Document:

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                                                                   EXHIBIT 10.13

                            PATENT LICENSE AGREEMENT

     This Agreement (the "Agreement") is made and entered into this day of May
6, 2002, (the "Effective Date") by and between Aderis Pharmaceuticals Inc.,
having its principal office at 85 Main Street, Hopkinton, Massachusetts, USA
(hereinafter referred to as "Aderis"), and Can-Fite Biopharma Ltd, a corporation
duly organized under the laws of Israel and having its principal office at 10
Bareket St., Petah-Tikva, Israel (hereinafter referred to as "Can-Fite").

                                   WITNESSETH
                                   ----------

     WHEREAS, Can-Fite has been granted a non-exclusive license under US patent
No. 5,773,423 and its counterpart European Patent No. 708,781 from The United
States Public Health Service within the Department of Health and Human Services
(hereinafter referred to as the "NIH") (the "NIH License") (the "NIH Patent(s)")
and is currently in final stages of converting its license under the NIH
Patent(s) into an exclusive license (the "NIH Exclusive License"); and

     WHEREAS, Can-Fite is developing a variety of compounds, inter alia under
the NIH patent, whereas one of said compounds (IB-MECA or
N6-3-iodobenzyl-52-N-methylcarboxamidoadenosine as an active ingredient (the
"Active Ingredient" is that referred to by Can-Fite as CF101 (the "Drug")) and
the Drug is being developed by Can-Fite for use in the Licensed Field of Use as
defined in Appendix C; and
           -----------

     WHEREAS, in order to be able to use the Active Ingredient, Can-Fite needs
to be granted a license from Aderis under certain patents, listed in Appendix A
                                                                     ----------
owned and held by Aderis (the "Aderis Patent(s)"), with regard to certain
compounds that fall within the scope of the Aderis Patent(s), as detailed in
Appendix B (the "Licensed Compound(s)") and for certain field of use as defined
----------
in Appendix C (the "Licensed Field of Use"); and
   ----------

     WHEREAS, Aderis hereby represents and warrants that it is the sole owner of
the Aderis Patent(s), and has the right to grant a license to Can-Fite under the
Aderis Patent(s); and

     WHEREAS, Can-Fite desires to obtain a license under the Aderis Patent to
the Licensed Compound(s) for the Licensed Field of Use and Aderis desires to
grant such a license to Can-Fite, according to the terms and conditions set
forth herein.

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

     1. DEFINITIONS
        -----------

     1.1 "Aderis Patent(s)" shall mean the patents listed in Appendix A attached
                                                             ----------
hereto, and as far as encompassing the Licensed Compound(s), all divisions,
continuations, Reexaminations or Reissues of these patents as well as all other
patents owned by Aderis that encompass the Licensed Compound(s) within their
scope.

<PAGE>

     1.2 "Licensed Compound(s)" means one or more of the compounds listed in
Appendix B.
----------

     1.3 "Licensed Patent Rights" means the Aderis Patent(s) as far as
encompassing the Licensed Compound(s) as long as such patents have not expired
or not held to be invalid or unenforceable by an unappealed or unappealable
decision of a court of competent jurisdiction or administrative agency.

     1.4 "Licensed Territory" means the countries in which the Aderis Patent(s)
are registered and as long as they are registered in these countries.

     1.5 "Net Sales" means the total gross receipts for sales of Licensed
Compound(s) or drugs containing the Licensed Compound(s) by or on behalf of
Can-Fite or its sublicensees, less returns and allowances actually granted,
packing costs, insurance costs, freight out, taxes or excise duties imposed on
the transaction (if separately invoiced), and wholesaler and cash discounts in
amounts customary in the trade, in all cases after deduction of: (a) sales taxes
(including value added taxes) to the extent applicable to such sale and not
collected separate from the counter-party to the sale; and (b) credits or
allowances, if any, actually granted on account of price adjustments, recalls,
rejections or return of Licensed Products previously sold; and (c) freight and
insurance charges in CIF sales. No deductions shall be made for commissions paid
to individuals, whether they be with independent sales agencies or regularly
employed by Can-Fite, or sublicensees, and on its payroll, or for the cost of
collections.

     1.6 "First Commercial Sale" means the initial transfer by or on behalf of
Can-Fite or its sublicensees of Licensed Products by or on behalf of Can-Fite or
its sublicensees in exchange for cash or some equivalent to which value can be
assigned for the purpose of determining Net Sales.

     1.7 "Licensed Field of Use" means the fields of use identified in Appendix
                                                                       --------
C.
-

     2. GRANT OF RIGHTS
        ---------------

     2.1 Aderis hereby grants to Can-Fite and Can-Fite accepts, subject to the
terms and conditions of this Agreement, an exclusive license under the Aderis
Patent(s) in the Licensed Territory to make and have made, to use and have used,
and to sell and have sold any Licensed Compound(s) or drugs containing the
Licensed Compound(s) in the Licensed Fields of Use.

     2.2 This Agreement confers no license or rights by implication, estoppel or
otherwise under the Aderis Patent(s) other than to the Licensed Compound(s) for
use within the Licensed Field of Use.

     3. SUBLICENSING AND MARKETING
        --------------------------

     3.1 Can-Fite has the right under the Agreement to enter into sublicensing
agreements with respect to the Licensed Compound(s) under the Licensed Patent(s)
in the Licensed Fields of use or any other agreement for commercialization of
Licensed Compound(s) or drugs containing the Licensed Compound(s) in the
Licensed Field of Use.

                                       2

<PAGE>

     3.2 Aderis may submit to Can-Fite at any time a proposal for
commercialization of Licensed Compound(s) or drugs containing the Licensed
Compound(s) (the "Aderis Proposal"). Can-Fite will consider the Aderis Proposal
in good faith. It is agreed, however, that Can-Fite is under no obligation to
accept the Aderis Proposal and Can-Fite can have the sole, absolute and final
discretion, to accept, enter into negotiations or decline the Aderis Proposal.

     3.3 Can-Fite and Aderis will convene for a periodical good faith
discussion, approximately every nine (9) months, on such time and in such manner
as shall be coordinated in good faith between the parties. Can-Fite will then
brief Aderis on its drug development activities relating to the Licensed
Compound(s). In such discussions Can-Fite shall not be obligated to disclose any
information with respect of which Can-Fite is bound by confidentiality
undertaking to an unaffiliated third party.

     3.4 The right of Aderis to submit to Can-Fite the Aderis Proposal at any
time does not limit Can-Fite in any way from entering into a sublicensing
agreement with respect to the Licensed Compound(s) under the Licensed Patent(s)
in the Licensed Field of Use or any other agreement for commercialization of
Licensed Compound(s) or drugs containing the Licensed Compound(s) in the
Licensed Field of Use.

     3.5 Can-Fite agrees that any sublicenses granted by it shall provide that
the obligations of Can-Fite to Aderis of Sections 4.1, 4.3-4.5 and 9 of this
Agreement shall be binding upon the sublicensee as if it were a party to this
Agreement. Can-Fite further agrees to include such provisions in all such
sublicense agreements.

     3.6 Any sublicenses granted by Can-Fite shall provide for the termination
of the sublicense, or the conversion to a license directly between such
sublicensees and Aderis, at the option of the sublicensee, upon termination of
this Agreement under Section 10. Such conversion is subject to Aderis's prior
approval and contingent upon acceptance by the sublicensee of the remaining
provisions of this Agreement.

     4. ROYALTIES
        ---------

     4.1 Can-Fite agrees to pay to Aderis an annual royalty as set forth in
Appendix D attached hereto (the "Royalty") in respect of sales made in a
----------
Licensed Territory (irrespective of where the product was manufactured). The
Royalty due for a calendar year shall be paid until March 31 of the next
calendar year.

     4.2 In addition to any payments of Royalties set forth above, Aderis will
receive two hundred forty-six thousand eight hundred fourteen (246,814) shares
in Can-Fite that represent 1% of the current share capital of Can-Fite (the
"Aderis Shares"). The Aderis Shares shall be issued to Aderis only immediately
after closing of the current Series B preferred financing of Can-Fite.

     4.3 An Aderis Patent(s) licensed under this Agreement shall cease to fall
within the Licensed Patent Rights for the purpose of computing the Royalty in
any given country within the territory on the earliest of the dates that (a) the
patent expires or irrevocably lapses, or

                                       3

<PAGE>

(b) the claim has been held to be invalid or unenforceable by an unappealed or
unappealable decision of a court of competent jurisdiction or administrative
agency.

     4.4 On sales of Licensed Compound(s) or drugs containing the Licensed
Compound(s) by Can-Fite to sublicensees or on sales made in other than an
arm's-length transaction, the value of the Net Sales attributed under this
Section 5 to such a transaction shall be that which would have been received in
an arm's-length transaction, based on sales of like quantity and quality
products on or about the time of such transaction.

     4.5 Can-Fite may elect to surrender its rights in any country of the
Licensed Territory under any Licensed Patent Rights upon ninety (90) days
written notice to Aderis and owe no payment obligation under this Section 4 for
patent-related expenses incurred in that country after ninety (90) days of the
effective date of such written notice.

     5. PATENT PROSECUTION AND MAINTENANCE
        ----------------------------------

     5.1 Aderis agrees to take full and absolute responsibility for prosecution
and maintenance of the Aderis Patent(s).

     5.2 Aderis undertakes to keep the Aderis Patent(s) in force for the maximal
duration of their term and, if applicable, to obtain the necessary patent term
extension.

     6. RECORD KEEPING
        --------------

     6.1 Can-Fite agrees to keep accurate and correct records of Licensed
Compound(s) made, used, or sold under this Agreement appropriate to determine
the amount of Royalties due to Aderis. Such records shall be retained for at
least five (5) years following a given reporting period. They shall be available
during normal business hours for inspection at the expense of Aderis by an
accountant or other designated auditor selected by Aderis for the sole purpose
of verifying reports and payments hereunder. The accountant or auditor shall
only disclose to Aderis information relating to the accuracy of reports and
payments made under this Agreement. If an inspection shows an underreporting or
underpayment in excess of five percent (5%) for any twelve (12) month period,
then Can-Fite shall reimburse Aderis for the cost of the inspection at the time
Can-Fite pays the unreported royalties, including any late charges as required
by Section 8.5 of this Agreement. All payments required under this Section shall
be due within thirty (30) days of the date Aderis provides Can-Fite notice of
the payment due.

     7. REPORTS ON SALES AND PAYMENTS
        -----------------------------

     7.1 Can-Fite shall report to Aderis the date of the First Commercial Sale
in each country in the Licensed Territory within thirty (30) days of such
occurrence.

     7.2 Can-Fite shall submit to Aderis within sixty (60) days after each
calendar year ending December 31 a royalty report setting forth for the
preceding one-year period the amount of the Licensed Compound(s) or drugs
containing the Licensed Compound(s) sold by or on behalf of Can-Fite in each
country within the Licensed Territory, the Net Sales, and the amount of royalty
accordingly due (the "Royalty Report"). With each such Royalty Report, Can-Fite
shall submit payment of the Royalties due, provided sublicense receipts from a

                                       4

<PAGE>

sublicensee have been received, and if not received at that time, within thirty
(30) days after receipt of the sublicense receipts from the sublicensee. If no
Royalties are due to Aderis for any reporting period, the written report shall
so state. The Royalty Report shall be certified as correct by an authorized
officer of Can-Fite and shall include all necessary details to determine Net
Sales as defined under Section 1.6 to determine Royalties due under Section 4.

     7.3 In the event of any sublicense, Can-Fite agrees to forward annually to
Aderis a copy of such reports received by Can-Fite from its sublicensees during
the preceding one-year period as shall be pertinent to a royalty accounting to
Aderis by Can-Fite for activities under the sublicense. However, the failure to
receive a report from the sublicensee shall not relieve Can-Fite of the
obligation to submit an annual report to Aderis.

     7.4 Royalties due under Section 4 shall be paid in U.S. dollars. For
conversion of foreign currency to U.S. dollars, the conversion rate shall be the
New York foreign exchange rate quoted in The Wall Street Journal on the day that
the payment is due. Any loss of exchange, value, taxes, or other expenses
incurred in the transfer or conversion to U.S. dollars shall be paid entirely by
Can-Fite.

     7.5 The payments set forth in this Agreement shall, if overdue, bear
interest until payment at a per annum rate of two percent (2%) above the prime
rate in effect at the Bank of New York on the due date. The payment of such
interest shall not foreclose Aderis from exercising any other rights it may have
as a consequence of the lateness of any payment.

     7.6 All plans and reports required by this Section 7 and marked
"CONFIDENTIAL" by Can-Fite shall be treated by Aderis as Confidential
Information as defined herein.

     8. INFRINGEMENT AND PATENT ENFORCEMENT
        -----------------------------------

     8.1 Aderis and Can-Fite agree to notify each other promptly of each
infringement or possible infringement, as well as any facts which may affect the
validity, scope or enforceability of the Licensed Patent Rights of which either
Party becomes aware.

     8.2 Pursuant to this Agreement, Can-Fite may (a) bring suit in its own
name, at its own expense, and on its own behalf for infringement in the Licensed
Fields of use of presumably valid claims in the Licensed Patent Rights; (b) in
any such suit, enjoin infringement and collect for its use, damages, profits,
and awards of whatever nature recoverable for such infringement; and (c) settle
any claim or suit for infringement in the Licensed Fields of Use of the Licensed
Patent Rights. Can-Fite shall take no action to compel Aderis either to initiate
or to join in any such suit for patent infringement. Should Aderis be made a
party to any such suit, Can-Fite shall reimburse Aderis for any costs, expenses,
or fees which Aderis incurs as a result of such motion or other action,
including any and all costs incurred by Aderis in opposing any such motion or
other action. Upon Can-Fite's payment of all costs incurred by Aderis as a
result of Can-Fite's joinder motion or other action, these actions by Can-Fite
will not be considered a default in the performance of any material obligation
under this Agreement. In all cases, Can-Fite agrees to keep Aderis reasonably
apprised of the status and progress of any litigation.

                                       5

<PAGE>

Before Can-Fite commences an infringement action, Can-Fite shall notify Aderis
and give careful consideration to the views of Aderis in deciding whether to
bring suit.

     8.3 In any infringement action commenced under Section 9.2, the expenses,
including costs, fees, attorney fees, and disbursements, shall be paid by
Can-Fite. Up to fifty percent (50%) of such expenses will be credited against
the Royalties payable to Aderis under Section 5 under the Licensed Patent Rights
in the county in which such a suit is filed. In the event that fifty percent
(50%) of such expenses exceed the amount of Royalties payable by Can-Fite in any
calendar year, the expenses in excess may be carried over as a credit on the
same basis into succeeding calendar years. Any recovery made by Can-Fite,
through court judgment or settlement, first shall be applied to reimburse Aderis
for Royalties withheld as a credit against litigation expenses and then to
reimburse Can-Fite for its litigation expenses. Aderis will be entitled to 15%
of any remaining recoveries. To the extent that the NIH Patent(s) will also be
subject to such an infringement action then out of said expenses only 33% will
be credited against the Royalties payable to Aderis and if both the NIH
Patent(s) and the Aderis Patent(s) are found to be valid and infringed, and
after reimbursing the NIH and Aderis hereunder, Aderis will be entitled to 7.5%
of any remaining recovery.

     8.4 Aderis shall cooperate fully with Can-Fite in connection with an
infringement action initiated under Section 9.2. Aderis agrees promptly to
provide access to all necessary documents and to render reasonable assistance in
response to a request by Can-Fite. In particular, the aforementioned in Section
9.2 notwithstanding, Aderis agrees that upon the occurrence of an infringement
in a jurisdiction in which an infringement suit cannot be brought by an
exclusive licensee, Aderis will provide its full assistance to enforce the
infringed patent rights including, without limitation, sending a Cease and
Desist letter and filing an infringement suit, all at Can-Fite's expense as
provided in Section 9.3.

     9. INDEMNIFICATION
        ---------------

     Can-Fite shall indemnify and hold Aderis, its employees, executive,
directors and consultants harmless from and against all liability, demands,
damages, expenses and losses, including but not limited to death, personal
injury, illness, or property damage in connection with or arising out of (a) the
use by or on behalf of Can-Fite, its sublicensees, directors, employees or third
parties of any Licensed Patent Rights, or (b) the design, manufacture,
distribution or use of any Licensed Compound(s) or drugs containing the Licensed
Compound(s), or materials, or other products or processes developed in
connection with or arising out of the Licensed Patent Rights. Can-Fite agrees to
maintain a liability insurance program consistent with sound business practice.

     10. TERM, TERMINATION AND MODIFICATION OF RIGHTS
         --------------------------------------------

     10.1 This Agreement is effective when signed by all parties and shall
extend to the expiration of the last to expire of the Aderis Patent(s) unless
sooner terminated as provided in this Section 10.

     10.2 In the event that Can-Fite is in default in the performance of any
material obligations under this Agreement, and if the default has not been
remedied within ninety (90)

                                       6

<PAGE>

days after the date of notice in writing of such default, Aderis may terminate
this Agreement immediately by written notice.

     10.3 Can-Fite shall have a unilateral right to terminate this Agreement
and/or any licenses in any country of its choice by giving Aderis sixty (60)
days' written notice to that effect.

     10.4 Within ninety (90) days of termination of this Agreement under this
Section 10 or expiration under Section 10.1, a final report shall be submitted
by Can-Fite. Any Royalty payments due to Aderis shall become immediately due and
payable upon termination or expiration. If terminated under this Section 10,
sublicensees may elect to convert their sublicenses to direct licenses with
Aderis pursuant to Section 3.3.

     11. CONFIDENTIAL INFORMATION
         ------------------------

     11.1 For the purpose of this Agreement, "Confidential Information" shall
mean all information (and all tangible and intangible embodiments thereof),
which is disclosed by either Aderis or Can-Fite (the "Disclosing Party") to the
other party (the "Receiving Party") pursuant to this Agreement, and (i) (if
disclosed in writing or other tangible medium) is marked or identified as
confidential at the time of disclosure to the Receiving Party; or (ii) (if
otherwise disclosed, or if not so marked or identified) is identified as
confidential at the time of disclosure to the Receiving Party and is summarized
and identified as confidential in writing within thirty (30) days after such
disclosure, or (iii) whether or not marked or identified as confidential in the
manner set forth above, is information that the other party should reasonably
understand to be the confidential or proprietary information of the Disclosing
Party. Notwithstanding the foregoing, Confidential Information shall not include
information which, and only to the extent, the Receiving Party can establish by
written documents (a) has been publicly known prior to disclosure of such
information by the Disclosing Party to the Receiving Party, (b) has become
publicly known, without fault on the part of the Receiving Party, subsequent to
disclosure of such information by the Disclosing Party to the Receiving Party,
(c) has been received by the Receiving Party at any time from a source, other
than the Disclosing Party, rightfully having possession of and the right to
disclose such information free of confidentiality obligations to the Disclosing
Party, (d) the Receiving Party can demonstrate by written evidence has been
otherwise known by the Receiving Party free of confidentiality obligations to
the Disclosing Party prior to disclosure of such information by the Disclosing
Party to the Receiving Party, or (e) has been independently developed by
employees or others on behalf of the Receiving Party, as evidenced by written
documentation, without access to or use of such information disclosed by the
Disclosing Party to the Receiving Party.

     11.2 During the term of this Agreement and for a period of three (3) years
following the expiration or earlier termination thereof, the Receiving Party
shall maintain in confidence the Confidential Information of the Disclosing
Party, shall use such Confidential Information only as explicitly set forth in
this Agreement, and shall not disclose, use or grant the use of the Confidential
Information of the Disclosing Party to any third party and may only disclose the
Confidential Information of the other on a need-to-know basis to such party's
directors, officers and employees, to the extent such disclosure is reasonably
necessary in connection with the Receiving Party's activities as expressly
authorized by this Agreement. The

                                       7

<PAGE>

Receiving Party shall notify the Disclosing Party promptly upon discovery of any
unauthorized use or disclose of the Disclosing Party's Confidential Information.

     11.3 The confidentiality obligations under this Section 12 shall not apply
to the extent that the Receiving Party is required to disclose information
applicable by law, regulation or other of a governmental agency or a court of
competent jurisdiction; provided, however, that to the extent practicable, the
Receiving Party (a) shall provide written notice thereof to the Disclosing Party
and consult with the Disclosing Party prior to such disclosure with respect
thereto, and (b) shall provide the Disclosing Party sufficient opportunity to
object to any such disclosure or to request confidential treatment thereof, and
provide reasonable assistance as requested in connection therewith.

     12. GENERAL PROVISIONS
         ------------------

     12.1 Neither Party may waive or release any of its rights or interests in
this Agreement except in writing. The failure of any party to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right by such party or excuse a
similar subsequent failure to perform any such term or condition by the other
party.

     12.2 This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of the Licensed Patent Rights, and all prior
negotiations, representations, agreements and understandings are merged into,
extinguished by, and completely expressed by this Agreement.

     12.3 The provisions of this Agreement are severable, and in the event that
any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such determination shall not in
any way affect the validity or enforceability of the remaining provisions of
this Agreement.

     12.4 If either Party desires a modification of this Agreement, the Parties
shall, upon reasonable notice of the proposed modification by the Party desiring
the change, confer in good faith to determine the desirability of such
modification. No modification will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.

     12.5 The construction, validity, performance, and effect of this Agreement
shall be governed by law of the State of New York, USA and the parties hereby
agree to submit to the exclusive jurisdiction of the courts in New York.

     12.6 All notices required or permitted by this Agreement shall be given by
prepaid, first class, registered or certified mail properly addressed to the
other Party at the address designated on the following Signature Page, or to
such other address as may be designated in writing by such other Party, and
shall be effective as of the date of the postmark of such notice.

     12.7 This Agreement shall not be assigned by Can-Fite, except (a) with the
prior written consent of Aderis, such consent to be reasonably given; or (b) as
part of a sale or transfer of substantially the entire business of Can-Fite
relating to operations which concern this

                                       8

<PAGE>

Agreement. Can-Fite shall notify Aderis within ten (10) days of any assignment
of this Agreement by Can-Fite.

     12.8 By entering into this Agreement, Aderis does not directly or
indirectly endorse any product or service provided, or to be provided, by
Can-Fite whether directly or indirectly related to this Agreement. Can-Fit shall
not state or imply that this Agreement is an endorsement by Aderis or any Aderis
employee. Additionally, Can-Fite shall not use the names of Aderis or their
employees in any advertising, promotional, or sales literature without the prior
written consent of Aderis.

     12.9 Performance and Diligence. Can-Fite or its sublicensee shall be solely
responsible for the development of, and obtaining regulatory approval for the
Licensed Compounds in the Licensed Field of Use in the Licensed Territory.
Can-Fite shall prepare a development plan that shall incorporate the elements
and timelines listed in Appendix E, and submit this plan to Aderis within 45
                        ----------
days of the effective date of this agreement. Can-Fite shall use its best
efforts to diligently prosecute this plan for the duration of this agreement.
This plan and the periods detailed in Appendix E may be subsequently modified by
                                      ----------
mutual written agreement.

     12.10 The parties agree to attempt to settle amicably any controversy or
claim arising under this Agreement or a breach of this Agreement. If such a
dispute cannot be resolved within 45 days of written notice, then either party
may request an arbitration proceeding as provided in Section 13.11.

     12.11 Alternative Dispute Resolution. Any dispute, controversy or claim
arising out of or relating to the validity, construction, enforceability or
performance of this Agreement, including disputes relating to an alleged breach
or to termination of this Agreement and including any claim of inducement by
fraud or otherwise, but excluding any dispute, controversy or claim arising out
of or relating to the validity, enforceability, or infringement of any Aderis
Patent shall be settled by binding Alternative Dispute Resolution by Mediation
and Arbitration pursuant to JAMS/ENDISPUTE Rules A and C attached as Appendix F.
                                                                     ----------

Aderis Pharmaceuticals, Inc.             Can-Fite Biopharma Ltd.

By:     /s/ Kenneth L. Rice, Jr.         By:     /s/ Ilan Cohn, Ph.D.
      ----------------------------             ---------------------------------
      Kenneth L. Rice, Jr.                     Ilan Cohn, Ph.D.
      Vice President and Chief                 Chief Executive Officer
        Commercial Officer

Date: May 7, 2002                        Date: May 7, 2002
      ----------------------------             ---------------------------------

                                       9

<PAGE>

                          APPENDIX A - Aderis Patent(s)

Country                        Patent No.                    Expiration Date
                                 RE 37,045
U.S.A.                           5,310,731                     10 May 2011
France                             0191025                     19 June 2005
Germany                          3,576,345                     19 June 2005
Italy                              0191025                     19 June 2005
United Kingdom                     0191025                     19 June 2005

<PAGE>

                        APPENDIX B - Licensed Compound(s)

N-6 substituted-5/2/-(N-substituted carboxamide) adenosine derivatives as
defined in Claim 1 of US RE37,045 (US 5,310,731), wherein

R1 is monohalobenzyle, and the group R\\4\\R\\5\\CO- is CH\\3\\NHCO-

[graphic]

<PAGE>

                       APPENDIX C - Licensed Field of Use

     The Licensed Field of Use includes the following clinical indications:

                       Cancer
                       Protection of myelocytes and their derivatives
                       Stem cell mobilization (mobilization of blood progenitor
                        cells)
                       Anti-viral
                       Arthritis

<PAGE>

                             APPENDIX D - Royalties

     Can-Fite agrees to pay Aderis earned royalties on Net Sales of Licensed
Compound(s), drugs containing the Licensed Compound(s) or on practice of
Licensed Process by or on behalf of Can-Fite and it sublicensees, calculated on
an annual basis in each calendar year, graded as follows:

     Royalties of 2.75% on an amount of annual Net Sales of Licensed
     Compound(s), drugs containing the Licensed Compound(s) or on practice of
     Licensed Process in the Licensed Territory of up to US$ twenty five million
     (US$ 25,000,000);

     Royalties of 2.25% on an amount of annual Net Sales of Licensed
     Compound(s), drugs containing the Licensed Compound(s) or on practice of
     Licensed Process in the Licensed Territory of up to US$ twenty five million
     (US$ 25,000,000) and up to US$ one hundred million (US$ 100,000,000);

     Royalties of 1.75% on an amount of annual Net Sales of Licensed
     Compound(s), drugs containing the Licensed Compound(s) or on practice of
     Licensed Process in the Licensed Territory exceeding US$ one hundred
     million (US$ 100,000,000).

Can-Fite further agrees to pay Aderis 2% of any fees, milestone payments, or
other payments, exclusive of equity, that are received from sublicensees to this
agreement, with the exception of any payments received by Can-Fite that
constitute reasonable reimbursement of expenses, including fully burdened
expenses for research and development of the Licensed Compounds.

<PAGE>

                     APPENDIX E - Performance and Diligence

     Can-Fite shall, from the date of this Agreement:

     1. Secure Series B preferred financing of not less than $2 million (US)
        within 9 months.

     2. File an IND with the US FDA and be free from clinical holds within 12
        months.

     3. Initiate Phase II clinical trials in a patient population in the Field
        of Use within 12 months.

     4. Initiate Phase II or Phase III clinical trials in the US within 3 years.

     5. File for regulatory approval within a Licensed Territory within 6 years.<PAGE>

                                                                   Exhibit 10.84

Portions of this exhibit marked [* ] are requested to be treated confidentially.

                                                                  Execution Copy

     SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 15, 2002,
                                          ---------
     among Incara Pharmaceuticals Corporation, a Delaware corporation
     ("Incara"), Aeolus Pharmaceuticals, Inc., a Delaware corporation, and the
       ------
     wholly owned subsidiary of Incara ("Aeolus"), Elan Pharma International
                                         ------
     Limited ("EPIL"), an Irish private limited liability company and
               ----
     wholly-owned subsidiary of Elan Corporation, plc., a public limited company
     incorporated under the laws of Ireland ("Elan") and Elan International
                                              ----
     Services, Ltd. ("EIS"), a Bermuda exempted limited liability company and
                      ---
     wholly-owned subsidiary of Elan.
     ---------------------------------------------------------------------------

                                R E C I T A L S:

         A.  Incara, Aeolus and EPIL wish to cooperate in the research,
development and commercialization of the Compounds in the Field (each as defined
in the Development Agreement (as defined herein)).

         B.  Incara, Aeolus and EPIL desire to enter into an agreement which
shall set forth the terms by which the parties shall cooperate in the research,
development and commercialization of the Compounds.

         C.  Incara desires to issue and sell to EPIL, and EPIL desires to
purchase and receive from Incara, shares (the "Shares") of Incara's Series B
                                               ------
preferred stock, par value U.S.$0.01 per share (the "Series B Preferred Stock"),
                                                     ------------------------
which are convertible (initially, on a 10-to-1 basis) into shares of Incara's
common stock, par value U.S.$0.001 per share (the "Common Stock") as provided in
                                                   ------------
Incara's Amended and Restated Certificate of Incorporation (the "Certificate")
                                                                 -----------
(the Series B Preferred Stock and the Common Stock into which it is convertible
are referred to herein as the "Securities").
                               ----------

         D.  Incara and EIS desire to amend and restate the Registration Rights
Agreement, dated December 21, 2000, among Incara and EIS (as amended and
restated and as may be amended, the "Registration Rights Agreement"), to include
                                     -----------------------------
all shares of the Common Stock issuable upon conversion of the Shares and to
effect certain mutually agreeable modifications to such agreement.

         E.  EPIL, Incara and Aeolus contemplate entering into a Development and
Option Agreement, in the form attached hereto as Exhibit A (the "Development
                                                 ---------       -----------
Agreement" and together with this Agreement, the Registration Rights Agreement
---------
and each other document or instrument executed and delivered in connection with
the transactions contemplated hereby, the "Transaction Documents"), which shall
                                           ---------------------
set forth the terms by which the parties shall cooperate in the research,
development and commercialization of the Compounds.

<PAGE>

          Each term used herein but not otherwise defined, shall have the
meaning assigned to such term in the Development Agreement.

                               A G R E E M E N T:

          In consideration of the foregoing premises and the mutual covenants
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:

          SECTION 1. Closings. The closing of the Initial Purchase (as defined
                     --------
below) (the "Initial Closing") shall occur on the date (the "Initial Closing
             ---------------                                 ---------------
Date") and at such time that original counterparts of the documents contemplated
----
hereby are exchanged and all conditions to the Initial Closing (as set forth in
Section 2(d)) have been satisfied or waived. The closing of any Later Purchase
(the closing of which is referred to herein as a "Later Closing"), shall occur
                                                  -------------
within fifteen (15) business days after the date when the applicable Milestone
Event (as defined below) has been met and when all conditions to such Later
Closing (as set forth in Section 2(e)) have been satisfied or waived (the "Later
                                                                           -----
Closing Date"). The Initial Closing and each Later Closing individually are
------------
referred to herein as a "Closing", and the Initial Closing Date and each Later
                         -------
Closing Date, individually, are referred to herein as a "Closing Date". The
                                                         ------------
Initial Closing and each Later Closing shall be held at the offices of Reitler
Brown LLC in New York City, New York (by means of facsimile or overnight mail)
or as otherwise agreed by the parties.

          SECTION 2.  Sale and Purchase.
                      -----------------

          (a)  Initial Purchase. At the Initial Closing, subject to the terms
               ----------------
and conditions hereof, Incara shall issue and sell to EPIL, and EPIL shall
purchase from Incara, 416,204 shares of Series B Preferred Stock (the "Initial
                                                                       -------
Purchase"), which was calculated at a price per share equal to twelve (12) times
--------
the average closing price of the Common Stock of Incara for the thirty (30)
trading day period immediately prior to the Initial Closing Date (the "Initial
                                                                       -------
Market Price"), for an aggregate purchase price of U.S.$3,000,000 (the "Initial
------------                                                            -------
Purchase Price").
--------------

          (b)  Milestone Purchases. Upon the occurrence of each of the following
               -------------------
events (each a "Milestone Event"), subject to the terms and conditions hereof,
                ---------------
EPIL shall purchase shares of Series B Preferred Stock, at a price per share
equal to ten (10) times the average closing price of the Common Stock of Incara
for the thirty (30) trading day period immediately prior to such Later Closing
Date (with respect to each Later Closing and subject to adjustment pursuant to
Section 2(g) below, the "Later Market Price"), for the aggregate purchase price
                         ------------------
as set forth below for such Later Closing (each, a "Later Purchase Price"):
                                                    --------------------

               (i)  if at any time within 180 days of the Initial Closing Date,
     Incara closes (A) a sale of capital stock, or securities convertible into
     capital stock, of Incara to one or more investors in a single transaction
     (a "Third Party Equity Purchase") or (B) a collaboration transaction (other
         ---------------------------
     than any collaboration with EPIL or any of its affiliates or with any
     affiliate of Incara) with Incara or any of its wholly-owned subsidiaries (a
     "Third
      -----

                                        2

<PAGE>

     Party Collaboration"), in either case, pursuant to which Incara actually
     -------------------
     receives, (either directly or through dividend or repayment of debt from
     its wholly-owned subsidiaries), aggregate net cash proceeds (as of the
     closing of the Third Party Equity Purchase or the Third Party Collaboration
     and not contingent upon future events or occurrences) from independent,
     unaffiliated, third-party investors or collaborators of at least
     U.S.$3,000,000 (the "Preliminary Milestone"), EPIL shall purchase
                          ---------------------
     U.S.$1,000,000 of duly and validly issued, fully paid and non-assessable
     shares of Series B Preferred Stock, free and clear of all security
     interests, liens, pledges, charges, escrows, options, rights of first
     refusal, encumbrances, agreements, arrangements, commitments or other
     claims of any kind or character (collectively, "Liens"); provided, that
                                                     -----
     such net cash proceeds must be received by Incara as a result of a single
     Third Party Equity Purchase or a single Third Party Collaboration and not
     from a combination of two or more such events;

               (ii)  if at any time prior to the termination of the Development
     Agreement, the Company reaches the IND Milestone with the Milestone
     Compound, EPIL shall purchase U.S.$500,000 of duly and validly issued,
     fully paid and non-assessable shares of Series B Preferred Stock, free and
     clear of all Liens;

               (iii) if at any time prior to the termination of the Development
     Agreement, the Company has obtained the IND Milestone with the Milestone
     Compound and then reaches the First Phase I Milestone with the Milestone
     Compound, EPIL shall purchase U.S.$500,000 of duly and validly issued,
     fully paid and non-assessable shares of Series B Preferred Stock, free and
     clear of all Liens;

               (iv)  if at any time prior to the termination of the Development
     Agreement, the Company has obtained the First Phase I Milestone with the
     Milestone Compound and then reaches the Second Phase I Milestone with the
     Milestone Compound, EPIL shall purchase U.S.$1,000,000 of duly and validly
     issued, fully paid and non-assessable shares of Series B Preferred Stock,
     free and clear of all Liens;

               (v)   if at any time prior to the termination of the Development
     Agreement, the Company has obtained the Second Phase I Milestone with the
     Milestone Compound and then reaches the First Phase II Milestone with the
     Milestone Compound, EPIL shall purchase U.S.$1,000,000 of duly and validly
     issued, fully paid and non-assessable shares of Series B Preferred Stock,
     free and clear of all Liens; and

               (vi)  if at any time prior to the termination of the Development
     Agreement, the Company has obtained the First Phase II Milestone with the
     Milestone Compound and then reaches the Second Phase II Milestone with the
     Milestone Compound, EPIL shall purchase U.S.$1,000,000 of duly and validly
     issued, fully paid and non-assessable shares of Series B Preferred Stock,
     free and clear of all Liens.

                                        3

<PAGE>

For purposes of this Section 2(b), (x) the purchase obligations of EPIL shall be
triggered by the first occurrence of each Milestone Event and (y) any subsequent
occurrence of a previously achieved Milestone Event (whether with respect to
another Compound or otherwise) shall not result in any additional purchase
obligation on behalf of EPIL or any of its affiliates (as used in this
Agreement, the term "affiliate" shall have the meaning assigned to such term in
Rule 12b-2 of the Securities Exchange Act of 1934, as amended). Incara hereby
agrees to provide EPIL with written notify within 5 business days of the
occurrence of any Milestone Event.

          (c)  Delivery and Payment.
               --------------------

               (i)  At the Initial Closing, Incara or Aeolus, as the case may
     be, shall deliver to EPIL:

                         (A) a certificate or certificates evidencing the shares
          of Series B Preferred Stock as forth in Section 2(a) above;

                         (B) the Amended and Restated Registration Rights
          Agreement, in the form attached hereto as Exhibit B (the "Amended and
                                                    ---------       -----------
          Restated Registration Rights Agreement"), duly executed by Incara;
          --------------------------------------

                         (C) a Secretary's Certificate of Incara, substantially
          in the form attached hereto as Exhibit C;
                                         ---------

                         (D) a Secretary's Certificate of Aeolus, substantially
          in the form attached hereto as Exhibit C;
                                         ---------

                         (E) an Officer's Certificate of Incara, substantially
          in the form attached hereto as Exhibit D;
                                         ---------

                         (F) an Officer's Certificate of Aeolus, substantially
          in the form attached hereto as Exhibit D;
                                         ---------

                         (G) an opinion of counsel to Incara, in the form
          attached hereto as Exhibit E;
                             ---------

                         (H) the Development Agreement, in the form attached
          hereto as Exhibit A, duly executed by Incara and Aeolus; and
                    ---------

                         (I) all other documents, instruments and writings
          reasonably requested by EPIL to be delivered to it pursuant to this
          Agreement, in form and substance reasonably satisfactory to EPIL.

               (ii) At the Initial Closing, EPIL shall deliver to Incara or
     Aeolus, as the case may be:

                                        4

<PAGE>

                         (A) the Initial Purchase Price by wire transfer of
          U.S.$3,000,000 to an account designated in writing by Incara prior to
          the Initial Closing;

                         (B) the Amended and Restated Registration Rights
          Agreement, duly executed by EIS;

                         (C) the Development Agreement, in the form attached
          hereto as Exhibit A, duly executed by EPIL; and
                    ---------

                         (D) all other documents, instruments and writings
          reasonably requested by Incara to be delivered to it pursuant to this
          Agreement, in form and substance reasonably satisfactory to Incara.

               (iii) At each Later Closing, Incara or Aeolus, as the case may
     be, shall deliver to EPIL (or its designee):

                         (A) a certificate or certificates evidencing the shares
          of Series B Preferred Stock to be purchased by EPIL at such Later
          Closing;

                         (B) a Secretary's Certificate of Incara, substantially
          in the form attached hereto as Exhibit C;
                                         ---------

                         (C) an Officer's Certificate of Incara, substantially
          in the form attached hereto as Exhibit D (which shall include a
                                         ---------
          certification that the Milestone Event (as defined below) with respect
          to such Later Closing has occurred);

                         (D) an opinion of counsel to Incara, in the form
          attached hereto as Exhibit E; and
                             ---------

                         (E) all other documents, instruments and writings
          reasonably requested by EPIL to be delivered to it pursuant to this
          Agreement, in form and substance reasonably satisfactory to EPIL.

               (iv)  At each Later Closing, EPIL shall deliver to Incara:

                         (A) the Later Purchase Price payable at such Later
          Closing (as set forth in Section 2(b)(ii)) by wire transfer to an
          account designated in writing by Incara prior to such Later Closing;
          and

                         (B) all other documents, instruments and writings
          reasonably requested by Incara to be delivered to it pursuant to this
          Agreement, in form and substance reasonably satisfactory to Incara.

                                        5

<PAGE>

               (d)  Conditions to Initial Closing. The obligation of EPIL to
                    -----------------------------
effect the Initial Closing is subject to the satisfaction of the following
conditions unless waived by EPIL:

                    (i)    the representations and warranties of Incara and
          Aeolus contained in this Agreement and the Development Agreement shall
          be true and correct in all respects as of the date of such agreement
          and as of the Initial Closing Date as if made on and as of the Initial
          Closing Date (except that such representations and warranties made as
          of a specified date shall be true and correct as of such date);

                    (ii)   Incara and Aeolus shall have each performed and
          complied with all covenants and agreements required to be performed or
          complied with on or prior to the Initial Closing Date under (x) each
          Transaction Document and (y) the Securities Purchase Agreement, dated
          as of December 21, 2000 between Incara, EPIL and EIS (the "Prior
                                                                     -----
          Purchase Agreement") and each document entered into or delivered in
          ------------------
          connection with the Prior Purchase Agreement (collectively, the "Prior
                                                                           -----
          Purchase Documents"), as the case may be, and no material breach or
          ------------------
          default by Incara under any Transactions Document or Prior Purchase
          Document shall have occurred and be continuing;

                    (iii)  Incara and/or Aeolus, as the case may be, shall have
          made the closing deliveries set forth in Section 2(c)(i); and

                    (iv)   all permits, consents, approvals, licenses, orders,
          authorizations, registrations, declarations, filings and other actions
          that are required in connection with the execution, delivery, filing
          and/or performance of each Transaction Document and the certificates
          evidencing the Series B Preferred Stock or the consummation of the
          transactions contemplated hereby and thereby shall have been obtained
          or taken.

               (e)  Conditions to each Later Closing. The obligation of EPIL to
                    --------------------------------
effect a Later Closing is subject to the satisfaction of the following
conditions unless waived by EPIL:

                    (i)    the Initial Closing shall have occurred;

                    (ii)   EPIL shall have received any required approvals under
          the Mergers and Takeovers (Control) Acts 1978-1996 (Ireland), the
          Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
          any other similar law or regulation (collectively, the "Applicable
          Anti-Trust Laws");

                    (iii)  the representations and warranties of Incara and
          Aeolus contained in this Agreement and the Development Agreement shall
          be true and correct in all respects as of the date of such agreement
          and as of such Later Closing Date as if made on and as of such Later
          Closing Date (except that such representations and warranties made as
          of a specified date shall be true and correct as of such date);

                    (iv)   Incara and Aeolus shall have each performed and
          complied with all covenants and agreements required to be performed or
          complied with on or prior to such

                                        6

<PAGE>

          Later Closing Date under (x) each Transaction Document (including the
          occurrence of any prior Milestone Event required to have occurred
          prior to the achievement of the Milestone Event triggering such Later
          Closing) and (y) each Prior Purchase Documents, as the case may be,
          and no material breach or default by Incara under any Transactions
          Document or Prior Purchase Document shall have occurred and be
          continuing;

                    (v)     Incara and/or Aeolus, as the case may be, shall have
          made the closing deliveries set forth in Section 2(c)(i);

                    (vi)    there shall not have been any material adverse
          change in the condition (financial or otherwise), operations,
          business, assets, liabilities, earnings or prospects of either Incara
          or Aeolus since the date of the immediately preceding Closing, but not
          including a change in the listing of the Common Stock of Incara from
          the Nasdaq National Market to the Nasdaq SmallCap Market;

                    (vii)   all permits, consents, approvals, licenses, orders,
          authorizations, registrations, declarations, filings and other actions
          that are required in connection with the execution, delivery, filing
          and/or performance of each Transaction Document and the certificates
          evidencing the Series B Preferred Stock or the consummation of the
          transactions contemplated hereby and thereby shall have been obtained
          or taken;

                    (viii)  with respect to the Later Closing triggered by the
          occurrence of the IND Milestone, the Steering Committee shall have
          approved the Phase I plan prepared by Aeolus with respect to the
          Milestone Compound;

                    (ix)    with respect to the Later Closing triggered by the
          occurrence of the Second Phase I Milestone, the Steering Committee
          shall have approved the Phase II plan prepared by Aeolus with respect
          to the Milestone Compound;

                    (x)     shares of Common Stock of Incara continue to be
          traded on a national securities exchange or quoted on the Nasdaq
          National Market or the Nasdaq SmallCap Market; and

                    (xi)    the Development Agreement shall be in effect and
          enforceable as to all parties thereto.

               (f)  Issuance of Securities. EPIL hereby assigns to EIS its right
                    ----------------------
to receive all Securities purchased by EPIL under this Agreement and EIS hereby
agrees to pay to EPIL upon the receipt by EIS of such Shares an amount equal to
the purchase price paid by EPIL for such Shares hereunder in return for similar
consideration paid by EPIL to Incara. Incara and EPIL hereby agree that all
Securities purchased by EPIL under this Agreement shall be issued beneficially
in the name of "Elan International Services, Ltd." and delivered to EIS, without
any further action on behalf of EIS.

                                        7

<PAGE>

               (g)  Restriction on Later Closings. During this Agreement:
                    -----------------------------

                    (i) if at a Later Closing the Later Market Price is equal to
          or greater than $6.01, which is ten (10) times the average of the
          closing price of the Common Stock of Incara for the thirty (30)
          trading day period immediately prior to the Initial Closing Date (the
          "Initial Closing Price"), EPIL shall purchase at the Later Market
          Price all shares of Series B Preferred Stock required to be purchased
          by EPIL pursuant to such Later Closing;

                    (ii) if at a Later Closing the Later Market Price is less
          than the Initial Closing Price, EPIL shall purchase at the Later
          Market Price up to an aggregate maximum of 279,158 shares of Series B
          Preferred Stock (as such number may be adjusted for stock splits,
          combinations, recapitalizations, reclassifications and dividends
          effected subsequent to the date hereof, the "Later Closing Maximum
                                                       ---------------------
          Shares"), which represents (on an as converted basis) less than 20% of
          ------
          the Common Stock of Incara issued and outstanding on the date hereof;
          and

                    (iii) if at a Later Closing the Later Market Price is less
          than the Initial Closing Price and EPIL has purchased all of the
          available Later Closing Maximum Shares, then Incara shall have 120
          days to obtain the necessary approval of its stockholders and any
          governmental entity to permit the purchase by EPIL of all additional
          Shares required to be purchased hereunder at the then-applicable Later
          Market Price. If Incara is unable to obtain such approvals within such
          period, EPIL shall have the right, in its sole discretion, to
          purchase, at the Initial Closing Price, any remaining Shares otherwise
          required to be purchased and, if so purchased by EPIL, EPIL shall be
          entitled to the remedies available to EPIL under the Development
          Agreement in the case of a breach under Section 12.3 of the
          Development Agreement.

               (h)  Exemption from Registration. The Securities and any
                    ---------------------------
underlying shares of Incara Common Stock will be issued under an exemption or
exemptions from registration under the U.S. Securities Act of 1933, as amended
(the "Securities Act"). Accordingly, the certificates evidencing the Series B
      --------------
Preferred Stock and any shares of Incara Common Stock or other securities
issuable upon the exercise, conversion or exchange of any of the Securities
shall, upon issuance, contain a legend, substantially in the form as follows:

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
          UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
          "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST
           ---
          THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
          UNLESS THERE IS (i) AN EFFECTIVE REGISTRATION STATEMENT FOR
          SUCH SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE
          SECURITIES LAWS OR (ii) A VALID EXEMPTION FROM THE
          REGISTRATION REQUIREMENTS UNDER SUCH SECURITIES UNDER THE
          ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                                  8

<PAGE>

                    (i)  Amendment to Registration Rights Agreement. EIS and
                         ------------------------------------------
Incara agree to amend the Registration Rights Agreement so as to include all
shares of Common Stock issuable upon conversion of the Shares purchased
hereunder within the definition of "Registrable Securities", and to incorporate
all prior amendments to such agreement in a comprehensive amended and restated
agreement.

                    (j)  Amendment to Certificate of Incorporation of Incara.
                         ---------------------------------------------------

                         (i)   Incara hereby agrees, and to seek all required
     approval of its stockholders (the "Stockholder Approval"), to cause the
                                        --------------------
     Certificate as in effect as of the date hereof (the "Existing Charter"), to
                                                          ----------------
     be amended and restated to incorporate the changes to the terms of its
     Series B Preferred Stock and Series C Preferred Stock, set forth in Exhibit
                                                                         -------
     F hereto (the "Amendment"), including, without limitation, calling a
     -              ---------
     special meeting of the stockholders to be held within 90 days of the date
     hereof to authorize and approve the Amendment, and recommending the
     authorization and approval of the Amendment to its stockholders in the
     proxy statement to be delivered to its stockholders in connection with such
     special meeting.

                         (ii)  Each of EIS and EPIL agree that, until the
     Amendment is effective:

                               (x) it shall not convert any share of Series B
               Preferred Stock pursuant to the conversion rights under the
               Existing Charter unless such share of Series B Preferred Stock
               has been issued and outstanding for not less than two years;
               provided, that each of EIS and EPIL may, at its option, convert
               its respective shares of Series B Preferred Stock into fully
               paid, non-assessable shares of Series B Conversion Stock (as
               defined in the Existing Charter) in the event that there shall
               occur a Significant Transaction (as defined in the Existing
               Charter) or:

                                   (I)   any consolidation or merger of the
                    Company with or into any other corporation or other entity
                    or person, or any other corporate reorganization, in which
                    the shareholders of the Company immediately prior to such
                    consolidation, merger or reorganization, own less than 50%
                    of the outstanding voting securities of the surviving or
                    resulting entity immediately after such consolidation,
                    merger or reorganization (other than any consolidation or
                    merger effected exclusively to change the domicile of the
                    Company);

                                   (II)  any transaction or series of related
                    transactions in which securities of the Company representing
                    50% or more of the combined voting power of the Company's
                    then outstanding voting securities are acquired by a person,
                    entity or group of related persons or entities; or

                                   (III) any sale, lease, exclusive license or
                    other disposition of all or substantially all of the assets
                    of the Company; and

                                        9

<PAGE>

                        (y) it shall not transfer any shares of Series B
          Preferred Stock to any of its affiliates without such transferee's
          written agreement to be bound by the restrictions on conversion of
          such shares set forth in clause (x) of this Section 2(j)(ii).

                (iii)   Incara agrees that, until the Amendment is effective,
     it shall be bound by the provisions of the Amendment as if the amendments
     set forth in the Amendment had been previously included in the Certificate
     as of the date of this Agreement.

          (k)   Waiver of Right to Appoint Director. Notwithstanding the rights
                -----------------------------------
of EIS pursuant to Section 5(b) of the Prior Purchase Agreement, effective until
the second anniversary of the Initial Closing Date, EIS hereby waives its right
to nominate or appoint a director to the board of directors of Incara under
Section 5(b) of the Prior Purchase Agreement; provided, that EIS shall continue
to have, during the term of such waiver, the right to select an individual to
attend all meetings of the board of directors of Incara and to receive all
notices and other correspondence and communications sent to members of the board
of directors of Incara (the "Observer Rights"); provided further that the
                             ---------------
Observer Rights shall not apply to any meeting or action related to an existing
or proposed transaction between Incara and EIS (or any of its affiliates) as to
which a director appointed to the board of director of Incara by EIS would be
required to abstain from voting as a director due to a conflict of interest.

          (l)   Waiver of Right to Vote Shares of Incara Stock. Effective until
                ----------------------------------------------
the second anniversary of the Initial Closing Date, EIS and EPIL each hereby (i)
waives its right to vote (including with respect to the election of directors of
Incara), any shares of capital stock of Incara held by EIS, EPIL (including all
shares acquired by EIS or EPIL pursuant to this Agreement or the Prior Purchase
Agreement or by upon conversion or exercise of any security acquired or right
granted under this Agreement or the Prior Purchase Agreement), except as
required by non-waivable provisions of applicable law and (ii) agrees to
condition any transfer of any shares of capital stock of Incara held by EIS,
EPIL upon such transferee's written agreement to be bound by the restrictions on
voting of such shares set forth in this Section 2(l).

          SECTION 3.  Representations and Warranties of Incara and Aeolus.
                      ---------------------------------------------------
Incara and Aeolus hereby, jointly and severally, represent and warrant to EPIL,
as of the date of this Agreement and as of each Closing Date, as follows:

          (a)   Organization and Qualification. (i) Incara is duly organized,
                ------------------------------
validly existing and in good standing under the laws of the State of Delaware
and has all 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 and to consummate the transactions contemplated hereby. Incara is
duly qualified as a foreign corporation and in good standing to do business in
each jurisdiction in which the nature of the business conducted or the property
owned by it requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, assets, liabilities (contingent or

                                       10

<PAGE>

otherwise), operations, condition (financial or otherwise), or prospects of
Incara taken as a whole (an "Incara Material Adverse Effect").
                             ------------------------------

               (ii)  Aeolus is duly organized, validly existing and in good
     standing under the laws of the State of Delaware and has all 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 and to
     consummate the transactions contemplated hereby. Aeolus is duly qualified
     as a foreign corporation and in good standing to do business in each
     jurisdiction in which the nature of the business conducted or the property
     owned by it requires such qualification, except where the failure to be so
     qualified would not, individually or in the aggregate, have a material
     adverse effect on the business, assets, liabilities (contingent or
     otherwise), operations, condition (financial or otherwise), or prospects of
     Incara taken as a whole (an "Aeolus Material Adverse Effect").
                                  ------------------------------

          (b)  Capitalization.
               --------------

               (i)   As of the Initial Closing Date, the authorized capital
     stock of Incara consists solely of: (A) 80,000,000 shares of Common Stock
     of which 13,957,908 are issued and outstanding; and (B) 3,000,000 shares of
     preferred stock, par value $0.01 per share; comprised of (x) 600,000 shares
     of Series B Preferred Stock of which 87,290 are issued and outstanding,
     prior to the shares issued pursuant to this Agreement, and (y) 20,000
     shares of Series C Preferred Stock, par value $0.01, per share (the "Series
                                                                          ------
     C Preferred Stock") of which 12,015 are issued and outstanding (all shares
     -----------------
     of Common Stock, Series B Preferred Stock and Series C Preferred Stock
     shall be collectively referred to from time to time as "Capital Stock").
                                                             -------------

               (ii)  Incara has reserved a sufficient number of shares of Incara
     Common Stock for issuance upon conversion of the Series B Preferred Stock
     and Series C Preferred Stock and 4,282,713 shares of Common Stock for
     issuance under Incara's 1994 Stock Option Plan and 173,414 shares of Common
     Stock for issuance under Incara's 1995 Employee Stock Purchase Plan.

               (iii) There are no preemptive rights, voting agreements, rights
     of first offer or refusal, options, warrants or other conversion privileges
     or rights presently outstanding to purchase, subscribe for or otherwise
     acquire, or any securities convertible into or exercisable or exchangeable
     for or into, any shares of Capital Stock (collectively, "Preemptive
                                                              ----------
     Rights"), except as described on Schedule 3(b). There are no agreements to
     ------                           -------------
     register any of Incara's outstanding securities under U.S. federal
     securities laws, other than the Amended and Restated Registration Rights
     Agreement and except as described on Schedule 3(b). No dividends on any
                                          -------------
     shares of Capital Stock have been declared but not yet paid.

               (iv) All of the outstanding shares of Capital Stock have been
     issued in accordance with applicable state and federal laws and regulations
     (or exemptions therefrom) governing the sale and purchase of securities,
     all of such shares have been

                                       11

<PAGE>

     duly and validly issued and are fully paid and non-assessable. Incara is
     not subject to any liability for any claim that Incara violated any
     applicable Federal or state securities laws in connection with the issuance
     of its Capital Stock or other securities. The Shares, when issued against
     payment therefore in accordance with this Agreement, will be duly and
     validly issued, fully paid and non-assessable, and in each case will not be
     issued in violation of any Preemptive Rights. The shares of Common Stock
     issuable upon conversion of the Shares (the "Underlying Shares"), when
                                                  -----------------
     issued upon conversion in accordance with the terms thereof, will be duly
     and validly issued, fully paid and non-assessable, will be free and clear
     of all Liens and will not be issued in violation of any Preemptive Rights.
     There are no restrictions on the transfer of the Shares or the Underlying
     Shares, other than those imposed by relevant Federal and state securities
     laws.

               (v)  Incara is the beneficial and record holder of all shares of
     outstanding capital stock of Aeolus. There are no preemptive rights, rights
     of first offer or refusal, options, warrants or other conversion privileges
     or rights presently outstanding to purchase, subscribe for or otherwise
     acquire, or any securities convertible into or exercisable or exchangeable
     for or into, any shares of capital stock of Aeolus.

          (c)  Authorization of Transaction Documents. (i) Incara has full
               --------------------------------------
corporate power and authority to execute and deliver this Agreement and each of
the other Transaction Documents to which it is a party, and to perform its
obligations hereunder and thereunder. The execution, delivery and performance by
Incara of this Agreement and each of the other Transaction Documents to which it
is a party (including the issuance and sale of the Securities and the Underlying
Shares) have been duly authorized by all requisite corporate action by Incara
and, when executed and delivered by Incara, this Agreement and each of the other
Transaction Documents to which it is a party will be the valid and binding
obligations of Incara, enforceable against Incara in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.

               (ii) Aeolus has full corporate power and authority to execute and
     deliver this Agreement and each of the other Transaction Documents to which
     it is a party, and to perform its obligations hereunder and thereunder. The
     execution, delivery and performance by Aeolus of this Agreement and each of
     the other Transaction Documents to which it is a party have been duly
     authorized by all requisite corporate action by Aeolus and, when executed
     and delivered by Aeolus, this Agreement and each of the other Transaction
     Documents to which it is a party will be the valid and binding obligations
     of Aeolus, enforceable against Aeolus in accordance with their respective
     terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization or similar laws affecting the rights of creditors generally
     and subject to general principles of equity.

          (d)  No Violations. (i) The execution, delivery and performance by
               -------------
Incara of this Agreement and each of the other Transaction Documents to which it
is a party (including the issuance and sale of the Securities) and the
compliance with the provisions hereof and thereof by

                                       12

<PAGE>

Incara do not violate, conflict with or constitute or result in a breach of or
default under (or an event which with notice or passage of time or both would
constitute a default) or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any Encumbrance upon any
properties or assets of Incara under (x) the Certificate of Incorporation or
bylaws of Incara, (y) applicable law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to Incara or any of
its properties or assets or (z) any contract or agreement affecting Incara,
except, in each case, where such violation, conflict, breach, default,
termination, cancellation, acceleration or Encumbrance would not, individually
or in the aggregate, have an Incara Material Adverse Effect. As used herein, the
term "Encumbrance" shall mean any lien, charge, encumbrance, claim, option,
      -----------
proxy, pledge, security interest, or other similar right of any nature other
than inchoate statutory tax liens securing payments not yet due and payable or
due but not yet delinquent.

               (ii) The execution, delivery and performance by Aeolus of this
     Agreement and the compliance with the provisions hereof by Aeolus do not
     violate, conflict with or constitute or result in a breach of or default
     under (or an event which with notice or passage of time or both would
     constitute a default) or give rise to any right of termination,
     cancellation or acceleration under, or result in the creation of any
     Encumbrance upon any properties or assets of Aeolus under (x) the
     Certificate of Incorporation or bylaws of Aeolus, (y) applicable law,
     statute, rule or regulation, or any ruling, writ, injunction, order,
     judgment or decree of any court, arbitrator, administrative agency or other
     governmental body applicable to Aeolus or any of its properties or assets
     or (z) any contract or agreement affecting Aeolus, except, in each case,
     where such violation, conflict, breach, default, termination, cancellation,
     acceleration or Encumbrance would not, individually or in the aggregate,
     have an Aeolus Material Adverse Effect.

          (e)  Approvals. Except as set forth on Schedule 3(e) and for consent
               ---------                         -------------
which may be required under Applicable Anti-Trust Laws, no permit,
authorization, consent, approval, or order of or by, or any notification of or
filing with, any person or entity (governmental or otherwise) is required in
connection with the execution, delivery or performance of this Agreement or the
other Transaction Documents (including the issuance and sale of the Securities)
by Incara or by Aeolus.

          (f)  Financial Statements. The Annual Report on Form 10-K filed by
               --------------------
Incara with the Securities and Exchange Commission (the "SEC") on December 21,
                                                         ---
2001 contains the audited consolidated balance sheets of Incara at September 30,
2001 and September 30, 2000 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended, together with the reports and opinions thereon of PricewaterhouseCoopers
LLP, and the Quarterly Report on Form 10-Q filed by Incara with the SEC on
February 14, 2002 contains the unaudited consolidated balance sheet of Incara at
December 31, 2001 and the related consolidated statements of operations and cash
flows for the three months then ended (collectively, the "Financial
                                                          ---------
Statements"). The Financial Statements are accurate and complete and fairly
----------
present, in all material respects, the financial position of Incara

                                       13

<PAGE>

and the results of its operations and its cash flows at such dates and for the
periods indicated and were prepared in conformity in all material respects with
United States generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as may be otherwise indicated
therein). As of the Initial Closing Date, Incara has not incurred and is not
liable for any material liabilities or obligations required to be disclosed on
the Financial Statements in accordance with United States generally accepted
accounting principles, except as set forth in the Financial Statements or
Schedule 3(f).
-------------

               (g)  Taxes. Incara has filed in a timely manner any federal,
                    -----
state, local and foreign tax returns, reports and filings with the appropriate
Governmental Authorities (as defined below) in all jurisdictions in which such
returns, reports and filings are required to be filed (collectively, the
"Returns"), including income, franchise, property and other taxes, and has paid
 -------
or accrued the appropriate amounts reflected on such Returns heretofore required
to be filed. All such returns, reports and filings are true, correct and
complete. Except as set forth on Schedule 3(g), none of the Returns have been
                                 -------------
audited or challenged, nor has Incara received any notice of challenge nor have
any of the amounts or other data included in the Returns been challenged or
reviewed by any governmental authority. All Federal, state, local and foreign
income, profits, franchise, sales, use, occupation, property, excise, employment
and other taxes (including interest, penalties and withholdings of tax) due from
and payable by Incara have been fully paid on a timely basis. Incara is not a
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" as of the
Initial Closing Date within the meaning of Section 280G of the Internal Revenue
Code (the "Code"). Incara has complied and will comply with all applicable laws
           ----
relating to the payment and withholding of taxes (including withholding and
reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041
and 6049 of the Code and similar provisions under any other laws) and, within
the time and in the manner prescribed by law, have withheld from wages, fees and
other payments and paid over to the proper Governmental Authorities all amounts
required.

               (h)  Plans. As of the Initial Closing Date, except as set forth
                    -----
on Schedule 3(h), which sets forth an accurate and complete list and description
   -------------
of all employee benefit plans maintained or sponsored by Incara or to which
Incara is required to make contributions (the "Benefit Plans"), Incara does not
                                               -------------
maintain, sponsor, is not required to make contributions to or otherwise have
any liability with respect to any pension, savings, profit sharing, thrift or
other retirement plan, employee stock ownership plan, deferred compensation,
stock option, stock appreciation, stock ownership, stock purchase, performance
share, bonus or other incentive plan, severance plan, health or group insurance
plan, welfare plan, or other similar plan, agreement, policy or understanding
(whether written or oral), whether or not such plan is intended to be qualified
under Section 401(a) of the U.S. Internal Revenue Code of 1986, as amended, or
within the meaning of Section 3(3) of the U.S. Employee Retirement Income
Security Act of 1974, as amended, which plan covers any employee or former
employee of Incara. The Benefit Plans have been and are administered in
substantial compliance with their terms and the requirements of applicable law.
No Benefit Plan is subject to the provisions of Section 412 of the Code or Part
3 of Subtitle B of Title I of ERISA. No Benefit Plan is subject to Title IV of
ERISA. During the past five years, neither Incara nor any business or entity
then controlling, controlled by, or under common control with Incara contributed
to or was obliged to contribute to an employee pension

                                       14

<PAGE>

plan that was subject to Title IV of ERISA (no representation is made as to
plans administered by Interneuron Pharmaceuticals, Inc., who owned a majority of
Incara's Common Stock prior to August 1999). Incara has satisfied all funding,
compliance and reporting requirements for all Benefit Plans. With respect to
each Benefit Plan, Incara has timely paid all contributions (including employee
salary reduction contributions) and all insurance premiums that have become due
and any such expense accrued but not yet due has been properly reflected in the
Financial Statements. None of the execution and delivery of this Agreement by
the parties hereto, the performance by any party to this Agreement of their
respective obligations or undertakings contemplated under this Agreement, or the
consummation of the transactions contemplated under this Agreement will (A)
entitle any employee of Incara to severance pay or termination benefits, or (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee.

          (i)  Absence of Certain Events.
               -------------------------

               (i)  Since September 30, 2001, except as contemplated by the
     Transaction Documents, or, as set forth on Schedule 3(i), Incara has
                                                -------------
     operated in the ordinary course consistent with past practice and there has
     not been, other than in the ordinary course of business consistent with
     past practice:

                      (A) any declaration, setting aside or payment of any
          dividend or other distribution with respect to any shares of the
          Capital Stock or other securities of Incara or any direct or indirect
          redemption, purchase or other acquisition of any such shares or
          securities;

                      (B) any recapitalization, reclassification, stock
          dividend, stock split or like change in capitalization with respect to
          Incara;

                      (C) any acquisition on behalf of Incara, by merger,
          consolidation, purchase of a substantial portion of assets or equity
          interests, or by any other manner, of any business, person, or
          division of either thereof, or of any assets which are material,
          individually or in the aggregate, to Incara;

                      (D) any creation of any Lien on, or any assignment or
          other disposition of, any property of Incara, except in the ordinary
          course of business consistent with past practice, and except to the
          extent such Liens, assignments and dispositions, together with all
          other such Liens, assignments and dispositions, would not have an
          Incara Material Adverse Effect;

                      (E) any (I) change in any bonus, commission, pension,
          profit-sharing or other benefit or compensation plan, policy, or
          arrangement or commitment or (II) increase in any such compensation,
          bonus, commission, pension, profit-sharing or other benefit payable
          now or in the future;

                                       15

<PAGE>

               (F)  any material damage, destruction or loss (whether or not
     covered by insurance) affecting any asset of Incara or Aeolus;

               (G)  any (I) grant of severance or termination pay to any
     director, officer, employee, consultant or independent contractor of
     Incara, (II) execution of any employment, deferred compensation or other
     similar agreement (or any amendment to any such existing agreement) with
     any director, officer, employee, consultant or independent contractor of
     Incara, (III) increase in benefits payable under existing severance or
     termination pay policies of Incara or under employment or other agreements
     to which Incara is a party, or (IV) acceleration of the time or payment or
     vesting of compensation of any director, officer, employee, consultant or
     independent contractor of Incara, except (x) in the case of clauses (III)
     and (IV) any such increase as may be required under an existing agreement,
     and (y) any such grant, execution, increase or acceleration involving any
     employee (other than an officer or a director), consultant or independent
     contractor made in the ordinary course of business, consistent with past
     practice;

               (H)  any incurrence or assumption by, or on behalf of, Incara of
     any liabilities, obligations of indebtedness for borrowed money or for the
     deferred purchase price of property or services, or any guarantee of any
     such liabilities, obligations or indebtedness, other than in the ordinary
     course of business, consistent with past practice;

               (I)  any cancellation of any material indebtedness (individually
     or in the aggregate) or waiver of any material claims or material rights
     owned by Incara;

               (J)  any election relating to taxes on behalf of Incara or any
     change in the method of accounting for tax purposes for Incara;

               (K)  any financing, joint venture, license or similar arrangement
     entered into by Incara that would limit or restrict its ability to perform
     its obligations hereunder and under each of the other Transaction
     Documents;

               (L)  any event, occurrence, development, circumstance or fact
     which has had or would reasonably be expected to have an Incara Material
     Adverse Effect except for a change in the listing of the Common Stock of
     Incara from the Nasdaq National Market to the Nasdaq SmallCap Market; and

               (M)  any agreement, whether in writing or otherwise, to directly
     or indirectly take any of the actions specified in the foregoing items (A)
     through (L).

          (ii) Without limiting the generality of the foregoing, since September
30, 2001, except as set forth on Schedule 3(i), there has not been (A) any lapse
                                 -------------
of any of trade secrets, inventions, patents, patent applications or
continuations (in whole or in

                                       16

<PAGE>

     part), trademarks, trademark registrations, service marks, service mark
     registrations, copyrights, copyright registrations, or any application
     therefore or filing in respect thereof (collectively, and together with any
     and all know-how, trade secrets and proprietary business or technology
     information, the "Intellectual Property") of Incara that could reasonably
                       ---------------------
     be expected to result in an Incara Material Adverse Effect; (B) loss of the
     services of any of the key officers or key employees of Incara; (C) any
     incurrence of or entry into any mortgage, Encumbrance, commitment or
     transaction, including without limitation, any borrowing (or assumption or
     guarantee thereof) or guarantee of a third party's obligations in excess of
     U.S. $250,000; or (D) any change in the assets, liabilities, condition
     (financial or otherwise), results or operations or prospects of Incara from
     those reflected on the Financial Statements, except changes in the ordinary
     course of business and changes that have not had or could not reasonably be
     expected to have, individually or in the aggregate, an Incara Material
     Adverse Effect.

               (j)  No Liabilities. Since September 30, 2001, Incara has not
                    --------------
incurred or suffered any liability or obligation, matured or unmatured,
contingent or otherwise, except in the ordinary course of business and except
any such liability or obligation that have not had and could not reasonably be
expected to have, individually or in the aggregate, an Incara Material Adverse
Effect.

               (k)  Properties and Assets; Etc.
                    --------------------------

                    (i)  Except as set forth on Schedule 3(k), as of the Initial
                                                -------------
     Closing Date Incara has good and marketable title to its properties and
     assets shown in the Financial Statements to be owned by Incara, and has
     valid leasehold interests to the properties and assets shown in the
     Financial Statements to be leased by Incara, in the case of owned property,
     subject to no Encumbrances.

                    (ii) Incara owns or possesses sufficient legal rights to use
     pursuant to license, sublicense, agreement or permission all Intellectual
     Property used in the operation of its business as presently conducted,
     other than any failure to own or possess sufficient legal rights which,
     individually or in the aggregate, would not have an Incara Material Adverse
     Effect. All of the Intellectual Property which is owned by Incara is owned
     free and clear of all Encumbrances; none of Incara's rights in or use of
     the Intellectual Property has been or, to Incara's knowledge, is currently
     threatened to be challenged; to Incara's knowledge, without making any
     inquiry other than those, if any, routinely conducted by Incara in the
     ordinary course of business, no current or currently planned product based
     upon Incara's Intellectual Property would infringe any patent, trademark,
     service mark, trade name or copyright of any other person or entity issued
     or pending on the Closing Date if Incara were to distribute, sell, market
     or manufacture such products, and Incara is not aware of any actual or
     threatened claim by any person or entity alleging any infringement by
     Incara of a patent, trademark, service mark, trade name or copyright
     possessed by such person or entity. Except as disclosed on Schedule 3(k),
     none of such Intellectual Property, whether foreign or domestic, has been
     canceled, abandoned, or otherwise terminated.

                                       17

<PAGE>

                    (iii)  Except as disclosed on Schedule 3(k), Incara has
     filed with the SEC all contracts that it believes are to be material. Each
     is a legal and valid agreement binding upon Incara and, to Incara's
     knowledge, is in full force and effect. To Incara's knowledge, there is no
     material breach or default by any party thereunder.

                    (iv)   Incara has and maintains adequate and sufficient
     insurance, including liability, casualty, workers' compensation and
     products liability insurance, covering risks associated with its business,
     properties and assets, including insurance that is customary for companies
     similarly situated.

                    (v)    Incara, its business and properties and assets are in
     compliance in all material respects with all applicable Federal, state,
     local and foreign laws, ordinances, regulations, interpretations and
     orders, including without limitation, those relating to (A) health, safety
     and employee relations, (B) environmental matters, including the discharge
     of any hazardous or potentially hazardous materials into the environment
     and (C) the development, commercialization and sale of pharmaceutical and
     biotechnology products, including all applicable regulations of the U.S.
     Food and Drug Administration and comparable applicable foreign regulatory
     authorities.

                    (vi)   Aeolus owns or possesses sufficient legal rights to
     use pursuant to license, sublicense, agreement or permission all
     Intellectual Property used in the operation of its business as presently
     conducted, other than any failure to own or possess sufficient legal rights
     which, individually or in the aggregate, would not have an Aeolus Material
     Adverse Effect. All of the Intellectual Property which is owned by Aeolus
     is owned free and clear of all Encumbrances; none of Aeolus' rights in or
     use of the Intellectual Property has been or, to Aeolus' knowledge, is
     currently threatened to be challenged; to Aeolus' knowledge, without making
     any inquiry other than those, if any, routinely conducted by Aeolus in the
     ordinary course of business, no current or currently planned product based
     upon Aeolus' Intellectual Property would infringe any patent, trademark,
     service mark, trade name or copyright of any other person or entity issued
     or pending on the Closing Date if Aeolus were to distribute, sell, market
     or manufacture such products, and Aeolus is not aware of any actual or
     threatened claim by any person or entity alleging any infringement by
     Aeolus of a patent, trademark, service mark, trade name or copyright
     possessed by such person or entity. Except as disclosed on Schedule 3(k),
     none of such Intellectual Property, whether foreign or domestic, has been
     canceled, abandoned, or otherwise terminated.

                    (vii)  Aeolus has and maintains adequate and sufficient
     insurance, including liability, casualty, workers' compensation and
     products liability insurance, covering risks associated with its business,
     properties and assets, including insurance that is customary for companies
     similarly situated.

                    (viii) Aeolus, its business and properties and assets are in
     compliance in all material respects with all applicable Federal, state,
     local and foreign laws, ordinances, regulations, interpretations and
     orders, including without limitation, those relating to (A)

                                       18

<PAGE>

     health, safety and employee relations, (B) environmental matters, including
     the discharge of any hazardous or potentially hazardous materials into the
     environment and (C) the development, commercialization and sale of
     pharmaceutical and biotechnology products, including all applicable
     regulations of the U.S. Food and Drug Administration and comparable
     applicable foreign regulatory authorities.

          (l)  Legal Proceedings, etc. There is no legal, administrative,
               ----------------------
arbitration or other action or proceeding or governmental or investigation
pending, or to Incara's knowledge, threatened against Incara, or any director,
officer or employee of Incara in their capacities as such that (i) challenges
the validity or performance of this Agreement or the other Transaction Documents
or (ii) could reasonably be expected to have an Incara Material Adverse Effect.
Incara is not in violation of or default under, any material laws, judgments,
injunctions, orders or decrees of Federal, state, local, foreign or other court,
governmental department, commission, agency, board, bureau, instrumentality or
arbitrator (collectively, "Governmental Authority") applicable to its business,
other than any violation or default which, individually or in the aggregate,
would not have an Incara Material Adverse Effect.

          (m)  Disclosure. The representations and warranties set forth herein
               ----------
and in the other Transaction Documents, when viewed collectively, do 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 in light of the
circumstances in which they were made.

          (n)  Brokers or Finders. There have been no investment bankers,
               ------------------
brokers or finders used by Incara or Aeolus in connection with the transactions
contemplated by the Transaction Documents and no persons or entities are
entitled to a fee or compensation in respect thereof.

          (o)  SEC Filings. Incara has filed with the SEC all forms, reports,
               -----------
schedules, statements, exhibits and other documents (collectively, the "SEC
                                                                        ---
Filings") required to be filed by Incara on or before the date hereof. At the
-------
time filed, the SEC Filings, including without limitation, any financial
statements, exhibits and schedules included therein or documents incorporated
therein by reference (i) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) complied in all material respects with
the applicable requirements of the Securities Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as the case may be.
                          ------------

          SECTION 4. Representation and Warranties of EPIL and EIS. EPIL and EIS
                     ---------------------------------------------
hereby represent and warrant (individually as to itself) to Incara and Aeolus,
as of the date hereof, as follows:

          (a)  Organization. EPIL is a private limited liability company, duly
               ------------
organized, validly existing and in good standing under the laws of Ireland and
has all 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
and to consummate the transactions to which it is a

                                       19

<PAGE>

party contemplated hereby. EPIL, where applicable, is duly qualified as a
foreign corporation and in good standing to do business in each jurisdiction in
which the nature of the business conducted or the property owned by it requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, liabilities (contingent or otherwise), operations, condition
(financial or otherwise), or prospects of EPIL, as applicable (an "EPIL Material
                                                                   -------------
Adverse Effect"). EIS is an exempted limited liability company, duly organized,
--------------
validly existing and in good standing under the laws of Bermuda and has all
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 and
to consummate the transactions to which it is a party contemplated hereby. EIS,
where applicable, is duly qualified as a foreign corporation and in good
standing to do business in each jurisdiction in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to be so qualified would not, individually or in the aggregate, have
a material adverse effect on the business, assets, liabilities (contingent or
otherwise), operations, condition (financial or otherwise), or prospects of EIS,
as applicable (an "EIS Material Adverse Effect").
                   ---------------------------

          (b)  Authorization of Transaction Documents. Each of EPIL and EIS has
               --------------------------------------
full corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents to which it is a party, and to perform
its obligations hereunder and thereunder. The execution, delivery, and
performance by each of EPIL and EIS of this Agreement and each other Transaction
Document to which it is a party (including the purchase and acceptance of the
Securities) have been duly authorized by all requisite corporate action by EPIL
and EIS and, when executed and delivered by EPIL and EIS, this Agreement and
each of the other Transaction Documents to which it is a party will be the valid
and binding obligation of EPIL and EIS, enforceable against it in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.

          (c)  No Violation. The execution, delivery and performance by EPIL and
               ------------
EIS of this Agreement and each other Transaction Document to which each of them
is a party (including the purchase and acceptance of the Securities) and
compliance with provisions hereof and thereof by EPIL and EIS will not violate
conflict with or constitute or result in a breach of or default under (or an
event which with notice or passage of time or both would constitute a default)
or give rise to any right of termination, cancellation or acceleration under (i)
the respective charter or bylaws of EPIL or EIS, (ii) applicable law, statute,
rule or regulation, or any ruling, writ, injunction, order, judgment or decree
of any court, arbitrator, administrative agency or other governmental body
applicable to EPIL or EIS or any of their respective properties or assets or
(iii) any material contract to which EPIL or EIS is a party, except, in each
case, where such violation, breach, default, termination, cancellation or
acceleration would not, individually or in the aggregate, have an EPIL Material
Adverse Effect or an EIS Material Adverse Effect.

          (d)  Approvals. Except for consents which may be required under
               ---------
Applicable Anti-Trust Laws, no material permit, authorization, consent, approval
or order of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in

                                       20

<PAGE>

connection with the execution, delivery or performance of this Agreement by EPIL
or EIS or the other Transaction Documents to which it is a party.

              (e)   Investment Representations.
                    --------------------------

                    (i)   Each of EPIL and EIS is sophisticated in transactions

     of this type and capable of evaluating the merits and risks of the
     transactions described herein and in the other Transaction Documents to
     which it is a party, and has the capacity to protect its own interests.
     Neither EPIL nor EIS has been formed solely for the purpose of entering
     into the transactions described herein and therein and each is acquiring
     the Securities (and the Underlying Shares) for investment for its own
     account, not as a nominee or agent, and not with the view to, or for resale
     or distribution thereof, in whole or in part, and no other person has a
     direct or indirect interest, beneficial or otherwise in the Securities (or
     the Underlying Shares); provided, however, that EPIL and EIS shall be
                             --------  -------
     permitted to convert or exchange such Securities in accordance with their
     terms.

                    (ii)  EPIL and EIS acknowledge their understanding that the
     private placement and sale of the Securities (and the Underlying Shares) is
     exempt from registration under the Securities Act. In furtherance thereof,
     EPIL and EIS each represents and warrants that it is an "accredited
     investor" as that term is defined in Regulation D promulgated under the
     Securities Act, has the financial ability to bear the economic risk of its
     investment, has adequate means for providing for its current needs and
     personal contingencies and has no need for liquidity with respect to its
     investment in Incara.

                    (iii) Each of EPIL and EIS agrees that it shall not sell or
     otherwise transfer any of the Securities (or the Underlying Shares) without
     registration under the Securities Act or pursuant to an exemption from
     registration, and fully understands and agrees that it must bear the total
     economic risk of its purchase for an indefinite period of time because,
     among other reasons, none of the Securities (or the Underlying Shares) have
     been registered under the Securities Act or under the securities laws of
     any applicable state or other jurisdiction and, therefore, cannot be
     resold, pledged, assigned or otherwise disposed of unless subsequently
     registered under the Securities Act and under the applicable securities
     laws of such states or jurisdictions or an exemption from such registration
     is available. Each of EPIL and EIS understands that Incara is under no
     obligation to register the Securities (or the Underlying Shares) on its
     behalf with the exception of certain registration rights, as provided in
     the Amended and Restated Registration Rights Agreement. EPIL and EIS
     understand the lack of liquidity and restrictions on transfer of the
     Securities (and the Underlying Shares) and that this investment is suitable
     only for a person or entity of adequate financial means that has no need
     for liquidity of this investment and that can afford a total loss of its
     investment.

              (f)   Legal Proceedings, etc. There is no legal, administrative,
                    ----------------------
arbitration or other action or proceeding or governmental investigation pending,
or to the knowledge of either EPIL or EIS threatened, against EPIL or EIS that
challenges the validity or performance of this

                                       21

<PAGE>

Agreement or the other Transaction Documents to which EPIL and EIS or any of
their affiliates is a party.

              (g)   Brokers or Finders. There have been no investment bankers,
                    ------------------
brokers or finders used by EPIL or EIS or their affiliates in connection with
the transactions contemplated by the Transaction Documents and no persons or
entities are entitled to a fee or compensation in respect thereof.

              SECTION 5.   Covenants of the Parties.
                           ------------------------

              (a)   Confidentiality; Non-Disclosure.
                    -------------------------------

                    (i)  Subject to clause (ii) below, from and after the date
     hereof, Incara, Aeolus, EPIL and EIS (and their respective affiliates)
     shall not disclose to any person or entity the terms of this Agreement or
     the other Transaction Documents or the contents thereof or the parties
     thereto, except that such parties may make such disclosure (x) to their
     directors, officers, employees and advisors, and potential bank creditors
     and investors, so long as they shall have advised such persons of the
     obligation of confidentiality herein and for whose breach or default the
     disclosing party shall be responsible or (y) as required by applicable
     law, rule, regulation or judicial or administrative process, provided
                                                                  --------
     that the disclosing party uses commercially reasonable efforts to obtain
     an order or ruling protecting the confidentiality of confidential
     information of the other party contained herein or therein and notifies
     the other party prior to such disclosure so that such other party may, if
     it chooses, seek such relief. The parties shall be entitled to seek
     injunctive or other equitable relief in respect of any breach or threatened
     breach of the foregoing covenant without the requirement of posting a bond
     or other collateral. This Section 5(a)(i) shall not restrict the ability of
     EPIL, EIS or their affiliates to complete and file with the Securities and
     Exchange Commission all required reports and filings to be made by EPIL or
     EIS as a stockholder of Incara, without the prior consent of Incara.

                    (ii) Prior to issuing the initial press release or public
     disclosure in respect of this Agreement or the transactions contemplated
     hereby (the "Initial Press Release") by Incara or Aeolus, the party
                  ---------------------
     proposing such issuance shall obtain the consent of EPIL to the contents
     thereof, which consent shall not be unreasonably withheld or delayed.
     Thereafter, Incara may issue press releases made in the ordinary course of
     its business, referring to research collaborations involving Incara, and
     which do not differ from or go beyond the terms of the Initial Press
     Release (except that no quotes from EPIL shall be repeated), without
     obtaining the consent of EPIL to the contents thereof; provided, however,
                                                            --------  -------
     that any other type of press release or public disclosure by Incara in
     respect of this Agreement or the transactions contemplated hereby will
     require the consent of EPIL to the contents thereof, which consent shall
     not be unreasonably withheld or delayed.

              (b)   Conduct of Business. From the date of this Agreement until
                    -------------------
the earlier of (x) the final Later Closing Date and (y) the termination of this
Agreement pursuant to Section 7

                                       22

<PAGE>

hereof, Incara shall (i) operate its business only in the ordinary course of
business consistent with past practices and (ii) not create, adopt, enact or
approve any (nor amend, supplement or modify any existing) agreement, contract
or arrangement that would result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code; provided, that this clause (ii) shall not be deemed violated by any
"excess parachute payments" resulting from any agreement, contract or
arrangement (including any stock options or other stock grants) in effect as of
the Initial Closing Date as to which Incara and Aeolus have represented herein
would not result in the payment of any "excess parachute payments" as of the
Initial Closing Date.

          (c) Reserved Shares. Incara shall reserve and at all times keep
              ---------------
available, free from preemptive rights, out of its authorized but unissued
stock, a sufficient number of shares of Common Stock to provide for the issuance
of such shares upon the conversion of the Series B Preferred Stock.

          (d) Use of Proceeds.
              ---------------

              (i)   Without the prior written approval of EPIL , the following
     proceeds from the sale of the Shares shall be used in the following manner:

                       (A) at least U.S.$[*] of the proceeds of the Initial
          Purchase shall be used to fund the continued research and development
          by Aeolus and Incara of the Compounds in the Field and the achievement
          of the IND Milestone;

                       (B) the proceeds of the sale of Shares to EPIL relating
          to the Preliminary Milestone shall be used, (x) if the Preliminary
          Milestone was reached as a result of the occurrence of a Third Party
          Equity Purchase, solely to fund the continued research and development
          by Aeolus and Incara of the Compounds in the Field and the achievement
          of the remaining Milestone Events, and (y) if the Preliminary
          Milestone was reached as a result of the occurrence of a Third Party
          Collaboration, for general corporate purposes; and

                       (C) all of the proceeds of the sale of Shares to EPIL
          relating to the any other Milestone Event shall be used solely to fund
          the continued research and development by Aeolus and Incara of the
          Compounds in the Field and the achievement of the remaining Milestone
          Events; provided, that to the extent that, at the time Aeolus obtains
          any Milestone Event, any proceeds from the purchase of Shares by EPIL
          that were to be used to obtain such Milestone remain available, Incara
          may use such unutilized funds in the ordinary course of its business;
          provided, further that all proceeds of the purchase of Shares
          resulting from the obtainment of such Milestone Event shall be used in
          accordance with this clause (C) to obtain the next Milestone Event.

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

                                       23

<PAGE>

       In the event that Incara utilizes funds from a source other than the
       purchase of Shares by EPIL to fund the obtainment of any Milestone Event,
       the proceeds resulting from EPIL's purchase of the Share upon such
       Milestone Event may to used to reimburse Incara for such advances.

                (ii) Notwithstanding the foregoing, no proceeds of the
       purchase by EPIL of Shares under this Agreement shall be used to
       effectuate any of the following:

                       (A) a declaration or payment of any dividends or
          distributions on any capital stock of Incara, Aeolus or any of their
          respective affiliates (other than any dividends or distributions to
          any affiliate of Elan);

                       (B) the purchase, redemption, retirement or other
          acquisition of any of the capital stock now or hereafter outstanding
          of Incara, Aeolus or any of their respective affiliates (other than
          repurchases from employees, consultants or other parties subject to
          reverse vesting arrangements);

                       (C) any transaction (other than for the payment of salary
          of, or reimbursement of expenses incurred by, an employee, or payments
          of compensation made under a consulting agreement, in each case in the
          ordinary course of business consistent with past practice of Incara),
          with any officer, manager, director or shareholder of Incara, Aeolus
          or any of their respective affiliates or with any affiliates of an
          officer, manager, director or shareholder of Incara, Aeolus or any of
          their respective affiliates (including family members);

                       (D) the making of any loans, except advances and similar
          expenditures in the ordinary course of business consistent with past
          practices; or

                       (E) the payment of any bonus, salary, commission profit
          sharing or other compensation, except such payments as are within
          ordinary course of business consistent with past practices of such
          company.

          (e)   Further Assurances. From and after the date hereof, each
                ------------------
of the parties hereto agree to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments, as each may reasonably require
or deem advisable to carry into effect the purposes of this Agreement and the
other Transaction Documents.

          SECTION 6.   Survival and Indemnification.
                       ----------------------------

          (a)   Survival.  For the purposes of this Section, the representations
                --------
and warranties of Incara, Aeolus, EPIL and EIS contained in Sections 3 and 4
hereof shall survive for

                                       24

<PAGE>

a period of 24 months from and after the date hereof, and the provisions of
Sections 1, 5, 6, 7, 16 and 17 shall survive the termination of this Agreement;
all other terms and provisions of this Agreement shall cease to have effect and
be null and void upon the termination of this Agreement.

       (b) Indemnification. In addition to all rights and remedies available to
           ---------------
the parties hereto at law or in equity, Incara and Aeolus (each, in such
capacity, "Indemnifying Party") shall indemnify EPIL, its stockholders,
           ------------------
officers, directors and assigns, their affiliates, and their affiliates'
stockholders, officers, directors, employees, agents, representatives,
successors and assigns (collectively, the "Indemnified Person"), and save and
                                           ------------------
hold each Indemnified Person harmless from and against and pay on behalf of or
reimburse each such Indemnified Person, as and when incurred, for any and all
loss, liability, demand, claim, action, cause of action, cost, damage,
deficiency, tax, penalty, fine or expense, whether or not arising out of any
claims by or on behalf of such Indemnified Person or any third party, including
interest, penalties, reasonable attorneys' fees and expenses and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "Losses"), that any such Indemnified Person may suffer, sustain
                ------
incur or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of:

           (i)   any misrepresentation or breach of any representation or
     warranty of Incara or Aeolus contained in this Agreement or the
     Development Agreement;

           (ii)  any third party claim or action, or potential or threatened
     claim or action, related to this Agreement, the Development Agreement and
     the transactions contemplated hereby or thereby;

           (iii) any nonfulfillment, default or breach of any covenant or
     agreement on the part of Incara or Aeolus under this Agreement or the
     Development Agreement; or

           (iv)  the research and development activities conducted by Incara or
     Aeolus on any Compound prior to the Initial Closing Date.

       (c) Maximum Recovery. Notwithstanding anything in this Agreement to the
           ----------------
contrary, in no event shall the Indemnifying Party be liable for indemnification
under this Section 6 in an amount in excess of the aggregate of the purchase
price paid for the Shares. No Indemnified Person shall assert any such claim
unless Losses in respect thereof incurred by any Indemnified Person, when
aggregated with all previous Losses hereunder, equal or exceed U.S. $250,000,
but at such time that an Indemnified Person is entitled to assert a claim, such
claim shall include all Losses covered by this Section 6.

       (d) Exception. Notwithstanding the foregoing, upon judicial determination
           ---------
that is final and no longer appealable, that the act or omission giving rise to
the indemnification set forth above resulted primarily out of or was based
primarily upon the Indemnified Person's negligence (unless such Indemnified
Person's negligence was based upon the Indemnified Person's reliance in good
faith upon any of the representations, warranties, covenants or promises made by
the Indemnifying Party herein), the Indemnifying Party shall not be responsible
for any

                                       25

<PAGE>

Losses sought to be indemnified in connection therewith, and the Indemnifying
Party shall be entitled to recover from the Indemnified Person all amounts
previously paid in full or partial satisfaction of such indemnity, together with
all costs and expenses (including reasonable attorneys fees) of the Indemnifying
Party reasonably incurred in connection with the Indemnified Persons claim for
indemnity, together with interest at the rate per annum publicly announced by
Morgan Guaranty Trust Company, or its successor, as its prime rate from the time
of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.

          (e)  Investigation. All indemnification rights hereunder shall survive
               -------------
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, irrespective of any investigation, inquiry or
examination made for or on behalf of, or any knowledge of the Indemnified Person
or the acceptance of any certificate or opinion.

          (f)  Contribution. If the indemnity provided for in this Section 6
               ------------
shall be, in whole or in part, unavailable to any Indemnified Person, due to
Section 6(b) being declared unenforceable by a court of competent jurisdiction
based upon reasons of public policy, so that Section 6(b) shall be insufficient
to hold each such Indemnified Person harmless from Losses which would otherwise
be indemnified hereunder, then the Indemnifying Party and the Indemnified Person
shall each contribute to the amount paid or payable for such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party on the one hand and the Indemnified Person on the
other, but also the relative fault of the Indemnifying Party and be in addition
to any liability that the Indemnifying Party may otherwise have. The indemnity,
contribution and expense reimbursement obligations that the Indemnifying Party
has under this Section 6 shall survive the expiration of the Transaction
Documents. The parties hereto further agree that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such lawsuit, claims or other
proceedings.

          (g)  Limitation. This Section 6 is not intended to limit the rights or
               ----------
remedies otherwise available to any party hereto with respect to this Agreement
or any other the Transaction Document.

          (h)  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.

          SECTION 7. Termination. (a) This Agreement shall terminate on the
                     -----------
earliest to occur of any of the following events:

               (i)  the mutual written agreement of the parties hereto;

                                       26

<PAGE>

               (ii)  by written notice of EPIL and EIS to Incara, if (A) the
     First Phase I Milestone shall not have occurred prior to the close of
     business on the date that is 180 days after the date set forth in the
     Development Plan for the achievement of such Milestone Event or (B) the
     First Phase II Milestone shall not have occurred prior to the close of
     business on the date that is 180 days after the date set forth in the
     Development Plan for the achievement of such Milestone Event, in each case,
     subject to the extension by the Steering Committee of such date set forth
     in the Development Plan;

               (iii) by written notice of EPIL and EIS to Incara, if Incara or
     Aeolus shall have materially breached any of its representations,
     warranties or agreements contained in this Agreement or the Development
     Agreement, which breach, if curable, has not been cured within 15 days of
     such notice or if a Bankruptcy Event (as defined below) shall have occurred
     with respect to Incara or Aeolus; or

               (iv)  by written notice of Incara to EPIL, if EPIL or EIS shall
     have materially breached any of its representations, warranties or
     agreements contained in this Agreement or the Development Agreement, which
     breach, if curable, has not been cured within 15 days of such notice or if
     a Bankruptcy Event (as defined below) shall have occurred with respect to
     EPIL or EIS.

          (b)  Nothing in this Section 7 shall relieve any party of any
liability for a breach of this Agreement prior to its termination. Except as set
forth in Section 6(a), all rights and obligations of the parties under this
Agreement shall terminate.

          (c)  For the purpose of this Section 7, a "Bankruptcy Event", with
                                                     ----------------
respect to any party, shall occur upon the following:

               (i)   the appointment of a liquidator, receiver, administrator,
     examiner, trustee or similar officer of such party 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

               (ii)  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 sixty
     (60) days, or a party 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 party are for any reason seized, confiscated or condemned.

          SECTION 8. Relationship of the Parties. Nothing contained in this
                     ---------------------------
Agreement is intended or is to be construed to constitute EPIL or EIS and Incara
or Aeolus as partners, or

                                       27

<PAGE>

EPIL or EIS as an employee or agent of Incara or Aeolus, or Incara or Aeolus as
an employee or agent of EPIL or EIS.

          SECTION 9. 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 an internationally-recognized overnight delivery courier or by
registered or certified mail, return receipt requested and postage prepaid, or
by facsimile transmission addressed as follows:

          (a)  if to Incara or Aeolus, to:

               Incara Pharmaceuticals Corporation
               Post Office Box 14287
               79 T. W. Alexander Drive
               4401 Research Commons, Suite 200
               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)  If to EPIL to:

               Elan Pharma International Limited
               Wil House
               Shannon Business Park
               Shannon, Co. Clare
               Ireland
               Facsimile: (011) 353-1-7094082

               with a copy to:

               Reitler Brown LLC
               800 Third Avenue
               New York, New York 10022

                                       28

<PAGE>

                       Attention:  Scott Rosenblatt
                       Facsimile:  (212) 371-5500

                  (c)  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

                       with a copy to:

                       Reitler Brown LLC
                       800 Third Avenue
                       New York, New York  10022
                       Attention:  Scott 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 9. 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, the date of telephone confirmation of receipt.

                  SECTION 10. Entire Agreement. This Agreement and the other
                              ----------------
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect thereto; provided
that the Transaction Documents shall not affect the rights of EPIL and its
affiliates under the Prior Purchase Agreement, and all documents, agreement,
instruments and securities executed or issued in connection with the Prior
Purchase Agreement.

                  SECTION 11. Amendments and Waiver. This Agreement may not be
                              ---------------------
modified or amended, or any of the provisions hereof waived, except by written
agreement of the parties hereto dated after the date hereof.

                  SECTION 12. Counterparts and Facsimile. The Transaction
                              --------------------------
Documents 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. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.

                                       29

<PAGE>

                  SECTION 13. 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 the Agreement.

                  SECTION 14. 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 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.

                  SECTION 15. Expenses. Each of the parties shall be responsible
                              --------
for its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.

                  SECTION 16. Exhibits and Schedules. The exhibits to and
                              ----------------------
schedules delivered by or on behalf of any party in connection with this
Agreement are an integral part of this Agreement, and any statements contained
in such schedules shall be deemed to be representations and warranties under
this Agreement.

                  SECTION 17. Assignments and Transfers. This Agreement and all
                              -------------------------
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. All or any
part of this Agreement, the shares of Series B Preferred Stock purchased
hereunder and the Underlying Shares may be assigned or transferred by EPIL and
its permitted assigns and transferees to their respective affiliates and
subsidiaries, as well as any special purpose financing or similar vehicle
established by EPIL or its affiliates or subsidiaries; provided, that the
parties hereto shall continue to be bound by the terms, conditions and
obligations of this Agreement. Other than as set forth above, no party shall
assign or transfer all or any part of this Agreement, without the prior written
consent of the other party. Subject to compliance with applicable Federal and
state securities laws, the shares of Series B Preferred Stock purchased
hereunder and the Underlying Shares may be assigned or transferred by EPIL.

                  SECTION 18. 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.

                            [Signature page follows]

                                       30

<PAGE>

                  IN WITNESS WHEREOF, each of the undersigned has duly executed
this Agreement as of the date first written above.

                                INCARA PHARMACEUTICALS CORPORATION

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

                                AEOLUS PHARMACEUTICALS, INC.

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

                                ELAN PHARMA INTERNATIONAL LIMITED

                                By: ____________________________________________
                                    Name:  __________________
                                    Title: Authorized Signatory

                                ELAN INTERNATIONAL SERVICES, LTD.

                                By: ____________________________________________
                                    Name:  __________________
                                    Title: Authorized Signatory

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