<PAGE>

                                                                   Exhibit 10.86

                                                                  Execution Copy

                  Amended and Restated Registration Rights Agreement (the
                  "Agreement"), dated as of May 14, 2002, by and among Incara
                  Pharmaceuticals Corporation, a Delaware corporation (the
                  "Company"), Elan International Services, Ltd., a Bermuda
                  exempted limited liability company ("EIS"), and Elan Pharma
                  International Limited, an Irish private limited liability
                  company ("EPIL").


                                R E C I T A L S:

                  A. Pursuant to the Securities Purchase Agreement dated as of
December 21, 2000, by and among the Company, EIS, and EPIL (together with all
amendments, the "First Purchase Agreement"), (i) EIS acquired (a) certain shares
of common stock, par value US$0.001 per share of the Company (the "Common
Stock"), (b) certain shares of Series B Convertible Preferred Stock, par value
US$0.001 per share, of the Company, which are convertible into shares of Common
Stock (the "Series B Preferred Stock"), (c) certain shares of Series C
Convertible Exchangeable Preferred Stock, par value $0.01 per share, of the
Company (the "Series C Preferred Stock"), which are convertible into shares of
Series B Preferred Stock of the Company, and (d) a warrant (the "Warrant") to
purchase certain shares of Series B Preferred Stock, and (ii) EPIL acquired a
certain note of the Company convertible into shares of Series B Preferred Stock
(the "Note").

                  B. Pursuant to an Agreement and Amendment, effective as of
January 22, 2001 (the "First Amendment"), between the Company, EIS and EPIL, the
Company agreed to issue to EIS a warrant (the "Compensatory Warrant")
exercisable for shares of Common Stock or Series B Preferred Stock as a
condition to the redemption of shares of Series C Preferred Stock and/or
conversion of the Note at a time when the fair market value of the Common Stock
is below the Share Price Floor (as defined in the First Amendment).

                  C. Pursuant to an Agreement and Fourth Amendment, effective as
of February 13, 2002 (the "Fourth Amendment"), between the Company, EIS, EPIL
and Elan Pharmaceutical Investments III, Ltd., a Bermuda exempted limited
liability company, the Company converted US$1,375,044.56 in outstanding
principal, together with all unpaid and accrued interest on such principal, of
the Note into shares of Common Stock and Series B Preferred Stock (the
"Conversion Stock").

                  D. Pursuant to the Securities Purchase Agreement dated as of
the date hereof, by and between the Company and EIS (the "Second Purchase
Agreement"), EIS has acquired shares of the Series B Preferred Stock and may be
obligated to purchase additional shares of Series B Preferred Stock in the
future.

<PAGE>

                                      -2-

                  E. In connection with the First Purchase Agreement, the
Company, EIS, and EPIL entered into a Registration Rights Agreement, dated as of
December 21, 2000, which was amended as of January 22, 2001 and as of February
13, 2002 (as amended, the "Prior Registration Rights Agreement"). As a condition
to the execution of, and the closing of the transactions contemplated by, the
Second Purchase Agreement, the parties have agreed to amend and restate the
Prior Registration Rights Agreement as set forth herein. Accordingly, this
Agreement supersedes the Prior Registration Rights Agreement in all respects.

                  F. The parties desire to set forth herein their agreement on
the terms and subject to the conditions set forth herein related to the granting
of certain registration rights to the Holders (as defined below) relating to the
Common Stock issuable upon conversion or exercise of the Securities by such
Holders.

                               A G R E E M E N T:

                  The parties hereto agree as follows:

         1.       Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:

                  "Commission" shall mean the U.S. Securities and Exchange
Commission.

                  "Exchange Act" shall mean the U.S. Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect from time to time.

                  "Holders" or "Holders of Registrable Securities" shall mean
EIS, EPIL, and any Person who shall have acquired Registrable Securities from
EIS or EPIL as permitted herein and in the First Purchase Agreement or the
Second Purchase Agreement, either individually or jointly, as the case may be,
in a transaction pursuant to which registration rights are transferred pursuant
to Section 10 hereof.

                  "Person" shall mean an individual, a partnership, a limited
liability company, company, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental or quasi-governmental entity (or any department, agency, or
political subdivision thereof).

                  "Registrable Securities" means (i) any share of Common Stock
subscribed for, (ii) any share of Common Stock issued or issuable upon
conversion or exercise of any of the other Securities, and (iii) any share of
Common Stock issued or issuable in respect of the securities referred to in
clauses (i) and (ii) above, until, in the case of any such security, it is
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering it; excluding in all cases, however,
any Registrable Securities that may be sold under Rule 144(k) promulgated under
the Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission, and Registrable
Securities sold by a Person in a transaction (including a transaction pursuant
to a registration statement under this Agreement and a transaction pursuant to
Rule 144 promulgated

<PAGE>

                                      -3-

under the Securities Act) in which registration rights are not transferred
pursuant to Section 10 hereof. Whenever a number or percentage of Registrable
Securities is to be determined pursuant to this Agreement, each then outstanding
Security that is convertible into or exercisable for shares of Common Stock
shall be deemed to be equal to the number of shares of Common Stock for which
such Security is then so convertible or exercisable.

                  The terms "register", "registered", and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act.

                  "Registration Expenses" shall mean all expenses, other than
Selling Expenses, incurred by the Company in complying with Sections 2 or 3
hereof, including without limitation, all registration, qualification, and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, or the
expense of any special audits incident to or required by any such registration.

                  "Securities" shall mean, collectively, (i) the Common Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Initial Warrant
and the Note purchased pursuant to the First Purchase Agreement, (ii) the
Compensatory Warrant that may be issued pursuant to the First Amendment, (iii)
the Conversion Stock issued pursuant to the Fourth Amendment and (iv) the Series
B Preferred Stock purchased, or to be purchased in the future, pursuant to the
Second Purchase Agreement.

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

                  "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes and the costs, fees and expenses of
any accountants, attorneys or other experts retained by the Holders.

         2.       Demand Registrations.

                  (a)  Requests for Registration. From and after the date
hereof, any Holder or Holders who collectively hold Registrable Securities
representing at least 5% of the Registrable Securities then outstanding shall
have the right (subject to the limitations below) to request registration under
the Securities Act of all or part of their Registrable Securities on Form S-1 or
S-3 (or any successor form to Form S-1 or S-3, or any similar short-form
registration statement) (each, a "Demand Registration"). The request for the
Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered, which must have a minimum expected
aggregate offering price to the public of at least U.S.$1,000,000. Within 10
days after receipt of any such request, the Company shall give written notice of
such requested registration to all other Holders of Registrable Securities. The
Company shall include such other Holders' Registrable Securities in such
offering if they have responded affirmatively within 10 days after the receipt
of the Company's notice. The Holders shall in the aggregate be permitted a total
of two Demand Registrations hereunder. A registration shall not count as a
permitted Demand Registration until it has become effective (unless such Demand
Registration has not become effective due solely to the fault of the Holders
requesting such registration, including a request by such Holders that such
registration be withdrawn).

<PAGE>

                                      -4-

                  (b) Priority on Demand Registrations. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in such offering without adversely affecting the marketability of
the offering, the Company shall include in such registration:

                      (i)  first, the Registrable Securities requested to be
         included in such registration by the Holders (if necessary, such
         Registrable Securities pro rata among the Holders thereof based upon
         the number of Registrable Securities owned by each such Holder); and

                      (ii) thereafter, other securities requested to be included
         in such registration, as determined by the Company.

                  (c) Restrictions on Demand Registration. The Company may
postpone or suspend for up to three months in any 12-month period the filing or
the effectiveness of a registration statement for a Demand Registration if the
Company determines in good faith that such Demand Registration (i) would
reasonably be expected to have a material adverse effect on (x) any proposal or
plan by the Company to engage in any financing, acquisition or disposition of
assets (other than in the ordinary course of business) or (y) any merger,
consolidation, tender offer or similar transaction or (ii) would require
disclosure of any information that the board of directors of the Company
reasonably and determines in good faith would be detrimental to the Company;
provided, however, that in such event, the Holders initially requesting such
Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as a permitted
Demand Registration hereunder and the Company shall pay any Registration
Expenses in connection with such registration.

                  (d) Selection of Underwriters. The Holders shall have the
right to select the investment banker(s) and manager(s) to administer an
offering pursuant to the Demand Registration, subject to the Company's prior
written approval, which shall not be unreasonably withheld, delayed or
conditioned.

                  (e) Other Registration Rights. Except as provided in this
Agreement, so long as any Holder owns any Registrable Securities, the Company
shall not grant to any Persons the right to require the Company to register any
equity securities of the Company, or any securities convertible or exchangeable
into or exercisable for such securities, which conflicts with the rights granted
to the Holders hereunder, without the prior written consent of the Holders of at
least 50% of the Registrable Securities.

         3.       Piggyback Registrations.

                  (a) Right to Piggyback. If at any time the Company shall
propose to register shares of Common Stock under the Securities Act (other than
an existing or proposed registration statement as disclosed in the First
Purchase Agreement, or in a registration statement on Form S-3 relating to sales
of securities to participants in a Company dividend reinvestment plan, or Form

<PAGE>

                                      -5-

S-4 or S-8 (or any successor forms), or in connection with an acquisition or
exchange offer or an offering of securities solely to the existing shareholders
or employees of the Company) (each, a "Piggyback Registration"), the Company (i)
shall give prompt written notice to all Holders of Registrable Securities of its
intention to effect such a registration and (ii) subject to Section 3(b) and the
other terms of this Agreement, shall include in such registration all
Registrable Securities which are permitted under applicable securities laws to
be included in the form of registration statement selected by the Company and
with respect to which the Company has received written requests for inclusion
therein within 30 days after the receipt of the Company's notice. The Holders
shall be permitted to withdraw all or any part of the Registrable Securities
from a Piggyback Registration at any time prior to the effective date of such
Piggyback Registration.

                  (b) Priority on Piggyback Registrations. If a Piggyback
Registration is to be an underwritten offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the marketability of the
offering, the Company shall include in such registration:

                      (i)   first, the securities the Company proposes to sell;

                      (ii)  second, the Registrable Securities requested to
         be included in such registration by the Holders and any securities
         requested to be included in such registration by any other Person,
         other than Persons having a lower priority of registration than the
         Holders, pro rata among the Holders of such Registrable Securities and
         such other Persons, on the basis of the number of securities requested
         to be included in such registration by each of such Holders and such
         other Persons; and

                      (iii) thereafter, other securities requested to be
         included in such registration, as determined by the Company.

                  The Holders of any Registrable Securities included in such an
underwritten offering shall execute an underwriting agreement in customary form
and in form and substance satisfactory to the managing underwriters.

                  (c) Right to Terminate Registration. If at any time after
giving written notice of its intention to register any of its securities as set
forth in Section 3(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to each Holder of
Registrable Securities and thereupon be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith as
provided herein).

                  (d) Selection of Underwriters. The Company shall have the
right to select the investment banker(s) and manager(s) to administer an
offering pursuant to a Piggyback Registration, subject to the approval of the
holders of a majority of the Registrable Securities, which approval shall not be
unreasonably withheld, delayed or conditioned.

<PAGE>

                                      -6-

         4.       Expenses of Registration.

                  Except as otherwise provided herein or as may otherwise be
prohibited by applicable law, all Registration Expenses incurred in connection
with all registrations pursuant to Sections 2 and 3 hereof shall be borne by the
Company. All Selling Expenses relating to securities registered on behalf of the
Holders of Registrable Securities shall be borne by such Holders pro rata
according to their relative ownership percentages of such securities.

         5.       Holdback Agreements.

                  (a) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10-day period prior
to, and during the 90-day period following, the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registration
statements on Form S-4 or Form S-8 or any successor forms), unless the
underwriters managing the registered public offering otherwise agree, and (ii)
to use all reasonable efforts to cause its officers and directors and each
holder of at least 5% (on a fully-diluted basis) of its outstanding shares of
Common Stock, or any securities convertible into or exchangeable or exercisable
for shares of Common Stock, purchased from the Company at any time after the
date of this Agreement (other than in a registered public offering) to agree not
to effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such periods (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.

                  (b) Each Holder agrees, if requested by the managing
underwriters in an underwritten offering of Common Stock or securities
convertible for Common Stock of the Company (including without limitation the
Company's initial public offering of Common Stock), not to effect any offer,
sale, distribution or transfer, including a sale pursuant to Rule 144 (or any
similar provision then effect) under the Securities Act (except as part of such
underwritten registration), during the 10-day period prior to, and during the
180-day period in the case of the Company's initial public offering or a 90-day
period in the case of any other offering of Common Stock (or, in each case, such
shorter period as may be agreed to in writing by the Company and the Holders of
at least 50% of the Registrable Securities) following, the effective date of
such Registration Statement; provided, however, that no Holder shall be required
to enter into more than one such agreement in any 12-month period.

<PAGE>

                                      -7-

         6.       Registration Procedures.

                  Whenever the Holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company shall use reasonable best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company shall as
expeditiously as possible:

                  (a) subject to Section 2(c) hereof, prepare and file with the
         Commission a registration statement on any appropriate form for which
         the Company qualifies with respect to such Registrable Securities and
         use all reasonable efforts to cause such registration statement to
         become effective (provided that before filing a registration statement
         or prospectus or any amendments or supplements thereto, the Company
         shall (i) furnish to the counsel selected by the selling Holders copies
         of all such documents proposed to be filed, which documents shall be
         subject to the review of such counsel, and (ii) notify each Holder of
         Registrable Securities covered by such registration of any stop order
         issued or threatened by the Commission);

                  (b) subject to Section 2(c) hereof, prepare and file with the
         Commission such amendments and supplements to such registration
         statement and the prospectus used in connection therewith as may be
         reasonably necessary to keep such registration statement effective for
         a period equal to the shorter of (i) six months and (ii) the time by
         which all securities covered by such registration statement have been
         sold, and comply with the provisions of the Securities Act with respect
         to the disposition of all securities covered by such registration
         statement during such period in accordance with the intended methods of
         disposition by the sellers thereof set forth in such registration
         statement;

                  (c) furnish to each seller of Registrable Securities such
         number of copies of such registration statement, each amendment and
         supplement thereto, the prospectus included in such registration
         statement (including each preliminary prospectus) and such other
         documents as such seller may reasonably request in order to facilitate
         the disposition of the Registrable Securities owned by such seller;

                  (d) use all reasonable efforts to register or qualify such
         Registrable Securities under the securities or blue sky laws of such
         jurisdictions as any seller reasonably requests and do any and all
         other acts and things which may be reasonably necessary or advisable to
         enable such seller to consummate the disposition in such jurisdictions
         of the Registrable Securities owned by such seller (provided, however,
         that the Company shall not be required to (i) qualify generally to do
         business in any jurisdiction where it would not otherwise be required
         to qualify but for this Section 6(d), (ii) subject itself to taxation
         in any jurisdiction, or (iii) take any action that would subject it to
         general service of process in any such jurisdiction);

                  (e) notify each seller of such Registrable Securities, at any
         time when a prospectus relating thereto is required to be delivered
         under the Securities Act, of the happening of any event as a result of
         which the prospectus included in such registration

<PAGE>

                                      -8-

         statement contains an untrue statement of a material fact or omits any
         fact necessary to make the statements therein not misleading, and, at
         the request of any such seller, the Company shall prepare a supplement
         or amendment to such prospectus so that, as thereafter delivered to the
         purchasers of such Registrable Securities, such prospectus shall not
         contain an untrue statement of a material fact or omit to state any
         fact necessary to make the statements therein not misleading; provided,
         however, that the Company shall not be required to amend the
         registration statement or supplement the Prospectus for a period of up
         to six months if the board of directors determines in good faith that
         to do so would reasonably be expected to have a material adverse effect
         on any proposal or plan by the Company to engage in any financing,
         acquisition, or disposition of assets (other than in the ordinary
         course of business) or any merger, consolidation, tender offer, or
         similar transaction or would require the disclosure of any information
         that the board of directors determines in good faith the disclosure of
         which would be detrimental to the Company, it being understood that the
         period for which the Company is obligated to keep the Registration
         Statement effective shall be extended for a number of days equal to the
         number of days the Company delays amendments or supplements pursuant to
         this provision. Upon receipt of any notice pursuant to this Section
         6(e), the Holders shall suspend all offers and sales of securities of
         the Company and all use of any prospectus until advised by the Company
         that offers and sales may resume, and shall keep confidential the fact
         and content of any notice given by the Company pursuant to this Section
         6(e);

                  (f) cause all such Registrable Securities to be listed on each
         securities exchange, if any, on which similar securities issued by the
         Company are then listed;

                  (g) provide a transfer agent and registrar for all such
         Registrable Securities not later than the effective date of such
         registration statement;

                  (h) enter into such customary agreements (including
         underwriting agreements in customary form) and take all such other
         actions as the Holders of a majority of the Registrable Securities
         being sold or the underwriters, if any, reasonably request in order to
         expedite or facilitate the disposition of such Registrable Securities;

                  (i) make available for inspection by a representative of the
         Holders of Registrable Securities included in the registration
         statement, any underwriter participating in any disposition pursuant to
         such registration statement and any attorney, accountant or other agent
         retained by any such Holder or underwriter, all pertinent financial and
         other records, pertinent corporate documents and properties of the
         Company, and cause the Company's officers, directors, employees and
         independent accountants to supply all information reasonably requested
         by any such Holder, underwriter, attorney, accountant or agent in
         connection with such registration statement;

                  (j) otherwise use its reasonable efforts to comply with all
         applicable rules and regulations of the Commission, and make available
         to its security holders, as soon as reasonably practicable, an earnings
         statement covering the period of at least 12 months beginning with the
         first day of the Company's first full calendar quarter after the
         effective

<PAGE>

                                      -9-

         date of the registration statement, which earnings statement shall
         satisfy the provisions of Section 11(a) of the Securities Act and Rule
         158 thereunder;

                  (k) in the event of the issuance of any stop order suspending
         the effectiveness of a registration statement, or of any order
         suspending or preventing the use of any related prospectus or
         suspending the qualification of any shares of Common Stock included in
         such registration statement for sale in any jurisdiction, use all
         reasonable efforts promptly to obtain the withdrawal of such order; and

                  (l) if the registration is an underwritten offering, use all
         reasonable efforts to obtain a so-called "cold comfort" letter from the
         Company's independent public accountants in customary form and covering
         such matters of the type customarily covered by cold comfort letters.

         7.       Obligations of Holders.

                  Whenever the Holders of Registrable Securities sell any
Registrable Securities pursuant to a Demand Registration or a Piggyback
Registration, such Holders shall be obligated to comply with the applicable
provisions of the Securities Act, including the prospectus delivery requirements
thereunder, and any applicable state securities or blue sky laws. In addition,
each Holder of Registrable Securities shall be deemed to have agreed by virtue
of its acquisition of such Registrable Securities that, upon receipt of any
notice described in Section 6(e), such Holder shall forthwith discontinue
disposition of such Registrable Securities covered by such registration
statement or prospectus until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(e), or until it is
advised in writing by the Company that the use of the applicable prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
prospectus.

         8.       Indemnification.

                  (a) The Company agrees to indemnify, to the fullest extent
permitted by applicable law, each Holder of Registrable Securities, its officers
and directors, and each Person who controls such Holder (within the meaning of
the Securities Act) against all losses, claims, damages, liabilities, expenses
or any amounts paid in settlement of any litigation, investigation, or
proceeding commenced or threatened (collectively, "Claims") to which each such
indemnified party may become subject under the Securities Act insofar as such
Claim arose out of (i) any untrue or alleged untrue statement of material fact
contained, on the effective date thereof, in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein, by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder with a sufficient number of copies of the same
or by such Holder's failure to comply with applicable securities laws. In
connection with an underwritten

<PAGE>

                                      -10-

offering, the Company shall indemnify the underwriters, their officers and
directors and each Person who controls the underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities.

                  (b) In connection with any registration statements in which a
Holder of Registrable Securities is participating, each such Holder shall, to
the fullest extent permitted by applicable law, indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any and all Claims to which each such
indemnified party may become subject under the Securities Act insofar as such
Claim arose out of (i) any untrue or alleged untrue statement of material fact
contained, on the effective date thereof, in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (iii) any failure to comply with applicable securities laws;
provided, however, that with respect to a Claim arising pursuant to clause (i)
or (ii) above, the material misstatement or omission is contained in the written
information such Holder provided to the Company pursuant to Section 11 hereof;
provided, further, that the obligation to indemnify shall be individual to each
Holder and shall be limited to the amount of proceeds received by such Holder
from the sale of Registrable Securities pursuant to such registration statement.

                  (c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (but the failure to provide such notice shall
not release the indemnifying party of its obligation under paragraphs (a) and
(b), unless and then only to the extent that, the indemnifying party has been
prejudiced by such failure to provide such notice) and (ii) unless in such
indemnified party's reasonable judgment, based on written advice of counsel, a
conflict of interest between such indemnified and indemnifying parties may exist
with respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party, based on
written advice of counsel, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

                  (d) The indemnifying party shall not be liable to indemnify an
indemnified party for any settlement, or consent to judgment of any such action
effected without the indemnifying party's written consent (but such consent
shall not be unreasonably withheld, delayed or conditioned). Furthermore, the
indemnifying party shall not, except with the prior written approval of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to each indemnified party of a release from all liability
in respect of such claim or litigation without any payment or consideration
provided by each such indemnified party.

<PAGE>

                                      -11-

                  (e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under clauses (a) and (b) above in respect
of any Claims, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Claims in such proportion as is
appropriate to reflect not only the relative benefits received by the Company,
the underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement from the sale of shares pursuant to
the registered offering of securities for which indemnity is sought but also the
relative fault of the Company, the underwriters, the sellers of Registrable
Securities, and any other sellers participating in the registration statement in
connection with the misstatement or omission which resulted in such Claims, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, the underwriters, the sellers of Registrable Securities
and any other sellers participating in the registration statement shall be
deemed to be based on the relative relationship of the total net proceeds from
the offering (before deducting expenses) to the Company, the total underwriting
commissions and fees from the offering (before deducting expenses) to the
underwriters and the total net proceeds from the offering (before deducting
expenses) to the sellers of Registrable Securities and any other sellers
participating in the registration statement. The relative fault of the Company,
the underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the sellers of Registrable Securities
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
that in no event shall the liability of any selling Holder hereunder be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.

                  (f) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and shall survive the transfer of the
Registrable Securities.

         9.       Participation in Underwritten Registrations.

                  No Holder may participate in any registration hereunder which
is underwritten unless such Holder (a) agrees to sell such Holder's securities
on the basis provided in any underwriting arrangements approved by the Holder or
Holders entitled hereunder to approve such arrangements, (b) as expeditiously as
possible notifies the Company of the occurrence of any event as a result of
which any prospectus contains an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (c) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements.

<PAGE>

                                      -12-

         10.      Transfer of Registration Rights.

                  The rights granted to any Holder under this Agreement may be
assigned to any permitted transferee of Registrable Securities, in connection
with any transfer or assignment of Registrable Securities by a Holder; provided,
however, that: (a) such transfer is otherwise effected in accordance with
applicable securities laws, (b) such transfer is permitted by the First Purchase
Agreement or the Second Purchase Agreement, (c) if not already a party hereto,
the assignee or transferee agrees in writing prior to such transfer to be bound
by the provisions of this Agreement applicable to the transferor, and (d) EIS
shall act as agent and representative for such Holder for the giving and
receiving of notices hereunder.

         11.      Information by Holder.

                  Each Holder shall furnish to the Company such written
information regarding such Holder and any distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement and shall promptly notify the Company of any
changes in such information.

         12.      Exchange Act Compliance.

                  The Company shall comply with all of the reporting
requirements of the Exchange Act then applicable to it, if any, and shall comply
with all other public information reporting requirements of the Commission which
are conditions to the availability of Rule 144 for the sale of the Registrable
Securities. The Company shall cooperate with each Holder in supplying such
information as may be necessary for such Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144.

         13.      Termination of Registration Rights.

                  All registration rights and obligations (including, without
limitation, under Section 5) under this Agreement shall terminate and be of no
further force and effect, as to any particular Holder, at such time as all
Registrable Securities held by such Holder are eligible to be sold without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144(k) promulgated thereunder or have been resold pursuant to a
registration statement hereunder.

         14.      Miscellaneous.

                  (a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders of Registrable
Securities in this Agreement without the prior written consent of a majority in
interest of such Registrable Securities.

                  (b) Remedies. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by

<PAGE>

                                      -13-

reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement; provided,
however, that in no event shall any Holder have the right to enjoin, delay or
interfere with any offering of securities by the Company.

                  (c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only with the
prior written consent of the Company and Holders of at least 50% of the
Registrable Securities; provided, however, that without the prior written
consent of all the Holders, no such amendment or waiver shall reduce the
foregoing percentage required to amend or waive any provision of this Agreement.

                  (d) Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. This Agreement may be
transferred by EIS, EPIL and their permitted assigns and transferees to their
respective affiliates and subsidiaries, as well as any special purpose financing
or similar vehicle established by EIS or EPIL. Other than as set forth above, no
party shall transfer or assign this Agreement without the prior written consent
of the other party, which shall not be unreasonably withheld, delayed or
conditioned. In addition, whether or not any express assignment has been made,
the provisions of this Agreement which are for the benefit of Holders of
Registrable Securities are also for the benefit of, and enforceable by, any
permitted transferee of Registrable Securities, in accordance with Section 10
hereof.

                  (e) Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be in any way affected or
impaired thereby.

                  (f) Counterparts and Facsimile. This Agreement may be executed
in any number of counterparts, and each such counterpart hereof shall be deemed
to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement may be signed and delivered to the
other party by facsimile transmission; such transmission shall be deemed a valid
signature.

                  (g) Descriptive Headings.  The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

                  (h) Governing Law; Disputes. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of laws. Any dispute under this
Agreement that is not settled by mutual consent may be finally adjudicated by
any federal or state court sitting in the City, County and State of New York,
and each party consents to the non-exclusive jurisdiction of such courts (or any
appellate court therefrom) over any such dispute. Nothing contained in this
Section shall

<PAGE>

                                      -14-

prevent the adjudication of any dispute under this Agreement by any other state
or federal court, regardless of location, so long as such court has jurisdiction
and is located in a proper venue.

                  (i) Notices. All notices, demands and requests of any kind to
be delivered to any party in connection with this Agreement shall be in writing
and shall be deemed to have been duly given if personally or hand delivered or
if sent by internationally-recognized overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, or by facsimile
transmission, addressed as follows:

                      (a)     if to the Company, to:

                              Incara Pharmaceuticals Corporation
                              Post Office Box 14287
                              3200 East Highway 54
                              Cape Fear Building, Suite 300
                              Research Triangle Park, North Carolina 27709
                              Attention: Chief Executive Officer
                              Facsimile: (919) 544-1245

                              with a copy to:

                              Wyrick Robbins Yates & Ponton LLP
                              4101 Lake Boone Trail
                              Suite 300
                              Raleigh, North Carolina 27607
                              Attention: Larry Robbins
                              Facsimile: (919) 781-4865

                      (b)(i)  if to EIS, to:

                              Elan International Services, Ltd.
                              102 St. James Court
                              Flatts, Smiths Parish
                              Bermuda FL 04
                              Attention: Chief Executive Officer
                              Facsimile: (441) 292-2224

<PAGE>

                                      -15-

                         (ii) if to EPIL, to:

                              Elan Pharma International Limited
                              Wil House
                              Shannon Business Park
                              Shannon, Co. Clare
                              Ireland
                              Attention: Secretary
                              Facsimile: 011-353-61-362097

                              with a copy, in the case of (i) or (ii) above, to:

                              Reitler Brown LLC
                              800 Third Avenue
                              21/st/ Floor
                              New York, NY 10022
                              Attention: Scott H. Rosenblatt
                              Facsimile: (212) 371-5500

or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 14(i). Any such notice or communication shall be deemed to have
been effectively given (i) in the case of personal or hand delivery, on the date
of such delivery, (ii) in the case of an internationally-recognized overnight
delivery courier, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted, and (iv) in the case of
facsimile transmission, on the date of telephone confirmation of receipt.

                  (j) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement of the parties with regard to the subject
matter hereof and supersedes all prior agreements and understandings among the
parties with respect thereto.

                            [signature page follows]

<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Registration Rights Agreement as of the date first written above.



                              INCARA PHARMACEUTICALS CORPORATION



                              By:_____________________________________________
                                 Name: Clayton I. Duncan
                                 Title: President and Chief Executive Officer



                              ELAN INTERNATIONAL SERVICES, LTD.



                              By:_____________________________________________
                                 Name: Kevin Insley
                                 Title: President and Chief Financial Officer



                              ELAN PHARMA INTERNATIONAL LIMITED



                              By:_____________________________________________
                                 Name: Kevin Insley
                                 Title: Authorized Signatory