<PAGE>

                                                                   EXHIBIT 10.58

Execution copy
--------------



            SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT



                             ELAN CORPORATION, PLC


                        ELAN PHARMA INTERNATIONAL LTD.


                       ELAN INTERNATIONAL SERVICES, LTD.


                                      AND


                      INCARA PHARMACEUTICALS CORPORATION



                                      AND


                           INCARA DEVELOPMENT, LTD.



Portions of this exhibit marked [*] have been omitted pursuant to a request for
confidential treatment.
<PAGE>

                                     INDEX
                                     -----

CLAUSE 1      DEFINITIONS

CLAUSE 2      BUSINESS

CLAUSE 3      REPRESENTATIONS AND WARRANTIES

CLAUSE 4      AUTHORIZATION AND CLOSING

CLAUSE 5      DIRECTORS; MANAGEMENT AND R&D COMMITTEES

CLAUSE 6      THE BUSINESS PLAN AND REVIEWS

CLAUSE 7      RESEARCH AND DEVELOPMENT

CLAUSE 8      COMMERCIALIZATION

CLAUSE 9      OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS[*]

CLAUSE 10     INTELLECTUAL PROPERTY RIGHTS

CLAUSE 11     CROSS LICENSING

CLAUSE 12     REGULATORY MATTERS/CLINICAL TRIALS

CLAUSE 13     MANUFACTURING

CLAUSE 14     TECHNICAL SERVICES AND ASSISTANCE

CLAUSE 15     AUDITORS, BANKERS,
              ACCOUNTING REFERENCE DATE; SECRETARY

CLAUSE 16     TRANSFER OF SHARES; RIGHTS OF FIRST OFFER; TAG ALONG RIGHTS

CLAUSE 17     MATTERS REQUIRING SHAREHOLDERS' APPROVAL

CLAUSE 18     DISPUTES


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       2
<PAGE>

CLAUSE 19     TERMINATION

CLAUSE 20     SHARE RIGHTS

CLAUSE 21     CONFIDENTIALITY

CLAUSE 22     COSTS

CLAUSE 23     GENERAL

                                       3
<PAGE>

THIS SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT made this 19 day of
January 2001

BETWEEN:

(1)  ELAN CORPORATION, PLC., a public limited company incorporated under the
     laws of Ireland, and having its registered office at Lincoln House, Lincoln
     Place, Dublin 2, Ireland;

(2)  ELAN PHARMA INTERNATIONAL LTD., a limited liability company incorporated
     under the laws of Ireland, and having its registered office at WIL House,
     Shannon Business Park, Shannon, County Clare, Ireland;

(3)  ELAN INTERNATIONAL SERVICES, LTD., a Bermuda exempted limited liability
     company incorporated under the laws of Bermuda, and having its registered
     office at Clarendon House, 2 Church St., Hamilton, Bermuda ("EIS");

(4)  INCARA PHARMACEUTICALS CORPORATION (FORMERLY INTERCARDIA, INC.), a
     corporation duly incorporated and validly existing under the laws of
     Delaware and having its principal place of business at 3200 East Highway
     54, Cape Fear Building, Suite 300, Research Triangle Park, North Carolina
     27709, United States of America; and

(5)  INCARA DEVELOPMENT, LTD., a Bermuda exempted limited liability company
     incorporated under the laws of Bermuda, and having its registered office at
     Clarendon House, 2 Church St., Hamilton, Bermuda ("Newco").

RECITALS:

A.   Newco desires to issue and sell to Incara, and Incara desires to purchase
     from Newco, for aggregate consideration of $7,500,000, 6000 Newco's common
     Shares, par value $1.00 per share (the "Common Shares").

     Additionally, Newco desires to issue and sell to the Shareholders (as
     defined below), and the Shareholders desire to purchase from Newco, for
     aggregate consideration of $7,500,000 apportioned between them as set forth
     herein, 6000 Newco's preference Shares, par value $1.00 per share (the
     "Preference Shares"), allocated 3612 Shares to Incara for aggregate
     consideration of $4,515,000 and 2388 Shares to EIS for aggregate
     consideration of $2,985,000.

B.   As of the Closing Date, Elan Corp. and EPIL have entered into the Elan
     License Agreement, and Incara has entered into the Incara License
     Agreement, in

                                       4
<PAGE>

     connection with the license to Newco of the Elan Intellectual Property and
     the Incara Intellectual Property, respectively (each as defined below).

C.   Elan and Incara have agreed to co-operate in the research, development and
     commercialization of the Products (as defined below) based on their
     respective technologies.

D.   Elan and Incara have agreed to enter into this Agreement for the purpose of
     recording the terms and conditions regulating their relationship with each
     other, with respect to the Licensed Technologies and with Newco.


NOW IT IS HEREBY AGREED AS FOLLOWS:

                                   CLAUSE 1

                                  DEFINITIONS

1.1  In this Agreement, the following terms shall, where not inconsistent with
     the context, have the following meanings respectively.

     "Affiliate" shall mean any corporation or entity controlling, controlled or
     under the common control of Elan or Incara or any third party, as the case
     may be, excluding, in the case of Elan, an Elan JV.  For the purpose of
     this definition, (i)"control" shall mean direct or indirect ownership of
     fifty percent (50%) or more of the stock or shares entitled to vote for the
     election of directors and (ii) Newco shall not be an Affiliate of Elan or
     EIS or Incara.

     "Agreement" shall mean this agreement (which expression shall be deemed to
     include the Recitals and the Schedules hereto).

     "Board" shall mean the board of directors of Newco.

     "Business" shall mean the business specified in the Business Plan.

     "Business Plan" shall mean the business plan and program of development to
     be agreed by Elan and Incara pursuant to Clause 6, with respect to the
     research, development, and commercialization of the Products, that shall
     contain, among other things, to the extent practicable, the research and
     development objectives, desired Product specifications, clinical
     indications, clinical trial designs, development timelines, budgeted costs
     and the relative responsibilities of Incara and Elan as it relates to the
     implementation of the R&D Plan.

     "Closing Date" shall mean the date upon which the Definitive Documents are
     executed and delivered by the Parties and the transactions effected thereby
     are closed.

                                       5
<PAGE>

     "Common Shares Equivalents" shall mean any options, warrants, rights or any
     other securities convertible, exercisable or exchangeable, in whole or in
     part, for or into Common Shares.

     "Certificate of Designations" shall mean that certain certificate of
     designations, preferences and rights of Series B Preferred Shares and
     Series C Preferred Shares of Incara issued on the Closing Date.

     "Compound" shall mean the compound identified by Incara as OP2000, an ultra
     low molecular weight heparin, the structure of which is described in
     Schedule 1, and in the Incara Patents.

     "Convertible Note" shall mean that certain convertible promissory note, of
     even date herewith, effective 21 December 2000, by and between Incara and
     EPIL.

     "Definitive Documents" shall mean this Agreement, the Elan License
     Agreement, the Incara License Agreement, the Convertible Note, the Incara
     Securities Purchase Agreement, the Registration Rights Agreements, the
     Certificate of Designations and associated documentation of even date
     herewith, by and between Incara, Elan, EPIL, EIS and Newco, as applicable.

     "Development Funding" shall have the meaning set forth in Clause 6.

     "Directors" shall mean, at any time, the directors of Newco.

     "EIS Director" shall have the meaning set forth in Clause 5.

     "Elan" shall mean EPIL and Affiliates and subsidiaries of Elan Corp within
     the division of Elan Corp carrying on business as Elan Pharmaceutical
     Technologies.  For the avoidance of doubt, "Elan" shall exclude the
     Excluded Entities.

     "Elan Corp" shall mean Elan Corporation, plc., a public limited company
     incorporated under the laws of Ireland.

     "Elan Improvements" has the meaning assigned thereto in the Elan License
     Agreement.

     "Elan Intellectual Property" has the meaning assigned thereto in the Elan
     License Agreement.

     "Elan JV" shall mean an entity that Elan and a third party (i) establish or
     have established, (ii) take shareholdings in or have a right to take
     shareholdings in, and (iii) grant certain licenses in and to certain
     intellectual property rights for the purpose of implementing a strategic
     alliance.

                                       6
<PAGE>

     "Elan License" has the meaning assigned thereto in the Elan License
     Agreement.

     "Elan License Agreement" shall mean the license agreement between Elan and
     Newco, of even date herewith, attached hereto in Schedule 2.

     "EIS/Newco Option" shall have the meaning set forth in Clause 8.

     "Encumbrance" shall mean any liens, charges, encumbrances, equities,
     claims, options, proxies, pledges, security interests, or other similar
     rights of any nature.

     "EPIL" or "Elan Pharma International Limited" shall mean Elan Pharma
     International Limited, a private limited company incorporated under the
     laws of Ireland.

     "Exchange Right" has the meaning assigned to such term in the Certificate
     of Designations in effect on the Closing Date.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Excluded Entities" shall mean The Liposome Company, Inc. and its
     subsidiaries; Axogen Limited; Neuralab Limited; Dura Pharmaceuticals, Inc.
     and its subsidiaries; and Affiliates (present or future) of Elan Corp
     within the division of Elan Corp carrying on business as Elan
     Pharmaceuticals which incorporates, inter alia, EPIL (only to the extent
     that it is the owner of patents, know-how or other intellectual property or
     technology invented and/or developed within the division of Elan Corp
     carrying on business as Elan Pharmaceuticals), Athena Neurosciences, Inc.,
     Elan Pharmaceuticals, Inc. and Elan Europe Limited.

     "FDA" shall mean the United States Food and Drug Administration or any
     other successor agency in the USA.

     "Field" shall mean the treatment and/or amelioration of any gastro-
     intestinal disease by the administration of the Product.  For the avoidance
     of doubt, gastro-intestinal disease includes inflammatory bowel disease
     (including ulcerative colitis and Crohn's Disease).

     "Financial Year" shall mean each year commencing on January 1 (or in the
     case of the first Financial Year, the Closing Date) and expiring on
     December 31 of each year.

     "Fully Diluted Common Shares" shall mean all of the issued and outstanding
     Common Shares, assuming the conversion, exercise or exchange of all
     outstanding Common Shares Equivalents.

     "Incara" shall mean Incara Pharmaceuticals Corporation (formerly
     Intercardia, Inc.), a Delaware corporation and its Affiliates.

                                       7
<PAGE>

     "Incara Directors" has the meaning set forth in Clause 5.

     "Incara Improvements" has the meaning assigned thereto in the Incara
     License Agreement.

     "Incara Intellectual Property" has the meaning assigned thereto in the
     Incara License Agreement.

     "Incara License" has the meaning assigned thereto in the Incara License
     Agreement.

     "Incara License Agreement" shall mean the license agreement between Incara
     and Newco, of even date herewith, attached hereto in Schedule 3.

     "Incara Patents" has the meaning assigned thereto in the Incara License
     Agreement.

     "Incara Securities Purchase Agreement" shall mean that certain securities
     purchase agreement, of even date herewith, by and between Incara and EIS.

     "License Agreements" shall mean the Elan License Agreement and the Incara
     License Agreement.

     "Licensed Technologies" shall mean, collectively, the Elan Intellectual
     Property and the Incara Intellectual Property.

     "Newco Intellectual Property" shall mean all rights to patents, know-how
     and other intellectual property arising out of the conduct of the Project
     by any person, including any technology acquired by Newco from a third
     party, that does not constitute Elan Intellectual Property or Incara
     Intellectual Property.

     For the avoidance of doubt, any preclinical and clinical data and/or
     toxicity, stability and pharmacological data generated pursuant to the
     Project relating to the Compound shall constitute Newco Intellectual
     Property.

     For the further avoidance of doubt, any patent application filed by Newco,
     or by Elan or Incara on behalf of Newco, and any patent issued pursuant
     thereto, covering a Product shall constitute Newco Intellectual Property.

     "Newco Bye-Laws" shall mean the Memorandum of Association and Bye-Laws of
     Newco.

     "Opocrin" shall mean Opocrin S.p.A., a corporation organized under the laws
     of Italy.

                                       8
<PAGE>

     "Opocrin Agreement" shall mean the License, Development, Marketing and
     Clinical Trials Supply Agreement dated 20 July 1998 between Opocrin and
     Incara (as amended by amendment agreement dated 15 September 2000).

     "Participant" shall mean Incara or Elan, as the case may be, and
     "Participants" shall mean both of the Participants together.

     "Party" shall mean Elan Corp, EPIL, EIS, Incara, or Newco, as the case may
     be, and "Parties" shall mean all such parties together.

     "Person" shall mean an individual, partnership, corporation, limited
     liability company, business trust, joint stock company, trust,
     unincorporated association, joint venture, governmental entity or authority
     or other entity of whatever nature.

     "Permitted Transferee" shall mean any Affiliate or subsidiary of Elan,
     EPIL, EIS or Incara, to whom this Agreement may be assigned, in whole or in
     part, pursuant to the terms hereof or in the case of Elan, EPIL, EIS, a
     special purpose financing entity created by Elan, EPIL or EIS.

     "Product(s)" shall mean:

     (i)  the System containing or packaged with the Compound developed pursuant
          to the Project; and/or

     (ii) an injectable (including, for the avoidance of doubt, by intramuscular
          injection, intravenous injection, or subcutaneous injection)
          formulation of the Compound developed pursuant to the Project.

     For the avoidance of doubt, "Product" shall exclude any oral formulation of
     heparin or any heparinoid.

     "Project" shall mean all activity as undertaken by or on behalf of Newco in
     order to develop the Products in accordance with the Business Plan.

     "Registration Rights Agreements" shall mean the Registration Rights
     Agreements of even date herewith relating to Newco and Incara,
     respectively.

     "Regulatory Application" shall mean any regulatory application or any other
     application for marketing approval for a Product, which Newco will file in
     any country of the Territory, including any supplements or amendments
     thereto.

     "Regulatory Approval" shall mean the final approval to market a Product in
     any country of the Territory, and any other approval which is required to
     launch the Product in the normal course of business.

                                       9
<PAGE>

     "RHA" shall mean any relevant government health authority (or successor
     agency thereof) in any country of the Territory whose approval is necessary
     to market a Product in the relevant country of the Territory.

     "R&D Plan" shall mean the program of work, including the budget, agreed by
     the Management Committee as part of the Business Plan that relates to the
     formulation, biopharmaceutical and clinical development of the Products and
     such further research and development work as may be agreed by the
     Management Committee from time to time.

     "R&D Program(s)" shall mean any research and development program(s)
     commenced by Newco pursuant to the Project.

     "R&D Term" shall mean the period of [*] starting from 21 December 2000.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Shares" shall mean the Common Shares and Preference Shares of Newco.

     "Shareholder" shall mean any of EIS, Incara, any Permitted Transferee or
     any other Person who subsequently becomes bound by this Agreement as a
     holder of the Shares, and "Shareholders" shall mean all of the Shareholders
     together.

     "System" has the meaning assigned thereto in the Elan License Agreement.

     "Technological Competitor of Elan" shall mean a person or entity listed in
     Schedule 4 and divisions, subsidiaries and successors thereof or any
     additional broad-based technological competitor of Elan added to such
     Schedule from time to time upon mutual agreement of Incara and Elan.

     "Term" shall mean the term of this Agreement.

     "Territory" shall mean all of the countries of the world, except for Japan
     and Korea.

     "United States Dollar" and "US$" and "$" shall mean the lawful currency of
     the United States of America.

1.2  In addition, the following definitions have the meanings in the Clauses
     corresponding thereto, as set forth below.



[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       10
<PAGE>

     Definition                            Clause

     "AAA"                                       19.5
     "Buyout Option"                             19.3
     "Closing"                                   4.3
     "Common Shares"                             Recital
     "Confidential Information"                  21.1
     "Co-sale Notice"                            16.4
     "Expert"                                    18.3
     "Management Committee"                      5.2.1
     "Notice of Exercise"                        16.3
     "Notice of Intention"                       16.3
     "Offered Shares"                            16.3
     "Offer Price"                               16.3
     "Preference Shares"                         Recital
     "Proposing Participant"                     19.3
     "Proposing Participant Price:               19.5
     "Purchase Price"                            19.5
     "R&D Committee"                             5.2.2
     "Recipient Participant"                     19.3
     "Recipient Participant Price"               19.5
     "Remaining Shareholders"                    16.4
     "Relevant Event"                            19.2
     "Selling Shareholder"                       16.3
     "Tag-Along Right"                           16.4
     "Transaction Proposal"                      16.3
     "Transfer"                                  16.1
     "Transferee Terms"                          16.4
     "Transferring Shareholder"                  16.4

1.3  Words importing the singular shall include the plural and vice versa.

1.4  Unless the context otherwise requires, reference to a recital, article,
     paragraph, provision, clause or schedule is to a recital, article,
     paragraph, provision, clause or schedule of or to this Agreement.

1.5  Reference to a statute or statutory provision includes a reference to it as
     from time to time amended, extended or re-enacted.

1.6  The headings in this Agreement are inserted for convenience only and do not
     affect its construction.

1.7  Unless the context or subject otherwise requires, references to words in
     one gender include references to the other genders.

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<PAGE>

1.8  Capitalized terms used but not defined herein shall have the meanings
     assigned thereto in the Definitive Documents, if defined therein.

                                    CLAUSE 2

                                    BUSINESS

2.1  The primary objective of the Agreement is to regulate the business of the
     development, testing, registration, manufacture, commercialization and
     licensing of Products in the Territory and to achieve the other objectives
     set out in this Agreement.  The focus of the Business will be the
     development of the Products using the Elan Intellectual Property, the
     Incara Intellectual Property and the Newco Intellectual Property to agreed-
     upon specifications and timelines.

2.2  The central management and control of Newco shall be exercised in Bermuda
     and shall be vested in the Directors and such Persons as they may delegate
     the exercise of their powers.  The majority of the Board shall be resident
     in Bermuda.  The Shareholders agree to conduct the Business in such a
     manner as to ensure that Newco is liable to taxation in Bermuda and not in
     any other jurisdiction.  The Participants shall use their best endeavors to
     ensure the sole residence of Newco in Bermuda, all meetings of the
     Directors are held in Bermuda or other jurisdictions outside the United
     States and generally to ensure that Newco is treated as resident for
     taxation purposes in Bermuda.

2.3  The Management Committee may determine, by unanimous agreement, that any
     R&D Program commenced as part of the Project in respect of the Compound
     should be terminated where the Compound or System fails to meet agreed
     specifications or the R&D Program reveals scientific or technical or
     intellectual property issues which would have a material adverse effect on
     the development and commercialization of the Compound or the System in the
     Field in the Territory.

     In either such event, the Management Committee shall review in good faith
     the possibility of in-licensing to Newco an alternative System or an
     alternative compound or alternative compounds from Incara, or of in-
     licensing or acquiring the rights from one or more third parties to such
     alternative compound or alternative compounds (in either case, "Alternative
     Compounds") provided that the number of Alternative Compounds selected
     under this Clause 2.3 shall not exceed two.

     If the Parties should agree to in-license to Newco an alternative System or
     an Alternative Compound from Incara, Elan or from a third party, the
     Parties shall discuss in good faith whether any amendments are required to
     the Definitive Documents as a result of such approval, such as amending the
     provisions regulating non-competition.

                                       12
<PAGE>

2.4  In the event that the Management Committee, by unanimous agreement,
     terminates any R&D Program in respect of any Compound ("Abandoned
     Compound") pursuant to Clause 2.3:

     2.4.1  as provided in the Elan License Agreement, Newco and Incara shall
            confirm to Elan in writing that the Elan License has terminated
            insofar as it previously related to the Abandoned Compound;

     2.4.2  as provided in the Incara License Agreement, Newco and Elan shall
            confirm to Incara in writing that the Incara License has terminated
            insofar as it previously related to the Abandoned Compound; and

     2.4.3  as provided in the License Agreements, Elan and Incara will cease to
            be bound by the [*] obligations set forth in this Clause 5 of the
            License Agreements or otherwise set forth in the Definitive
            Documents in respect of the Abandoned Compound, and the Parties
            shall discuss in good faith what additional amendments are required
            to the Definitive Documents.

                                   CLAUSE 3

                        REPRESENTATIONS AND WARRANTIES

3.1  Representations and Warranties of Newco: Newco hereby represents and
     ---------------------------------------
     warrants to each of the Shareholders as follows, as of the Closing Date:

     3.1.1  Organization:  Newco is an exempted company duly organized, validly
            -------------
            existing and in good standing under the laws of Bermuda, and has all
            the requisite corporate power and authority to own and lease its
            properties, to carry on its business as presently conducted and as
            proposed to be conducted.

     3.1.2  Capitalization:  The authorized capital Shares of Newco consists of
            ---------------
            6000 Common Shares and 6000 Preference Shares. Prior to the Closing
            Date, no shares of capital stock of Newco have been issued.



     [*] Confidential Treatment Requested; Certain Information Omitted and Filed
          Separately with the SEC.

                                       13
<PAGE>

     3.1.3  Authorization:  The execution, delivery and performance by Newco of
            --------------
            this Agreement, including the issuance of the Shares, have been duly
            authorized by all requisite corporate actions; this Agreement has
            been duly executed and delivered by Newco and is the valid and
            binding obligation of Newco, enforceable against it in accordance
            with its terms except as limited by applicable bankruptcy,
            insolvency, reorganization, moratorium and other laws of general
            application affecting the enforcement of creditors' rights
            generally, and except as enforcement of rights to indemnity and
            contribution hereunder may be limited by United States federal or
            state securities laws or principles of public policy. The Shares,
            when issued as contemplated hereby, will be validly issued and
            outstanding, fully paid and non-assessable and not subject to
            preemptive or any other similar rights of the Shareholders or
            others.

     3.1.4  No Conflicts:  The execution, delivery and performance by Newco of
            ------------
            this Agreement, the issuance, sale and delivery of the Shares, and
            compliance with the provisions hereof by Newco, will not:

            (i)    violate any provision of applicable law, statute, rule or
                   regulation applicable to Newco or any ruling, writ,
                   injunction, order, judgment or decree of any court,
                   arbitrator, administrative agency or other governmental body
                   applicable to Newco or any of its properties or assets;

            (ii)   conflict with or result in any breach of any of the terms,
                   conditions or provisions of, or constitute (with notice or
                   lapse of time or both) a default (or give rise to any right
                   of termination, cancellation or acceleration) under the Newco
                   Bye-Laws or any material contract to which Newco is a party,
                   except where such violation, conflict or breach would not,
                   individually or in the aggregate, have a material adverse
                   effect on Newco; or

            (iii)  result in the creation of, any Encumbrance upon any of the
                   properties or assets of Newco.

     3.1.5  Approvals:  No permit, authorization, consent or approval of or by,
            ---------
            or any notification of or filing with, any Person is required in
            connection with the execution, delivery or performance of this
            Agreement by Newco. Newco has full authority to conduct its business
            as contemplated in the Business Plan and the Definitive Documents.

     3.1.6  Disclosure:  This Agreement does not contain any untrue statement of
            ----------
            a material fact or omit to state any material fact necessary to make
            the statements contained herein not misleading. Newco is not aware
            of any material contingency, event or circumstance relating to its
            business or prospects, which could have a material adverse effect
            thereon, in order for

                                       14
<PAGE>

            the disclosure herein relating to Newco not to be misleading in any
            material respect.

     3.1.7  No Business; No Liabilities:  Newco has not conducted any business
            ----------------------------
            or incurred any liabilities or obligations prior to the Closing
            Date, except solely in connection with its organization and
            formation.

3.2  Representations and Warranties of the Shareholders:  Each of the
     ---------------------------------------------------
     Shareholders hereby severally but not jointly represents and warrants to
     Newco as follows, as of the Closing Date:

     3.2.1  Organization:  Such Shareholder is a corporation duly organized and
            ------------
            validly existing under the laws of its jurisdiction of organization
            and has all the requisite corporate power and authority to own and
            lease its respective properties, to carry on its respective business
            as presently conducted and as proposed to be conducted and to carry
            out the transactions contemplated hereby.

     3.2.2  Authority:  Such Shareholder has full legal right, power and
            ----------
            authority to enter into this Agreement and to perform its
            obligations hereunder, which have been duly authorized by all
            requisite corporate action. This Agreement is the valid and binding
            obligation of such Shareholder, enforceable against it in accordance
            with its terms except as limited by applicable bankruptcy,
            insolvency, reorganization, moratorium and other laws of general
            application affecting the enforcement of creditors' rights
            generally, and except as enforcement of rights to indemnity and
            contribution hereunder may be limited by United States federal or
            state securities laws or principles of public policy.

     3.2.3  No Conflicts:  The execution, delivery and performance by such
            ------------
            Shareholder of this Agreement, purchase of the Shares, and
            compliance with the provisions hereof by such Shareholder will not:

            (i)  violate any provision of applicable law, statute, rule or
                 regulation known by and applicable to such Shareholder or any
                 ruling, writ, injunction, order, judgment or decree of any
                 court, arbitrator, administrative agency or other governmental
                 body applicable to such Shareholder or any of its properties or
                 assets;

            (ii) conflict with or result in any breach of any of the terms,
                 conditions or provisions of, or constitute (with notice or
                 lapse of time or both) a default (or give rise to any right of
                 termination, cancellation or acceleration) under the charter or
                 organizational documents of such Shareholder or any material
                 contract to which such Shareholder is a party, except where
                 such violation, conflict or breach would not,

                                       15
<PAGE>

                   individually or in the aggregate, have a material adverse
                   effect on such Shareholder; or

            (iii)  result in the creation of, any Encumbrance upon any of the
                   properties or assets of such Shareholder.

     3.2.4  Approvals:  No permit, authorization, consent or approval of or by,
            ----------
            or any notification of or filing with, any Person is required in
            connection with the execution, delivery or performance of this
            Agreement by such Shareholder.

     3.2.5  Investment Representations:  Such Shareholder is sophisticated in
            --------------------------
            transactions of this type and capable of evaluating the merits and
            risks of its investment in Newco. Such Shareholder has not been
            formed solely for the purpose of making this investment and such
            Shareholder is acquiring the Common Shares and Preference Shares for
            investment for its own account, not as a nominee or agent, and not
            with the view to, or for resale in connection with, any distribution
            of any part thereof. Such Shareholder understands that the Shares
            have not been registered under the Securities Act or applicable
            state and foreign securities laws by reason of a specific exemption
            from the registration provisions of the Securities Act and
            applicable state and foreign securities laws, the availability of
            which depends upon, among other things, the bona fide nature of the
            investment intent and the accuracy of such Shareholders'
            representations as expressed herein. Such Shareholder understands
            that no public market now exists for any of the Shares and that
            there is no assurance that a public market will ever exist for such
            Shares.

                                   CLAUSE 4

                           AUTHORIZATION AND CLOSING

4.1  Newco has authorized the issuance to (i) EIS of 2388 Preference Shares and
     (ii) Incara of 6000 Common Shares and 3612 Preference Shares, issuable as
     provided in Clause 4.3 hereof.

4.2  Incara and EIS hereby subscribe for the number of Shares set forth in
     Clause 4.1 and shall pay to Newco in consideration therefore, by wire
     transfer of immediately available funds (to a bank account established by
     Newco in connection with Completion) the subscription amounts each as
     provided in Clause 4.4.1.

4.3  The closing (the "Closing") shall take place at the offices of Brock
     Silverstein LLC at 800 Third Avenue, New York, New York 10022 on the
     Closing Date or such other places if any, as the Parties may agree and
     shall occur

                                       16
<PAGE>

     contemporaneously with the closing under the Incara Securities Purchase
     Agreement.

4.4  At the Closing, each of the Shareholders shall take or (to the extent
     within its powers) cause to be taken the following steps at Directors and
     shareholder meetings of Newco, or such other meetings, as appropriate:

     4.4.1  Newco shall issue and sell to EIS, and EIS shall purchase from
            Newco, upon the terms and subject to the conditions set forth
            herein, 2388 Preference Shares for an aggregate purchase price of
            $2,985,000;

            Newco shall issue and sell to Incara, and Incara shall purchase from
            Newco, upon the terms and conditions set forth herein, (i) 6000
            Common Shares for an aggregate purchase price of $7,500,000 and (ii)
            3612 Preference Shares for an aggregate purchase price of
            $4,515,000;

     4.4.2  the Parties shall execute and deliver to each other, as applicable,
            certificates in respect of the Common Shares and Preference Shares
            described above and any other certificates, resolutions or documents
            which the Parties shall reasonably require;

     4.4.3. the adoption by Newco of Newco Bye-Laws;

     4.4.4. the appointment of [*] as Directors of Newco;

     4.4.5. the resignation of all directors and the secretary of Newco holding
            office prior to the execution of this Agreement and delivery of
            written confirmation under seal by each Person so resigning that he
            has no claim or right of action against Newco and that Newco is not
            in any way obligated or indebted to him; and

     4.4.6. the transfer to Newco of the share register.

4.5  Exemption from Registration:
     ----------------------------

     The Shares will be issued under an exemption or exemptions from
     registration under the Securities Act.  Accordingly, the certificates
     evidencing the Shares shall, upon issuance, contain the following legend:



[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       17
<PAGE>

     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAWS OF A STATE OR
     OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD,
     TRANSFERRED, OR OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OF THE
     ORIGINAL HOLDER OR AS OTHERWISE PERMITTED IN THE AGREEMENT PURSUANT TO
     WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
     STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR
     BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
     SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO
     THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
     REASONABLY SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT
     REQUIRED UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS.

4.6. Newco shall use reasonable efforts to file any documents that require
     filing with the Registrar of Companies in Bermuda within the prescribed
     time limits.  EIS and Incara shall provide all reasonable co-operation to
     Newco in relation to the matters set forth in this Clause 4.6.

4.7. In the event that EIS exercises the Exchange Right, Newco and the
     Participants shall, immediately upon such exercise, take all necessary
     steps to ensure that EIS obtains full legal right, title and interest in
     and to the Preference Shares covered thereby.

     The Parties acknowledge that such Shares have been pledged to EIS pursuant
     to the Incara Securities Purchase Agreement and that EIS' lawyers have
     physical possession of such Shares.  Upon exercise by EIS of the Exchange
     Right, EIS shall be entitled to take full legal ownership of, and title to,
     such Shares in accordance with the applicable provisions of the Incara
     Securities Purchase Agreement.  In the event that EIS fails to exercise the
     Exchange Right, EIS shall cause such Shares to be promptly returned to
     Incara.

                                   CLAUSE 5

                   DIRECTORS; MANAGEMENT AND R&D COMMITTEES

5.1. Directors:
     ---------

                                       18
<PAGE>

     5.1.1  Prior to the exercise of the Exchange Right, the Board shall be
            composed of five Directors.

            Incara shall have the right to nominate four directors of Newco,
            provided that at least two such directors are residents of Bermuda,
            ("Incara Directors") and EIS shall have the right to nominate one
            Director of Newco ("EIS Director") which Director, save as further
            provided herein, shall only be entitled to 15% of the votes of the
            Board.

            In the event that the Exchange Right is exercised by EIS within [*]
            years following the Closing Date, the EIS Director shall only be
            entitled to 15% of the votes of the Board until the expiry of [*]
            years from the Closing Date.

            In the event that the Exchange Right is exercised by EIS at any time
            after two years following the Closing Date or upon the expiry of [*]
            years following the Closing Date where the Exchange Right has been
            exercised by EIS within [*] years following the Closing Date, each
            of Incara, and EIS shall cause the Board to be reconfigured so that
            an equal number of Directors are designated by EIS and Incara and
            that each of the Directors has equal voting power.

     5.1.2  If EIS removes the EIS Director, or Incara removes any of the Incara
            Directors, EIS or Incara, as the case may be, shall indemnify the
            other Shareholder against any claim by such removed Director arising
            from such removal.

     5.1.3  The Directors shall meet not less than [*] times in each Financial
            Year and all Board meetings shall be held in Bermuda to ensure the
            sole residence of Newco in Bermuda.

     5.1.4  At any such meeting, the presence of the EIS Director and at least
            two of the Incara Directors shall be required to constitute a quorum
            and, subject to Clause 17 hereof, the affirmative vote of a majority
            of the Directors present at a meeting at which such a quorum is
            present shall constitute an action of the Directors. In the event of
            any meeting being inquorate, the meeting shall be adjourned for a
            period of seven days. A notice shall be sent to the EIS Director and
            the Incara Directors specifying the date, time and place where such
            adjourned meeting is to be held and reconvened.

     5.1.5  On the Closing Date, Incara may appoint one of the Incara Directors
            to be the chairman of Newco. The chairman of Newco shall hold office
            until:



[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       19
<PAGE>

            (i)  the first meeting of the Board following the exercise by EIS of
                 the Exchange Right, where the Exchange Right has been exercised
                 by EIS after [*] years following the Closing Date; or

            (ii) the first meeting of the Board following the expiry of [*]
                 years following the Closing Date where the Exchange Right has
                 been exercised by EIS within [*] years following the Closing
                 Date

            (in each case the "Chairman Status Board Meeting")

            After the Chairman Status Board Meeting, each of EIS and Incara,
            beginning with EIS at the Chairman Status Board Meeting, shall have
            the right, exercisable alternatively, of nominating one Director to
            be chairman of Newco for a term of one year.

            If the chairman is unable to attend any meeting of the Board held
            prior to the Chairman Status Board Meeting, the Incara Directors
            shall be entitled to appoint another Incara Director to act as
            chairman in his place at the meeting.

            If the chairman of Newco is unable to attend any meeting of the
            Board held after the Chairman Status Board Meeting, the Directors
            shall be entitled to appoint another Director to act as chairman of
            Newco in his place at the meeting.

     5.1.6  In case of an equality of votes at a meeting of the Board, the
            chairman of Newco shall not be entitled to a second or casting vote.
            In the event of continued deadlock, the Board shall resolve the
            deadlock pursuant to the provisions set forth in Clause 18.

  5.2  Management and R&D Committees:
       ------------------------------

     5.2.1  The Board shall appoint a management committee (the "Management
            Committee") to consist initially of four members, two of whom shall
            be nominated by Elan and two of whom shall be nominated by Incara,
            and each of whom shall be entitled to one vote, whether or not
            present at any Management Committee meeting. Decisions of the
            Management Committee shall require approval of at least one Elan
            nominee on the Management Committee and one Incara nominee on the
            Management Committee.


     [*] Confidential Treatment Requested; Certain Information Omitted and Filed
          Separately with the SEC.

                                       20
<PAGE>

            Each of Elan and Incara shall be entitled to remove any of their
            nominees to the Management Committee and appoint a replacement
            therefor. The number of members of the Management Committee may be
            altered if agreed to by a majority of the directors of Newco;
            provided that, each of Elan and Incara shall be entitled to appoint
            an equal number of members to the Management Committee. The
            Management Committee shall be responsible for, inter alia, devising,
            implementing and reviewing strategy for the Project.

     5.2.2  The Management Committee shall appoint a research and development
            committee (the "R&D Committee"), which shall initially be comprised
            of four members, two of whom shall be nominated by Elan and two of
            whom shall be nominated by Incara, and each of whom shall have one
            vote, whether or not present at an R&D Committee meeting. Decisions
            of the R&D Committee shall require approval of at least one Elan
            nominee on the R&D Committee and one Incara nominee on the R&D
            Committee.

            Each of Elan and Incara shall be entitled to remove any of their
            nominees to the R&D Committee and appoint a replacement therefor.
            The number of members of the R&D Committee may be altered if agreed
            to by a majority of the directors of Newco provided that each of
            Elan and Incara shall be entitled to appoint an equal number of
            members to the R&D Committee.

     5.2.3  The R&D Committee shall be responsible for, inter alia:-

            (1)  designing that portion of the Business Plan that relates to the
                 Project for consideration by the Management Committee;

            (2)  establishing a joint Project team consisting of an equal number
                 of team members from Elan and Incara, including one Project
                 leader from each of Elan and Incara; and

            (3)  implementing such portion of the Business Plan that relates to
                 the Project, as approved by the Management Committee.

     5.2.4  In the event of any dispute amongst the R&D Committee, the R&D
            Committee shall refer such dispute to the Management Committee whose
            decision on the dispute shall be binding on the R&D Committee.

            If the Management Committee cannot resolve any dispute referred to
            it by the R&D Committee, or any dispute within the Management
            Committee, after 15 days or such other period as may be agreed by
            the Management Committee, the dispute will be referred to a
            designated senior officer of each of Elan and Incara, and
            thereafter, in the event of continued deadlock, pursuant to the
            deadlock provisions set forth in Clause 18,

                                       21
<PAGE>

            involving inter alia, the referral of the dispute to an expert,
            whose decision, however, will ultimately be non-binding on the
            Participants.

                                   CLAUSE 6

                         THE BUSINESS PLAN AND REVIEWS

6.1  The Directors shall meet together as soon as reasonably practicable after
     the Closing Date and shall agree upon and approve the Business Plan for the
     current Financial Year within 60 days of the Closing Date.

6.2. The Business Plan shall be subject to ongoing review and updating by the
     Directors and the approval of the EIS Director and the Incara Directors on
     a quarterly basis.

6.3  It is estimated that Newco will require an US$[*] to commence and continue
     the development of the Products (the "Development Funding").

     Subject to Clause 6.4, during the R&D Term, EIS and Incara may provide to
     Newco, by way of contributed surplus or loan, as may be agreed to by both
     EIS and Incara, up to an aggregate maximum amount of US$[*] in Development
     Funding, [*], such funding to be provided by EIS and Incara on a pro rata
     basis based on their respective equity interests, on a fully-diluted basis,
     at the time of each such funding, in Newco.

6.4  Neither Participant shall be obliged to provide Development Funding [*] to
     Newco in the absence of quarterly approval of the Business Plan and a
     determination by each Participant, in its sole discretion, that Development
     Funding [*] shall be provided for the development of the Products.

6.5  [*]

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
    Separately with the SEC.]

                                      22

<PAGE>

     [*]

                                   CLAUSE 7

                         RESEARCH AND DEVELOPMENT WORK

7.1  It is the expectation of the Parties that [*] shall perform substantially
     all the research and development work in the Project in accordance with the
     provisions of this Clause 7.

     Subject to the provisions of Clause 6.3 and Clause 6.4, each of Elan and
     Incara Elan may, at its respective discretion, provide research and
     development services to Newco, at the request of Newco and as articulated
     in the Business Plan in furtherance of the development and
     commercialization of the Products and cultivation of patent rights and
     know-how related to the Elan Intellectual Property, Incara Intellectual
     Property and Newco Intellectual Property.

     It is acknowledged by the Parties that Incara has undertaken research and
     development work relating to the Compound prior to the Closing Date.  For
     the avoidance of doubt, Incara has agreed to indemnify and continues to
     indemnify the other parties hereto against any claims, losses or damages
     arising against any party thereunder prior to the Closing Date.

7.2   The cost of any research and development work undertaken by Elan and/or
     Incara shall be calculated based on a rate of $[*] per FTE (Full Time
     Equivalent Employee Rate) per year (an FTE being the equivalent of 1500
     hours per year per employee).

     Research and development work that is subcontracted by Elan or Incara to
     third party providers shall be charged by Elan or Incara to Newco at the
     amount invoiced by the relevant third party provider.

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
     Separately with the SEC.

                                       23
<PAGE>

7.3  Newco shall pay Incara and Elan for any research and development work
     carried out by them on behalf of Newco at the end of each month during the
     R&D Program, subject to the proper vouching of research and development
     work and expenses.  An invoice shall be issued to Newco by Incara or Elan,
     as applicable, by the 15/th/ day of the month following the month in which
     work was performed.

7.4  Elan and Incara shall permit Newco or its duly authorized representative on
     reasonable notice and at any reasonable time during normal business hours
     to have access to inspect and audit the accounts and records of Elan or
     Incara and any other book, record, voucher, receipt or invoice relating to
     the calculation or the cost of the R&D Program and to the accuracy of the
     reports which accompanied them. Any such inspection of Elan's or Incara's
     records, as the case may be, shall be at the expense of Newco, except that
     if such inspection reveals an overpayment in the amount paid to Elan or
     Incara, as the case may be, for the R&D Program hereunder in any Financial
     Year of 5% or more of the amount due to Elan or Incara, as the case may be,
     then the expense of such inspection shall be borne solely by Elan or
     Incara, as the case may be, instead of by Newco. Any surplus over the sum
     properly payable by Newco to Elan or Incara, as the case may be, shall be
     paid promptly by Elan or Incara, as the case may be, to Newco. If such
     inspection reveals a deficit in the amount of the sum properly payable to
     Elan or Incara, as the case may be, by Newco, Newco shall pay the deficit
     to Elan or Incara, as the case may be.

                                   CLAUSE 8

                               COMMERCIALIZATION

8.1  Newco shall diligently pursue the research, development, prosecution and
     commercialization of the Products as provided in the Business Plan.

8.2  At such time as Newco notifies EIS in writing that Newco in good faith
     intends to commercialize a Product, EIS shall have a first option to
     negotiate the terms of any agreement for the commercialization of such
     Product, which option shall be exercised within 45 days of EIS' receipt of
     such written notification from Newco (the "EIS/Newco Option").  If EIS
     elects to enter into such negotiations, the Parties shall negotiate in good
     faith the terms of the agreement for the commercialization of such Product
     by EIS.

                                       24
<PAGE>

     If, despite good faith negotiations, EIS and Newco do not reach agreement
     within 120 days from EIS' exercise of the EIS/Newco Option, then Newco
     shall be free for a period of [*] months thereafter to enter into
     negotiations with a third party (other than a Technological Competitor of
     Elan) to agree upon terms upon which the third party would commercialize
     the Product in the Territory, provided that such terms when taken as a
     whole, are not more favorable to the third party than the principal terms
     of the last written proposal offered by Newco to EIS or by EIS to Newco, as
     the case may be.

     If Newco has not entered into an agreement with a third party within the
     [*] month period described above, the EIS/Newco Option shall be deemed to
     have re-commenced upon the same terms as set forth herein [*].

                                   CLAUSE 9

                 OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS[*]

9.1. The Parties acknowledge and agree to be bound by the provisions of Clause
     3 of the Elan License Agreement and Clause 3 of the Incara License
     Agreement which set forth the agreement between the Parties in relation to
     the ownership of the Elan Intellectual Property, the Incara Intellectual
     Property and the Newco Intellectual property respectively.

9.2  The Parties acknowledge and agree to be bound by the provisions of Clause
     4 of the Elan License Agreement and the provisions of Clause 4 of the
     Incara License Agreement which set forth the agreement between the parties
     thereto in relation to the [*] obligations of Elan and Incara,
     respectively.

                                   CLAUSE 10

                         INTELLECTUAL PROPERTY RIGHTS

10.1 Elan, at [*] expense, may:

     10.1.1  secure the grant of any patent applications within the Elan
             Intellectual Property in the Field;

     10.1.2  file and prosecute patent applications on patentable inventions and
             discoveries relating to the same;

     10.1.3  defend all such applications against third party oppositions; and

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       25
<PAGE>

     10.1.4  maintain in force any issued letters patent relating to the same.

     Elan shall have the right in its discretion to control such filing,
     prosecution, defense and maintenance, provided that Newco and Incara at
     their request shall be provided with copies of all documents relating to
     such filing, prosecution, defense and maintenance in sufficient time to
     review such documents and comment thereon prior to filing.

10.2 Incara, at [*] expense, may:

     10.2.1  secure the grant of any patent applications within the Incara
             Intellectual Property in the Field;

     10.2.2  file and prosecute patent applications on patentable inventions and
             discoveries relating to the same;

     10.2.3  defend all such applications against third party oppositions; and

     10.2.4  maintain in force any issued letters patent that relate to the
             same.

     Incara shall have the right in its discretion to control such filing,
     prosecution, defense and maintenance provided that Elan and Newco at their
     request shall be provided with copies of all documents relating to such
     filing, prosecution, defense and maintenance in sufficient time to review
     such documents and comment thereon prior to filing.

10.3 All results of research and development pursuant to the Project shall be
     promptly disclosed by each Party to the Management Committee.

     The Management Committee shall review on an ongoing basis whether such
     results constitute Incara Intellectual Property, Elan Intellectual Property
     or Newco Intellectual Property having regard to the provisions of this
     Agreement.

     In the event that the disclosing Party informs the other Parties that it
     does not intend to file patent applications on disclosed patentable
     inventions and discoveries, or maintain issued patents which are Incara
     Intellectual Property or Elan Intellectual Property, as the case may be,
     that relate to the Products or the Field in one or more countries in the
     Territory or fails to file such an application within a reasonable period
     of time, Newco may request such disclosing Party to file and prosecute such
     patent application(s) at Newco's expense.

     The disclosing Party shall comply with such request unless the disclosing
     party believes such request is without merit.

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       26
<PAGE>

10.4 Newco at [*] expense, may:

     10.4.1  secure the grant of any patent applications within the Newco
             Intellectual Property in the Field;

     10.4.2  file and prosecute patent applications on patentable inventions and
             discoveries relating to the same;

     10.4.3  defend all such applications against third party oppositions; and

     10.4.4  maintain in force any issued letters patent that relate to the
             same.

     Newco shall have the right in its discretion to control such filing,
     prosecution, defense and maintenance provided that Elan and Incara at their
     request shall be provided with copies of all documents relating to such
     filing, prosecution, defence and maintenance in sufficient time to review
     such documents and comment thereon prior to filing.

10.5 In the event that Newco informs both Elan and Incara that it does not
     intend to file an application on disclosed patentable inventions and
     discoveries or maintain any issued patent within the Newco Intellectual
     Property, Elan shall have the right to file and prosecute such patent
     applications on inventions which relate predominantly to the Elan
     Intellectual Property, and Incara shall have the right to file and
     prosecute and maintain such patent applications on inventions which relate
     predominantly to the Incara Intellectual Property, and Elan and Incara
     agree to negotiate in good faith on the course of action to be taken with
     respect to Newco Intellectual Property that relates equally to both Elan
     Intellectual Property and Incara Intellectual Property.

10.6 Each Party shall notify the Management Committee in a timely manner of any
     decision to abandon a pending or issued patent relating to the Compound,
     the System, the Products or the Field.  The other Party (that is Incara in
     the case that Elan proposes to abandon; and Elan in the case that Incara
     proposes to abandon) shall have the option of requesting the owner of the
     pending or issued patent to continue the prosecution or maintenance of such
     pending or issued patent at Newco's expense, provided that such decision is
     commercially reasonable.

10.7 The Parties shall promptly inform each other in writing of any actual or
     alleged unauthorized use of Elan Intellectual Property, the Incara
     Intellectual Property or the Newco Intellectual Property by a third party
     of which it becomes aware and provide the others with any available
     evidence of such unauthorized use.


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       27
<PAGE>

10.8  At its option, as the case may be, Elan or Incara shall have the first
      option to enforce at [*] expense and for [*] benefit any unauthorized use
      of its respective intellectual property (the Elan Intellectual Property or
      the Incara Intellectual Property, as the case may be,) in the Field.

      At the enforcing party's request, the other Parties shall cooperate with
      such action.

      Should Elan or Incara decide not to enforce the Elan Intellectual Property
      or the Incara Intellectual Property respectively, against such
      unauthorized use in the Field, within a reasonable period but in any event
      within 20 days after receiving written notice of such actual or alleged
      unauthorized use, Newco may in its discretion request the respective
      intellectual property owner to initiate such proceedings in Newco's name,
      at Newco's expense and for Newco's benefit. Elan or Incara, as the case
      may be, shall cooperate in bringing such action on Newco's behalf unless
      Elan or Incara believe in good faith that such an action is without merit.

      Alternatively, Elan or Incara may agree to enforce either or both such
      Party's intellectual property in their joint names and shall reach
      agreement as to the proportion in which they shall share the proceeds of
      any such action, and the expense of any costs not recovered,

10.9  Newco shall have the first right but not the obligation to bring suit or
      otherwise take action against any alleged infringement of the Newco
      Intellectual Property or alleged unauthorized use of the Newco
      Intellectual Property.

      In the event that Newco takes such action, Newco shall do so at its own
      cost and expense and all damages and monetary award recovered in or with
      respect to such action shall be the property of Newco.

      Newco shall keep Elan and Incara informed of any action in a timely manner
      so as to enable Incara and Elan to provide input in any such action and
      Newco shall reasonably take into consideration any such input.

      At Newco's request, the Parties shall co-operate with any such action at
      Newco's cost and expense.

10.10 In the event that Newco does not bring suit or otherwise take action
      against an infringement of any Newco Intellectual Property or
      misappropriation of the Newco Intellectual Property:


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       28
<PAGE>

      10.10.1 if only one Participant determines to pursue such suit or take
              such action at its own cost and expense, it shall be entitled to
              all damages and monetary award recovered in or with respect to
              such action; and

      10.10.2 if the Participants pursue such suit or action jointly outside of
              Newco, they shall negotiate in good faith an appropriate
              allocation of costs, expenses and recovery amounts. At the
              Participants' request, Newco shall co-operate with any such action
              at the Participants' cost and expense.

10.11 In the event that a claim is or proceedings are brought against Newco by a
      third party alleging that the sale, distribution or use of a Product in
      the Territory or use of the Elan Intellectual Property or the Incara
      Intellectual Property, as the case may be, infringes the intellectual
      property rights of such third party, Newco shall promptly advise the other
      Parties of such threat or suit.

      Save in respect of claims by Newco against either Participant or by a
      third party against Newco where there has been a breach of representation
      or warranty under the Elan License Agreement or the Incara License
      Agreement, by Elan or Incara, respectively, Newco shall indemnify, defend
      and hold harmless Elan or Incara, as the case may be, against all actions,
      losses, claims, demands, damages, costs and liabilities (including
      reasonable attorneys fees) relating directly or indirectly to all such
      claims or proceedings, provided that Elan or Incara, as the case may be,
      shall not acknowledge to the third party or to any other person the
      validity of any claims of such a third party, and shall not compromise or
      settle any claim or proceedings relating thereto without the prior written
      consent to Newco, not to be unreasonably withheld or delayed.

      At its option, Elan or Incara, as the case may be, may elect to take over
      the conduct of such proceedings from Newco provided that Newco's
      indemnification obligations shall continue; the costs of defending such
      claim shall be borne by Elan or Incara, as the case may be and such Party
      shall not compromise or settle any such claim or proceeding without the
      prior written consent of Newco, such consent not to be unreasonably
      withheld or delayed.

                                   CLAUSE 11

          CROSS LICENSING/EXPLOITATION OF PRODUCTS OUTSIDE THE FIELD

11.1  Solely for the purposes of, and only to the extent necessary, to enable
      Elan to conduct research and development work on behalf of Newco, Newco
      shall grant to Elan [*] license for the term of the License Agreements:


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       29
<PAGE>

     11.1.1  to use the Newco Intellectual Property in the Field in the
             Territory; and

     11.1.2  subject to the terms and conditions of the Incara License Agreement
             and the Elan License Agreement, a sublicense to use the Incara
             Intellectual Property and the Elan Intellectual Property in the
             Field in the Territory.

11.2 Solely for the purposes of, and only to the extent necessary, to enable
     Incara to conduct research and development work on behalf of Newco, Newco
     shall grant to Incara [*] license for the term of the License Agreements:

     11.2.1  to use the Newco Intellectual Property in the Field in the
             Territory; and

     11.2.2  subject to the terms and conditions of the Elan License Agreement
             and the Incara License Agreement, a sublicense to use the Elan
             Intellectual Property and the Incara Intellectual Property in the
             Field in the Territory.

                                   CLAUSE 12

                      REGULATORY MATTERS/CLINICAL TRIALS

12.1 Newco shall keep the other Parties promptly and fully advised of Newco's
     regulatory activities, progress and procedures.  Newco shall inform the
     other Parties of any dealings it shall have with an RHA, and shall furnish
     the other Parties with copies of all material correspondence relating to
     the Products.  The Parties shall collaborate to obtain any required
     Regulatory Approval of the RHA to market the Products.

12.2 Newco shall, at its own cost, file, prosecute and maintain any and all
     Regulatory Applications for the Products in the Territory in accordance
     with the Business Plan.

12.3 Subject to Clause 12.5, any and all Regulatory Approvals obtained hereunder
     for any Product shall remain the property of Newco, provided that Newco
     shall allow Elan and Incara access thereto to enable Elan and Incara to
     fulfill their respective obligations and exercise their respective rights
     under this Agreement. Newco shall maintain such Regulatory Approvals at its
     own cost.


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
     Separately with the SEC.

                                       30
<PAGE>

12.4 It is hereby acknowledged that there are inherent uncertainties involved in
     the registration of pharmaceutical products with the RHA's insofar as
     obtaining approval is concerned and such uncertainties form part of the
     business risk involved in undertaking the form of commercial collaboration
     as set forth in this Agreement.

12.5 All Regulatory Approvals and the DMF (Drug Master File) relating to the
     Compound(s) shall be processed by and be the property of Incara and at all
     times held in Incara's sole name.

     All regulatory approvals and the MAF (Master File) relating to the System
     shall be processed by and be the property of Elan and at all times held in
     Elan's sole name.

     Each of Elan and Incara will authorize Newco to reference such Party's DMF
     or MAF, as described herein, with any RHA to the extent necessary for
     Newco's regulatory purposes.

     Newco will authorize Elan and Incara to reference Newco's Regulatory
     Approvals to the extent necessary for Elan's and Incara's regulatory
     purposes relating specifically to the Project.

12.6 The Management Committee shall, by unanimous agreement, be responsible for
     determining Newco's strategy as regards the conduct of any clinical trials
     with respect to the development of the Products.  Any agreement between
     Newco and Elan or Incara, as the case may be, or between Newco and any
     independent third party relating to the conduct of any clinical trial with
     respect to the development of the Products shall require the prior approval
     in writing of Elan and Incara, which shall not be unreasonably withheld.

     For the avoidance of doubt, where Elan or Incara commences any clinical
     trial with respect to the development of the Products (the "Clinical Trial
     Co-ordinator") such Clinical Trial Co-ordinator will indemnify the other
     Parties hereto (for the avoidance of doubt, including Elan or Incara, as
     the case may be) against any claims, losses or damages arising against any
     such other Party hereto in connection with any such clinical trial with
     respect to the development of the Products.

12.7 The Parties agree that each Party shall effect and maintain comprehensive
     general liability insurance in respect of all clinical trials and other
     activities performed by them on behalf of Newco.  The Participants and
     Newco shall ensure that the industry standard insurance policies shall be
     in place for all activities to be carried out by Newco.

                                   CLAUSE 13

                                       31
<PAGE>

                                 MANUFACTURING

13.1 Subject to the provisions of Clause 13.2, Newco shall be responsible for
     assembling and manufacturing, or having assembled and manufactured, all
     quantities of Products required for the development and commercialization
     of Products for use in the Field in the Territory.

13.2 Elan shall have the first right to manufacture and supply, and/or
     subcontract the manufacture and supply, of the System with respect to the
     Product on industry standard, commercially reasonable terms negotiated in
     good faith on an arms' length basis by Newco and Elan; and Incara shall,
     subject to the Opocrin Agreement, have the first right to manufacture and
     supply, and/or subcontract the manufacture and supply, of the Compound with
     respect to the Product, on industry standard, commercially reasonable terms
     negotiated in good faith on an arms' length basis by Newco and Incara.

13.3 Any such supply agreements (including quality agreements) shall be
     negotiated and agreed by the Parties not later than the date of completion
     of Phase III (as such term is commonly used in connection with FDA
     applications) of the R&D Plan.  The terms of the said supply agreements
     shall be negotiated in good faith on standard industry and commercial
     terms.

13.4 The cost charged by Elan and/or Incara to Newco in respect of the
     provision by Elan and/or Incara to Newco of any clinical trial supplies
     pursuant to the Project shall be agreed by the Parties as soon as
     practicable in advance of supply to Newco.

                                   CLAUSE 14

                       TECHNICAL SERVICES AND ASSISTANCE

14.1 Whenever commercially and technically feasible, Newco shall contract with
     Incara or Elan, as the case may be, to perform such other services as Newco
     may require, other than those specifically dealt with hereunder or in the
     License Agreements.  In determining which Party should provide such
     services, the Management Committee shall take into account the respective
     infrastructure, capabilities and experience of Elan and Incara.  There
     shall be no obligation upon either of Incara or Elan to perform such
     services.

14.2 Newco shall, if the Participants so agree, conclude an administrative
     support agreement with Elan and/or Incara on such terms as the Parties
     thereto shall in good faith negotiate.  The administrative services shall
     include one or more of the following administrative services as requested
     by Newco:

     14.2.1  accounting, financial and other services;

                                       32
<PAGE>

     14.2.2  tax services;

     14.2.3  insurance services;

     14.2.4  human resources services;

     14.2.5  legal and company secretarial services;

     14.2.6  patent and related intellectual property services; and

     14.2.7  all such other services consistent with and of the same type as
             those services to be provided pursuant to this Agreement, as may be
             required.

     The foregoing list of services shall not be deemed exhaustive and may be
     changed from time to time upon written request by Newco.

14.3 If Elan or Incara so requires, Incara or Elan, as the case may be, shall
     receive, at times and for periods mutually acceptable to the Parties,
     employees of the other Party (such employees to be acceptable to the
     receiving Party in the matter of qualification and competence) for
     instruction in respect of the Elan Intellectual Property or the Incara
     Intellectual Property, as the case may be, as necessary to further the
     Project.

14.4 The employees received by Elan or Incara, as the case may be, shall be
     subject to obligations of confidentiality no less stringent than those set
     out in Clause 21 and such employees shall observe the rules, regulations
     and systems adopted by the Party receiving the said employees for its own
     employees or visitors.

                                   CLAUSE 15

            AUDITORS, BANKERS, ACCOUNTING REFERENCE DATE; SECRETARY

Unless otherwise agreed by the Participants and save as may be provided to the
contrary herein:

15.1 the bankers of Newco shall be [*] or such other bank as may be mutually
     agreed from time to time;

15.2 the accounting reference date of Newco shall be September 30 in each
     Financial Year; and

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
     Separately with the SEC.

                                       33
<PAGE>

15.3 the secretary of Newco shall be [*] or such other Person as may be
     appointed by the Directors from time to time.

                                   CLAUSE 16

                             TRANSFERS OF SHARES;
                    RIGHT OF FIRST OFFER; TAG ALONG RIGHTS

General:
--------

16.1. Until such time as the Common Shares shall be registered pursuant to the
      Exchange Act and be publicly traded in an established securities market,
      no Shareholder shall, directly or indirectly, sell or otherwise transfer
      (each, a "Transfer") any Shares held by it except in as expressly
      permitted by and accordance with the terms of this Agreement. Newco shall
      not, and shall not permit any transfer agent or registrar for any Shares
      to, transfer upon the books of Newco any Shares from any Shareholder to
      any transferee, in any manner, except in accordance with this Agreement,
      and any purported transfer not in compliance with this Agreement shall be
      void.

      During the R&D Term, no Shareholder shall, directly or indirectly, sell or
      otherwise Transfer any of its legal and/or beneficial interest in the
      Shares held by it to any other Person. After completion of the R&D Term, a
      Shareholder may Transfer Shares provided such Shareholder complies with
      the provisions of Clauses 16.2 and 16.3.

      Notwithstanding anything contained herein to the contrary, at all times,
      EIS and/or Incara shall have the right to Transfer any Shares to their
      Affiliates provided, however, that such assignment does not result in
      adverse tax consequences for any other Parties. EIS shall have the right
      to Transfer any Shares to a special purpose financing or similar entity
      established by Elan or EIS; provided, that such Affiliates or other
      Permitted Transferee to which such legal and/or beneficial interest in the
      Shares have been transferred shall agree to be expressly subject to and
      bound by all the limitations and provisions which are embodied in this
      Agreement.

16.2  No Shareholder shall, except with the prior written consent of the other
      Shareholder, create or permit to subsist any Encumbrance over, or grant
      any option or other rights in all or any of the Shares held by it (other
      than by a Transfer of such Shares in accordance with the provisions of
      this Agreement).


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
Separately with the SEC.

                                       34
<PAGE>

16.3  Rights of First Offer:
      ----------------------

      If at any time after the end of the R&D Term a Shareholder shall desire to
      Transfer any Shares owned by it (a "Selling Shareholder"), in any
      transaction or series of related transactions other than a Transfer to an
      Affiliate or subsidiary or in the case of EIS to a special purpose
      financing or similar entity established by EIS, then such Selling
      Shareholder shall deliver prior written notice of its desire to Transfer
      (a "Notice of Intention") (i) to Newco and (ii) to the Shareholders who
      are not the Selling Shareholder (and any transferee thereof permitted
      hereunder, if any), as applicable, setting forth such Selling
      Shareholder's desire to make such Transfer, the number of Shares proposed
      to be transferred (the "Offered Shares") and the proposed form of
      transaction (the "Transaction Proposal"), together with any available
      documentation relating thereto, if any, and the price at which such
      Selling Shareholder proposes to Transfer the Offered Shares (the "Offer
      Price"). The "Right of First Offer" provided for in this Clause 16 shall
      be subject to any "Tag Along Right" benefiting a Shareholder which may be
      provided for by Clause 16, subject to the exceptions set forth therein.

      Upon receipt of the Notice of Intention, the Shareholders who are not the
      Selling Shareholder shall have the right to purchase at the Offer Price
      the Offered Shares, exercisable by the delivery of notice to the Selling
      Shareholder (the "Notice of Exercise"), with a copy to Newco, within 10
      business days from the date of receipt of the Notice of Intention. If no
      such Notice of Exercise has been delivered by the Shareholders who are not
      the Selling Shareholder within such 10-business day period, or such Notice
      of Exercise does not relate to all of the Offered Shares covered by the
      Notice of Intention, then the Selling Shareholder shall be entitled to
      Transfer all of the Offered Shares to the intended transferee. In the
      event that all of the Offered Shares are not purchased by the non-selling
      Shareholders, the Selling Shareholder shall sell the available Offered
      Shares within 30 days after the delivery of such Notice of Intention on
      terms no more favourable to a third party than those presented to the non-
      selling Shareholders. If such sale does not occur, the Offered Shares
      shall again be subject to the Right of First Offer set forth in Clause
      16.3.

      In the event that any of the Shareholders who are not the Selling
      Shareholder exercises their right to purchase all of the Offered Shares
      (in accordance with this Clause 16), then the Selling Shareholder shall
      sell all of the Offered Shares to such Shareholder(s), in the amounts set
      forth in the Notice of Intention, after not less than 10 business days and
      not more than 25 business days from the date of the delivery of the Notice
      of Exercise. In the event that more than one of the Shareholders who are
      not the Selling Shareholders wish to purchase the Offered Shares, the
      Offered Shares shall be allocated to such Shareholders on the basis of
      their pro rata equity interests in Newco.

                                       35
<PAGE>

      The rights and obligations of each of the Shareholders pursuant to the
      Right of First Offer provided herein shall terminate upon the date that
      the Common Shares is registered under Section 12(b) or 12(g) of the
      Exchange Act.

      At the closing of the purchase of all of the Offered Shares by the
      Shareholders who are not the Selling Shareholder (scheduled in accordance
      with Clause 16), the Selling Shareholder shall deliver certificates
      evidencing the Offered Shares being sold, duly endorsed, or accompanied by
      written instruments of transfer in form reasonably satisfactory to the
      Shareholders who are not the Selling Shareholder, duly executed by the
      Selling Shareholder, free and clear of any adverse claims, against payment
      of the purchase price therefor in cash, and such other customary documents
      as shall be necessary in connection therewith.

16.4  Tag Along Rights:
      -----------------

      Subject to Clause 16.3, a Shareholder (the "Transferring Shareholder")
      shall not Transfer (either directly or indirectly), in any one transaction
      or series of related transactions, to any Person or group of Persons, any
      Shares, unless the terms and conditions of such Transfer shall include an
      offer to the other Shareholders (the "Remaining Shareholders"), to sell
      Shares at the same price and on the same terms and conditions as the
      Transferring Shareholder has agreed to sell its Shares (the "Tag Along
      Right").

      In the event a Transferring Shareholder proposes to Transfer any Shares in
      a transaction subject to this Clause 16.4, it shall notify, or cause to be
      notified, the Remaining Shareholders in writing of each such proposed
      Transfer. Such notice shall set forth: (i) the name of the transferee and
      the amount of Shares proposed to be transferred, (ii) the proposed amount
      and form of consideration and terms and conditions of payment offered by
      the transferee (the "Transferee Terms") and (iii) that the transferee has
      been informed of the Tag Along Right provided for in this Clause 16.4, if
      such right is applicable, and the total number of Shares the transferee
      has agreed to purchase from the Shareholders in accordance with the terms
      hereof.

      The Tag Along Right may be exercised by each of the Remaining Shareholders
      by delivery of a written notice to the Transferring Shareholder (the "Co-
      sale Notice") within 10 business days following receipt of the notice
      specified in the preceding subsection. The Co-sale Notice shall state the
      number of Shares owned by such Remaining Shareholder which the Remaining
      Shareholder wishes to include in such Transfer; provided, however, that
      without the written consent of the Transferring Shareholder, the amount of
      such securities belonging to the Remaining Shareholder included in such
      Transfer may not be greater than such Remaining Shareholder's percentage
      beneficial ownership of Fully Diluted Common Shares multiplied by the
      total number of Fully Diluted Common Shares to be sold by both the
      Transferring Shareholder and all Remaining Shareholders. Upon receipt of a
      Co-sale Notice, the Transferring Shareholder shall be obligated

                                       36
<PAGE>

      to transfer at least the entire number of Shares set forth in the Co-sale
      Notice to the transferee on the Transferee Terms; provided, however, that
      the Transferring Shareholder shall not consummate the purchase and sale of
      any Shares hereunder if the transferee does not purchase all such Shares
      specified in all Co-sale Notices. If no Co-sale Notice has been delivered
      to the Transferring Shareholder prior to the expiration of the 10 business
      day period referred to above and if the provisions of this Section have
      been complied with in all respects, the Transferring Shareholder shall
      have the right for a 45 day calendar day period to Transfer Shares to the
      transferee on the Transferee Terms without further notice to any other
      party, but after such 45-day period, no such Transfer may be made without
      again giving notice to the Remaining Shareholders of the proposed Transfer
      and complying with the requirements of this Clause 16.

      At the closing of any Transfer of Shares subject to this Clause 16.4, the
      Transferring Shareholder, and the Remaining Shareholder, in the event such
      Tag Along Right is exercised, shall deliver certificates evidencing such
      securities as have been Transferred by each, duly endorsed, or accompanied
      by written instruments of transfer in form reasonably satisfactory to the
      transferee, free and clear of any adverse claim, against payment of the
      purchase price therefor.

      Notwithstanding the foregoing, this Clause 16.4 shall not apply to any
      sale of Common Shares pursuant to an effective registration statement
      under the Securities Act in a bona fide public offering.

                                   CLAUSE 17

                   MATTERS REQUIRING SHAREHOLDERS' APPROVAL

17.1  In consideration of Incara and Elan agreeing to enter into the License
      Agreements, the Parties hereby agree that Newco shall not without the
      prior approval in writing of EIS and Incara:

      17.1.1.  make a material Newco determination outside the ordinary course
               of business, including, among other things, acquisitions or
               dispositions of intellectual property and licenses or
               sublicenses, changes in the Business or the Newco budget, in each
               case, as they relate to the Licensed Technologies; enter into
               joint ventures and similar arrangements as they relate to the
               Licensed Technologies and changes to the Business Plan as they
               relate to the Licensed Technologies;

      17.1.2.  issue any unissued Shares or unissued Common Shares Equivalents,
               or create or issue any new shares (including a split of the
               Shares) or Common Shares Equivalents, except as expressly
               permitted by the Newco Bye-Laws;

                                       37
<PAGE>

     17.1.3.  alter any rights attaching to any class of share in the capital of
              Newco or alter the Newco Bye-Laws;

     17.1.4.  consolidate, sub-divide or convert any of Newco's share capital or
              in any way alter the rights attaching thereto;

     17.1.5.  dispose of all or substantially all of the assets of Newco;

     17.1.6.  do or permit to be done any act or thing whereby Newco may be
              dissolved (whether voluntarily or compulsorily), save as otherwise
              expressly provided for in this Agreement;

     17.1.7.  enter into any contract or transaction except in the ordinary and
              proper course of the Business on arm's length terms;

     17.1.8.  subject to Clause 23.13, assign, license or sub-license any of the
              Elan Intellectual Property, Incara Intellectual Property, Newco
              Intellectual Property;

     17.1.9.  amend or vary the terms of the Incara License Agreement or the
              Elan License Agreement;

     17.1.10  permit a person other than Newco to own a Regulatory Approval
              relating to the Product(s) ) (save as otherwise provided in Clause
              12);

     17.1.11  approve, or amend or vary, the Business Plan or the Newco budget
              as they relate to the Licensed Technologies;

     17.1.12  alter the number of Directors

     17.1.13  change the domicile of Newco from, or discontinue Newco out of,
              Bermuda;

     17.1.14  register any Shares of Newco for public trading with any
              governmental authority for public trading in any securities
              market;

     17.1.15  declare or pay any dividend or make any distribution, directly or
              indirectly, with respect to its capital Shares; or issue, sell,
              exchange, deliver, redeem, purchase or otherwise acquire or
              dispose of any shares of its capital stock or other securities;
              and

     17.1.16  adopt or register or use any trade name, trademark or service mark
              on behalf of Newco.

                                       38
<PAGE>

                                   CLAUSE 18

                                   DISPUTES

18.1 Subject to the provisions of Clause 5.3, should any dispute or difference
     arise between Elan and Incara, or between Elan or Incara and Newco, during
     the period that this Agreement is in force, then any Party may forthwith
     give notice to the other Parties that it wishes such dispute or difference
     to be referred to a designated senior officer of each of Elan and Incara.

18.2 In any event of a notice being served in accordance with Clause 18.1, each
     of the Participants shall within 14 days of the service of such notice
     prepare and circulate to the designated senior officer of each of Elan and
     Incara a memorandum or other form of statement setting out its position on
     the matter in dispute and its reasons for adopting that position.  Each
     memorandum or statement shall be considered by the designated senior
     officers of each of Elan and Incara who shall endeavor to resolve the
     dispute.  If designated senior officers of each of Elan and Incara agree
     upon a resolution or disposition of the matter, they shall each sign a
     statement which sets out the terms of their agreement.  The Participants
     agree that they shall exercise the voting rights and other powers available
     to them in relation to Newco to procure that the agreed terms are fully and
     promptly carried into effect.

18.3 In the event the designated senior officers of each of Elan and Incara are
     unable to resolve a dispute or difference within 60 days of its being
     referred to them under Clause 18.1, the following procedures shall apply:

     18.3.1  If the dispute relates to the interpretation of this Agreement or
             any other Definitive Document or the compliance of the Parties with
             their legal obligations thereunder, or the ownership of any
             intellectual property, the provisions of Clause 23.9.2 shall
             govern.

     18.3.2  If the dispute does not relate to the interpretation of this
             Agreement or any other Definitive Document or the compliance of the
             Parties with their legal obligations thereunder, or the ownership
             of any intellectual property, the provisions of Clause 18.4 shall
             govern.

18.4 The designated senior officers of each of Elan and Incara shall, if they
     are unable to resolve a dispute or difference described in Clause 18.3.2
     within sixty (60) days of such referral, and if so agreed to by Elan and
     Incara, refer the matter to an independent expert in pharmaceutical product
     development and marketing (including clinical development and regulatory
     affairs) jointly selected by the designated senior officers of each of Elan
     and Incara (the "Expert").

     In the event the designated senior officers of each of Elan and Incara
     cannot agree upon the designation of the Expert, the Participants shall
     request the American

                                       39
<PAGE>

     Arbitration Association ("AAA"), sitting in the City of New York to select
     the Expert. In each case, the Expert shall be selected having regard to his
     suitability to determine the particular dispute or difference on which the
     Expert is being requested to determine. Unless otherwise agreed between the
     designated senior officers of each of Elan and Incara, the following rules
     shall apply to the appointment of the Expert. The fees of the AAA and the
     Expert shall be shared equally by the Participants. The Expert shall be
     entitled to inspect and examine all documentation and any other material
     which the Expert may consider to be relevant to the dispute. The Expert
     shall afford each Party a reasonable opportunity (in writing or orally) of
     stating reasons in support of such contentions as each Party may wish to
     make relative to the matters under consideration. The Expert shall give
     notice in writing of his determination to the Parties within such time as
     may be stipulated in his terms of appointment or in the absence of such
     stipulation as soon as practicable but in any event within four weeks from
     the reference of the dispute or difference to him.

18.5 Any determination by the Expert of a dispute or difference shall not be
     binding on the Parties, and neither Participant may introduce any such
     determination into evidence, or otherwise provide such determination as
     evidence in any manner, in any legal, administrative or arbitration
     proceeding.

                                   CLAUSE 19

                                  TERMINATION

19.1 This Agreement shall govern the operation and existence of Newco until

     19.1.1  terminated by written agreement of all Parties hereto; or

     19.1.2  otherwise terminated in accordance with this Clause 19.

19.2 For the purpose of this Clause 19, a "Relevant Event" is committed by a
     Participant if:

     19.2.1  it commits a material breach of its representations, warranties or
             obligations under this Agreement and fails to cure it within [*]
             days of being specifically required in writing to do so by the
             other Participant; provided, however, that if the breaching
             Participant has proposed a course of action to cure the breach and
             is acting in good faith to cure same but has not cured the breach
             by the [*] day, such period shall be extended by such period as is
             reasonably necessary to permit the breach to be cured, provided
             that such period shall not be extended by more than [*] days,
             unless otherwise agreed in writing by the Parties; or

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
     Separately with the SEC.

                                       40
<PAGE>

     19.2.2  a distress, execution, sequestration or other process is levied or
             enforced upon or sued out against a material part of its property
             which is not discharged or challenged within [*] days; or

     19.2.3  it is unable to pay its debts in the normal course of business; or

     19.2.4  it ceases wholly or substantially to carry on its business,
             otherwise than for the purpose of a reconstruction or amalgamation,
             without the prior written consent of the other Participant (such
             consent not to be unreasonably withheld); or

     19.2.5  the appointment of a liquidator, receiver, administrator, examiner,
             trustee or similar officer of such Participant or over all or
             substantially all of its assets under the law of any applicable
             jurisdiction, including without limitation, the United States of
             America, Bermuda or Ireland; or

     19.2.6  an application or petition for bankruptcy, corporate re-
             organization, composition, administration, examination, arrangement
             or any other procedure similar to any of the foregoing under the
             law of any applicable jurisdiction, including without limitation,
             the United States of America, Bermuda or Ireland, is filed, and is
             not discharged within 60 days, or a Participant applies for or
             consents to the appointment of a receiver, administrator, examiner
             or similar officer of it or of all or a material part of its
             assets, rights or revenues or the assets and/or the business of a
             Participant are for any reason seized, confiscated or condemned.

19.3 If either Participant commits a Relevant Event, the other Participant shall
     be entitled, within three months of the occurrence of the Relevant Event,
     to require the defaulting Participant (the "Recipient Participant") to sell
     on reasonable terms of payment to the non-defaulting Participant (the
     "Proposing Participant") all (but not less than all) of the Shares, held or
     beneficially owned by the Recipient Participant for an amount equal to [*]%
     of the fair market value of the Shares of the Recipient Participant (the
     "Buyout Option").

19.4 The Proposing Participant shall notify the Recipient Participant of the
     exercise of the Buyout Option, no later than 30 business days prior to the
     proposed exercise thereof, by delivering written notice to the Recipient
     Participant stating that the Buyout Option is exercised and the price at
     which the Proposing Participant is willing to purchase the Shares of the
     Recipient Participant.


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
     Separately with the SEC.

                                       41
<PAGE>

19.5      In the event that the Participants do not agree upon a purchase price
          for the Shares within five business days following the receipt by the
          Recipient Participant of written notice from the Proposing Participant
          pursuant to Clause 19.4 above, the Proposing Participant may contact
          the American Arbitration Association ("AAA"), sitting in New York City
          and request that an independent US-based arbitrator who is
          knowledgeable of the pharmaceutical/biotechnology industry be
          appointed within 10 business days. The AAA shall endeavor to select an
          arbitrator who is technically knowledgeable in the
          pharmaceutical/biotechnology industry (and who directly and through
          his affiliates, has no business relationship with, or shareholding in,
          either the Proposing Participant or the Recipient Participant).
          Promptly upon being notified of the arbitrator's appointment, the
          Proposing Participant and the Recipient Participant shall submit to
          the arbitrator details of their assessment of the fair market value
          for the Shares of the Recipient Participant together with such
          information as they think necessary to validate their assessment. The
          arbitrator shall notify the Recipient Participant of [*]% of the fair
          market value assessed by the Proposing Participant (the "Proposing
          Participant Price") and shall notify the Proposing Participant of [*]%
          of the fair market value assessed by the Recipient Participant (the
          "Recipient Participant Price"). The Proposing Participant and the
          Recipient Participant shall then be entitled to make further
          submissions to the arbitrator within five business days explaining why
          the Recipient Participant Price or the Proposing Participant Price, as
          the case may be, is unjustified. The arbitrator shall thereafter meet
          with the Proposing Participant and the Recipient Participant and shall
          thereafter choose either the Recipient Participant Price or the
          Proposing Participant Price (but not any other price) as the purchase
          price for the Shares (the "Purchase Price") on the basis of which
          price the arbitrator determines to be closer to [*]% of the fair
          market value for the Shares of the Recipient Participant. The
          arbitrator shall use his best efforts to determine the Purchase Price
          within 30 business days of his appointment. The Proposing Participant
          and the Recipient Participant shall bear the costs of the arbitrator
          equally provided that the arbitrator may, in his discretion, allocate
          all or a portion of such costs to one Party. Any decision of the
          arbitrator shall be final and binding.

19.6      The Proposing Participant shall purchase the Shares of the Recipient
          Participant by delivery of the Purchase Price in cash no later than
          the 90th business day following determination of the Purchase Price by
          the Expert.

19.7      The Shares of the Recipient Participant so transferred shall be sold
          by the transferor as beneficial owner with effect from the date of
          such transfer free from any lien, charge or encumbrance with all
          rights and restrictions attaching thereto.


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
      Separately with the SEC.

                                       42
<PAGE>

19.8      If the Proposing Participant exercises the Buyout Option, both parties
          will negotiate in good faith to agree to additional reasonable
          provisions and/or amendments to the License Agreements to protect the
          intellectual property rights of the Recipient Party.

19.9      If either Participant commits a Relevant Event, the other Shareholder
          shall have in addition to all other legal and equitable rights and
          remedies hereunder, the right to terminate this Agreement upon 30
          days' written notice.

19.10     In the event of a termination of the Elan License Agreement and/or the
          Incara License Agreement, both parties will negotiate in good faith to
          determine whether this Agreement should be terminated.

19.11     The provisions of Clauses 1.1, 3, 9, 10, 12.5, 12.6, 16, 17, 18, 19,
          20, 21, and 23 shall survive the termination of this Agreement under
          this Clause 19; all other terms and provisions of this Agreement shall
          cease to have effect and be null and void upon the termination of this
          Agreement.


                                   CLAUSE 20

                                 SHARE RIGHTS

The provisions regulating the rights and obligations attaching to the Common
Shares and the Preference Shares are set out in the Newco Bye-laws.


                                   CLAUSE 21

                                CONFIDENTIALITY

21.1      The Parties and/or Newco acknowledge and agree that it may be
          necessary, from time to time, to disclose to each other confidential
          and/or proprietary information, including without limitation,
          inventions, works of authorship, trade secrets, specifications,
          designs, data, know-how and other information, relating to the Field,
          the Products, present or future products, the Newco Intellectual
          Property, the Elan Intellectual Property or the Incara Intellectual
          Property, as the case may be, methods, compounds, research projects,
          work in process, services, sales suppliers, customers, employees
          and/or business of the disclosing Party, whether in oral, written,
          graphic or electronic form (collectively "Confidential Information").

21.2      Save as otherwise specifically provided herein, any Confidential
          Information revealed by a Party to another Party shall be maintained
          as confidential and shall be used by the receiving Party exclusively
          for the purposes of fulfilling the

                                       43
<PAGE>

          receiving Party's rights and obligations under this Agreement, and for
          no other purpose. Confidential Information shall not include:

          21.2.1    information that is generally available to the public;

          21.2.2    information that is made public by the disclosing Party;

          21.2.3    information that is independently developed by the receiving
                    Party, as evidenced by such Party's records, without the
                    aid, application or use of the disclosing Party's
                    Confidential Information;

          21.2.4    information that is published or otherwise becomes part of
                    the public domain without any disclosure by the receiving
                    Party, or on the part of the receiving Party's directors,
                    officers, agents, representatives or employees;

          21.2.5    information that becomes available to the receiving Party on
                    a non-confidential basis, whether directly or indirectly,
                    from a source other than the disclosing Party, which source
                    did not acquire this information on a confidential basis; or

          21.2.6    information which was already in the possession of the
                    receiving Party at the time of receiving such information,
                    as evidenced by its records, provided such information was
                    not previously provided to the receiving party from a source
                    which was under an obligation to keep such information
                    confidential; or

          21.2.7    information that is the subject of a written permission to
                    disclose, without restriction or limitation, by the
                    disclosing Party.

21.3      The receiving Party will be entitled to disclose Confidential
          Information which the receiving Party is required to disclose pursuant
          to:

          21.3.1    a valid order of a court or other governmental body or any
                    political subdivision thereof or as otherwise required by
                    law, rule or regulation; or

          21.3.2    any other requirement of law;

          provided that if the receiving Party becomes legally required to
          disclose any Confidential Information, the receiving Party shall give
          the disclosing Party prompt notice of such fact so that the disclosing
          Party may obtain a protective order or confidential treatment or other
          appropriate remedy concerning any such disclosure. The receiving Party
          shall fully co-operate with the disclosing Party in connection with
          the disclosing Party's efforts to obtain any such order or other
          remedy. If any such order or other remedy does not fully preclude
          disclosure, the receiving Party shall make such disclosure only to the
          extent that such disclosure is legally required.

                                       44
<PAGE>

21.4      Save as otherwise specifically provided herein, each Party agrees to
          disclose Confidential Information of another Party only to those
          employees, representatives and agents requiring knowledge thereof in
          connection with their duties directly related to the fulfilling of the
          Party's obligations under this Agreement, so long as such persons are
          under an obligation of confidentiality no less stringent than as set
          forth herein. Each Party further agrees to inform all such employees,
          representatives and agents of the terms and provisions of this
          Agreement and their duties hereunder and to obtain their consent
          hereto as a condition of receiving Confidential Information. Each
          Party agrees that it will exercise the same degree of care and
          protection to preserve the proprietary and confidential nature of the
          Confidential Information disclosed by a Party, as the receiving Party
          would exercise to preserve its own Confidential Information. Each
          Party agrees that it will, upon request of another Party, return all
          documents and any copies thereof containing Confidential Information
          belonging to or disclosed by such other Party. Each Party shall
          promptly notify the other Parties upon discovery of any unauthorized
          use or disclosure of the other Parties' Confidential Information.

21.5      Any breach of this Clause 21 by any employee, representative or agent
          of a Party is considered a breach by the Party itself.

21.6      The provisions relating to confidentiality in this Clause 21 shall
          remain in effect during the Term and for a period of [*] years
          following the termination of this Agreement.

21.7      The Parties agree that the obligations of this Clause 21 are necessary
          and reasonable in order to protect the Parties' respective businesses,
          and each Party expressly agrees that monetary damages would be
          inadequate to compensate a Party for any breach by the other Party of
          its covenants and agreements set forth herein. Accordingly, the
          Parties agree and acknowledge that any such violation or threatened
          violation will cause irreparable injury to a Party and that, in
          addition to any other remedies that may be available, in law or in
          equity or otherwise, any Party shall be entitled to obtain injunctive
          relief against the threatened breach of the provisions of this Clause
          21, or a continuation of any such breach by the other Party, specific
          performance and other equitable relief to redress such breach together
          with its damages and reasonable counsel fees and expenses to enforce
          its rights hereunder, without the necessity of proving actual or
          express damages.

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
          Separately with the SEC.

                                       45
<PAGE>

                                   CLAUSE 22

                                     COSTS

22.1      Each Shareholder shall bear its own legal and other costs incurred in
          relation to preparing and concluding this Agreement and the Definitive
          Documents.

22.2      All other costs, legal fees, registration fees and other expenses
          relating to the transactions contemplated hereby, including the costs
          and expenses incurred in relation to the incorporation of Newco, shall
          be borne by Newco.


                                   CLAUSE 23

                                    GENERAL

23.1      Exclusion of liability:
          ----------------------

          Notwithstanding anything to the contrary in this Agreement, no Party
          shall be liable to any other Party by reason of any representation or
          warranty, condition or other term or any duty of common law, or under
          the express terms of this Agreement, for any consequential, special or
          incidental or punitive loss or damage (whether for loss of current or
          future profits, loss of enterprise value or otherwise) and whether
          occasioned by the negligence of the respective Parties, their
          employees or agents or otherwise.

23.2      Good Faith:
          ----------

          Each of the Parties agrees to act reasonably in giving effect to the
          provisions of this Agreement.

23.3      Further Assurance:
          -----------------

          At the request of any of the Parties, the other Party or Parties shall
          (and shall use reasonable efforts to procure that any other necessary
          parties shall) execute and perform all such documents, acts and things
          as may reasonably be required subsequent to the signing of this
          Agreement for assuring to or vesting in the requesting Party the full
          benefit of the terms hereof.

23.4      No Representation:
          -----------------

          Each of the Parties hereto hereby acknowledges that in entering into
          this Agreement it has not relied on any representation or warranty
          except as expressly set forth herein or in any document referred to
          herein.

23.5      Force Majeure:
          -------------

                                       46
<PAGE>

          Neither Party to this Agreement shall be liable for delay in the
          performance of any of its obligations hereunder if such delay is
          caused by or results from causes beyond its reasonable control,
          including without limitation, acts of God, fires, strikes, acts of war
          (whether war be declared or not), insurrections, riots, civil
          commotions, strikes, lockouts or other labor disturbances or
          intervention of any relevant government authority, but any such delay
          or failure shall be remedied by such Party as soon as practicable.

23.6      Relationship of the Parties:
          ---------------------------

          Nothing contained in this Agreement is intended or is to be construed
          to constitute Elan/EIS/EPIL and Incara as partners, or Elan/EIS/EPIL
          as an employee or agent of Incara, or Incara as an employee or agent
          of Elan/EIS/EPIL.

          No Party hereto shall have any express or implied right or authority
          to assume or create any obligations on behalf of or in the name of
          another Party or to bind another Party to any contract, agreement or
          undertaking with any third party.

23.7      Counterparts:
          ------------

          This Agreement may be executed in any number of counterparts, each of
          which when so executed shall be deemed to be an original and all of
          which when taken together shall constitute this Agreement.

23.8      Notices:
          -------

          Any notice to be given under this Agreement shall be sent in writing
          in English by registered or recorded delivery post or reputable
          overnight courier or telefaxed to:

          Elan at:

          Lincoln House,
          Lincoln Place,
          Dublin 2,
          Ireland
          Attention: Vice President & General Counsel
                     Elan Pharmaceutical Technologies,
                     a division of Elan Corporation, plc
          Telephone: 353-1-709-4000
          Fax:       353-1-709-4124

          and

          Elan International Services, Ltd.
          102 St. James Court

                                       47
<PAGE>

          Flatts, Smiths FL04
          Bermuda
          Attention: President
          Telephone: 441-292-9169
          Fax:       441-292-2224

          Incara at:

          3200 East Highway 54,
          Cape Fear Building,
          Suite 300,
          Post Office Box 14287,
          Research Triangle Park,
          North Carolina 27709
          USA.
          Attn:      Chief Executive Officer
          Telephone  001 919 558 8688
          Fax:       001 919 544 1245

          with a copy to:

          Wyrick Robbins Yates Ponton LLP,
          4101 Lake Boone Trail,
          Suite 300,
          Raleigh,
          NC 27607.7506,
          USA

          Attention: Larry E. Robbins
          Telephone  001 919 781 4000
          Fax:       001 919 781 4865


          Newco at:

          Clarendon House,
          2 Church St.,
          Hamilton,
          Bermuda
          Attention: Secretary
          Telephone: 441 292 9169
          Fax:       441 292 2224

          or to such other address(es) as may from time to time be notified by
          any Party to the others hereunder.

                                       48
<PAGE>

          Any notice sent by mail shall be deemed to have been delivered within
          7 business days after dispatch or delivery to the relevant courier and
          any notice sent by telefax shall be deemed to have been delivered upon
          confirmation of receipt. Notices of change of address shall be
          effective upon receipt. Notices by telefax shall also be sent by
          another method permitted hereunder.

23.9      Governing Law and Jurisdiction
          ------------------------------

23.9.1.   This Agreement shall be governed by and construed in accordance with
          the laws of the State of New York.

23.9.2    In the event that a dispute regarding the matters described in Clause
          18.3.1 is not resolved pursuant to the provisions of Clause 18.1, the
          Parties agree to consider other dispute resolution mechanisms
          including mediation.

23.9.3    In the event that the Parties fail to agree on a mutually acceptable
          dispute resolution mechanism within 10 days of either Party's demand
          for such alternative dispute resolution under Clause 23.9.2 or in the
          event that the dispute is not resolved pursuant to any dispute
          resolution mechanism agreed by the Parties under Clause 23.9.2 within
          6 months, save as otherwise agreed by the Parties, the dispute shall
          be finally settled by the courts of competent jurisdiction. For the
          purposes of this Agreement the parties submit to the non-exclusive
          jurisdiction of the courts of the State and Federal Courts located in
          the State, City and County of New York.

23.10     Severability:
          ------------

          If any provision in this Agreement is agreed by the Parties to be,
          deemed to be or becomes invalid, illegal, void or unenforceable under
          any law that is applicable hereto, such provision will be deemed
          amended to conform to applicable laws so as to be valid and
          enforceable or, if it cannot be so amended without materially altering
          the intention of the Parties, it will be deleted, with effect from the
          date of such agreement or such earlier date as the Parties may agree,
          and the validity, legality and enforceability of the remaining
          provisions of this Agreement shall not be impaired or affected in any
          way.

23.11     Amendments:
          ----------

          No amendment, modification or addition hereto shall be effective or
          binding on any Party unless set forth in writing and executed by a
          duly authorized representative of all Parties.

23.12     Waiver:
          ------

          No waiver of any right under this Agreement shall be deemed effective
          unless contained in a written document signed by the Party charged
          with such waiver,

                                       49
<PAGE>

          and no waiver of any breach or failure to perform shall be deemed to
          be a waiver of any future breach or failure to perform or of any other
          right arising under this Agreement.

23.13     Assignment:
          -----------

          None of the Parties shall be permitted to assign its rights or
          obligations hereunder without the prior written consent of the other
          Parties except as follows:

          23.13.1   Elan, EIS and/or Incara shall have the right to assign their
                    rights and obligations hereunder to their Affiliates
                    provided, however, that such assignment does not result in
                    adverse tax consequences for any other Parties.

          23.13.2   Elan and EIS shall have the right to assign their rights and
                    obligations hereunder to a special purpose financing or
                    similar entity established by Elan or EIS.

          23.13.3   Any permitted assignee under this Clause 23.13 shall assume
                    all obligations of the assignor under this Agreement.

23.14     Assignment of Newco Intellectual Property:
          -----------------------------------------

          Upon unanimous agreement of the Parties, and upon one month's prior
          notice in writing from Elan and Incara to Newco, Newco shall assign
          the Newco Intellectual Property from Newco to a wholly-owned
          subsidiary of Newco to be incorporated in Ireland, which company shall
          be newly incorporated to facilitate such assignment.

23.15     Whole Agreement:
          ---------------

          This Agreement (including the Schedules attached hereto) and the
          Definitive Documents set forth all of the agreements and
          understandings between the Parties with respect to the subject matter
          hereof, and supersede and terminate all prior agreements and
          understandings between the Parties with respect to the subject matter
          hereof. There are no agreements or understandings with respect to the
          subject matter hereof, either oral or written, between the Parties
          other than as set forth in this Agreement and the Definitive
          Documents.

          In the event of any ambiguity or conflict arising between the terms of
          this Agreement and those of the Newco Bye-Laws, the terms of this
          Agreement shall prevail except with respect to the rights and
          obligations attaching to the Common Shares and the Preference Shares,
          where the Newco Bye-Laws shall prevail.

          No provision of this Agreement shall be construed so as to negate,
          modify or affect in any way the provisions of any other agreement
          between any of the

                                       50
<PAGE>

          Parties unless specifically referred to, and solely to the extent
          provided herein. In the event of a conflict between the provisions of
          this Agreement and the provisions of the License Agreements, the terms
          of this Agreement shall prevail unless this Agreement specifically
          provide otherwise.

23.16     Successors:
          ----------

          This Agreement shall be binding upon and inure to the benefit of the
          Parties hereto, their successors and permitted assigns.

                                       51
<PAGE>

                                  Schedule 1
                                  ----------

                                 The Compound
                                 ------------



                               OP2000 STRUCTURE

                                      [*]


[*] Confidential Treatment Requested; Certain Information Omitted and Filed
          Separately with the SEC.

                                       52
<PAGE>

                                  Schedule 2
                                  ----------

                            Elan License Agreement
                            ----------------------

                                       53
<PAGE>

                                  Schedule 3
                                  ----------

                           Incara License Agreement
                           ------------------------

                                       54
<PAGE>

                                  Schedule 4
                                  ----------

                       Technological Competitors of Elan
                       ---------------------------------

[*]

Including any and all divisions or subsidiaries of such entities and
successor entities.

[*] Confidential Treatment Requested; Certain Information Omitted and Filed
          Separately with the SEC.

                                       55
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
first set forth above.

                                 SIGNED

                                 BY: /s/ Kevin Insley
                                    ------------------------------

                                 for and on behalf of
                                 ELAN CORPORATION, PLC


                                 SIGNED

                                 BY: /s/ Kevin Insley
                                    ------------------------------

                                 for and on behalf of
                                 ELAN PHARMA INTERNATIONAL LTD.


                                 SIGNED

                                 BY: /s/ Kevin Insley
                                    ------------------------------

                                 for and on behalf of
                                 ELAN INTERNATIONAL SERVICES, LTD.


                                 SIGNED

                                 BY: /s/ Clayton I. Duncan
                                    ------------------------------

                                 for and on behalf of
                                 INCARA PHARMACEUTICALS CORPORATION


                                 SIGNED

                                 BY: /s/ Stephen J. Rossiter
                                    ------------------------------

                                 for and on behalf of
                                 INCARA DEVELOPMENT, LTD.

                                       56