United States)
        (the "AIDS Drugs"); provided however, that no such royalty will be
        payable by TTI until TTI's cumulative Gross Margin on Net Sales of AIDS
        Drugs exceeds the total amount of costs incurred for clinical inventory
        used in the AIDS clinical studies (up to a maximum of $1.5 million of
        such costs), which royalty shall be payable only on such excess; and
        provided further, that the sum of all royalty obligations with respect
        to technology involved in the manufacture, use or sale of such AIDS
        Drugs will in no case, in the aggregate, exceed 8.5% of Net Sales, which
        percentage will include payments to Cornell



                                       -5-


<PAGE>   6


        and any other third party for technology involved in the manufacture,
        use or sale of such AIDS Drugs.

        (b)     TTI will deliver to NESTLE within 30 days after the end of each
        calendar year ending after the date of this Agreement a report in
        writing setting forth sales of the AIDS Drugs and will accompany such
        report with an appropriate payment of royalty due for such period. TTI
        will keep an accurate record for at least three years, certified by it,
        showing the information by which TTI arrived at a royalty determination
        and will permit an auditor appointed and paid for by NESTLE and
        acceptable to TTI to make such inspection of said records as may be
        necessary to verify royalty reports made by TTI. However, if such
        inspection demonstrates that the royalties paid were less than 90% of
        the royalties due, and TTI's Net Sales of the AIDS Drugs for the
        applicable year was $500,000 or more, then TTI shall reimburse NESTLE
        the reasonable charges charged by the auditor for such inspection.

        (c)     In the event it is ultimately determined, by a court of
        competent jurisdiction or pursuant to any agreement between TTI and the
        Internal Revenue Service ("IRS") and/or any applicable state tax
        authority (collectively "Tax Authority"), that any payment made pursuant
        to SECTION 3.2(a) is not currently deductible by TTI for federal or
        state income tax purposes (a "Final Determination"), then the amounts
        payable by TTI under SECTION 3.2(b) after such Final Determination
        becomes final shall be reduced to the extent necessary so that the
        present value, as of the first day of the first year for which any
        payment is determined not to be currently deductible, of (i) all
        payments made by TTI under SECTION 3.2(b) (taking into account the
        reduction under this SECTION 3.2(c)) minus (ii) all Tax Reductions
        attributable to such payments, is equivalent to the present value, as of
        the first day of the first year for which any payment is determined not
        to be currently deductible, of (iii) all payments that would be provided
        for under SECTION 3.2(b) but for this SECTION 3.2(c) and SECTION 3.2(d)
        if all such payments had been currently deductible for federal and state
        income tax purposes, minus (iv) all Tax Reductions attributable to such
        payments, it being the intention of the parties that TTI be put in the
        same economic position it would have been in had the amounts payable
        pursuant to SECTION 3.2(b) been currently deductible for federal and
        state income tax purposes. For this purpose, (i) present value of a
        payment of Tax Reduction shall be determined by using, for each calendar
        year of the computation, the federal mid-term rate determined using an
        annual compounding convention under Section 1274(d) of the Internal
        Revenue Code of 1986, as amended (the "Code"), announced for January of
        such calendar year, and (ii) the "Tax Reduction" attributable to a
        payment is the amount of the actual reduction in federal and state
        income tax liability resulting from the payment.



                                       -6-


<PAGE>   7


        (d)     In the event the IRS asserts that any payment made pursuant to
        SECTION 3.2(b) is not currently deductible by TTI for federal income tax
        purposes and the matter has not been settled or resolved upon the
        completion of the audit examination (including an appeal to the IRS
        appeals office) (an "Interim Determination") then, notwithstanding the
        provisions of SECTION 3.2(c), the amounts payable by TTI under SECTION
        3.2(b) after the Interim Determination may be reduced to the extent they
        could have been reduced under SECTION 3.2(c) if such deficiency had been
        upheld or agreed to in a Final Determination, provided, however, that if
        there is a Final Determination in which such deficiency is not upheld or
        agreed to in its entirety, then TTI shall pay to NESTLE, within 90 days
        of such Final Determination, the amount necessary to put NESTLE in the
        same economic position it would have been in if this SECTION 3.2(d) had
        not applied.

        (e)     In the event that the amounts payable under SECTION 3.2(b)
        without regard to SECTIONS 3.2(c) and 3.2(d) are insufficient to permit
        any reduction in the amounts payable under SECTION 3.2(b) that is
        required pursuant to SECTION 3.2(c) or 3.2(d) as a result of a Final
        Determination or Interim Determination to be effected within the four
        next succeeding calendar quarters after such Final Determination or
        Initial Determination, then NESTLE shall pay to TTI, within 90 days
        after the end of the last of such calendar quarters, the amount
        necessary to put TTI in the economic position it would have been in if
        the amounts payable under SECTION 3.2(b) had been sufficient to permit
        the full amount of any such required reduction to be effected.

        (f)     TTI shall give NESTLE a reasonable period of time (i) to review
        any federal or state income tax returns of TTI in which TTI claims a
        deduction for payments made pursuant to SECTION 3.2(b) prior to filing
        of any such returns and (ii) to control the manner in which any such
        deductions are claimed on such return.

        (g)     TTI shall promptly notify NESTLE of any claim by a Tax Authority
        that any payment made by TTI under SECTION 3.2(b) is not currently
        deductible, and in such event NESTLE shall have the exclusive right to
        assume the defense of any such claim and to control any controversy
        resulting therefrom, at NESTLE's expense. TTI agrees to cooperate with
        NESTLE in the defense of any such claim and to cooperate with NESTLE and
        the TTI Firm or the Joint Firm (as hereinafter defined) in the
        determination of the amount of any reduction in payments required
        hereunder. Such cooperation shall include, but not be limited to, (i)
        the execution and delivery of any power of attorney required to allow
        NESTLE and its representatives to represent TTI in any controversy which
        NESTLE has the right to control hereunder, (ii) the prompt and timely
        filing of appropriate claims for any refund, and (iii) making available
        to NESTLE and its representatives all books, records (including


                                       -7-


<PAGE>   8


        working papers and schedules), information and employees necessary or
        useful in connection with any tax inquiry, audit, investigation, dispute
        or litigation relating to the matters described in this SECTION 3.2(g).

        (h)     The determination of the amount of any reduction pursuant to
        SECTIONS 3.2(c) or 3.2(d) hereof shall initially be made by the
        independent certified public accountants then serving as auditor for TTI
        (the "TTI Firm"), and such determination shall be furnished to NESTLE in
        writing, which shall include a computation of the amount of any
        reduction and a detailed written explanation of the manner in which such
        computation was made. If NESTLE objects in writing to such determination
        within 60 days after it is received by NESTLE, then the amount of any
        reduction shall be determined by a "Big Six" firm of independent
        certified public accountants jointly selected by NESTLE and TTI (or, if
        they are unable to agree, then such a firm jointly selected by the TTI
        Firm and a firm of independent public accountants designated by NESTLE)
        (the "Joint Firm"), and the decision of the Joint Firm shall be final
        and binding upon the parties. If NESTLE does not object in writing to
        the determination of the TTI Firm within such time period, then the
        decision of the TTI Firm shall be final and binding upon the parties. No
        reduction in the payments provided for in SECTION 3.2(a) shall be made
        until a decision of the TTI Firm of the Joint Firm has become final. The
        fees and expenses of the TTI Firm shall be borne by TTI, and the fees
        and expenses of the Joint Firm shall be shared equally by NESTLE and
        TTI, except that if the Joint Firm decides that the amount of any
        reduction in payments required hereunder is less that 90% of the amount
        of the reduction decided by the TTI Firm, then TTI shall bear all of the
        fees and expenses of the Joint Firm.

4.      INRA.

        4.1 COOPERATION WITH TTI IN OBTAINING RIGHTS FROM INRA. Clintec
Technologies, S.A. and L'Institut National de la Recherche Agronomique ("INRA")
entered into a Research Contract on December 24, 1992 (the "INRA Contract").
Clintec Technologies, S.A. has subsequently notified INRA of its assignment of
the INRA Contract to NESTLE effective as of September 30, 1996. Under the INRA
Contract NESTLE may have rights to commercially exploit any research results,
inventions or discoveries. To the extent that NESTLE or its Affiliates has such
rights (including the right to license TTI) under the INRA Contract as such
rights relate to Pharmaceutical Applications without the payment by NESTLE of
additional consideration therefor, NESTLE will execute an exclusive, fully paid,
royalty-free license granting to TTI all such rights. To the extent NESTLE is
unable to license such rights, NESTLE will use its best efforts to cause INRA to
offer to TTI an exclusive license, granting TTI all such rights, provided
however, that NESTLE shall not be required to make any payment to INRA or to
incur any out-of-pocket expenses in connection therewith.



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<PAGE>   9


5.      NON-SOLICITATION UNDERTAKING.

        5.1 NON-SOLICITATION OF TTI EMPLOYEES. NESTLE agrees that until April 5,
1999 it will not (i) directly or indirectly recruit, solicit or otherwise induce
or influence any technical, professional or managerial employee of TTI to
discontinue such employment with TTI, or (ii) willfully induce any person or
firm that performed consulting services for both CLINTEC and TTI at the Original
Effective Date to discontinue the provision of such services to TTI. NESTLE also
agrees that for a period from the date of this Agreement to April 5, 1999, it
will not hire any employee of TTI. Nothing herein shall prevent either party
from (a) hiring any employee of the other who was discharged by the other, or
(b) hiring any employee of the other who terminated their employment without
inducement by the hiring party.

        5.2     NO DISCLOSURE OF PROPRIETARY INFORMATION.

        (a)     NESTLE hereby agrees that, except as expressly permitted hereby,
        it will not directly or indirectly disclose to anyone, or use or
        otherwise exploit for its own benefit or for the benefit of anyone else,
        any trade secrets contributed to TTI as Contributed Assets under the
        Contribution Agreement for as long as they remain trade secrets.

        (b)     NESTLE hereby agrees that, except as expressly permitted hereby,
        until April 5, 1999, it will not directly or indirectly disclose to
        anyone, or use or otherwise exploit for its own benefit or for the
        benefit or anyone else, any confidential information contributed to TTI
        as Contributed Assets under the Contribution Agreement.

        (c)     NESTLE shall use reasonable efforts to require its employees to
        abide by the obligations of this Section 5.2.

        5.3 REMEDIES. NESTLE agrees that if (i) if it breaches the provision in
SECTION 5.1 or, the damage to TTI will be substantial, although difficult to
ascertain, and money damages will not afford TTI an adequate remedy, and (ii) if
it is in breach of SECTION 5.1 or 5.2, or threatens a breach of this SECTION 5.1
or 5.2, TTI shall be entitled, in addition to all other rights and remedies as
may be provided by law and this Agreement, to specific performance, injunctive
and other equitable relief to prevent or restrain a breach of SECTION 5.1 OR
5.2.

6.      PATENT COST.

        6.1     TTI PATENTS AND PATENT APPLICATIONS. TTI shall have the
responsibility to pay all attorney's fees, maintenance fees, and any and all
other costs associated with any TTI Patent or TTI Patent Applications. Should
TTI decide not to pay any cost or expense for any TTI Patent or TTI Patent
Application or decide to allow any such TTI



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<PAGE>   10


Patent or TTI Patent Application to go abandoned, prior to abandoning such TTI
Patent Application or TTI Patent, TTI shall advise NESTLE in writing. NESTLE
shall then have the right to pay such expense and maintain the TTI Patent or TTI
Patent Application jointly with BAXTER. Should NESTLE or BAXTER pay the expense
or fee, TTI agrees to assign to BAXTER or NESTLE such TTI Patent or TTI Patent
Application upon receipt of a joint written direction of NESTLE and BAXTER
delivered within 30 days after notice from TTI of such abandonment.

        6.2 CORNELL LICENSED PATENTS. To the extent any fees are due and owing
under the Cornell License Agreement for a Cornell Licensed Patent, TTI will be
responsible to pay all costs and expenses. However, prior to allowing any
Cornell Licensed Patent to go abandoned for failure to pay any cost or expense,
TTI shall advise NESTLE and NESTLE shall have the right, but not the obligation,
to pay the applicable expense or fee jointly with BAXTER. Should NESTLE and/or
BAXTER pay the expense or fee, TTI will then transfer to NESTLE and/or BAXTER,
to the extent permitted by the Cornell License Agreement, the rights to the
applicable Cornell Licensed Patent upon receipt of a joint written direction of
NESTLE and BAXTER delivered within 30 days after notice from TTI of such
abandonment.

7.      TERM.

        The term of this Agreement shall last for the effective life of the last
to expire of the TTI Patents or Cornell Licensed Patents. Upon expiration of
this License Agreement, NESTLE shall have a royalty-free license to Licensed
Know-How for the purpose of making, using, and selling Clinical Nutrition
Products or products used in the field of Nutrition.

8.      ENFORCEMENT.

        Upon learning of an infringement of a TTI Patent or Cornell Patent,
NESTLE will advise TTI of such infringement in writing. TTI will then be free,
at its expense, to file a law suit in its name and at its expense against the
infringer. TTI shall be entitled to all damages it recovers. If TTI does not
file a law suit within ninety (90) days of NESTLE's notice, NESTLE, either
individually or jointly with BAXTER, shall at its cost and expense, be entitled
to bring suit against the infringer for infringement of the rights granted to
NESTLE in the field of Nutrition and Clinical Nutrition hereunder. TTI will not
be entitled to any damages that may be recovered by NESTLE or BAXTER from any
such law suit. TTI agrees, to the extent requested by NESTLE, to join NESTLE and
assist NESTLE, at NESTLE's expense, in maintaining such law suit.




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<PAGE>   11


9.      ASSIGNMENT.

        The rights and obligations of NESTLE under this Agreement can be
assigned to any party by NESTLE upon thirty (30) days notice from NESTLE.

10.     TERMINATION.

        Either TTI or NESTLE may terminate this Agreement if there is a material
breach of this Agreement by the other party by providing the other party with
written notice of such breach. The breaching party will then have a six (6)
month period in which to cure such breach. If such breach remains uncured at the
end of the six (6) month period, this Agreement will then terminate.

11.     SUBLICENSING.

        NESTLE may sublicense its rights under this Agreement to any third
party.

12.     MISCELLANEOUS.

        12.1 NOTICES. Any notices to be given under any provision of this
Agreement may be given by sending by registered or certified mail to the address
of the party concerned as follows:

         If to NESTLE:

         Nestec, Ltd.
         Attn: Legal Department
         Avenue Nestle 55
         1800 Vevey
         Switzerland
         Tel. No.: 011-41-21-921-1111
         Fax No.: 011-41-21-921-1885

         If to TTI:

         Transcend Therapeutics Inc.
         Attn: President
         640 Memorial Drive
         Cambridge, Massachusetts 02139
         Tel. No.: (617) 374-1200
         Fax No.: (617) 374-1201

or to such other person as may be designated in a notice delivered to the other
party in accordance with this SECTION 12.1.



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<PAGE>   12


        12.2 APPLICABLE LAW. This Agreement shall be deemed to be made under and
to be governed by the laws of the State of Illinois.

        12.3 SEPARABILITY. Should any part or provision of this Agreement be
held unenforceable or in conflict with the law of any jurisdiction, the
enforceability of the remaining parts or provisions shall not be affected by
such holding.

        12.4 HEADINGS. The headings and subheadings of the various articles and
sections of this Agreement are inserted merely for the purpose of convenience
and do not express or imply any limitation, definition, or extension of the
specific terms and sections 50 designated.

        12.5 SUCCESSORS AND ASSIGNS. This Agreement is binding on any successors
of NESTLE or assigns of any TTI Patents, TTI Patent Applications, the Licensed
Know-How, or any rights under the Cornell License Agreement.

        12.6 TERMINATION OF APRIL 5, 1994 AGREEMENTS. Upon execution of this
Agreement and the BAXTER License Agreement, the Original License Agreement and
the Contribution Agreement shall terminate and be of no further force and
effect, except that Section 6 of the Contribution Agreement shall remain in full
force and effect and be enforceable against NESTLE as and to the extent that
such section would be enforceable against CLINTEC in the absence of this
Agreement.

        12.7 SECURITIES ACT REPORTS. Transcend agrees to furnish to NESTLE
promptly following the filing thereof with the Securities Exchange Commission, a
copy of all periodic reports on Form 10-K or Form 10-Q filed by the TTI under
the Securities Exchange Act of 1934.




                                      -12-


<PAGE>   13


        IN WITNESS WHEREOF, the parties have caused this instrument to be
executed in duplicate as of the day and year first above written.


ATTEST:                                       TRANSCEND THERAPEUTICS INC.

/s/ B. Nicholas Harvey                        By: /s/ Hector J. Gomez
-------------------------------                   ----------------------------
                                                  Title:______________________
                                                  Date:_______________________




ATTEST:                                       NESTEC LTD.

/s/ [illegible]                               By: /s/ [illegible]
-------------------------------                   ---------------------------
                                                  Title:  Sons-directeur
                                                  Date:  February 20, 1998




                                      -13-


<PAGE>   14


                         SCHEDULE A TO LICENSE AGREEMENT

                                  U.S. Patents



U.S. Patent No. 5,095,027     "Method for Treating Reperfusion Injury Employing
                              L-2- oxothiazolidine-4-carboxylic Acid"

                              Date Issued: March 10, 1992

U.S. Patent No. 5,208,249     "Method for Stimulating Intracellular Synthesis of
                              Glutathione Using Esters of
                              L-2-Oxothiazolidine-4-carboxylate"

                              Date Issued: May 4, 1993

U.S. Patent No. 5,214,062     "Method and Composition for Treating Immune
                              Disorders, Inflammation and Chronic Infections"

                              Date Issued: May 25, 1993





<PAGE>   15


                         SCHEDULE B TO LICENSE AGREEMENT

                           Pending Patent Applications

--------------------------------------------------------------------------------

      * Asterisk (and italics) denotes patent applications which were abandoned
by TTI between the Original Effective Date and the Effective Date of this
License Agreement.

--------------------------------------------------------------------------------



Title:            "A Method to Enhance Cellular Defense Against Infection"
U.S. Serial No.:  07/682,636
Date Filed:       April 8, 1991



Title:            "Method of Treatment for Latent Virus Infection"
U.S. Serial No.:  07/769,194
Date Filed:       September 30, 1991

     Corresponding Non-U.S. Applications:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          22,115/92                      September 4, 1992
     Canada             2077966-7                      September 10, 1992
     Europe             92115046.2                     September 3, 1992
     Japan              4-26183                        September 30, 1992


Title:            "Method for Reducing or Preventing Toxicity Associated With
                  Antiretroviral Therapy"
U.S. Serial No.:  07/872,549
Date Filed:       April 23, 1992

          Corresponding Non-U.S. Applications:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          35,357/93                      March 23, 1993
     Canada             2,094,311                      April 19, 1993
     Europe             93302218.8                     March 22, 1993
     Japan              5-94678                        April 21, 1993





                                       B-1


<PAGE>   16


Title:            "Method for Preventing and Treating Atherosclerosis"
U.S. Serial No.:  07/930,183
Date Filed:       August 17, 1992

     Corresponding Non-U.S. Applications:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          38,387/93                        May 5, 1993
     Canada             2103644                          August 9, 1993
     Europe             93303526.3                       May 6, 1993
     Japan              5-203491                         August 17, 1993

--------------------------------------------------------------------------------


Title:            "Method for Optimizing Defensin Synthesis in Vivo and in
                  Vitro"

U.S. Serial No.:  07/969,412 *
Date Filed:       October 30, 1992


Title:            "Method for Treating Systemic Inflammatory Response Syndrome"
U.S. Serial No.:  07/983,415 *
Date Filed:       November 30, 1992

     Corresponding Non-U.S. Applications:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          50,404/93    *                   November 3, 1993
     Canada             2110147      *                   November 26, 1993
     Europe             93118259.6   *                   November 11, 1993
     Japan              5-298826     *                   November 30, 1993

--------------------------------------------------------------------------------


Title:            "Method for Treating Infertility"
U.S. Serial No.:  08/012,006
Date Filed:       February 1, 1993


--------------------------------------------------------------------------------


     Corresponding Non-U.S. Applications:
     PCT/US94/01118 *
     filed January 31, 1994

     Title:            "Method for Treatment of Pulmonary Disease"
     U.S. Serial No.:  08/057,122 *
     Date Filed:       May 3, 1993


--------------------------------------------------------------------------------


                                       B-2


<PAGE>   17


     Corresponding Non-U.S. Applications:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     -------------------------------------------------------------------
     Australia          10,064/92    *                   January 6, 1992
     -------------------------------------------------------------------

     Canada             2058793-8                        January 6, 1992
     Europe             91121524.2                       December 16, 1991
     Japan              19504/1992                       January 7, 1992


Title:               "Method for Treating Acquired Immune Deficiency Syndrome"
U.S. Serial No.:     08/059,775
Date Filed:          May 10, 1993


Title:               "Method for Reducing or Preventing Bone Marrow Hypoplasia"
U.S. Serial No.:     08/068,385
Date Filed:          May 28, 1993

--------------------------------------------------------------------------------


Title:               "Method and Compositions for Retarding the Aging Process"
U.S. Serial No.:     08/146,305 *
Date Filed:          November 1, 1993

Title:               "Method and Composition for Stimulating Intracellular
                     Glutathione"
U.S. Serial No.:     08/147,165 *
Date Filed:          November 3, 1993

Title:               "Methods of Preventing Hair Loss and of Stimulating
                     New Hair Growth"
U.S. Serial No.:     08/149,614 *
Date Filed:          November 9, 1993

--------------------------------------------------------------------------------


Title:               "Methods of Reducing or Preventing Side Effects of
                     Chemotherapeutic Agents"
U.S. Serial No.:     08/164,069
Date Filed:          December 9, 1993





                                       B-3


<PAGE>   18


          Non-U.S. Applications Corresponding to U.S. Patent No. 5,095,027,
"Method for Treating Reperfusion Injury Employing L-2-oxothiazolidine-4
carboxylic Acid"; Date Issued: March 10, 1992:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          11,101/92                        February 20, 1992
     Canada             2061270-3                        February 14, 1992
     Europe             92301226.4                       February 14, 1992
     Japan              4-43042                          February 28, 1992


          Non-U.S. Applications Corresponding to U.S. Patent No. 5,208,249,
"Method for Stimulating Intracellular Synthesis of Glutathione Using Esters of
L-2- Oxothiazolidine-4-Carboxylate"; Date Issued: May 4, 1993:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          37,181/93                        April 22, 1993
     Canada             2096036                          May 12, 1993
     Europe             93303213.8                       April 23, 1993
     Japan              5-205958                         August 20, 1993


          Non-U.S. Applications Corresponding to U.S. Patent No. 5,214,062,
"Method and Composition for Treating Immune Disorders, Inflammation and Chronic
Infections"; Date Issued: May 25, 1993:

     Country            Application No.                  Filing Date
     -------            ---------------                  -----------
     Australia          34,092/93                        March 9, 1993
     Canada             2093163                          April 1, 1993
     Europe             93301861.6                       March 11, 1993
     Japan              5-81957                          April 8, 1993




                                       B-4


<PAGE>   19

                         SCHEDULE C TO LICENSE AGREEMENT

                                Invention Records


Goldberg, "Stimulation of Intracellular Glutathione Synthesis for Prevention of
Diabetic Complications" dated August 8, 1990

Pace et al., "Topical Elevation of Intracellular Glutathione as Treatment for
Psoriasis" dated October 19, 1990

Kamarei, "Diets Containing Glutathione for Hepatic Diseases" dated December 4,
1990

Mark et al., "Novel Methods for the Reduction of Difluromethylornithine
Associated Toxicity" dated March 29, 1991

Goldberg, "Topical Applications of Glutathione Esters for Treatment of Local
Herpes, Bursus and Inflammations" dated April 8, 1991

Mark et al., "Method of Treatment of Autoimmune Diseases" dated April 11, 1991

Mark et al., "Method of Modifying in Vitro Cell Culture Media to Enhance
Cellular Functions Including Replication" dated July 23, 1991

Rowe et al., "A Solid Oral Dosage Form for Procysteine" dated July 29, 1991

Madsen, "Amelioration of Valproate Toxicity of Co-administration of Procysteine"
dated October 30, 1991

Mark, "Methods of Enhancing the Use of Nitric Oxide to Treat Severe Adult
Respiratory Distress Syndrome" dated November 8, 1991

Goldberg et al., "Method to Reduce Muscle Injury and Damage and Enhance Recovery
from High Intensity Exercise" dated March 31, 1992

Goldberg, "Method for Enhancing Glutathione Synthesis by Concomitant
Administration of Glutamine and Cysteine" dated April 1, 1992

Mark, "Methods of Modifying in Vitro Tissue Culture Media to Enhance Cellular
Functions, Including Replication" dated October 30, 1992