Document:

<PAGE>

                                                                    EXHIBIT 10.3

                  THIRD AMENDED AND RESTATED ADVISORY AGREEMENT

     THIS THIRD AMENDED AND RESTATED ADVISORY AGREEMENT, dated as of September
30, 2007, is between CORPORATE PROPERTY ASSOCIATES 16 - GLOBAL INCORPORATED, a
Maryland corporation (the "Company"), and CAREY ASSET MANAGEMENT CORP., a
Delaware corporation and wholly-owned subsidiary of W. P. Carey & Co. LLC (the
"Advisor").

                                   WITNESSETH:

     WHEREAS, the Company intends to qualify as a REIT (as defined below), and
to invest its funds in investments permitted by the terms of any prospectus
pursuant to which it raised equity capital and Sections 856 through 860 of the
Code (as defined below);

     WHEREAS, the Company and the Advisor entered into an initial advisory
agreement, dated December 19, 2003, which has been subsequently amended and
restated;

     WHEREAS, the Company desires to continue to avail itself of the experience,
sources of information, advice and assistance of, and certain facilities
available to, the Advisor and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of, and subject to the
supervision of the Board of Directors of the Company, all as provided herein;

     WHEREAS, the Advisor is willing to continue to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth; and

     WHEREAS, the parties desire to further amend and restate their mutual
agreements as set forth herein;

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

     1. Definitions. As used in this Agreement, the following terms have the
definitions hereinafter indicated:

     "2%/25% Guidelines." The requirement, as provided for in Section 13 hereof,
that, in the 12-month period ending on the last day of any fiscal quarter,
Operating Expenses not exceed the greater of two percent of Average Invested
Assets during such 12-month period or 25% of the Company's Adjusted Net Income
over the same 12-month period.

     "Acquisition Expense." To the extent not paid or to be paid by the seller
or lessee in the case of a Property or the borrower in the case of a Loan, those
expenses, including but not limited to travel and communications expenses, the
cost of appraisals, title insurance, nonrefundable option payments on Property
not acquired, legal fees and expenses, accounting fees and expenses and
miscellaneous expenses, related to selection, acquisition and origination of
Properties and Loans, whether or not a particular Property or Loan ultimately is
acquired or originated. Acquisition Expenses shall not include Acquisition Fees.

     "Acquisition Expense Allowance." An amount equal to one half percent of the
Contract Purchase Price of a Property or Loan, to be paid to the Advisor in
connection with Properties and Loans acquired using proceeds of the Part I
Offering, to provide for the payment by the Advisor of Acquisition Expenses and
such other expenses as provided in Section 10(b) hereof.

<PAGE>

     "Acquisition Fee." Any fee or commission (including any interest thereon)
paid by the Company to the Advisor or, with respect to Section 9(d), by the
Company to any party, in connection with the making or investing in Loans and
the purchase, development or construction of Properties by the Company. A
Development Fee or a Construction Fee paid to a Person not affiliated with the
Sponsor in connection with the actual development or construction of a project
after acquisition of the Property by the Company shall not be deemed an
Acquisition Fee. Acquisition Fees include, but are not limited to, any real
estate commission, selection fee, development fee (other than as described
above) or any fee of a similar nature, however designated. Acquisition Fees
include Subordinated Acquisition Fees unless the context otherwise requires.
Acquisition Fees shall not include Acquisition Expenses or the Acquisition
Expense Allowance.

     "Adjusted Invested Assets." The average during any period of the aggregate
historical cost, or to the extent available for a particular asset, the most
recent Appraised Value, of the Investment Assets of the Company, before
accumulated reserves for depreciation or bad debt allowances or other similar
non-cash reserves, computed (unless otherwise specified) by taking the average
of such values at the end of each month during such period.

     "Adjusted Investor Capital." As of any date, the Initial Investor Capital
reduced by any Redemptions, other than Redemptions intended to qualify as a
liquidity event for purposes of this Agreement, and by any other Distributions
on or prior to such date determined by the Board to be from Cash from Sales and
Financings.

     "Adjusted Net Income." For any period, the total revenues recognized in
such period, less the total expenses recognized in such period, excluding
additions to reserves for depreciation and amortization, bad debts or other
similar non-cash reserves; provided, however, if the Advisor receives a
Subordinated Incentive Fee, Adjusted Net Income for purposes of calculating
total allowable Operating Expenses shall exclude any gain, losses or writedowns
from the sale of the Company's assets that gave rise to such Subordinated
Incentive Fee.

     "Advisor." Carey Asset Management Corp, a corporation organized under the
laws of the State of Delaware and wholly-owned by W. P. Carey & Co.  LLC.

     "Affiliate." An Affiliate of another Person shall include any of the
following: (i) any Person directly or indirectly owning, controlling, or
holding, with power to vote ten percent or more of the outstanding voting
securities of such other Person; (ii) any Person ten percent or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held, with power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person; (iv) any executive officer, director, trustee or general partner of such
other Person; or (v) any legal entity for which such Person acts as an executive
officer, director, trustee or general partner.

     "Agreement." This Advisory Agreement.

     "Appraised Value." Value according to an appraisal made by an Independent
Appraiser, which may take into consideration any factor deemed appropriate by
such Independent Appraiser, including, but not limited to, the terms and
conditions of any lease of the relevant property, the quality of any lessee's
credit and the conditions of the credit markets. The Appraised Value may be
greater than the construction cost or the replacement cost of the property. For
purposes of the definition of Adjusted Invested Assets, Appraised Value shall
not include the initial appraisal of any property in connection with the
acquisition of that property.

                                       2

<PAGE>

     "Articles of Incorporation." Articles of Incorporation of the Company under
the General Corporation Law of Maryland, as amended from time to time, pursuant
to which the Company is organized.

     "Asset Management Fee." The Asset Management Fee as defined in Section 9(a)
hereof.

     "Average Invested Assets." The average during any period of the aggregate
book value of the assets of the Company invested, directly or indirectly, in
Properties and in Loans, before deducting reserves for depreciation, bad debts,
impairments, amortization and all other similar non-cash reserves, computed by
taking the average of such values at the end of each month during such period.

     "Board or Board of Directors." The Board of Directors of the Company.

     "Bylaws." The bylaws of the Company.

     "Cash from Financings." Net cash proceeds realized by the Company from the
financing of Investment Assets or the refinancing of any Company indebtedness.

     "Cash from Sales." Net cash proceeds realized by the Company from the sale,
exchange or other disposition of any of its assets after deduction of all
expenses incurred in connection therewith. Cash from Sales shall not include
Cash from Financings.

     "Cash from Sales and Financings." The total sum of Cash from Sales and Cash
from Financings.

     "Cause." With respect to the termination of this Agreement, fraud, criminal
conduct, willful misconduct or willful or negligent breach of fiduciary duty by
the Advisor that, in each case, is determined by a majority of the Independent
Directors to be materially adverse to the Company, or a breach of a material
term or condition of this Agreement by the Advisor and the Advisor has not cured
such breach within 30 days of written notice thereof or, in the case of any
breach that cannot be cured within 30 days by reasonable effort, has not taken
all necessary action within a reasonable time period to cure such breach.

     "Change of Control." A change of control of the Company of a nature that
would be required to be reported in response to the disclosure requirements of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as enacted and in force on the date
hereof, whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a Change of Control
shall be deemed to have occurred if: (i) any "person" (within the meaning of
Section 13(d) of the Exchange Act, as enacted and in force on the date hereof)
is or becomes the "beneficial owner" (as that term is defined in Rule 13d-3, as
enacted and in force on the date hereof, under the Exchange Act) of securities
of the Company representing 8.5% or more of the combined voting power of the
Company's securities then outstanding; (ii) there occurs a merger, consolidation
or other reorganization of the Company which is not approved by the Board; (iii)
there occurs a sale, exchange, transfer or other disposition of substantially
all of the assets of the Company to another entity, which disposition is not
approved by the Board; or (iv) there occurs a contested proxy solicitation of
the Shareholders of the Company that results in the contesting party electing
candidates to a majority of the Board's positions next up for election.

     "Code." Internal Revenue Code of 1986, as amended.

     "Company." Corporate Property Associates 16 - Global Incorporated, a
corporation organized under the laws of the State of Maryland.

                                       3

<PAGE>

     "Competitive Real Estate Commission." The real estate or brokerage
commission paid for the purchase or sale of a property that is reasonable,
customary and competitive in light of the size, type and location of the
property.

     "Construction Fee." A fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects or to provide major repairs or rehabilitation on a Property.

     "Contract Purchase Price." The amount actually paid for, or allocated to,
the purchase, development, construction or improvement of a Property or acquired
Loan or, in the case of an originated Loan, the principal amount of such Loan,
exclusive, in each case, of Acquisition Fees, Acquisition Expenses and the
Acquisition Expense Allowance.

     "Contract Sales Price." The total consideration received by the Company for
the sale of Properties and Loans.

     "Cumulative Return." For the period for which the calculation is being
made, the percentage resulting from dividing (A) the total Distributions for
such period (not including Distributions out of Cash from Sales and Financings),
by (B) the product of (i) the average Adjusted Investor Capital for such period
(calculated on a daily basis), and (ii) the number of years (including fractions
thereof) elapsed during such period. Notwithstanding the foregoing, neither the
Shares received by the Advisor or its Affiliates for any consideration other
than cash, nor the Distributions in respect of such Shares, shall be included in
the foregoing calculation.

     "Development Fee." A fee for the packaging of a Property including
negotiating and approving plans, and undertaking to assist in obtaining zoning
and necessary variances and necessary financing for the specific Property,
either initially or at a later date.

     "Directors." The persons holding such office, as of any particular time,
under the Articles of Incorporation, whether they be the directors named therein
or additional or successor directors.

     "Distributions." Distributions declared by the Board.

     "GAAP." Generally accepted accounting principles in the United States.

     "Good Reason." With respect to the termination of this Agreement, (i) any
failure to obtain a satisfactory agreement from any successor to the Company to
assume and agree to perform the Company's obligations under this Agreement; or
(ii) any material breach of this Agreement of any nature whatsoever by the
Company; provided that such breach (a) is of a material term or condition of
this Agreement and (b) the Company has not cured such breach within 30 days of
written notice thereof or, in the case of any breach that cannot be cured within
30 days by reasonable effort, has not taken all necessary action within a
reasonable time period to cure such breach.

     "Gross Offering Proceeds." The aggregate purchase price of Shares sold in
any Offering.

     "Independent Appraiser." A qualified appraiser of real estate as determined
by the Board, who is not affiliated, directly or indirectly, with the Company,
the Advisor or their respective Affiliates. Membership in a nationally
recognized appraisal society such as the American Institute of Real Estate
Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence
of such qualification.

                                       4

<PAGE>

     "Independent Director." A Director of the Company who meets the criteria
for an Independent Director specified in the Bylaws.

     "Individual." Any natural person and those organizations treated as natural
persons in Section 542(a) of the Code.

     "Initial Closing Date." The first date on which Shares were issued pursuant
to an Offering.

     "Initial Investor Capital." The total amount of capital invested from time
to time by Shareholders (computed at the Original Issue Price per Share),
excluding any Shares received by the Advisor or its Affiliates for any
consideration other than cash.

     "Investment Asset." Any Property, Loan or Other Permitted Investment Asset.

     "Loan Refinancing Fee." The Loan Refinancing Fee as defined in Section 9(e)
hereof.

     "Loans." The notes and other evidences of indebtedness or obligations
acquired or entered into by the Company as lender which are secured or
collateralized by personal property, or fee or leasehold interests in real
estate or other assets, including but not limited to first or subordinate
mortgage loans, construction loans, development loans, loans secured by capital
stock or any other assets or form of equity interest and any other type of loan
or financial arrangement, such as providing or arranging for letters of credit,
providing guarantees of obligations to third parties, or providing commitments
for loans. The term "Loans" shall not include leases which are not recognized as
leases for Federal income tax reporting purposes.

     "Market Value." The value calculated by multiplying the total number of
outstanding Shares by the average closing price of the Shares over the 30
trading days beginning 180 calendar days after the Shares are first listed on a
national security exchange or included for quotation on Nasdaq, as the case may
be.

     "Nasdaq." The national automated quotation system operated by the National
Association of Securities Dealers, Inc.

     "Offering." The offering of Shares pursuant to a Prospectus.

     "Operating Expenses." All operating, general and administrative expenses
paid or incurred by the Company, as determined under GAAP, except the following
(insofar as they would otherwise be considered operating, general and
administrative expenses under GAAP): (i) interest and discounts and other cost
of borrowed money; (ii) taxes (including state and Federal income tax, property
taxes and assessments, franchise taxes and taxes of any other nature); (iii)
expenses of raising capital, including Organization and Offering Expenses,
printing, engraving, and other expenses, and taxes incurred in connection with
the issuance and distribution of the Company's Shares and Securities; (iv)
Acquisition Expenses, real estate commissions on resale of property and other
expenses connected with the acquisition, disposition, origination, ownership and
operation of real estate interests, mortgage loans, or other property, including
the costs of foreclosure, insurance premiums, legal services, brokerage and
sales commissions, maintenance, repair and improvement of property; (v)
Acquisition Fees or Subordinated Disposition Fees payable to the Advisor or any
other party; (vi) non-cash items, such as depreciation, amortization, depletion,
and additions to reserves for depreciation, amortization, depletion, losses and
bad debts; (vii) Termination Fees; and (viii) Subordinated Incentive Fees paid
in compliance with Section 9(i). Notwithstanding anything herein to the
contrary, Operating Expenses shall include the Asset Management Fee and the Loan
Refinancing Fee.

                                       5

<PAGE>

     "Organization and Offering Expenses." Those expenses payable by the Company
in connection with the formation, qualification and registration of the Company
and in marketing and distributing Shares, including, but not limited to: (i) the
preparation, printing, filing and delivery of any registration statement or
Prospectus and the preparing and printing of contractual agreements between the
Company and the Sales Agent and the Selected Dealers (including copies thereof);
(ii) the preparing and printing of the Articles of Incorporation and Bylaws,
solicitation material and related documents and the filing and/or recording of
such documents necessary to comply with the laws of the State of Maryland for
the formation of a corporation and thereafter for the continued good standing of
a corporation; (iii) the qualification or registration of the Shares under state
securities or "Blue Sky" laws; (iv) any escrow arrangements, including any
compensation to an escrow agent; (v) the filing fees payable to the SEC and to
the National Association of Securities Dealers, Inc.; (vi) reimbursement for the
reasonable and identifiable out-of-pocket expenses of the Sales Agent and the
Selected Dealers, including the cost of their counsel; (vii) the fees of the
Company's counsel; (viii) all advertising expenses incurred in connection with
the Offering, including the cost of all sales literature and the costs related
to investor and broker-dealer sales and information meetings and marketing
incentive programs; and (ix) selling commissions, marketing fees, incentive
fees, due diligence fees and wholesaling fees and expenses incurred in
connection with the sale of the Shares.

     "Original Issue Price." For any share issued in an Offering, the price at
which such Share was initially offered to the public by the Company, regardless
of whether selling commissions were paid in connection with the purchase of such
Shares from the Company.

     "Other Permitted Investment Asset." An asset, other than cash, cash
equivalents, short term bonds, auction rate securities and similar short term
investments, acquired by the Company for investment purposes that is not a Loan
or a Property and is consistent with the investment objectives and policies of
the Company.

     "Other Permitted Investment Assets Fee." The Other Permitted Investment
Assets Fee as defined in Section 9(h).

     "Part I Offering." The Offering of 110,000,000 Shares of the Company,
declared effective by the Securities and Exchange Commission pursuant to the
Company's Registration Statement on Form S-11 (File No. 333-106838).

     "Part II Offering." The Offering of 55,000,000 Shares of the Company,
declared effective by the Securities and Exchange Commission pursuant to the
Company's Registration Statement on Form S-11 (File No. 333-119265).

     "Person." An Individual, corporation, partnership, joint venture,
association, company, trust, bank, or other entity, or government or any agency
or political subdivision of a government.

     "Preferred Return." A Cumulative Return of six percent computed from the
Initial Closing Date through the date as of which such amount is being
calculated.

     "Property or Properties." The Company's partial or entire interest in real
property (including leasehold interests) and personal or mixed property
connected therewith. An investment which obligates the Company to acquire a
Property will be treated as a Property for purposes of this Agreement

     "Property Management Fee." A fee for property management services rendered
by the Advisor or its Affiliates in connection with Properties acquired directly
or through foreclosure.

                                       6

<PAGE>

     "Prospectus." Any prospectus pursuant to which the Company offers Shares in
a public offering, as the same may at any time and from time to time be amended
or supplemented after the effective date of the registration statement in which
it is included.

     "Redemptions." An amount determined by multiplying the number of Shares
redeemed by the Original Issue Price.

     "REIT." A real estate investment trust, as defined in Sections 856-860 of
the Code.

     "Sales Agent." Carey Financial Corporation.

     "Securities." Any stock, shares (other than currently outstanding Shares
and subsequently issued Shares), voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise or in general any instruments commonly known as
"securities" or any certificate of interest, shares or participation in
temporary or interim certificates for receipts (or, guarantees of, or warrants,
options or rights to subscribe to, purchase or acquire any of the foregoing),
which subsequently may be issued by the Company.

     "Selected Dealers." Broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed an agreement with
the Sales Agent in which the Selected Dealers agree to participate with the
Sales Agent in the Offering.

     "Shareholders." Those Persons who, at the time any calculation hereunder is
to be made, are shown as holders of record of Shares on the books and records of
the Company.

     "Shares." All of the shares of common stock of the Company, $.001 par
value, and any other shares of common stock of the Company.

     "Sponsor." W.P. Carey & Co. LLC and any other Person directly or indirectly
instrumental in organizing, wholly or in part, the Company or any person who
will control, manage or participate in the management of the Company, and any
Affiliate of any such person. Sponsor does not include a person whose only
relationship to the Company is that of an independent property manager and whose
only compensation is as such. Sponsor also does not include wholly independent
third parties such as attorneys, accountants and underwriters whose only
compensation is for professional services.

     "Subordinated Acquisition Fee." The Subordinated Acquisition Fee as defined
in Section 9(c).

     "Subordinated Disposition Fee." The Subordinated Disposition Fee as defined
in Section 9(g) hereof.

     "Subordinated Incentive Fee." The Subordinated Incentive Fee as defined in
Section 9(i) hereof.

     "Termination Date." The effective date of any termination of this
Agreement.

     "Termination Fee." An amount equal to 15% of the amount, if any, by which
(1) the fair value of the Investment Assets, less the amount of all indebtedness
secured by such Investment Assets and less any fees (other than the Termination
Fee) payable to the Advisor, in each case as of the Termination Date, exceeds
(2) the total of the Adjusted Investor Capital plus an amount equal to the
Preferred Return through the Termination Date reduced by the total Distributions
paid by the Company from its inception through the Termination Date (other than
Distributions made from Cash from Sales and Financings that are counted in
determining Adjusted Investor Capital). For purposes of calculating this Fee (i)
the fair

                                       7

<PAGE>

value of any Property shall be its Appraised Value, and (ii) any payments in
respect of redeemed Shares (other than in respect of Redemptions intended to
qualify as a liquidity event for purposes of this Agreement), Shares received by
the Advisor or its Affiliates for any consideration other than cash and the
Distributions in respect of such Shares shall be excluded.

     "Total Property Cost." With regard to any Property or Loan, an amount equal
to the sum of the Contract Purchase Price of such Property or Loan plus the
Acquisition Fees paid in connection with such Property or Loan.

     2. Appointment. The Company hereby appoints the Advisor to serve as its
advisor on the terms and conditions set forth in this Agreement, and the Advisor
hereby accepts such appointment.

     3. Duties of the Advisor. The Advisor undertakes to use its best efforts to
present to the Company potential investment opportunities and to provide a
continuing and suitable investment program consistent with the investment
objectives and policies of the Company as determined and adopted from time to
time by the Board. In performance of this undertaking, subject to the
supervision of the Board and consistent with the provisions of the Articles of
Incorporation and Bylaws of the Company and any Prospectus pursuant to which
Shares are offered, the Advisor shall, either directly or by engaging an
Affiliate:

          (a) serve as the Company's investment and financial advisor and
     provide research and economic and statistical data in connection with the
     Company's assets and investment policies;

          (b) provide the daily management of the Company and perform and
     supervise the various administrative functions reasonably necessary for the
     management of the Company;

          (c) investigate, select, and, on behalf of the Company, engage and
     conduct business with such Persons as the Advisor deems necessary to the
     proper performance of its obligations hereunder, including but not limited
     to consultants, accountants, correspondents, lenders, technical advisors,
     attorneys, brokers, underwriters, corporate fiduciaries, escrow agents,
     depositaries, custodians, agents for collection, insurers, insurance
     agents, banks, builders, developers, property owners, mortgagors, and any
     and all agents for any of the foregoing, including Affiliates of the
     Advisor, and Persons acting in any other capacity deemed by the Advisor
     necessary or desirable for the performance of any of the foregoing
     services, including but not limited to entering into contracts in the name
     of the Company with any of the foregoing;

          (d) consult with Directors of the Company and assist the Board in the
     formulation and implementation of the Company's policies, and furnish the
     Board with such information, advice and recommendations as they may request
     or as otherwise may be necessary to enable them to discharge their
     fiduciary duties with respect to matters coming before the Board;

          (e) subject to the provisions of Sections 3(g) and 4 hereof: (i)
     locate, analyze and select potential investments in Investment Assets; (ii)
     structure and negotiate the terms and conditions of transactions pursuant
     to which investments in Investment Assets will be made, purchased or
     acquired by the Company; (iii) make investments in Investment Assets on
     behalf of the Company in compliance with the investment objectives and
     policies of the Company; (iv) arrange for financing and refinancing of,
     make other changes in the asset or capital structure of, dispose of,
     reinvest the proceeds from the sale of, or otherwise deal with the
     investments in, Investment Assets; and (v) enter into leases and service
     contracts for Properties and, to the extent

                                       8

<PAGE>

     necessary, perform all other operational functions for the maintenance and
     administration of such Properties;

          (f) provide the Board with periodic reports regarding prospective
     investments in Investment Assets;

          (g) obtain the prior approval of the Board (including a majority of
     the Independent Directors) for any and all investments in Property which do
     not meet all of the requirements set forth in Section 4(b) hereof;

          (h) negotiate on behalf of the Company with banks or lenders for loans
     to be made to the Company, and negotiate on behalf of the Company with
     investment banking firms and broker-dealers or negotiate private sales of
     Shares and Securities or obtain loans for the Company, but in no event in
     such a way so that the Advisor shall be acting as broker-dealer or
     underwriter; and provided, further, that any fees and costs payable to
     third parties incurred by the Advisor in connection with the foregoing
     shall be the responsibility of the Company;

          (i) obtain reports (which may be prepared by the Advisor or its
     Affiliates), where appropriate, concerning the value of investments or
     contemplated investments of the Company in Investment Assets;

          (j) obtain for, or provide to, the Company such services as may be
     required in acquiring, managing and disposing of Investment Assets,
     including, but not limited to: (i) the negotiation, making and servicing of
     Loans; (ii) the disbursement and collection of Company monies; (iii) the
     payment of debts of and fulfillment of the obligations of the Company; and
     (iv) the handling, prosecuting and settling of any claims of or against the
     Company, including, but not limited to, foreclosing and otherwise enforcing
     mortgages and other liens securing the Loans;

          (k) from time to time, or at any time reasonably requested by the
     Board, make reports to the Board of its performance of services to the
     Company under this Agreement;

          (l) communicate on behalf of the Company with Shareholders as required
     to satisfy the reporting and other requirements of any governmental bodies
     or agencies to Shareholders and third parties and otherwise as requested by
     the Company;

          (m) provide or arrange for administrative services and items, legal
     and other services, office space, office furnishings, personnel and other
     overhead items necessary and incidental to the Company's business and
     operations;

          (n) provide the Company with such accounting data and any other
     information requested by the Company concerning the investment activities
     of the Company as shall be required to prepare and to file all periodic
     financial reports and returns required to be filed with the Securities and
     Exchange Commission and any other regulatory agency, including annual
     financial statements;

          (o) maintain the books and records of the Company;

          (p) supervise the performance of such ministerial and administrative
     functions as may be necessary in connection with the daily operations of
     the Properties and Loans;

          (q) provide the Company with all necessary cash management services;

                                       9

<PAGE>

          (r) do all things necessary to assure its ability to render the
     services described in this Agreement;

          (s) perform such other services as may be required from time to time
     for management and other activities relating to the assets of the Company
     as the Advisor shall deem advisable under the particular circumstances;

          (t) arrange to obtain on behalf of the Company as requested by the
     Board, and deliver to or maintain on behalf of the Company copies of, all
     appraisals obtained in connection with investments in Properties and Loans;
     and

          (u) if a transaction, proposed transaction or other matter requires
     approval by the Board or by the Independent Directors, deliver to the Board
     or the Independent Directors, as the case may be, all documentation
     reasonably requested by them to properly evaluate such transaction,
     proposed transaction or other matter.

     4. Authority of Advisor.

          (a) Pursuant to the terms of this Agreement (and subject to the
     restrictions included in Paragraphs (b), (c) and (d) of this Section 4 and
     in Section 7 hereof), and subject to the continuing and exclusive authority
     of the Board over the management of the Company, the Board hereby delegates
     to the Advisor the authority to: (1) locate, analyze and select investment
     opportunities; (2) structure the terms and conditions of transactions
     pursuant to which investments will be made or acquired for the Company; (3)
     acquire Property, make or acquire Loans and make or acquire Other Permitted
     Investment Assets in compliance with the investment objectives and policies
     of the Company; (4) arrange for financing or refinancing, or make changes
     in the asset or capital structure of, and dispose of or otherwise deal
     with, Investment Assets; (5) enter into leases and service contracts for
     Properties, and perform other property level operations; (6) oversee
     non-affiliated property managers and other non-affiliated Persons who
     perform services for the Company; and (7) undertake accounting and other
     record-keeping functions at the Investment Asset level.

          (b) The consideration paid for an Investment acquired by the Company
     shall ordinarily be based on the fair market value thereof. Consistent with
     the foregoing provision, the Advisor may, without further approval by the
     Board (except with respect to transactions subject to paragraphs (c) and
     (d)) invest on behalf of the Company in an Investment Asset so long as, in
     the Advisor's good faith judgment, (i) the Total Property Cost of such
     Investment Asset does not exceed the fair market value thereof, and in the
     case of an Investment Asset that is a Property, shall in no event exceed
     the Appraised Value of such Property and (ii) the Investment Asset, in
     conjunction with the Company's other investments and proposed investments,
     at the time the Company is committed to purchase or originate the
     Investment Asset, is reasonably expected to fulfill the Company's
     investment objectives and policies as established by the Board and then in
     effect. For purposes of the foregoing, Total Property Cost shall be
     measured at the date the Investment Asset is acquired and shall exclude
     future commitments to fund improvements. Investments not meeting the
     foregoing criteria must be approved in advance by the Board.

          (c) Notwithstanding anything to the contrary contained in this
     Agreement, the Advisor shall not cause the Company to make investments that
     do not comply with Article VIII (Restrictions on Investments and
     Activities) and related sections of the Bylaws.

                                       10

<PAGE>

          (d) The prior approval of the Board, including a majority of the
     Independent Directors and a majority of the Directors not interested in the
     transaction, will be required for: (i) investments in Properties made
     through co-investment or joint venture arrangements with the Sponsor, the
     Advisor or any of their Affiliates; (ii) investments in Investment Assets
     which are not contemplated by the terms of a Prospectus; (iii) transactions
     that present issues which involve conflicts of interest for the Advisor or
     an Affiliate (other than conflicts involving the payment of fees or the
     reimbursement of expenses); (iv) the lease of assets to the Sponsor, any
     Director, the Advisor or any Affiliate of the Advisor; (v) any purchase or
     sale of an Investment Asset from or to the Advisor or an Affiliate; and
     (vi) the retention of any Affiliate of the Advisor to provide services to
     the Company not expressly contemplated by this Agreement and the terms of
     such services by such Affiliate. In addition, the Advisor shall comply with
     any further approval requirements set forth in the Bylaws.

          (e) The Board may, at any time upon the giving of notice to the
     Advisor, modify or revoke the authority set forth in this Section 4. If and
     to the extent the Board so modifies or revokes the authority contained
     herein, the Advisor shall henceforth comply with such modification or
     revocation, provided however, that such modification or revocation shall be
     effective upon receipt by the Advisor and shall not be applicable to
     investment transactions to which the Advisor has committed the Company
     prior to the date of receipt by the Advisor of such notification.

     5. Bank Accounts. The Advisor may establish and maintain one or more bank
accounts in its own name for the account of the Company or in the name of the
Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
provided that no funds shall be commingled with the funds of the Advisor; and
the Advisor shall from time to time render appropriate accountings of such
collections and payments to the Board and to the auditors of the Company.

     6. Records; Access. The Advisor shall maintain appropriate records of all
its activities hereunder and make such records available for inspection by the
Board and by counsel, auditors and authorized agents of the Company, at any time
or from time to time during normal business hours. The Advisor shall at all
reasonable times have access to the books and records of the Company.

     7. Limitations on Activities. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would adversely affect the
status of the Company as a REIT, subject the Company to regulation under the
Investment Company Act of 1940, would violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Shares or its Securities, or otherwise not be permitted by the
Articles of Incorporation or Bylaws, except if such action shall be ordered by
the Board, in which case the Advisor shall notify promptly the Board of the
Advisor's judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from
the Board. In such event the Advisor shall have no liability for acting in
accordance with the specific instructions of the Board so given. Notwithstanding
the foregoing, the Advisor, its shareholders, directors, officers and employees,
and partners, shareholders, directors and officers of the Advisor's shareholders
and Affiliates of any of them, shall not be liable to the Company, or to the
Directors or Shareholders for any act or omission by the Advisor, its
shareholders, directors, officers and employees, or partners, shareholders,
directors or officers of the Advisor's shareholders except as provided in
Sections 20 and 22 hereof.

     8. Relationship with Directors. There shall be no limitation on any
shareholder, director, officer, employee or Affiliate of the Advisor serving as
a Director or an officer of the Company, except

                                       11

<PAGE>

that no employee of the Advisor or its Affiliates who also is a Director or
officer of the Company shall receive any compensation from the Company for
serving as a Director or officer other than for reasonable reimbursement for
travel and related expenses incurred in attending meetings of the Board; for the
avoidance of doubt, the limitations of this Section 8 shall not apply to any
compensation paid by the Advisor or any Affiliate for which the Company
reimbursed the Advisor or Affiliate in accordance with Section 10 hereof.

     9. Fees.

          (a) Asset Management Fee. The Company shall pay to the Advisor as
     compensation for the advisory services rendered to the Company hereunder an
     amount equal to one percent per annum of the Adjusted Invested Assets of
     the Company (the "Asset Management Fee") calculated as set forth below. The
     Asset Management Fee will be calculated monthly, beginning with the month
     in which the Company first makes an investment in Investment Assets, on the
     basis of one-twelfth of one percent of the Adjusted Invested Assets for
     that month, computed as a daily average. The Asset Management Fee shall be
     prorated for the number of days during the month that the Company owns an
     Investment Asset. One-half of the Asset Management Fee with respect to a
     Property or Loan will be paid on the first business day of each month,
     beginning on the first business day after the month in which the Investment
     Asset was acquired or originated. The remaining one-half of the Asset
     Management Fee shall be subordinated to the extent described below and
     shall be payable quarterly. The subordinated Asset Management Fee for any
     quarter shall be payable only if the Preferred Return has been met through
     the end of the applicable quarter. Any portion of the subordinated Asset
     Management Fee not paid due to the Company's failure to meet the Preferred
     Return shall be paid by the Company, to the extent it is not restricted by
     the 2%/25% Guidelines as described below, at the end of the next fiscal
     quarter through which the Company has met the Preferred Return. If at the
     end of any fiscal quarter, the Company's Operating Expenses exceed the
     2%/25% Guidelines over the immediately preceding 12 months, payment of the
     subordinated Asset Management Fee will be withheld consistent with Section
     13. For purposes of calculating the value per share of restricted stock
     given for payment of the Asset Management Fee, the price per share shall
     be: (i) the net asset value per share as determined by the most recent
     appraisal performed by an independent third party at the time such Asset
     Management Fee was earned or, if an appraisal has not yet been made and
     accepted by the Company, (ii) $10 per share. Any part of the Asset
     Management Fee that has been subordinated pursuant to this subsection (a)
     shall not be deemed earned until such time as payable hereunder.

          (b) Acquisition Fee. The Advisor may receive as compensation in
     connection with the investigation, selection, acquisition or origination
     (by purchase, investment or exchange) of any Property or Loan, an
     Acquisition Fee payable by the Company at the time such Property or Loan is
     acquired. The total such Acquisition Fees (not including Subordinated
     Acquisition Fees and any interest thereon) payable to the Advisor may not
     exceed two-and-one-half percent of the aggregate Total Property Cost of all
     Properties and Loans acquired or originated by the Company, subject to the
     limitations set forth in paragraph 9(d).

          (c) Subordinated Acquisition Fee. In addition to the Acquisition Fee
     described in Section 9(b) above, the Advisor may receive as compensation in
     connection with the investigation, selection, acquisition or origination
     (by purchase, investment or exchange) of Properties and Loans a
     Subordinated Acquisition Fee payable by the Company to the Advisor or its
     Affiliates (the "Subordinated Acquisition Fee"). The total Subordinated
     Acquisition Fees paid may not exceed two percent of the aggregate Total
     Property Cost of all Properties and Loans purchased and originated by the
     Company, measured at such time as the Company shall have completed all
     Offerings (other than pursuant to its dividend reinvestment plan) and
     invested

                                       12

<PAGE>

     substantially all of the net proceeds of such Offerings, unless a majority
     of the Directors (including a majority of the Independent Directors) not
     otherwise interested in any transaction approves the excess as being
     commercially competitive, fair and reasonable to the Company. The unpaid
     portion of the Subordinated Acquisition Fee payable to the Advisor and its
     Affiliates with respect to any Property or Loan shall bear interest at the
     rate of five percent per annum from the date of acquisition of such
     Property or Loan until such portion is paid. Subject to the following
     sentence, the Subordinated Acquisition Fee with respect to any Investment
     Asset shall be payable in equal annual installments on January 1 of each of
     the three calendar years following the date such Asset was purchased;
     accrued interest on all unpaid Subordinated Acquisition Fees shall also be
     payable on such dates. The portion of the Subordinated Acquisition Fees,
     and accrued interest thereon, otherwise payable on any January 1 shall be
     payable only if the Preferred Return through the end of the fiscal year
     preceding such January 1 has been met. Any portion of the Subordinated
     Acquisition Fees, and accrued interest thereon, not paid due to the
     Company's failure to meet the Preferred Return through any fiscal year end
     shall be paid by the Company on the January 1 following the first fiscal
     year thereafter through which the Preferred Return has been met.

          (d) Six Percent Limitation. The total amount of Acquisition Fees plus
     Subordinated Acquisition Fees and any interest thereon, whether payable to
     the Advisor or a third party, and Acquisition Expenses may not exceed six
     percent of the sum of the aggregate Contract Purchase Price of all
     Properties and Loans, measured for the period beginning on the date of the
     initial acquisition of a Property or Loan by the Company and ending on each
     December 31 after the date hereof, unless a majority of the Directors
     (including a majority of the Independent Directors) not otherwise
     interested in any transaction approves the excess as being commercially
     competitive, fair and reasonable to the Company.

          (e) Loan Refinancing Fee. The Company shall pay to the Advisor for all
     qualifying loan refinancings of Properties a Loan Refinancing Fee in the
     amount up to one percent of the principal amount of the refinanced loan.
     Any Loan Refinancing Fee shall be due and payable upon the funding of the
     related loan or as soon thereafter as is reasonably practicable. A
     refinancing will qualify for a Loan Refinancing Fee only if the refinanced
     loan is secured by Property and (i) the maturity date of the refinanced
     loan (which must have a term of five years or more) is less than one year
     from the date of the refinancing; or (ii) the terms of the new loan
     represent, in the judgment of a majority of the Independent Directors, an
     improvement over the terms of the refinanced loan; or (iii) the new loan is
     approved by the Board, including a majority of the Independent Directors
     and, in each case, the Loan Refinancing Fee is found, in the judgment of a
     majority of the Independent Directors, to be in the best interest of the
     Company.

          (f) Property Management Fee. No Property Management Fee shall be paid
     unless approved by a majority of the Independent Directors.

          (g) Subordinated Disposition Fee. If the Advisor or an Affiliate
     provides a substantial amount of services in the sale of a Property or
     Loan, the Advisor or such Affiliate shall receive a fee equal to the lesser
     of: (i) 50% of the Competitive Real Estate Commission and (ii) three
     percent of the Contract Sales Price of such Property (the "Subordinated
     Disposition Fee"). The Subordinated Disposition Fee will be paid only if
     Shareholders have received in the aggregate a return of 100% of Initial
     Investor Capital (through liquidity or Distributions) plus a Preferred
     Return through the end of the fiscal quarter immediately preceding the date
     the Subordination Disposition Fee is paid. The return requirement will be
     deemed satisfied if the total Distributions paid by the Company have
     satisfied the Preferred Return requirement and the Market Value of the
     Company equals or exceeds Adjusted Investor Capital. To the extent that

                                       13

<PAGE>

     Subordinated Disposition Fees are not paid by the Company on a current
     basis due to the foregoing limitation, the unpaid fees will be due and paid
     at such time as the limitation has been satisfied. The Subordinated
     Disposition Fee may be paid in addition to real estate commissions paid to
     non-Affiliates, provided that the total of all real estate commissions in
     respect of a Property paid to all Persons by the Company and the
     Subordinated Disposition Fee shall not exceed an amount equal to the lesser
     of: (i) six percent of the Contract Sales Price of such Property or (ii)
     the Competitive Real Estate Commission. The Advisor shall present to the
     Independent Directors such information as they may reasonably request to
     review the level of services provided by the Advisor in connection with a
     disposition and the basis for the calculation of the amount of the accrued
     Subordinated Disposition Fees on an annual basis. The amount of any accrued
     Subordinated Disposition Fee shall be deemed conclusively established once
     it has been approved by the Independent Directors, absent a subsequent
     finding of error. No payment of Subordinated Disposition Fees shall be made
     prior to review and approval of such information by the Independent
     Directors. If this Agreement is terminated prior to such time as the
     Shareholders have received (through liquidity or Distributions) a return of
     100% of Initial Investor Capital plus a Preferred Return through the date
     of termination of this Agreement, an appraisal of the Properties then owned
     by the Company shall be made and any unpaid Subordinated Disposition Fee on
     Properties sold prior to the date of termination will be payable if the
     Appraised Value of the Properties then owned by the Company plus
     Distributions to Shareholders prior to the date of termination of this
     Agreement (through liquidity or Distributions) is equal to or greater than
     100% of Initial Investor Capital plus an amount sufficient to pay a
     Preferred Return through the date of termination of this Agreement. If the
     Company's Shares are listed on a national securities exchange or included
     for quotation on Nasdaq and, at the time of such listing, the Advisor or an
     Affiliate has provided a substantial amount of services in the sale of
     Property, for purposes of determining whether the subordination conditions
     for the payment of the Subordinated Disposition Fee have been satisfied,
     Shareholders will be deemed to have received a Distribution in an amount
     equal to the Market Value of the Company.

          (h) Other Permitted Investment Assets Fee. The Advisor may receive as
     compensation for services rendered in connection with the investigation,
     selection, acquisition or origination of Other Permitted Investments a fee
     (the "Other Permitted Investment Assets Fee") that shall be negotiated in
     good faith by the Advisor and the Company and approved by the Board
     (including a majority of the Independent Directors) on a case by case
     basis; provided that such compensation shall be on terms not more
     favorable, taken as a whole, than what the Advisor receives in respect of
     investments in Properties and Loans.

          (i) Subordinated Incentive Fee. A fee shall be payable to the Advisor
     in an amount equal to 15% of Cash from Sales distributable to Shareholders
     after Shareholders have received a return of 100% of Initial Investor
     Capital (through liquidity or Distributions) plus a Preferred Return
     through the date payment is made (the "Subordinated Incentive Fee"). For
     these purposes the Shareholders will be deemed to have been provided
     liquidity if the Shares are listed on a national security exchange or
     included for quotation on Nasdaq. The return requirement will be deemed
     satisfied if the total Distributions paid by the Company has satisfied the
     Preferred Return requirement and the Market Value of the Company equals or
     exceeds Adjusted Investor Capital. The Company shall have the option to pay
     such fee in the form of a promissory note or as set forth in Section 9(l).
     The promissory note shall be fully amortizing over five years, provide for
     quarterly payments and bear interest at the prime rate announced from time
     to time in The Wall Street Journal.

          (j) Loans From Affiliates. The Company shall not borrow funds from the
     Advisor or its Affiliates unless (A) the transaction is approved by a
     majority of the Independent Directors

                                       14

<PAGE>

     and a majority of the Directors who are not interested in the transaction
     as being fair, competitive and commercially reasonable, (B) the interest
     and other financing charges or fees received by the Advisor or its
     Affiliates do not exceed the amount which would be charged by
     non-affiliated lending institutions and (C) the terms are not less
     favorable than those prevailing for comparable arm's-length loans for the
     same purpose. The Company will not borrow on a long-term basis from the
     Advisor or its Affiliates unless it is to provide the debt portion of a
     particular investment and the Company is unable to obtain a permanent loan
     at that time or in the judgment of the Board, it is not in the Company's
     best interest to obtain a permanent loan at the interest rates then
     prevailing and the Board has reason to believe that the Company will be
     able to obtain a permanent loan on or prior to the end of the loan term
     provided by the Advisor or its Affiliates.

          (k) Changes To Fee Structure. In the event the Shares are listed on a
     national securities exchange or are included for quotation on Nasdaq, the
      Company and the Advisor shall negotiate in good
     faith to establish a fee structure appropriate for an entity with a
     perpetual life. A majority of the Independent Directors must approve the
     new fee structure negotiated with the Advisor. In negotiating a new fee
     structure, the Independent Directors may consider any of the factors they
     deem relevant, including but not limited to: (a) the size of the Advisory
     Fee in relation to the size, composition and profitability of the Company's
     portfolio; (b) the success of the Advisor in generating opportunities that
     meet the investment objectives of the Company; (c) the rates charged to
     other REITs and to investors other than REITs by Advisors performing
     similar services; (d) additional revenues realized by the Advisor and its
     Affiliates through their relationship with the Company, including loan
     administration, underwriting or broker commissions, servicing, engineering,
     inspection and other fees, whether paid by the Company or by others with
     whom the Company does business; (e) the quality and extent of service and
     advice furnished by the Advisor; (f) the performance of the investment
     portfolio of the Company, including income, conversion or appreciation of
     capital, frequency of problem investments and competence in dealing with
     distress situations; and (g) the quality of the portfolio of the Company in
     relationship to the investments generated by the Advisor for its own
     account. The new fee structure can be no more favorable to the Advisor than
     the current fee structure. The Independent Directors shall not approve any
     new fee structure that is in their judgment more favorable (taken as a
     whole) to the Advisor than the current fee structure.

          (l) Payment. Compensation payable to the Advisor pursuant to this
     Section 9 shall be paid in cash; provided, however, that any fee payable
     pursuant to Section 9 may be paid, at the option of the Advisor, in the
     form of: (i) cash, (ii) common stock of the Company, or (iii) a combination
     of cash and common stock. The Advisor shall notify the Company in writing
     annually of the form in which the fee shall be paid. Such notice shall be
     provided no later than January 15 of each year. If no such notice is
     provided, the fee shall be paid in cash. For purposes of the payment of
     compensation to the Advisor in the form of stock, the value of each share
     of common stock shall be: (i) the Net Asset Value per Share as determined
     by the most recent appraisal of the Company's assets performed by an
     Independent Appraiser, or (ii) if an appraisal has not yet been performed,
     $10 per share. If shares are being offered to the public at the time a fee
     is paid with stock, the value shall be the price of the stock without
     commissions. The Net Asset Value determined on the basis of such appraisal
     may be adjusted on a quarterly basis by the Board to account for
     significant capital transactions. Stock issued by the Company to the
     Advisor in payment of fees hereunder shall be governed by the terms set
     forth in Schedule A hereto, or such other terms as the Advisor and the
     Company may from time to time agree.

     10. Expenses.

                                       15

<PAGE>

          (a) Subject to the limitations set forth in Section 9(d), to the
     extent applicable, in addition to the compensation paid to the Advisor
     pursuant to Section 9 hereof, the Company shall pay directly or reimburse
     the Advisor for the following expenses:

               (i) the Company's Organization and Offering Expenses; provided
          however, that within 60 days after the end of the month in which any
          Offering terminates, the Advisor shall reimburse the Company for any
          Organization and Offering Expense reimbursements received by the
          Advisor pursuant to this Section 10 to the extent that such
          reimbursements, when added to the balance of the Organization and
          Offering Expenses (excluding selling commissions, and fees paid and
          expenses reimbursed to the Selected Dealers) paid directly by the
          Company, exceed four percent of the Gross Offering Proceeds; provided
          further, however, that the Advisor shall be responsible for the
          payment of all Organization and Offering Expenses (excluding such
          commissions and such fees and expense reimbursements) in excess of
          four percent of the Gross Offering Proceeds;

               (ii) all Acquisition Expenses;

               (iii) to the extent not otherwise included in Acquisition
          Expenses, all expenses of whatever nature reasonably incurred and
          directly connected with the proposed acquisition of any Investment
          that does not result in the actual acquisition of the Investment,
          including, without limitation, personnel costs;

               (iv) expenses other than Acquisition Expenses incurred in
          connection with the investment of the funds of the Company, including,
          without limitation, costs of retaining industry or economic
          consultants and finder's fees and similar payments, to the extent not
          paid by the seller of the Investment Asset or another third party,
          regardless of whether such expenses were incurred in transactions
          where a fee is not payable to the Advisor;

               (v) interest and other costs for borrowed money, including
          discounts, points and other similar fees;

               (vi) taxes and assessments on income of the Company, to the
          extent paid or advanced by the Advisor, or on Property and taxes as an
          expense of doing business;

               (vii) costs associated with insurance required in connection with
          the business of the Company or by the Directors;

               (viii) expenses of managing and operating Properties owned by the
          Company, whether payable to an Affiliate of the Advisor or a
          non-affiliated Person;

               (ix) fees and expenses of legal counsel for the Company;

               (x) fees and expense of auditors and accountants for the Company;

               (xi) all expenses in connection with payments to the Directors
          and meetings of the Directors and Shareholders;

               (xii) expenses associated with listing the Shares and Securities
          on a securities exchange or Nasdaq if requested by the Board;

                                       16

<PAGE>

               (xiii) expenses connected with payments of Distributions in cash
          or otherwise made or caused to be made by the Board to the
          Shareholders;

               (xiv) expenses of organizing, revising, amending, converting,
          modifying, or terminating the Company or the Articles of
          Incorporation;

               (xv) expenses of maintaining communications with Shareholders,
          including the cost of preparation, printing and mailing annual reports
          and other Shareholder reports, proxy statements and other reports
          required by governmental entities;

               (xvi) expenses related to the Properties and Loans and other fees
          relating to making investments including personnel and other costs
          incurred in Property or Loan transactions where a fee is not payable
          to the Advisor other than as provided in Section 10(b) hereof; and

               (xvii) all other expenses the Advisor incurs in connection with
          providing services to the Company, including reimbursement to the
          Advisor or its Affiliates for the cost of rent, goods, materials and
          personnel incurred by them based upon the compensation of the Persons
          involved and an appropriate share of overhead allocable to those
          Persons as reasonably determined by the Advisor on a basis approved
          annually by the Board (including a majority of the Independent
          Directors). No reimbursement shall be made for the cost of personnel
          to the extent that such personnel are used in transactions for which
          the Advisor receives a separate fee.

          (b) Notwithstanding anything to the contrary in Section 10(a), with
     respect to Properties and Loans acquired using proceeds of the Part I
     Offering, the Advisor shall be responsible for payment of (i) all
     Acquisition Expenses, (ii) all expenses of whatever nature directly
     connected with the proposed acquisition of any property or loan that does
     not result in the actual acquisition of Properties or Loans; (iii) finder's
     fees and similar payments to the extent not paid by the seller of Property
     or other third party; and (iv) costs of retaining industry or economic
     consultants. The Company shall pay to the Advisor the Acquisition Expense
     Allowance, which shall be used by Advisor to pay the expenses described in
     this Section 10(b). To the extent the expenses paid by the Advisor pursuant
     to this Section 10(b) exceed the Acquisition Expense Allowance, the Company
     shall have no duty to reimburse the Advisor for the amount of such excess.
     To the extent the Acquisition Expense Allowance exceeds the expenses paid
     by the Advisor pursuant to this Section 10(b), the Advisor shall have no
     duty to repay or account to the Company for any such excess.

          (c) With respect to Properties and Loans acquired using proceeds of
     the Part II Offering, no Acquisition Expense Allowance shall be payable to
     the Advisor and the Company shall be solely responsible for payment of (i)
     all Acquisition Expenses; (ii) all expenses of whatever nature directly
     connected with the proposed acquisition of any property or loan that does
     not result in the actual acquisition of Properties or Loans; (iii) finder's
     fees and similar payments to the extent not paid by the seller of Property
     or other third party; and (iv) costs of retaining industry or economic
     consultants.

          (d) With respect to Properties and Loans acquired using a mixture of
     proceeds from the Part I and Part II Offerings, the Acquisition Expense
     Allowance shall be calculated and payable to the Advisor on a pro rata
     basis, and the Advisor and the Company shall be responsible for its
     respective pro rata share of the expenses described in Section 10(b) and
     10(c).

                                       17

<PAGE>

          (e) Expenses incurred by the Advisor on behalf of the Company and
     payable pursuant to this Section 10 shall be reimbursed quarterly to the
     Advisor within 60 days after the end of each quarter, subject to the
     provisions of Section 13 hereof. The Advisor shall prepare a statement
     documenting the Operating Expenses of the Company within 45 days after the
     end of each quarter.

     11. Other Services. Should the Board request that the Advisor or any
shareholder or employee thereof render services for the Company other than as
set forth in Section 3 hereof, such services shall be separately compensated and
shall not be deemed to be services pursuant to the terms of this Agreement.

     12. Fidelity Bond. The Advisor shall maintain a fidelity bond for the
benefit of the Company which bond shall insure the Company from losses of up to
$5,000,000 and shall be of the type customarily purchased by entities performing
services similar to those provided to the Company by the Advisor.

     13. Limitation on Expenses.

          (a) If Operating Expenses of the Company during the 12-month period
     ending on the last day of any fiscal quarter of the Company exceed the
     greater of (i) two percent of the Average Invested Assets during the same
     12-month period or (ii) 25% of the Adjusted Net Income of the Company
     during the same 12-month period, then subject to paragraph (b) of this
     Section 13, such excess amount shall be the sole responsibility of the
     Advisor and the Company shall not be liable for payment therefor.

          (b) Notwithstanding the foregoing, to the extent that the Advisor
     becomes responsible for any such excess amount as provided in paragraph
     (a), if a majority of the Independent Directors finds such excess amount or
     a portion thereof justified based on such unusual and non-recurring factors
     as they deem sufficient, the Company shall reimburse the Advisor in future
     quarters for the full amount of such excess, or any portion thereof, but
     only to the extent such reimbursement would not cause the Company's
     Operating Expenses to exceed the 2%/25% Guidelines in the 12-month period
     ending on any such quarter. In no event shall the Operating Expenses paid
     by the Company in any 12-month period ending at the end of a fiscal quarter
     exceed the 2%/25% Guidelines.

          (c) Within 60 days after the end of any twelve-month period referred
     to in paragraph (a), the Advisor shall reimburse the Company for any
     amounts expended by the Company in such twelve-month period that exceeds
     the limitations provided in paragraph (a) unless the Independent Directors
     determine that such excess expenses are justified, as provided in paragraph
     (b), and provided the Operating Expenses for such later quarter would not
     thereby exceed the 2%/25% Guidelines.

          (d) To the extent Organization and Offering Expenses payable by the
     Company exceed 15% of the Gross Offering Proceeds, the excess will be paid
     by the Advisor.

          (e) All computations made under paragraphs (a) and (b) of this Section
     13 shall be determined in accordance with generally accepted accounting
     principles applied on a consistent basis.

                                       18

<PAGE>

          (f) If the Advisor receives a Subordinated Incentive Fee for the sale
     of Property, Adjusted Net Income, for purposes of calculating the Operating
     Expenses, shall exclude the gain from the sale of such Property.

     14. Other Activities of the Advisor. Nothing herein contained shall prevent
the Advisor from engaging in other activities, including without limitation
direct investment by the Advisor and its Affiliates in assets that would be
suitable for the Company, the rendering of advice to other investors (including
other REITs) and the management of other programs advised, sponsored or
organized by the Advisor or its Affiliates; nor shall this Agreement limit or
restrict the right of the Advisor or any of its Affiliates or of any director,
officer, employee or shareholder of the Advisor or its Affiliates to engage in
any other business or to render services of any kind to any other partnership,
corporation, firm, individual, trust or association. The Advisor may, with
respect to any investment in which the Company is a participant, also render
advice and service to each other participant therein. Without limiting the
generality of the foregoing, the Company acknowledges that the Advisor provides
or will provide services to other CPA REIT funds, whether now in existence or
formed hereafter, and that the Advisor and its Affiliates may invest for their
own account. The Advisor shall be responsible for promptly reporting to the
Board the existence of any actual or potential conflict of interest that arises
that may affect its performance of its duties under this Agreement. If the
Sponsor, Advisor, Director or Affiliates thereof has or have sponsored other
investment programs with similar investment objectives which have investment
funds available at the same time as the Company, it shall be the duty of the
Advisor to adopt a reasonable method by which properties are to be allocated to
the competing investment entities and to use its best efforts to apply such
method fairly to the Company.

     The Advisor shall be required to use its best efforts to present a
continuing and suitable investment program to the Company that is consistent
with the investment policies and objectives of the Company, but subject to the
last sentence of the preceding paragraph, neither the Advisor nor any Affiliate
of the Advisor shall be obligated generally to present any particular investment
opportunity to the Company even if the opportunity is of character which, if
presented to the Company, could be taken by the Company.

     If the Advisor or its Affiliates is presented with a potential investment
which might be made by the Company and by another investment entity which the
Advisor or its Affiliates advises or manages, the Advisor shall consider, among
other things, the investment portfolio of each entity, cash flow of each entity,
the effect of the acquisition on the diversification of each entity's portfolio,
rental payments during any renewal period, the estimated income tax effects of
the purchase on each entity, the policies of each entity relating to leverage,
the funds of each entity available for investment, the amount of equity required
to make the investment and the length of time such funds have been available for
investment.

     15. Relationship of Advisor and Company. The Company and the Advisor agree
that they have not created and do not intend to create by this Agreement a joint
venture or partnership relationship between them and nothing in this Agreement
shall be construed to make them partners or joint venturers or impose any
liability as partners or joint venturers on either of them.

     16. Term; Termination of Agreement. This Agreement, as amended and
restated, shall continue in force until September 30, 2008 and thereafter shall
be automatically renewed for successive one-year periods, unless either party
shall give notice in writing of non-renewal to the other party not less than 60
days before the end of any such year.

     17. Termination by Company. At the sole option the Board (including a
majority of the Independent Directors), this Agreement may be terminated
immediately by written notice of termination

                                       19

<PAGE>

from the Company to the Advisor upon the occurrence of events which would
constitute Cause or if any of the following events occur:

          (a) If the Advisor shall breach this Agreement; provided that such
     breach (i) is of a material term or condition of this Agreement and (ii)
     the Advisor has not cured such breach within 30 days of written notice
     thereof or, in the case of any breach that cannot be cured within 30 days
     by reasonable effort, has not taken all necessary action within a
     reasonable time period to cure such breach;

          (b) If the Advisor shall be adjudged bankrupt or insolvent by a court
     of competent jurisdiction, or an order shall be made by a court of
     competent jurisdiction for the appointment of a receiver, liquidator, or
     trustee of the Advisor, for all or substantially all of its property by
     reason of the foregoing, or if a court of competent jurisdiction approves
     any petition filed against the Advisor for reorganization, and such
     adjudication or order shall remain in force or unstayed for a period of 30
     days; or

          (c) If the Advisor shall institute proceedings for voluntary
     bankruptcy or shall file a petition seeking reorganization under the
     federal bankruptcy laws, or for relief under any law for relief of debtors,
     or shall consent to the appointment of a receiver for itself or for all or
     substantially all of its property, or shall make a general assignment for
     the benefit of its creditors, or shall admit in writing its inability to
     pay its debts, generally, as they become due.

     Any notice of termination under Section 16 or 17 shall be effective on the
date specified in such notice, which may be the day on which such notice is
given or any date thereafter. The Advisor agrees that if any of the events
specified in Section 17(b) or (c) shall occur, it shall give written notice
thereof to the Board within 15 days after the occurrence of such event.

     18. Termination by Either Party. This Agreement may be terminated
immediately without penalty (but subject to the requirements of Section 20
hereof) by the Advisor by written notice of termination to the Company upon the
occurrence of events which would constitute Good Reason or by the Company
without cause or penalty (but subject to the requirements of Section 20 hereof)
by action of a majority of the Independent Directors or by action of a majority
of the Shareholders, in either case upon 60 days' written notice.

     19. Assignment Prohibition. This Agreement may not be assigned by the
Advisor without the approval of the Board (including a majority of the
Independent Directors); provided, however, that such approval shall not be
required in the case of an assignment to a corporation, partnership,
association, trust or organization which may take over the assets and carry on
the affairs of the Advisor, provided: (i) that at the time of such assignment,
such successor organization shall be owned substantially by an entity directly
or indirectly controlled by the Sponsor and only if such entity has a net worth
of at least $5,000,000, and (ii) that the board of directors of the Advisor
shall deliver to the Board a statement in writing indicating the ownership
structure and net worth of the successor organization and a certification from
the new Advisor as to its net worth. Such an assignment shall bind the assignees
hereunder in the same manner as the Advisor is bound by this Agreement. The
Advisor may assign any rights to receive fees or other payments under this
Agreement without obtaining the approval of the Board. This Agreement shall not
be assigned by the Company without the consent of the Advisor, except in the
case of an assignment by the Company to a corporation or other organization
which is a successor to the Company, in which case such successor organization
shall be bound hereunder and by the terms of said assignment in the same manner
as the Company is bound by this Agreement.

                                       20

<PAGE>

     20. Payments to and Duties of Advisor Upon Termination.

          (a) After the Termination Date, the Advisor shall not be entitled to
     compensation for further services hereunder but shall be entitled to
     receive from the Company the following:

               (i) all unpaid reimbursements of Organization and Offering
          Expenses and of Operating Expenses payable to the Advisor;

               (ii) all earned but unpaid Asset Management Fees payable to the
          Advisor prior to the Termination Date;

               (iii) all earned but unpaid Subordinated Acquisition Fees and
          interest thereon, in each case payable to the Advisor relating to the
          acquisition of any Property prior to the Termination Date;

               (iv) all earned but unpaid Subordinated Disposition Fees payable
          to the Advisor relating to the sale of any Property prior to the
          Termination Date;

               (v) all earned but unpaid Loan Refinancing Fees payable to the
          Advisor relating to the financing or refinancing of any Property prior
          to the Termination Date; and

               (vi) all earned but unpaid Property Management Fees payable to
          the Advisor or its Affiliates relating to the management of any
          property prior to the termination of this Agreement.

          (b) Notwithstanding the foregoing, if this Agreement is terminated by
     the Company for Cause, or by the Advisor for other than Good Reason, the
     Advisor will not be entitled to receive the sums in Section 20(a) above.

          (c) If this Agreement is terminated by the Company for any reason
     other than Cause, by either party in connection with a Change of Control,
     or by the Advisor for Good Reason, the Advisor shall be entitled to payment
     of the Termination Fee. Notwithstanding the foregoing, the Advisor shall
     not be entitled to payment of the Termination Fee if:

               (i) this Agreement is terminated because of failure of the
          Company and the Advisor to establish, following good-faith
          negotiations pursuant to Section 9(k) hereof, a fee structure
          appropriate for an entity with a perpetual life in the event the
          Shares are listed on a national securities exchange or are included
          for quotation on Nasdaq, or

               (ii) the Subordinated Incentive Fee is paid to the Advisor as a
          result of the listing of the Shares on a national securities exchange
          or their inclusion for quotation on Nasdaq and this Agreement is
          terminated after such listing or inclusion.

          (d) Any and all amounts payable to the Advisor pursuant to Section
     20(a) and Section 20(c) that, irrespective of the termination, were payable
     on a current basis prior to the Termination Date either because they were
     not subordinated or all conditions to their payment had been satisfied,
     shall be paid within 90 days after the Termination Date. All other amounts
     payable to the Advisor pursuant to Section 20(a) and Section 20(c) shall be
     paid in a manner determined by the Board, but in no event on terms less
     favorable to the Advisor than those represented by a note (i) maturing upon
     the liquidation of the Company or three years from the Termination Date,
     whichever is earlier, (ii) with no less than twelve equal quarterly
     installments

                                       21

<PAGE>

     and (iii) bearing a fair, competitive and commercially reasonable interest
     rate (the "Note"). The Note, if any, may be prepaid by the Company at any
     time prior to maturity with accrued interest to the date of payment but
     without premium or penalty. Notwithstanding the foregoing, any amounts that
     relate to Investment Assets (i) shall be an amount which provides
     compensation to the Advisor only for that portion of the holding period for
     the respective Investment Assets during which the Advisor provided services
     to the Company, (ii) shall not be due and payable until the Investment
     Asset to which such amount relates is sold or refinanced, and (iii) shall
     not bear interest until the Investment Asset to which such amount relates
     is sold or refinanced. A portion of the amount shall be paid as each
     Investment Asset owned by the Company on the Termination Date is sold. The
     portion of such amount payable upon each such sale shall be equal to (i)
     such amount multiplied by (ii) the percentage calculated by dividing the
     fair value (at the Termination Date) of the Investment Asset sold by the
     Company divided by the total fair value (at the Termination Date) of all
     Investment Assets owned by the Company on the Termination Date.

          (e) The Advisor shall promptly upon termination:

               (i) pay over to the Company all money collected and held for the
          account of the Company pursuant to this Agreement, after deducting any
          accrued compensation and reimbursement for its expenses to which it is
          then entitled;

               (ii) deliver to the Board a full accounting, including a
          statement showing all payments collected by it and a statement of all
          money held by it, covering the period following the date of the last
          accounting furnished to the Board;

               (iii) deliver to the Board all assets, including Properties and
          Loans, and documents of the Company then in the custody of the
          Advisor; and

               (iv) cooperate with the Company to provide an orderly management
          transition.

     21. Indemnification by the Company.

          (a) The Company shall not indemnify the Advisor or any of its
     Affiliates for any loss or liability suffered by the Advisor or the
     Affiliate, or hold the Advisor or the Affiliate harmless for any loss or
     liability suffered by the Company, unless all of the following conditions
     are met:

               (i) The Advisor or Affiliate has determined, in good faith, that
          the course of conduct which caused the loss or liability was in the
          best interests of the Company;

               (ii) The Advisor or the Affiliate was acting on behalf of or
          performing services for the Company; and

               (iii) Such liability or loss was not the result of negligence or
          misconduct by the Advisor or the Affiliate.

          (b) Notwithstanding the foregoing, the Advisor and its Affiliates
     shall not be indemnified by the Company for any losses, liabilities or
     expenses arising from or out of the alleged violation of federal or state
     securities laws unless one or more of the following conditions are met:

                                       22

<PAGE>

               (i) There has been a successful adjudication on the merits of
          each count involving alleged securities law violations as to the
          particular indemnitee;

               (ii) Such claims have been dismissed with prejudice on the merits
          by a court of competent jurisdiction as to the particular indemnitee;
          or

               (iii) A court of competent jurisdiction approves a settlement of
          the claims against a particular indemnitee and finds that
          indemnification of the settlement and the related costs should be
          made, and the court considering the request for indemnification has
          been advised of the position of the Securities and Exchange Commission
          and of the published position of any state securities regulatory
          authority in which securities of the Company were offered or sold as
          to indemnification for violation of securities laws.

          (c) The Company shall advance funds to the Advisor or its Affiliates
     for legal expenses and other costs incurred as a result of any legal action
     for which indemnification is being sought only if all of the following
     conditions are satisfied:

               (i) The legal action relates to acts or omissions with respect to
          the performance of duties or services on behalf of the Company;

               (ii) The legal action is initiated by a third party who is not a
          Shareholder or the legal action is initiated by a Shareholder acting
          in his or her capacity as such and a court of competent jurisdiction
          specifically approves such advancement; and

               (iii) The Advisor or the Affiliate undertakes to repay the
          advanced funds to the Company, together with the applicable legal rate
          of interest thereon, in cases in which such Advisor or Affiliate is
          found not to be entitled to indemnification.

          (d) Notwithstanding the foregoing, the Advisor shall not be entitled
     to indemnification or be held harmless pursuant to this Section 21 for any
     activity which the Advisor shall be required to indemnify or hold harmless
     the Company pursuant to Section 22.

          (e) Any amounts paid pursuant to this Section 21 shall be recoverable
     or paid only out the net assets of the Company and not from Shareholders.

     22. Indemnification by Advisor. The Advisor shall indemnify and hold
harmless the Company from liability, claims, damages, taxes or losses and
related expenses including attorneys' fees, to the extent that such liability,
claims, damages, taxes or losses and related expenses are not fully reimbursed
by insurance and are incurred by reason of the Advisor's bad faith, fraud,
willful misfeasance, misconduct, negligence or reckless disregard of its duties.

     23. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered by hand or by overnight
mail or other overnight delivery service to the addresses set forth herein:

     To the Board
     and to the Company:   Corporate Property Associates 16 - Global
                           Incorporated
                           50 Rockefeller Plaza
                           New York, NY 10020

                                       23

<PAGE>

     To the Advisor:       Carey Asset Management Corp.
                           50 Rockefeller Plaza
                           New York, NY 10020

     Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Section 23.

     24. Modification. This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.

     25. Severability. The provisions of this Agreement are independent of and
severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

     26. Construction. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York.

     27. Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.

     28. Indulgences, Not Waivers. Neither the failure nor any delay on the part
of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

     29. Gender. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

     30. Titles Not to Affect Interpretation. The titles of Sections and
subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

     31. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.

     32. Name. W.P. Carey & Co. LLC has a proprietary interest in the name
"Corporate Property Associates" and "CPA(R)." Accordingly, and in recognition of
this right, if at any time the Company ceases to retain Carey Asset Management
Corp., or an Affiliate thereof to perform the services

                                       24

<PAGE>

of Advisor, the Company will, promptly after receipt of written request from
Carey Asset Management Corp., cease to conduct business under or use the name
"Corporate Property Associates" or "CPA(R)" or any diminutive thereof and the
Company shall use its best efforts to change the name of the Company to a name
that does not contain the name "Corporate Property Associates" or "CPA(R)" or
any other word or words that might, in the sole discretion of the Advisor, be
susceptible of indication of some form of relationship between the Company and
the Advisor or any Affiliate thereof. Consistent with the foregoing, it is
specifically recognized that the Advisor or one or more of its Affiliates has in
the past and may in the future organize, sponsor or otherwise permit to exist
other investment vehicles (including vehicles for investment in real estate) and
financial and service organizations having "Corporate Property Associates" or
"CPA(R)" as a part of their name, all without the need for any consent (and
without the right to object thereto) by the Company or its Directors.

     33. INITIAL INVESTMENT. The Advisor has contributed to the Company $200,000
in exchange for 20,000 Shares (the "Initial Investment"). The Advisor or its
Affiliates may not sell any of the Shares purchased with the Initial Investment
during the term of this Agreement. The restrictions included above shall not
continue to apply to any Shares other than the Share acquired through the
Initial Investment acquired by the Advisor or its Affiliates. The Advisor shall
not vote any Shares it now owns or hereafter acquires in any vote for the
election of Directors or any vote regarding the approval or termination of any
contract with the Advisor or any of its Affiliates.

                                       25

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Advisory
Agreement as of the day and year first above written.

                                        CORPORATE PROPERTY ASSOCIATES 16 -
                                        GLOBAL INCORPORATED

                                        By: /s/ Thomas Zacharias
                                            ------------------------------------
                                        Name: Thomas Zacharias
                                        Title: President

                                        CAREY ASSET MANAGEMENT CORP.

                                        By: /s/ Gordon DuGan
                                            ------------------------------------
                                        Name: Gordon DuGan
                                        Title: President and Chief Executive
                                               Officer

<PAGE>

                                   SCHEDULE A

     This Schedule sets forth the terms governing any Shares issued by the
Company to the Advisor in payment of advisory fees set forth in the Agreement.

     1. Restrictions. The Shares are subject to vesting over a five-year period.
The Shares shall vest ratably over a five-year period with 20% of the Shares
paid in each payment vesting on each of the first through fifth anniversary of
the date hereof. Prior to the vesting of the ownership of the Shares in the
Advisor, the Shares may not be transferred by the Advisor.

     2. Immediate Vesting. Upon the expiration of the Agreement for any reason
other than a termination for Cause under paragraph 17 or upon a "Change of
Control" of CPA(R):16 (as defined below), all Shares granted to the Advisor
hereunder shall vest immediately and all restrictions shall lapse. For purposes
of this Schedule A, a "Change of Control" of the Company shall be deemed to have
occurred if there has been a change in the ownership of the Company of a nature
that would be required to be reported in response to the disclosure requirements
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as enacted and in force on the date
hereof, whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a Change of Control
shall be deemed to have occurred if:

               (i) any "person," as such term is used in Sections 13(d) and
          14(d) of the Exchange Act (other than the Company, any of its
          subsidiaries, any trustee, fiduciary or other person or entity holding
          securities under any employee benefit plan of the Company or any of
          its subsidiaries), together with all "affiliates" and "associates" (as
          such terms are defined in Rule 14b-2 under the Exchange Act) of such
          person, shall become the "beneficial owner" (as such term is defined
          in Rule 13d-3 under the Exchange Act), directly or indirectly, of
          securities of the Company representing 25% or more of either (A) the
          combined voting power of the Company's then outstanding securities
          having the right to vote in an election of the Board ("Voting
          Securities") or (B) the then outstanding common stock of the Company
          (in either such case other than as a result of acquisition of
          securities directly from the Company);

               (ii) persons who, as of the date hereof, constitute the Board
          (the "Incumbent Directors") cease for any reason, including without
          limitation, as a result of a tender offer, proxy contest, merger or
          similar transaction, to constitute at least a majority of the Board,
          provided that any person becoming a director of the Company subsequent
          to the date hereof whose election or nomination for election was
          approved by a vote of at least a majority of the Incumbent Directors
          shall be considered an Incumbent Director; or

               (iii) the stockholders of the Company shall approve (A) any
          consolidation or merger of the Company or any subsidiary where the
          stockholders of the Company, immediately prior to the consolidation or
          merger, would not, immediately after the consolidation or merger,
          beneficially own (as such term is defined in Rule 13d-3 under the
          Exchange Act), directly or indirectly, shares representing in the
          aggregate 50% or more of the voting equity of the entity issuing cash
          or securities in the consolidation or merger (or of its ultimate
          parent entity, if any), (B) any sale, lease, exchange or other
          transfer (in one transaction or a series of transactions contemplated
          or arranged by any party as a single plan) of all or substantially all
          of the assets of the Company or (C) any plan or proposal for the
          liquidation or dissolution of the Company.

                                  Schedule A-1

<PAGE>

     Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
Shares of Common Stock outstanding, increases (A) the proportionate number of
Shares beneficially owned by any person to 25% or more of the Shares then
outstanding, or (B) the proportionate voting power represented by the Shares
beneficially owned by any person to 25% or more of the combined voting power of
all then outstanding voting Securities; provided, however, that if any person
referred to in clause (A) or (B) of this sentence shall thereafter become the
beneficial owner of any additional Shares or other Voting Securities (other than
pursuant to a Share split, Share dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).

     3. Exception. Notwithstanding anything else in this Agreement to the
contrary, the Shares shall continue to vest according to the vesting schedule in
Section 1 regardless of: (a) the expiration of the Advisory Agreement for any
reason other than a termination by the Company for Cause or a resignation by the
Advisor for other than Good Reason, (b) the merger of the Company and an
Affiliate of the Company or (c) any "Change of Control" of the Company in
connection with a merger with an Affiliate of the Company.

                                  Schedule A-2<PAGE>

                                                                     Exhibit 4.2

                                                                  EXECUTION COPY

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

                                  BY AND AMONG

                         XANODYNE PHARMACEUTICALS, INC.,

                                       AND

           THE PREFERRED STOCKHOLDERS AND WARRANTHOLDERS NAMED HEREIN

                                   ----------

                                  JUNE 20, 2007

                                   ----------

<PAGE>

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

     This Amended and Restated Investor Rights Agreement (this "Agreement")
dated as of June 20, 2007 is entered into by and among Xanodyne Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), the preferred stockholders named
in Exhibit A hereto (each individually, a "Preferred Stockholder" and
collectively, the "Preferred Stockholders") that are signatories to this
Agreement and the warrantholders named on Exhibit B hereto (each individually, a
"Warrantholder" and collectively, the "Warrantholders").

                                    RECITALS:

     WHEREAS, pursuant to the Series A-l Convertible Preferred Stock Purchase
Agreement (the "Purchase Agreement") dated June 20, 2007 by and among the
Company and the Purchasers (as defined therein), the Purchasers (as defined
therein) are purchasing certain shares of the Company's Series A-l Preferred
Stock (the "Financing");

     WHEREAS, as a condition precedent to the Financing, the Company, the
Preferred Stockholders and the Warrantholders desire to enter into this
Agreement (i) amending and restating that certain Investors Right Agreement, by
and among the Company and certain stockholders of the Company, dated as of July
25, 2005 (the "Original Investors Rights Agreement"), to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act, the Preferred Stockholders' right of first
refusal with respect to certain issuances of securities of the Company, and
certain covenants of the Company in accordance with the terms and conditions set
forth below.

     NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged the parties hereto agree
as follows:

                                   SECTION 1

                               CERTAIN DEFINITIONS

     As used in this Agreement, the following terms shall have the following
respective meanings:

     1.1 "2005 Purchase Agreement" means the Series A-l Convertible Preferred
Stock Purchase Agreement dated July 8, 2005 by and among the Company and the
Purchasers (defined therein).

     1.2 "Affiliate" means any person or entity directly or indirectly
controlling, controlled by or under common control with another person or
entity.

     1.3 "Available Undersubscription Amount" means the difference between the
total of all Basic Amounts available for purchase by Major Stockholders pursuant
to Section 3 and the Basic Amounts subscribed for pursuant to Section 3.

<PAGE>

     1.4 "Basic Amount" means, with respect to a Preferred Stockholder, its pro
rata portion of the Offered Securities determined by multiplying the number of
Offered Securities by a fraction, the numerator of which is the aggregate number
of Registrable Shares then held by such Preferred Stockholder and the
denominator of which is the total number of shares of Common Stock then
outstanding (giving effect to the conversion or exercise into Common Stock of
all outstanding convertible or exercisable securities that are then convertible
or exercisable for shares of Common Stock). If no specific conversion price is
otherwise specified in the convertible security, the number of shares of Common
Stock deemed issuable upon conversion of such convertible security shall be
computed using the price per share of the most recently completed round of
equity financing.

     1.5 "By-laws" means the Company's By-laws, as amended from time to time.

     1.6 "Code" means the Internal Revenue Code of 1986, as amended.

     1.7 "Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act.

     1.8 "Common Stock" means the common stock, $0.001 par value per share, of
the Company.

     1.9 "Company" has the meaning ascribed to it in the introductory paragraph
hereto.

     1.10 "Company Sale" means (a) a merger or consolidation in which (i) the
Company is a constituent party, or (ii) a Subsidiary of the Company is a
constituent party and either (x) the Company issues shares of its capital stock
pursuant to such merger or consolidation, or (y) as a result of such merger or
consolidation of a Subsidiary, the Company's ownership interest in the surviving
entity is reduced; (b) the disposition by holders of the Company's then
outstanding capital stock of at least a majority of the then outstanding equity
voting power of the Company in a single or a series of related transactions; or
(c) the sale, lease or other disposition of all or substantially all of the
assets of the Company in a single transaction or series of related transactions.

     1.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.

     1.12 "Executive Officer" means the Company's Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer and any other
officer designated by the Board of Directors as an Executive Officer.

     1.13 "Founder" means any of the following individuals: Rolf Classon,
Stephen Stamp, Roger Griggs and Tim Wright.

     1.14 "Indemnified Party" means a party entitled to indemnification pursuant
to Section 2.6.

                                       2

<PAGE>

     1.15 "Indemnifying Party" means a party obligated to provide
indemnification pursuant to Section 2.6.

     1.16 "Initiating Holder" means any Preferred Stockholder or Preferred
Stockholders initiating a request for registration pursuant to Section 2.1(a)
or 2.1(b), as the case may be.

     1.17 "Initial Public Offering" means the initial underwritten public
offering of shares of Common Stock pursuant to an effective Registration
Statement under the Securities Act.

     1.18 "Major Stockholder" has the meaning ascribed to it in Sections 2.1(b)
and 2.3 hereto.

     1.19 "Notice of Acceptance" means a written notice from a Major Stockholder
to the Company containing the information specified in Section 3.1(b).

     1.20 "Offer" means a written notice of any proposed or intended issuance,
sale or exchange of Offered Securities containing the information specified in
Section 3.1(a).

     1.21 "Offered Securities" means (i) any shares of Common Stock, (ii) any
other equity securities of the Company, including, without limitation, shares of
preferred stock, (iii) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity securities of the Company or (iv) any
debt securities convertible into or exchangeable for capital stock of the
Company.

     1.22 "Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by an amendment or prospectus supplement,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.

     1.23 "Purchase Agreement" has the meaning ascribed to it in the recitals
hereto.

     1.24 "Qualified Public Offering" means the closing of an underwritten
public offering of shares of Common Stock of the Company pursuant to an
effective Registration Statement under the Securities Act and listed on the New
York Stock Exchange or NASDAQ, in which the per share public offering price is
not less than $1.50 (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares), and which results in at least $50,000,000 of net proceeds to the
Company.

     1.25 "Refused Securities" means those Offered Securities as to which a
Notice of Acceptance has not been given by the Major Stockholders pursuant to
Section 3.1.

     1.26 "Registration Expenses" means all expenses incurred by the Company in
complying with the provisions of Section 2, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees and
expenses of counsel for the Company and the fees and expenses of one counsel to
represent the Selling Stockholders selected by holders of a majority of the
Registrable Shares held by the Selling Stockholders, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts, selling commissions and
the fees and

                                       3

<PAGE>

expenses of any additional counsel to the Selling Stockholders' (other than the
counsel selected to represent all Selling Stockholders).

     1.27 "Registrable Shares" means (i) the shares of Common Stock issued or
issuable upon conversion of the then outstanding shares of Series A-l Preferred
Stock, (ii) any other shares of Common Stock, and any shares of Common Stock
issued or issuable upon the conversion or exercise of any other securities
acquired by the Preferred Stockholders after the date hereof, (iii) solely for
the purposed of Section 2.2, the shares of common stock issued upon exercise or
conversion of those certain warrants to purchase Common Stock issued pursuant to
the Second Amendment, dated as of June __, 2007, to the Financing Agreement
dated July 25, 2005, as amended, by and among the Company, the lenders listed
therein and Silver Point Finance, LLC and (iv) any other shares of Common Stock
issued in respect of such shares or securities (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided
however, that shares of Common Stock which are Registrable Shares shall cease to
be Registrable Shares upon (x) any sale of such shares pursuant to a
Registration Statement or Rule 144 under the Securities Act or (y) any sale in
any manner to a person or entity that is not entitled pursuant to Section 5 to
the rights provided by this Agreement. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include shares of
Common Stock issuable upon conversion of such Registrable Shares even if such
conversion has not yet been effected.

     1.28 "Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).

     1.29 "Securities Act" means the Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.

     1.30 "Selling Stockholder" means any Preferred Stockholder and any
Warrantholder and his, her or its successors or assigns owning Registrable
Shares included in a Registration Statement.

     1.31 "Series A-l Preferred Stock" means the Company's Series A-l
Convertible Preferred Stock, $0.001 par value per share.

     1.32 "Seventh Amended and Restated Certificate" means the Company's Seventh
Amended and Restated Certificate of Incorporation, as amended from time to time.

     1.33 "Stockholders Agreement" means the Second Amended and Restated
Stockholders' Agreement dated as of the date hereof by and among the Company and
the Stockholders (as defined therein).

     1.34 "Subsidiary" or "Subsidiaries" means any corporation, partnership,
limited liability company, trust or other entity of which the Company directly
or indirectly owns at the

                                       4

<PAGE>

time (a) a majority of the outstanding shares of every class of voting equity
securities of such corporation, partnership, limited liability company, trust or
other entity or (b) the right to receive more than 50% of the net assets of such
entity available for distribution to the holders of outstanding stock or
ownership interests upon a liquidation or dissolution of such entity.

     1.35 "Undersubscription Amount" means, with respect to a Major Stockholder,
any additional portion of the Offered Securities attributable to the Basic
Amounts of other Major Stockholders as such Major Stockholder indicates it will
purchase or acquire should the other Major Stockholders subscribe for less than
their Basic Amounts.

                                    SECTION 2

                               REGISTRATION RIGHTS

     2.1 Required Registrations.

          (a) At any time after the Company's Initial Public Offering, the
Preferred Stockholders holding in the aggregate at least thirty-five percent
(35%) of the Registrable Shares then outstanding may request, in writing, that
the Company effect the registration on Form S-l or Form S-2 (or any successor
form) of Registrable Shares owned by such Preferred Stockholder or Preferred
Stockholders. The Company shall not register any additional shares of stock of
the Company on a Registration Statement at the same time as a demand
registration pursuant to this Section 2.1 without the prior written consent of
the Preferred Stockholders holding at least a majority of the Registrable Shares
to be included in the demand registration.

          (b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), any Preferred Stockholder that held greater than 8,177,284 shares of
Series A-l Preferred Stock immediately following closing of the Financing (each,
a "Major Stockholder") may request, in writing, that the Company effect the
registration on Form S-3 (or such successor form).

          (c) Upon receipt of any request for registration pursuant to Section
2.1 (a) or 2.1(b), the Company shall promptly give written notice of such
proposed registration to all other Preferred Stockholders in accordance with
Section 6.1. Such Preferred Stockholders shall have the right, by giving written
notice to the Company within 30 days after the Company provides its registration
notice, to elect to have included in such registration the number of Registrable
Shares as such Preferred Stockholders may request in such notice of election,
subject in the case of an underwritten offering to the terms of Section 2.1(d).
Thereupon, the Company shall use commercially reasonable efforts to effect the
registration on an appropriate Registration Statement of all Registrable Shares
that the Company has been requested to so register; provided however, that in
the case of a registration requested under Section 2.1(b), the Company will only
be obligated to effect such registration on Form S-3 (or any successor form).

          (d) If the Initiating Holders intend to distribute the Registrable
Shares covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to Section 2.1 (a)
or 2.1(b), as the case may be, and the Company shall include such information in
its written notice referred to in Section 2.1(c). In such event, (i) the

                                       5

<PAGE>

right of any other Preferred Stockholder to include its Registrable Shares in
such registration pursuant to Section 2.1(a) or 2.1(b) shall be conditioned
upon such other Preferred Stockholder's participation in such underwriting on
the terms set forth herein, and (ii) all Preferred Stockholders including
Registrable Shares in such registration shall enter into an underwriting
agreement upon customary terms with the underwriter or underwriters managing the
offering. The Company shall have the right to select the managing underwriter(s)
for any underwritten offering requested pursuant to Section 2.1(a) or (b),
subject to the approval of the Initiating Holders, which approval shall not be
unreasonably delayed or withheld. If any Preferred Stockholder who has requested
inclusion of its Registrable Shares in such registration as provided above
disapproves of the terms of the underwriting, such person may elect, by written
notice to the Company, to withdraw its Registrable Shares from such registration
and underwriting. In an underwritten offering, if the managing underwriter
advises the Company in writing that market factors require a limitation on the
number of shares to be underwritten, the number of Registrable Shares to be
included in the Registration Statement and underwriting shall be allocated among
all Preferred Stockholders requesting registration in proportion, as nearly as
practicable, to the respective number of Registrable Shares held by them on the
date of the request for registration made by the Initiating Holders pursuant to
Section 2.1(a) or 2.1(b), as the case may be. If any Preferred Stockholder
would thus be entitled to include more Registrable Shares than such Preferred
Stockholder requested to be registered, the excess shall be allocated among
other requesting Preferred Stockholders pro rata in the manner described in the
preceding sentence.

          (e) The Company shall not be required to effect more than two (2)
registrations requested by the Preferred Stockholders pursuant to Section 2.1(a)
above. The Company shall not be required to effect in any twelve (12) month
period more than three (3) registrations requested by the Major Stockholders
pursuant to Section 2.1(b) above. For purposes of this Section 2.1(e), a
Registration Statement shall not be counted (i) until such time as such
Registration Statement has been declared effective by the Commission (unless the
Initiating Holders withdraw their request for such registration (other than as a
result of information concerning the business, properties, assets or condition
(financial or otherwise) of the Company which is made known to the holders of
Registrable Shares after the date on which such registration was requested) and
elect not to pay the Registration Expenses therefor pursuant to Section 2.5) or
(ii) if (A) less than fifty percent (50%) of the total number of Registrable
Shares that Preferred Stockholders have requested to be included in such
Registration Statement are sold or (B) the Company or any other person registers
additional shares of stock of the Company on a Registration Statement at the
same time as a demand registration pursuant to this Section 2.1.

          (f) If at the time of any request to register Registrable Shares
pursuant to this Section 2.1 the Company is engaged or has plans to engage in a
registered public offering or is engaged in any other activity which, in the
good faith determination of the Company's Board of Directors, would be adversely
affected by the requested registration, then the Company may at its option
direct that such request be delayed for a period not in excess of ninety (90)
days from the effective date of such request, provided that such right to delay
a request may not be exercised by the Company more than twice in any twelve
month period, and the Company shall thereafter promptly file a Registration
Statement and cause such Registration Statement to become effective as soon as
practicable after filing.

                                       6

<PAGE>

     2.2 Incidental Registration.

          (a) Whenever the Company proposes to file a Registration Statement,
including a Registration Statement to effect an Initial Public Offering, at any
time and from time to time, it will, prior to such filing, give written notice
to all Preferred Stockholders and Warrantholders of its intention to do so. Upon
the written request of one or more Preferred Stockholders or Warrantholders
given within fifteen (15) days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use commercially reasonable efforts to cause all
Registrable Shares which the Company has been requested by such Preferred
Stockholders and Warrantholders to be registered under the Securities Act (in
the case of an Initial Public Offering, however, in an amount not to exceed 25%
of all shares of Common Stock offered in such Initial Public Offering) to the
extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of such Preferred
Stockholders and Warrantholders; provided that the Company shall have the right
to postpone or withdraw any registration effected pursuant to this Section 2.2
without obligation to any Preferred Stockholder or Warrantholder.

          (b) If the registration for which the Company gives notice pursuant to
Section 2.2(a) is a registered public offering involving an underwriting, the
Company shall so advise the Preferred Stockholders and Warrantholders as a part
of their written notice made pursuant to Section 2.2(a). In such event, (i) the
right of any Preferred Stockholder or Warrantholder to include his, her or its
Registrable Shares in such registration pursuant to Section 2.2 shall be
conditioned upon such Preferred Stockholder's and Warrantholder's participation
in such underwriting on the terms set forth herein, and (ii) all Preferred
Stockholders and Warrantholders including Registrable Shares in such
registration shall enter into an underwriting agreement upon customary terms
with the underwriter or underwriters selected for the underwriting by the
Company. If any Preferred Stockholder or Warrantholder who has requested
inclusion of his, her or its Registrable Shares in such registration as provided
above disapproves of the terms of the underwriting, such Preferred Stockholder
or Warrantholder may elect, by written notice to the Company, to withdraw his,
her or its Registrable Shares from such Registration Statement and underwriting.
If the managing underwriter advises the Company in writing that market factors
require a limitation on the number of shares to be underwritten, all of the
shares held by holders other than the Preferred Stockholders and Warrantholders,
including any officers, directors or employees of the Company, shall first be
excluded from such Registration Statement and underwriting to the extent deemed
advisable by the managing underwriter, and, if further reduction of the number
of shares is required, the number of shares that may be included in the
Registration Statement and underwriting shall be allocated among all Preferred
Stockholders and Warrantholders requesting registration in proportion, as nearly
as practicable, to the respective number of Registrable Shares held by them on
the date the Company gives the notice specified in Section 2.2(a); provided that
the number of Registrable Shares included in such registration on behalf of the
Preferred Stockholders and Warrantholders requesting registration shall not be
less than thirty percent (30%) of the total shares requested to be registered
(except in the case of an Initial Public Offering, in which case the number of
Registrable Shares included in such registration on behalf of the Preferred
Stockholders and Warrantholders requesting registration shall not be less than
twenty-five (25%) of the total shares registered in such offering). If any
Preferred Stockholder or Warrantholder would thus be entitled to include more
shares than such

                                       7

<PAGE>

holder requested to be registered, the excess shall be allocated among other
requesting Preferred Stockholders and Warrantholders pro rata in the manner
described in the preceding sentence.

          2.3 Aggregation. For purposes of this Agreement, for any Preferred
Stockholder, Wararntholder or Major Stockholder that is a partnership,
corporation or limited liability company, the general partner, limited partners,
retired partners, shareholders, members, retired members and Affiliates of such
Preferred Stockholder, Warrantholder or Major Stockholder, and the general
partners, limited partners, retired partners, shareholders, members, retired
members or Affiliates of the foregoing, or investment vehicles for whom any of
the foregoing is a general partner, manager or investment advisor, as
applicable, and the estates, beneficiaries and family members of any such
general partner, limited partners, retired partners, shareholders, members, and
retired members and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "Preferred Stockholder," "Warrantholder" or
"Major Stockholder." The determination of whether a Preferred Stockholder is a
"Major Stockholder" and the determination of any pro rata reduction pursuant to
Section 2.1(d) or 2.2(b) with respect to such Preferred Stockholder shall be
based upon the aggregate amount of Registrable Shares owned by all entities and
individuals included in such "Preferred Stockholder" or "Major Stockholder", as
defined in this section.

     2.4 Registration Procedures.

          (a) If and whenever the Company is required by the provisions of this
Agreement to use commercially reasonable efforts to effect the registration of
any Registrable Shares under the Securities Act, the Company shall
expeditiously:

               (i) prepare and file with the Commission a Registration Statement
with respect to such Registrable Shares and use commercially reasonable efforts
to cause that Registration Statement to become effective as promptly as
practicable and to keep the Registration Statement effective for up to twelve
(12) months from the effective date or such lesser period until all such
Registrable Shares are sold; provided however, that such twelve month period
shall be extended for a period of time equal to the period the Selling
Stockholders refrain from selling any securities of the Company included in such
registration at the request of an underwriter of the Company's Common Stock or
as required pursuant to Section 2.4(b) and (c);

               (ii) prepare and file with the Commission any amendments and
supplements to the Registration Statement and the Prospectus included in the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act (including the anti-fraud provisions thereof);

               (iii) furnish to each Selling Stockholder such reasonable numbers
of copies of the Prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the
Selling Stockholder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Shares owned by such Selling
Stockholder;

                                       8

<PAGE>

               (iv) register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of such states as
the Selling Stockholders shall reasonably request; provided however, that the
Company shall not be required in connection with this subsection (iv) to qualify
as a foreign corporation or execute or file a general consent to service of
process in any jurisdiction, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;

               (v) cause all such Registrable Shares to be listed on each
securities exchange or automated quotation system on which similar securities
issued by the Company are then listed;

               (vi) provide a transfer agent and registrar for all such
Registrable Shares and a CUSIP number not later than the effective date of such
Registration Statement;

               (vii) notify each Selling Stockholder, promptly after it shall
receive notice thereof, of the time when such Registration Statement has become
effective or a supplement to any Prospectus forming a part of such Registration
Statement has been filed;

               (viii) following the effectiveness of such Registration
Statement, notify each Selling Stockholder of any request by the Commission for
the amending or supplementing of such Registration Statement or Prospectus;

               (ix) notify each Selling Stockholder of Registrable Shares
covered by such Registration Statement upon the occurrence of any event as a
result of which the Prospectus included in a Registration Statement, as then in
effect, contains an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and prepare,
file and furnish to each such Selling Stockholder a reasonable number of copies
of a supplement or an amendment to such Prospectus as may be necessary so that
such Prospectus does not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and

               (x) use commercially reasonable efforts to prevent the issuance
of any stop order or other order suspending the effectiveness of a Registration
Statement covering Registrable Shares and, if such an order is issued, to use
commercially reasonable efforts to obtain the withdrawal thereof at the earliest
possible time and to notify the Selling Stockholder of the issuance of such
order and the resolution thereof.

          (b) At the request of any Selling Stockholder at any time after any
Registrable Shares held by such Selling Stockholder become eligible for resale
pursuant to Rule 144(k) under the Securities Act, the Company shall deliver a
letter to the Company's transfer agent irrevocably instructing the transfer
agent to remove any securities law legend from any certificate representing such
Registrable Shares which have become eligible for sale pursuant to Rule 144(k).

          (c) If the Company has delivered a Prospectus to the Selling
Stockholders and after having done so the Prospectus is amended to comply with
the requirements of the Securities

                                       9

<PAGE>

Act, the Company shall promptly notify the Selling Stockholders and, if
requested, the Selling Stockholders shall immediately cease making offers of
Registrable Shares and return all Prospectuses to the Company. The Company shall
promptly provide the Selling Stockholders with revised Prospectuses and,
following receipt of the revised Prospectuses, the Selling Stockholders shall be
free to resume making offers of the Registrable Shares.

          (d) In the event that, in the reasonable judgment of the Company, it
is advisable to suspend use of a Prospectus included in a Registration Statement
due to pending material developments or other events that have not yet been
publicly disclosed and as to which the Company believes public disclosure would
be detrimental to the Company, the Company shall notify all Selling Stockholders
to such effect, and, upon receipt of such notice, each such Selling Stockholder
shall immediately discontinue any sales of Registrable Shares pursuant to such
Registration Statement until such Selling Stockholder has received copies of a
supplemented or amended Prospectus or until such Selling Stockholder is advised
in writing by the Company that the then current Prospectus may be used and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. Notwithstanding anything
to the contrary herein, the Company shall not exercise its rights under this
Section 2.4(c) to suspend sales of Registrable Shares for a period in excess of
60 calendar days consecutively or 180 calendar days in the aggregate in any
365-day period.

     2.5 Allocation of Expenses. The Company shall pay all Registration Expenses
of all registrations under this Agreement; provided however, that if a
registration under Section 2.1(a) is withdrawn at the request of the Initiating
Holders holding a majority of the shares requested by such Initiating Holders to
be so registered and if such Initiating Holders elect not to have such
registration counted as a registration requested under Section 2.1(a), the
Selling Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares included in
such registration; provided further however, that if at the time of such
withdrawal, the Initiating Holders have either (i) learned material adverse
information concerning the business, properties, assets or condition (financial
or otherwise) of the Company which is made known to the Selling Stockholders
after the date on which such registration was requested and materially impacts
the Offering or (ii) been informed by the underwriters of such registration that
more than twenty-five percent (25%) of the Registrable Shares requested for
registration shall not be included therein due to market factors, and in either
such case the Initiating Holders have withdrawn the request with reasonable
promptness following such disclosure, then the Selling Stockholders shall not be
required to pay the Registration Expenses and shall retain all of their rights,
including their demand and incidental registration rights pursuant to Sections
2.1 and 2.2.

     2.6 Indemnification and Contribution.

          (a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless each Selling Stockholder, each underwriter of such Registrable
Shares, and each other person, if any, who controls such Selling Stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which such
Selling Stockholder, underwriter or controlling person may become subject under
the

                                       10

<PAGE>

Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, (ii) the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the Registration Statement or the offering
contemplated thereby; and the Company will reimburse such Selling Stockholder,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such Selling Stockholder, underwriter or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus or final prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
Selling Stockholder, underwriter or controlling person specifically for use in
the preparation thereof.

          (b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each Selling Stockholder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors and officers and each underwriter (if any) and each person, if
any, who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or (ii)
any omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if and to
the extent (and only to the extent) that the statement or omission was made
solely in reliance upon and in conformity with information relating to such
Selling Stockholder furnished in writing to the Company by or on behalf of such
Selling Stockholder specifically for use in connection with the preparation of
such Registration Statement, prospectus, amendment or supplement; provided
however, that the obligations of each such Selling Stockholder hereunder shall
be limited to an amount equal to the net proceeds received by such Selling
Stockholder of Registrable Shares sold in connection with such registration.

          (c) Each Indemnified Party shall give notice to the Indemnifying Party
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
that counsel for the Indemnifying Party, who

                                       11

<PAGE>

shall conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld,
conditioned or delayed); and, provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.6 except to the
extent that the Indemnifying Party is adversely affected by such failure. The
Indemnified Party may participate in such defense at such party's expense;
provided however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding; provided further, that in no event shall the
Indemnifying Party be required to pay the expenses of more than one law firm per
jurisdiction as counsel for the Indemnified Party. The Indemnifying Party shall
also be responsible for the expenses of such defense if the Indemnifying Party
does not elect to assume such defense. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed.

          (d) An underwriter shall not be entitled to indemnification pursuant
to this Section 2.6 in the event that it fails to deliver to any Selling
Stockholder any preliminary or final or revised Prospectus, as required by the
rules and regulations of the Commission.

          (e) In order to provide for just and equitable contribution to joint
liability under the Securities Act in circumstances in which the indemnification
provided for in this Section 2.6 is due in accordance with its terms but for any
reason is held to be unavailable to an Indemnified Party in respect to any
losses, claims, damages and liabilities referred to herein, then the
Indemnifying Party shall, in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such Indemnified Party as a result
of losses, claims, damages or liabilities to which such party may be subject in
such proportions as is appropriate to reflect the relative fault of the Company
on the one hand and the Selling Stockholders on the other in connection with the
statements, omissions or violations which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative fault of the Company and the Selling Stockholders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact related to information supplied by the Company
or the Selling Stockholders and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Stockholders agree that it would not be just and
equitable if contribution pursuant to this Section 2.6(e) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 2.6(e), (i) in no case shall any one Selling
Stockholder be liable or responsible for any amount in excess of the net
proceeds received by such Selling Stockholder from the offering of Registrable
Shares and (ii) the Company shall be liable and responsible for at least any
amount in excess of such proceeds; provided however that no person guilty of
fraudulent misrepresentation (within the meaning of

                                       12

<PAGE>

Section 11(f) of the Securities Act) shall be entitled to contribution from any
person or entity who is not guilty of such fraudulent misrepresentation. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 2.6(e), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties from whom
contribution may be sought shall not relieve such party from any other
obligation it or they may have thereunder or otherwise under this Section
2.6(e). No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.

          (f) The rights and obligations of the Company and the Selling
Stockholders under this Section 2.6 shall survive the termination of this
Agreement.

     2.7 Other Matters with Respect to Underwritten Offering. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2.1, the Company agrees to (a) enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by the Company, including without limitation customary provisions with
respect to indemnification by the Company of the underwriters of such offering;
(b) use commercially reasonable efforts to cause its legal counsel to render
customary opinions to the underwriters with respect to the Registration
Statement; and (c) use commercially reasonable efforts to cause its independent
public accounting firm to issue customary "cold comfort letters" to the
underwriters with respect to the Registration Statement.

     2.8 Information by Holder. Each Selling Stockholder shall furnish to the
Company such information regarding such holder and the distribution proposed by
such holder as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.

     2.9 Market "Stand-Off" Agreement. Each Preferred Stockholder and
Warrantholder, if requested by the Company and the managing underwriter of an
underwritten public offering by the Company of Common Stock, shall not sell or
otherwise transfer or dispose of any Registrable Shares or other securities of
the Company (excluding securities acquired in the Initial Public Offering or in
the public market after such offering) held by such Preferred Stockholder and
Warrantholder for a period specified by the managing underwriter of an
underwritten public offering by the Company, which period shall not exceed 180
days following the effective date of a Registration Statement of the Company
filed under the Securities Act; provided that, (a) such agreement shall only
apply to the Initial Public Offering of the Company, (b) such agreement shall
not apply to any Registrable Securities included in the Initial Public Offering
of the Company pursuant to the terms hereof and (c) all stockholders of the
Company then holding at least 1% of the outstanding shares of Common Stock (on
an as-converted basis) and all officers and directors of the Company enter into
similar agreements. Any discretionary waiver or termination of the restrictions
of such agreements (including this Agreement) by the Company or the managing
underwriter shall apply to all persons subject to such agreements on a pro rata
basis, based upon the number of shares held by such persons. Each Preferred
Stockholder and

                                       13

<PAGE>

Warrantholder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the managing underwriter(s) which are
consistent with the foregoing or which are necessary to give further effect
thereto. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to such Capital Stock subject to the
foregoing restriction until the end of such lock-up period. The underwriters of
any class of the Company's capital stock are intended third party beneficiaries
of this Section 2.9 and shall have the right, power and authority to enforce the
provisions hereof as though they were parties hereto.

     2.10 Limitations on Subsequent Registration Rights. Except with respect to
assignees as contemplated by Section 5 hereof, the Company shall not, without
the prior written consent of Preferred Stockholders holding at least sixty
percent (60%) of the Registrable Shares, enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder to include securities of the Company in any
Registration Statement.

     2.11 Rule 144 Requirements. After the earliest of (i) the closing of the
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:

          (a) comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;

          (b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and

          (c) furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.

     2.12 Company Sale. The Company shall not, directly or indirectly, enter
into any Company Sale in which the Company shall not be the surviving
corporation unless the proposed surviving corporation shall, prior to such
Company Sale, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Shares" shall be deemed to be references to the securities which the Preferred
Stockholders would be entitled to receive in exchange for Registrable Shares
under any such Company Sale; provided however, that (i) the provisions of this
Section 2.12 may be waived by the holders of at least sixty percent (60%) of the
then outstanding Registrable Securities and (ii) the provisions of this Section
2.12 shall not apply in the event of any Company Sale in which the Company is
not the surviving corporation if all Preferred Stockholders are entitled to
receive in

                                       14

<PAGE>

exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to use
its best efforts to register within 90 days of completion of the transaction for
resale to the public pursuant to the Securities Act.

     2.13 Termination. All of the Company's obligations to register Registrable
Shares under this Agreement shall terminate on the earlier of (i) the seventh
year anniversary of the consummation of the Initial Public Offering or (ii) the
date on which no Preferred Stockholder or Warrantholder holds any Registrable
Shares.

                                    SECTION 3

                              PARTICIPATION RIGHTS

     3.1 Participation Rights.

          (a) The Company shall not issue, sell or exchange, agree to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange, any
Offered Securities (excluding those described in Section 3.1(h)), unless in each
such case the Company shall have first complied with this Section 3.1. The
Company shall deliver to each Major Stockholder an Offer, which shall (i)
identify and describe the Offered Securities, (ii) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (iii) identify
the persons or entities to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (iv) offer to issue and sell to or
exchange with such Major Stockholder such Major Stockholder's Basic Amount and
Undersubscription Amount. Each Major Stockholder shall have the right, for a
period of fifteen (15) days following delivery of the Offer, to purchase or
acquire, at a price and upon the other terms specified in the Offer, up to the
number or amount of the Offered Securities described above. The Offer by its
terms shall remain open and irrevocable for such 15-day period.

          (b) To accept an Offer, in whole or in part, a Major Stockholder must
deliver a Notice of Acceptance to the Company prior to the end of the 15-day
period of the Offer, setting forth the portion of the Major Stockholder's Basic
Amount that such Major Stockholder elects to purchase and, if such Major
Stockholder shall elect to purchase all of its Basic Amount, the
Undersubscription Amount (if any) that such Major Stockholder elects to
purchase. If the Basic Amounts subscribed for by all Major Stockholders are less
than the total of all Basic Amounts available for purchase, then each Major
Stockholder who has set forth Undersubscription Amounts in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for; provided
however, that should the Undersubscription Amounts subscribed for exceed the
Available Undersubscription Amount, each Major Stockholder who has subscribed
for any Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Undersubscription Amount
subscribed for by such Major Stockholder bears to the total Undersubscription
Amounts subscribed for by all Major

                                       15

<PAGE>

Stockholders, subject to rounding by the Board of Directors to the extent it
reasonably deems necessary.

          (c) The Company shall have 90 days from the expiration of the 15-day
period set forth in Section 3.1 (a) above to issue, sell or exchange all or any
part of the Refused Securities, but only to the offerees or purchasers described
in the Offer and only upon terms and conditions (including, without limitation,
unit prices and interest rates) which are not more favorable, in the aggregate,
to the acquiring person or persons or less favorable, in the aggregate, to the
Company than those set forth in the Offer.

          (d) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 3.1(c) above), then each Major Stockholder may, at his, her or its
sole option and in his, her or its sole discretion, reduce the number or amount
of the Offered Securities specified in his, her or its Notice of Acceptance to
an amount that shall be not less than the number or amount of the Offered
Securities that the Major Stockholder elected to purchase pursuant to Section
3.1(b) above multiplied by a fraction, (i) the numerator of which shall be the
number or amount of Offered Securities the Company actually proposes to issue,
sell or exchange (including Offered Securities to be issued or sold to Major
Stockholders pursuant to Section 3.1(b) above prior to such reduction) and (ii)
the denominator of which shall be the original amount of the Offered Securities.
In the event that any Major Stockholder so elects to reduce the number or amount
of Offered Securities specified in his, her or its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Major Stockholders in accordance with Section 3.1(a) above.

          (e) Upon the closing of the issuance, sale or exchange of all of the
Refused Securities or less than all, in accordance with Section 3.1(d), of the
Refused Securities, the Major Stockholders shall acquire from the Company, and
the Company shall issue to the Major Stockholders, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 3.1(d) above if the Major Stockholders have so elected, upon the
terms and conditions specified in the Offer.

          (f) The purchase by the Major Stockholders of any Offered Securities
is subject in all cases to the preparation, execution and delivery by the
Company and the Major Stockholders of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to the Company,
the Major Stockholders and their respective counsel.

          (g) Any Offered Securities not acquired by the Major Stockholders or
other persons in accordance with Section 3.1(c) above may not be issued, sold or
exchanged until they are again offered to the Major Stockholders under the
procedures specified in this Agreement.

          (h) The rights of the Major Stockholder under this Section 3 shall not
apply to:

               (i) shares of Series A-l Preferred Stock issued pursuant to the
Purchase Agreement;

                                       16

<PAGE>

               (ii) shares of Common Stock issuable upon conversion of shares of
Series A-l Preferred Stock;

               (iii) shares of Common Stock issued upon conversion of any
debenture, warrant, option or other convertible security that is outstanding on
the date of this Agreement (including up to 5,119,139 shares of Common Stock (as
may be adjusted in the event of any stock dividend, stock split, combination or
other similar recapitalization affecting shares of Common Stock) issued upon
exercise of warrants granted in connection with certain credit facilities on the
date of this Agreement);

               (iv) shares of Common Stock issued as a dividend or distribution
on the Series A-l Preferred Stock;

               (v) shares of Common Stock issued or deemed issued by reason of a
dividend, stock split, split-up or other distribution on shares of Common Stock;

               (vi) up to an aggregate of 15,204,427 shares of Common Stock (or
options or other rights with respect thereto, including shares of Common Stock
issuable upon exercise thereof) (subject in either case to appropriate
adjustment for any stock dividend, stock split, combination or similar
recapitalization affecting such shares), issued to employees or directors of, or
consultants to, the Company or any of its subsidiaries pursuant to a plan,
agreement or arrangement approved by a majority of the members of the Board of
Directors of the Corporation;

               (vii) up to an aggregate of 5,000,000 shares of Common Stock
(subject to appropriate adjustment for any stock dividend, stock split,
combination or similar recapitalization affecting such shares), issued in
connection with the Company's acquisition of any business or assets used in a
business;

               (viii) up to 35,437 shares of Series A-l Preferred Stock (as may
be adjusted in the event of any stock, dividend, stock split, combination or
similar recapitalization affecting shares of Series A-l Preferred Stock) issued
to Silicon Valley Bank;

               (ix) up to 6,600,000 shares of Series A-l Preferred Stock to be
issued in connection with a merger or acquisition of product(s) approved by the
holders of at least sixty percent (60%) of the then outstanding shares of Series
A-l Preferred Stock; and

               (x) shares of Common Stock issued in a Qualified Public Offering.

     3.2 Directed Shares. In the event that an Initial Public Offering is
consummated at least one year after the closing of the Financing, the Company
will use its reasonable best efforts to cause the managing underwriter(s) of
such Initial Public Offering to designate a number of shares equal to ten
percent (10%) of the Company's shares of Common Stock to be offered in such
Initial Public Offering for sale under a "directed shares program" and shall
instruct such underwriter(s) to allocate no less than fifty percent (50%) of
such directed shares program to be sold to persons or entities designated by the
Major Stockholders on a pro rata basis (based upon the number of Registrable
Shares each Major Stockholder holds relative to the number of Registrable Shares
held by all Major Stockholders). The shares designated by the underwriter(s)

                                       17

<PAGE>

for sale under a directed shares program are referred to herein as "directed
shares." The Major Stockholders acknowledge that, despite the Company's use of
its reasonable best efforts, the underwriter(s) may determine in their sole
discretion that it is not advisable to designate all such shares as directed
shares in the Initial Public Offering, in which case the number of designated
shares may be reduced or no directed shares may be designated, as applicable;
provided that such determination by such underwriter shall be made in writing
and furnished to the Major Stockholders. The Major Stockholders also acknowledge
that notwithstanding the terms of this Agreement, the sale of any directed
shares to any person or entity pursuant to this Agreement will only be made in
compliance with Rule 2110 of the National Association of Securities Dealers,
Inc. Conduct Rules and federal, state and local laws, rules and regulations and
only if the Initial Public Offering is consummated after one year from the date
hereof.

     3.3 Termination. Sections 3.1 and 3.2 hereof shall terminate upon the
earlier of the closing of a Company Sale or immediately following the
consummation of the Initial Public Offering.

                                    SECTION 4

                            COVENANTS OF THE COMPANY

     4.1 Affirmative Covenants. So long as any shares of Series A-l Preferred
Stock are outstanding, the Company covenants and agrees that, subject to waiver
or amendment in accordance with Section 6.4 below, it will perform and observe
the following covenants and provisions, and will cause each Subsidiary, if and
when such Subsidiary exists, to perform and observe such of the following
covenants and provisions as are applicable to such Subsidiary:

          (a) Payment of Taxes. The Company and each Subsidiary will pay and
discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become
overdue; provided, however, that the Company or any Subsidiary shall not be
required to pay and discharge any such tax, assessment, charge, levy, or claim
so long as the validity thereof is being contested by the Company or any
Subsidiary in good faith by appropriate proceedings if the Company or Subsidiary
shall have set aside on its books sufficient reserves, if any, with respect
thereto or where the failure to so pay would not have a material adverse effect
on the business, properties, assets or condition (financial or otherwise) of the
Company or its Subsidiaries. All transfer, excise or other taxes payable to any
jurisdiction (in the United States and outside of the United States) and/or by
reason of the sale or issuance of the shares of Series A-l Preferred Stock
(except for such taxes payable by reason of any subsequent transfer of the
shares of Series A-l Preferred Stock) shall be paid or provided for by the
Company. The preparation of such returns shall be at the Company's expense.

          (b) Maintenance of Insurance. The Company shall maintain, or shall
cause to be maintained, valid policies of workers' compensation insurance,
product liability insurance and other insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company or

                                       18

<PAGE>

such Subsidiary operates, including, without limitation, insurance against loss,
damage, fire, theft, public liability, liability associated with clinical trials
and other risks.

          (c) Conduct of Business; Preservation of Corporate Existence and
Intellectual Property Rights. The Company and each Subsidiary shall preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified, and cause
each Subsidiary to qualify and remain qualified, as a foreign corporation in
each jurisdiction in which (i) such qualification is necessary or desirable in
view of its business and operations or the ownership or lease of its properties
or (ii) the failure to so qualify would have a material adverse effect on the
business, properties, assets or condition (financial or otherwise) of the
Company or its Subsidiaries. The Company and each Subsidiary will continue to
engage principally in the businesses they conduct as of the date hereof. The
Company shall, and shall cause each Subsidiary to, secure, preserve and maintain
all Company Intellectual Property Rights (as defined in the Purchase Agreement)
owned or possessed by it, except where the failure to so secure, preserve and
maintain such Intellectual Property Rights would not have a material adverse
effect on the business, properties, assets or condition (financial or otherwise)
of the Company or its Subsidiaries.

          (d) Current Obligations. The Company and each Subsidiary shall pay,
when due, or in conformity with customary trade terms but not later than 90 days
from the due date, all lease obligations, all trade debt, and all other
indebtedness incident to the operations of the Company or its Subsidiaries,
except such as are being contested in good faith and by proper proceedings if
the Company or Subsidiary shall have set aside on its books sufficient reserves,
if any, with respect thereto or where the failure to so pay would not have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Company or its Subsidiaries. The Company and
each Subsidiary will pay and discharge all lawful claims for labor, materials
and supplies which, if not paid when due, might become a lien or charge upon its
property or any part thereof.

          (e) Maintenance of Properties. The Company and each Subsidiary shall
maintain and preserve all of its tangible properties and assets necessary or
useful for the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted, and except where the failure to so
preserve and maintain such property would not have a material adverse effect on
the business, properties, assets or condition (financial or otherwise) of the
Company or its Subsidiaries.

          (f) Inspection Rights. The Company shall, at any time during normal
business hours and upon reasonable prior notice to the Company, permit any Major
Stockholder, or the designated representative or agent of Major Stockholder, to
(i) visit and inspect the premises and any of the properties of the Company and
any Subsidiary, including its records and books of account (and make copies
thereof and take extracts therefrom), and (ii) discuss the affairs, finances and
accounts of the Company and any Subsidiary with its officers, directors,
employees and accountants, all at the expense of such Major Stockholder;
provided, that, the Company shall not be obligated under this Section 4.1(f)
with respect to information that the Board of Directors determines in good faith
is confidential and should not be disclosed.

                                       19

<PAGE>

          (g) Compliance with Laws. The Company and each Subsidiary shall comply
with the requirements of all applicable laws, rules, regulations and orders of
the United States or any applicable foreign jurisdiction, including of the Food
and Drug Administration or similar foreign governmental authority, in the
conduct of its business, except where noncompliance would not have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Company or its Subsidiaries.

          (h) Material Changes, Litigation and FDA Notices. The Company will
promptly notify its Board of Directors of any material adverse change in the
business, properties, assets or condition (financial or otherwise) of the
Company or any Subsidiary and of any litigation or governmental proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or any Subsidiary which, if adversely determined, would
materially adversely affect its present or proposed business, properties, assets
or condition (financial or otherwise) taken as a whole. The Company will also
promptly notify its Board of Directors of any facts which, if such facts had
existed as of the date hereof, would have constituted a material breach of any
representation or warranty contained in the Purchase Agreement and has had or
would reasonably be expected to have a material adverse effect on the business,
properties, assets or condition (financial or otherwise) of the Company or its
Subsidiaries. The Company will also promptly provide to its Board of Directors
written notice and copies of any material notices or correspondence from the
Food and Drug Administration or any foreign regulatory equivalent.

          (i) Confidentiality, Assignment of Inventions, Non-Competition and
Non-Solicitation Agreements. The Company will require each Founder and each
person now or hereafter employed or retained by the Company or any Subsidiary
(whether as an employee or as a consultant) with access to confidential and
proprietary information of the Company to enter into an agreement covering
confidentiality and assignment of inventions in substantially the form attached
as Exhibit J to the Purchase Agreement.

          (j) Meetings of Directors and Committees of the Board. The Company
shall hold meetings of the Company's Board of Directors on a monthly basis
during the first six months following the date of the Original Investor Rights
Agreement and thereafter not less than six (6) times per year unless otherwise
determined by a majority of the members of the Board of Directors of the
Company, but in any event not less than on a quarterly basis.

          (k) Keeping of Records and Books of Account. The Company and each
Subsidiary shall keep adequate records and books of account in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.

          (l) Compliance with ERISA. The Company and each Subsidiary shall
comply with all minimum funding requirements applicable to any pension, employee
benefit plans or employee contribution plans which are subject to ERISA or to
the Code, and shall comply, in all other material respects, with the provisions
of ERISA and the Code, and the rules and regulations thereunder, which are
applicable to any such plan. Neither the Company nor any Subsidiary will

                                       20

<PAGE>

permit any event or condition to exist which could permit any such plan to be
terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.

          (m) Vesting of Stock. Unless otherwise approved by a majority of the
members of the Board of Directors of the Company or a duly appointed committee
thereof, all stock options and other stock equivalents issued after the date of
this Agreement to employees, directors, consultants and other service providers
pursuant to a stock purchase or option plan or other employee stock incentive
program shall be subject to a minimum vesting schedule of at least four years,
with 25% of the shares subject thereto vesting one year after the date of the
issuance or grant of such shares, and the balance of such shares vesting no more
frequently than monthly for three years thereafter, and shall provide for
termination of vesting upon cessation of employment. With respect to any shares
of stock purchased by any such person, the Company shall have a right of first
refusal on any transfer of such shares with certain exceptions for transfers to
immediate family members and to trusts of which the holder is the trustee. With
respect to any stock equivalents that are subject to vesting, the Company shall
have a repurchase option on any unvested portion of such securities in the event
of cessation of employment or provision of services.

          (n) Stockholders' Agreement. If any person receives greater than
50,000 shares of Common Stock after the date of this Agreement (including
without limitation receipt of Common Stock upon exercise of options) (subject to
appropriate adjustment for any stock dividend, stock split, combination or
similar recapitalization affecting such shares), the Company shall cause each
such person to execute and deliver the applicable Instrument of Accession
attached to the Stockholders' Agreement.

          (o) Reservation of Conversion Stock. The Company will, upon any
increase in the number of shares of Common Stock issuable upon conversion of the
outstanding shares of Series A-l Preferred Stock, reserve additional shares of
Common Stock for issuance upon such conversion, so that the number of shares of
Common Stock so reserved will not at any time be less than the number of such
shares issuable upon such conversion.

          (p) Affiliated Transactions. All transactions by and between the
Company or its Subsidiaries and any officer, employee or stockholder of the
Company or its Subsidiaries or persons controlled by or affiliated with such
officer, employee or stockholder, shall be conducted on an arms-length basis and
shall be approved by a majority of the members of the Board of Directors of the
Company after full disclosure of the terms thereof.

     4.2 Negative Covenants. The Company covenants and agrees that, in addition
to any other vote required by law or the Company's Seventh Amended and Restated
Certificate or the By-Laws, without the prior approval of a majority of the
members of the Board of Directors of the Company, the Company shall not after
the date of this Agreement, and the Company shall not permit any Subsidiary to:

          (a) enter into any contract, agreement or license or series of related
contracts, agreements or licenses providing for payments thereunder, or make any
expenditures, in excess of $250,000, whether in a single disbursement or a
series of related disbursements, if such

                                       21

<PAGE>

contract, agreement, license or series of contracts, agreements or licenses or
expenditure is not included in the Budget (as defined below) approved by the
Board of Directors;

          (b) enter into any financing arrangement in excess of $250,000
including, without limitation, loan agreements, guarantees, credit lines,
letters of credit or capitalized leases, if such financing arrangement is not
included in the Budget (as defined below) approved by the Board of Directors;

          (c) make any loan or guarantee any indebtedness;

          (d) appoint, terminate, remove or change the compensation of any
Executive Officer;

          (e) enter into any asset purchase agreement, joint venture agreement,
licensing agreement, exclusive marketing agreement, or exclusive distribution
agreement outside the ordinary course of business;

          (f) authorize, designate, issue or agree to issue any equity or debt
security of the Company, or any security convertible into, or exercisable for,
shares of the capital stock of the Company;

          (g) take any action or enter into any other transaction outside the
ordinary course of business or effect any material change in the conduct or
operation of the Company's business that would be inconsistent with the
Company's Budget (as defined below) approved by the Board of Directors; or

          (h) enter into any line of business other than the business described
in the Company's Budget (as defined below) approved by the Board of Directors.

     4.3 Financial Statements and Other Information. The Company shall deliver
the following documents to each Major Stockholder, or the designated
representative or agent of such Major Stockholder:

          (a) not later than thirty (30) days prior to the end of each fiscal
year, a comprehensive operating budget forecasting the Company revenues,
expenses and cash position on a month-to-month basis for the upcoming fiscal
year (the "Budget") approved for such fiscal year by the Board of Directors and,
promptly after preparation, any revisions to the Budget.

          (b) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, audited balance sheets of the
Company and of each of its Subsidiaries as at the end of such year, together
with separate statements of income and retained earnings, statements of cash
flows and summaries of bookings and backlogs of the Company and of each of its
Subsidiaries for such year, prepared in accordance with generally accepted
accounting principles, audited by certified independent public accountants of
established national reputation selected by the Company, together with the
accountant's management letter regarding the adequacy of the audit and a
capitalization updated as of such fiscal year end.

                                       22

<PAGE>

          (c) as soon as practicable, but in any event within thirty (30) days
after the end of each of the first three fiscal quarters of the Company in each
year, unaudited balance sheets of the Company and of each of its Subsidiaries as
at the end of such quarter, together with separate statements of income and
retained earnings, statements of cash flows and summaries of bookings and
backlogs of the Company and of each of its Subsidiaries for such period and for
the current fiscal year to date, and a report from the Chief Executive Officer
or Chief Financial Officer discussing comparisons to forecasted quarterly
budgets, all in reasonable detail; and

          (d) as soon as practicable, but in any event within fifteen (15) days
after the end of each month, balance sheets of the Company and of each of its
Subsidiaries as of the end of such month, together with separate statements of
income and retained earnings, statements of cash flows and summaries of bookings
and backlogs of the Company and of each of its Subsidiaries for such month and
for the current fiscal year to date, and a report from the Chief Executive
Officer or Chief Financial Officer discussing comparisons to forecasted monthly
budgets, all in reasonable detail; and

          (e) as soon as practicable, but in any event within thirty (30) days
after the end of each fiscal quarter, a table reflecting the Company's
capitalization as of the end of such quarter, which lists stockholdings by
individual stockholder.

     The foregoing financial statements shall be prepared on a consolidated
basis if the Company has any Subsidiaries. The financial statements delivered
pursuant to clauses (c) and (d) shall be accompanied by a certificate of the
Chief Financial Officer of the Company stating that such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as otherwise noted therein and subject to physical
inventory and other customary year end audit adjustments) and fairly present the
financial condition of the Company at the date thereof and for the periods
covered thereby. The capitalization table delivered pursuant to clause (e) shall
be accompanied by a certificate of the Chief Financial Officer of the Company
stating that such table accurately presents the capitalization of the Company at
the date thereof.

     4.4 Director and Officer Insurance; Indemnification. The Company shall
obtain, as soon as reasonably practicable, and maintain from responsible and
reputable insurance companies or associations, Director and Officer insurance
upon terms reasonably satisfactory to the Board of Directors. In the event that
the Company or any of its successors or assigns (i) consolidates with or merges
into any other entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person or entity, then,
and in each such case, to the extent necessary, proper provision shall be made
so that the successors and assigns of the Company assume the obligations of the
Company with respect to indemnification of members of the Board of Directors as
in effect immediately prior to such transaction, whether in the Company's
bylaws, Company's certificate of incorporation, or elsewhere, as the case may
be, and to continue such indemnification for a period of at least six (6) years
following the closing of any such merger or sale.

                                       23

<PAGE>

     4.5 Issuance of Series A-l Preferred Stock. The Company hereby agrees that
it will not, in any transaction or series of transactions, issue or sell any
shares of Series A-l Preferred Stock other than in accordance with and pursuant
to the terms of the Purchase Agreement.

     4.6 Termination of Covenants. This Section 4 shall terminate upon the
earlier of (a) the closing of a Company Sale or (b) the consummation of a
Qualified Public Offering.

                                    SECTION 5

               TRANSFERS OF RIGHTS; AGREEMENT OF THE STOCKHOLDERS

     5.1 Transfers of Shares. The rights and obligations of each Preferred
Stockholder hereunder may be assigned by such Preferred Stockholder and
Warrantholder to any person or entity to which Registrable Shares are
transferred by such Preferred Stockholder and Warrantholder in compliance with
the requirements of the Stockholders' Agreement, and for purposes of this
Agreement such transferee shall be deemed a "Preferred Stockholder" or
"Warrantholder", respectively, provided that the assignment of rights shall be
contingent upon the transferee providing written instrument to the Company
notifying the Company of such transfer and agreeing in writing to be bound by
all terms and conditions set forth in this Agreement. This Agreement may not be
assigned by the Company.

                                    SECTION 6

                                  MISCELLANEOUS

     6.1 Notices. Any notice, demand, request or delivery required or permitted
to be given pursuant to the terms of this Agreement shall be in writing and
shall be deemed given (i) when delivered personally or when sent by facsimile
transmission and confirmed by telephone or electronic transmission report (with
a hard copy to follow by mail), (ii) on the next business day after timely
delivery to a generally recognized receipted overnight courier (such as FedEx)
and (iii) on the third business day after deposit in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed to the
party at such party's address as set forth below or as subsequently modified by
written notice delivered as provided herein, as follows:

               (i) if to the Company, to:

                   Xanodyne Pharmaceuticals, Inc.
                   7300 Turfway Road
                   Suite 300
                   Florence, Kentucky 41042
                   Telephone: (879) 371-7581
                   Facsimile: (859) 371-7692
                   Attention: Thomas P. Jennings, Esq.

or at such other address or addresses as may have been furnished in writing by
the Company, with a copy to:

                                       24

<PAGE>

                   Paul R. Mattingly, Esq.
                   Dinsmore & Shohl LLP
                   255 E. 5th St., Suite 1900
                   Cincinnati, Ohio 45202
                   Telephone: (513)977-8200
                   Facsimile: (513)977-8141

               (ii) if to a Preferred Stockholder, at the address as set forth
on Exhibit A hereto or at such other address as may have been furnished in
writing by such Preferred Stockholder to the other parties hereto.

               (iii) if to a Warrantholder, at the address as set forth on
Exhibit B hereto or at such other address as may have been furnished in writing
by such Warrantholder to the other parties hereto.

     6.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions of this Agreement shall inure to the benefit of, and be binding
upon, the respective successors, permitted assigns, heirs, executors and
administrators of the parties hereto.

     6.3 Entire Agreement. This Agreement, the Purchase Agreement, and the
Stockholders' Agreement embody the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, written or oral, relating to such subject matter,
including, without limitation, that certain Original Investor Rights Agreement
and that certain Term Sheet by and among the Company and MPM BioVentures III
LLC, dated as of May 10, 2007.

     6.4 Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended or terminated and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of at least sixty (60) percent of the
Registrable Shares; provided that, if such amendment or waiver would
disadvantage one or more holders of Registerable Shares in a manner more adverse
than other holders of Registerable Shares, the affirmative vote or written
consent of the holders of Registerable Shares so disadvantaged shall be
required; and provided further that the rights contained in Section 3.1 hereof
may not be waived, amended or terminated without the written consent of the
Company and the holders of at least sixty-eight (68) percent of the Registrable
Shares. Any amendment, termination or waiver effected in accordance with this
Section 6.4 shall be binding on all parties hereto, even if they do not execute
such consent. No waivers of or exceptions to any term, condition or provision of
this Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.

     6.5 Confidentiality. Each Preferred Stockholder shall keep confidential and
shall not disclose, divulge, use or otherwise take advantage of (except as
contemplated hereunder) any confidential, proprietary or secret information that
it may obtain from the Company or any Subsidiary pursuant to financial
statements, reports and other materials and information transmitted by such
entities to such Preferred Stockholder pursuant to this Agreement or the

                                       25

<PAGE>

Purchase Agreement, or pursuant to any visitation, observation or inspection
rights granted hereunder, unless such information (i) was a matter of public
knowledge prior to the time of its disclosure by the Company to such Preferred
Stockholder; (ii) became a matter of public knowledge after the time of its
disclosure by the Company to such Preferred Stockholder through means other than
an unauthorized disclosure resulting from an act or omission by such Preferred
Stockholder; (iii) was independently developed or discovered by the Preferred
Stockholder without reference to information provided by the Company; (iv) was
or becomes available to such Preferred Stockholder on a non-confidential basis
from a third party, provided that such third party is not bound by an obligation
of confidentiality to the Company with respect to such confidential information;
or (v) is required to be disclosed to comply with applicable laws or
regulations, or with a valid order of a court or other governmental body of the
United States or any political subdivisions thereof, provided such Preferred
Stockholder takes all reasonable actions to obtain confidential treatment for
such disclosure and, if possible, to minimize the extent of such disclosure.
Notwithstanding the foregoing, each Preferred Stockholder may disclose such
information (a) to its respective partners, members, parent corporations,
subsidiaries or other affiliates, which parties shall remain bound by this
confidentiality provision; (b) to its attorneys, accountants, consultants and
other professionals to the extent necessary to obtain their services in
connection with its investment in the Company; or (c) to any prospective
purchaser of any Company securities from such Preferred Stockholder as long as
such prospective purchaser agrees in writing to be bound by the provisions of
this Section 6.5, except that such Preferred Stockholder may disclose such
confidential information for the purpose of evaluating its investment in the
Company only to any general partner, limited partner, retired partner,
shareholder, member, retired member or Affiliate of such Preferred Stockholder,
as applicable, or any general partner, limited partner, retired partner,
shareholder, member, retired member or Affiliate of the foregoing, or investment
vehicles for whom any of the foregoing serves as a general partner, manager or
investment advisor, as applicable, or the estates, beneficiaries, trustees or
family members of any such general partner, limited partner, retired partner,
shareholder, member, retired member or Affiliate, or any trusts for the benefit
of any of the foregoing persons, as long as such person or entity is advised of
the confidentiality provisions of this Agreement.

     6.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document. Facsimile signatures may be relied upon and
shall be deemed originals for purposes of effecting the provisions of this
Agreement.

     6.7 Independent Signatures. The signatories hereto shall be entitled to the
benefits and subject to the obligations set forth in this Agreement. Each
signatory hereto acknowledges and agrees that he, she or it shall be bound by
the terms and obligations of this Agreement with and to the other signatories
regardless of whether all of the Common Stockholders or Preferred Stockholders
listed on the signature pages hereto execute this Agreement.

     6.8 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                                       26

<PAGE>

     6.9 Specific Performance. In addition to any and all other remedies that
may be available at law in the event of any breach of this Agreement, each
Preferred Stockholder shall be entitled to seek specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.

     6.10 Titles and Subtitles. The titles of sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

     6.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and the laws of the United
States applicable therein (without giving effect to any choice or conflict of
laws provision or rule that would cause the application of the laws of any other
jurisdiction) and shall be treated in all respects as a Delaware contract.

                  [Remainder of page intentionally left blank]

                                       27

<PAGE>

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

                                        COMPANY:

                                        XANODYNE PHARMACEUTICALS, INC.

                                        By: /s/ Rolf Classon
                                            ------------------------------------
                                            Rolf Classon
                                            President and Chief Executive
                                            Officer

                                        PREFERRED STOCKHOLDERS:

                                        UNION SPRINGS, L.L.C.

                                        By: Griggs Family L.L.C., Manager

                                        By:
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS II LLC

                                        By: Griggs Family L.L.C., Manager

                                        By:
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS III LLC

                                        By: Griggs Family L.L.C., Manager

                                        By:
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS V LLC

                                        By: Griggs Family L.L.C., Manager

                                        By:
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        By:
                                            ------------------------------------
                                            Roger D. Griggs

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       28

<PAGE>

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

                                        COMPANY:

                                        XANODYNE PHARMACEUTICALS, INC.

                                        By:
                                            ------------------------------------
                                            Rolf Classon
                                            President and Chief Executive
                                            Officer

                                        PREFERRED STOCKHOLDERS:

                                        UNION SPRINGS, L.L.C.

                                        By: Griggs Family L.L.C., Manager

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS II LLC

                                        By: Griggs Family L.L.C., Manager

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS III LLC

                                        By: Griggs Family L.L.C., Manager

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        UNION SPRINGS V LLC

                                        By: Griggs Family L.L.C., Manager

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       29

<PAGE>

                                        UNION SPRINGS VII LLC

                                        By: Griggs Family L.L.C., Manager

                                        By: /s/ Roger D. Griggs
                                            ------------------------------------
                                            Roger D. Griggs, Authorized Member

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       30

<PAGE>

                                        BLUE CHIP IV LIMITED PARTNERSHIP

                                        By: Blue Chip Venture Company, Ltd.,
                                            General Partner

                                        By: /s/ John C. McIlwraith
                                            ------------------------------------
                                        Name: John C. McIlwraith
                                        Its:  Managing Director

                                        BLUE CHIP CAPITAL FUND II LIMITED
                                        PARTNERSHIP

                                        By: Blue Chip Venture Company, Ltd.,
                                            General Partner

                                        By: /s/ John C. McIlwraith
                                            ------------------------------------
                                        Name: John C. McIlwraith
                                        Its: Managing Director

                                        BLUE CHIP CAPITAL FUND III LIMITED
                                        PARTNERSHIP

                                        By: Blue Chip Venture Company, Ltd.,
                                            General Partner

                                        By: /s/ John C. McIlwraith
                                            ------------------------------------
                                        Name: John C. McIlwraith
                                        Its: Managing Director

                                        BLUE CHIP/UNION SPRINGS, LLC

                                        By: Blue Chip Venture Company, Ltd.,
                                            Manager

                                        By: /s/ John C. McIlwraith
                                            ------------------------------------
                                        Name: John C. McIlwraith
                                        Its: Managing Director

                                        MIAMI VALLEY VENTURE FUND L.P.

                                        By: Blue Chip Venture Company of Dayton,
                                            Ltd.
                                            Special Limited Partner

                                        By: /s/ John C. McIlwraith
                                            ------------------------------------
                                        Name: John C. McIlwraith
                                        Its: Managing Director

                                       31

<PAGE>

                                        MPM BIOVENTURES III, L.P.

                                        By: MPM BioVentures III GP, L.P., its
                                            General Partner

                                        By: MPM BioVentures III LLC, its
                                            General Partner

                                        By: /s/ Ansbert Gadicke
                                            ------------------------------------
                                        Name: Ansbert Gadicke
                                        Title: Series A Member

                                        MPM BIOVENTURES III-QP, L.P.

                                        By: MPM BioVentures III GP, L.P., its
                                            General Partner

                                        By: MPM BioVentures III LLC, its
                                            General Partner

                                        By: /s/ Ansbert Gadicke
                                            ------------------------------------
                                        Name: Ansbert Gadicke
                                        Title: Series A Member

                                        MPM BIOVENTURES III PARALLEL FUND, L.P.

                                        By: MPM BioVentures III GP, L.P., its
                                            General Partner

                                        By: MPM BioVentures III LLC, its
                                            General Partner

                                        By: /s/ Ansbert Gadicke
                                            ------------------------------------
                                        Name: Ansbert Gadicke
                                        Title: Series A Member

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       32

<PAGE>

                                        MPM BIOVENTURES III GMBH & CO.
                                        BETEILIGUNGS KG

                                        By: MPM BioVentures III GP, L.P., in its
                                            capacity as the Managing Limited
                                            Partner

                                        By: MPM BioVentures III LLC, its
                                            General Partner

                                        By: /s/ Ansbert Gadicke
                                            ------------------------------------
                                        Name: Ansbert Gadicke
                                        Title: Series A Member

                                        MPM ASSET MANAGEMENT INVESTORS 2005
                                        BVIII LLC

                                        By: /s/ Ansbert Gadicke
                                            ------------------------------------
                                        Name: Ansbert Gadicke
                                        Title: Manager

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       33

<PAGE>

                                     APAX EUROPE VI - A, L.P.

                                     By: Apax WW Nominee Limited -a/c AE6, as
                                         their nominee

                                     By: /s/ Adrian Beecroft   /s/ Stephen Green
                                         ---------------------------------------
                                     Name: Adrian Beecroft     Stephen Green
                                     Title: Director           Director

                                     APAX EUROPE VI - I, L.P.

                                     By: Apax WW Nominee Limited - a/c AE6,
                                         as their nominee

                                     By: /s/ Adrian Beecroft   /s/ Stephen Green
                                         ---------------------------------------
                                     Name: Adrian Beecroft     Stephen Green
                                     Title: Director           Director

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       34

<PAGE>

                                        APAX EXCELSIOR VI, L.P.

                                        By: Apax Excelsior VI Partners, L.P.,
                                            their General Partner

                                        By: Apax Managers, Inc., its General
                                            Partner

                                        By: /s/ Peter Jeton
                                            ------------------------------------
                                        Name: Peter Jeton
                                        Title: COO

                                        APAX EXCELSIOR VI - A, C.V.

                                        By: Apax Excelsior VI Partners, L.P.,
                                            their General Partner

                                        By: Apax Managers, Inc., its General
                                            Partner

                                        By: /s/ Peter Jeton
                                            ------------------------------------
                                        Name: Peter Jeton
                                        Title: COO

                                        APAX EXCELSIOR VI - B, C.V.

                                        By: Apax Excelsior VI Partners, L.P.,
                                            their General Partner

                                        By: Apax Managers, Inc., its General
                                            Partner

                                        By: /s/ Peter Jeton
                                            ------------------------------------
                                        Name: Peter Jeton
                                        Title: COO

                                        PATRICOF PRIVATE INVESTMENT CLUB
                                        III, L.P.

                                        By: Apax Excelsior VI Partners, L.P.,
                                            their General Partner

                                        By: Apax Managers, Inc., its General
                                            Partner

                                        By: /s/ Peter Jeton
                                            ------------------------------------
                                        Name: Peter Jeton
                                        Title: COO

       [Signature Page to Amended and Restated Investor Rights Agreement]

<PAGE>

                                        PERSEUS-SOROS BYOPHARMACEUTICAL FUND,
                                        L.P.

                                        By: /s/ Jay A. Schoenfarber
                                            ------------------------------------
                                        Name: Jay A. Schoenfarber
                                        Title: Attorney-in-Fact

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                        2

<PAGE>

                                        AIG PEP III DIRECT, L.P.

                                        By: AIG Global Investment Corp., its
                                            investment adviser

                                        By: /s/ Jonathan Stearns
                                            ------------------------------------
                                        Name: Jonathan Stearns
                                        Title: Managing Director

                                        AIG PEP IV CO-INVESTMENT, L.P.

                                        By: AIG PEP IV Co-Investment GP, L.P.,
                                            its general partner

                                        By: AIG PEP IV Co-Investment GP, LLC,
                                            its general manager

                                        By: AIG Global Investment Corp., its
                                            managing member

                                        By: /s/ Jonathan Stearns
                                            ------------------------------------
                                        Name: Jonathan Stearns
                                        Title: Managing Director

                                        AIG HORIZON PARTNERS FUND, L.P.

                                        By: AIG Horizon Partners GP, L.P., its
                                            general partner

                                        By: AIG Horizon Partners, LLC, its
                                            general partner

                                        By: AIG Global Investment Corp., its
                                            managing member

                                        By: /s/ Jonathan Stearns
                                            ------------------------------------
                                        Name: Jonathan Stearns
                                        Title: Managing Director

       [Signature Page to Amended and Restated Investor Rights Agreement]

<PAGE>

                                        AIG HORIZON SIDE-BY-SIDE FUND, L.P.

                                        By: AIG Horizon SBS GP, L.P., its
                                            general partner

                                        By: AIG Horizon Partners, LLC, its
                                            general partner

                                        By: AIG Global Investment Corp., its
                                            managing member

                                        By: /s/ Jonathan Stearns
                                            ------------------------------------
                                        Name: Jonathan Stearns
                                        Title: Managing Director

                                        AIG CO-INVESTMENT FUND, L.P.

                                        By: AIG Co-Investment General Partner,
                                            L.P., its general partner

                                        By: AIG Direct Investments, LLC, its
                                            general partner

                                        By: AIG Global Investment Corp., its
                                            managing member

                                        By: /s/ Jonathan Stearns
                                            ------------------------------------
                                        Name: Jonathan Stearns
                                        Title: Managing Director

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                       2

<PAGE>

                                        AIG PRIVATE EQUITY (BERMUDA) LTD.

                                        By: /s/ Mark Waddington
                                            ------------------------------------
                                        Name: Mark Waddington
                                        Title: Treasurer

<PAGE>

                                        HEALTHCARE VENTURES VI, L.P.

                                        By: Health Care Partners VI L.P., its
                                            General Partner

                                        By: /s/ Jeffrey Steinberg
                                            ------------------------------------
                                        Name: Jeffrey Steinberg
                                        Title: Administrative Partner

       [Signature Page to Amended and Restated Investor Rights Agreement]

<PAGE>

                                        ESSEX WOODLANDS HEALTH VENTURES FUND
                                        IV, L.P.

                                        By: Essex Woodlands Health Ventures, IV,
                                            LLC, General Partner

                                        By: /s/ J L Currie
                                            ------------------------------------
                                        Name: J L Currie
                                        Title: Managing Partner

                                        ESSEX WOODLANDS HEALTH VENTURES FUND
                                        V, L.P.

                                        By: Essex Woodlands Health Ventures V,
                                            LLC, General Partner

                                        By: /s/ J L Currie
                                            ------------------------------------
                                        Name: J L Currie
                                        Title: Managing Partner

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                        2

<PAGE>

                                        COLEMAN SWENSON HOFFMAN BOOTH IV L.P.

                                        By: Its General Partner
                                            CSHB Ventures VI, L.P.

                                        By: /s/ Larry H. Coleman
                                            ------------------------------------
                                        Name: Larry H. Coleman
                                        Title: General Partner

                                        JOHNSON & JOHNSON DEVELOPMENT
                                        CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        MESIROW FINANCIAL

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        PAREXEL INTERNATIONAL CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        ----------------------------------------
                                        William A. Nuerge

       [Signature Page to Amended and Restated Investor Rights Agreement]

<PAGE>

                                        COLEMAN SWENSON HOFFMAN BOOTH, IV. L.P.

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        JOHNSON & JOHNSON DEVELOPMENT
                                        CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        MESIROW FINANCIAL

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        PAREXEL INTERNATIONAL CORPORATION

                                        By: /s/ James F. Winschel
                                            ------------------------------------
                                        Name: James F. Winschel
                                        Title: SVP & CFO

                                        ----------------------------------------
                                        William A. Nuerge

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                        2

<PAGE>

                                        WARRANTHOLDERS:

                                        SILVER POINT CAPITAL FUND, LP

                                        By: /s/ Richard Petrilli
                                            ------------------------------------
                                        Name: Richard Petrilli
                                        Title: Authorized Signatory

                                        SILVER POINT CAPITAL OFFSHORE FUND, INC.

                                        By: /s/ Richard Petrilli
                                            ------------------------------------
                                        Name: Richard Petrilli
                                        Title: Authorized Signatory

                                        SPCP GROUP III LLC

                                        By: /s/ Richard Petrilli
                                            ------------------------------------
                                        Name: Richard Petrilli
                                        Title: Authorized Signatory

       [Signature Page to Amended and Restated Investor Rights Agreement]

<PAGE>

                                        BLUE RIDGE INVESTMENTS, LLC

                                        By: /s/ Peter Sherman
                                            ------------------------------------
                                        Name: Peter Sherman
                                        Title: Managing Director

       [Signature Page to Amended and Restated Investor Rights Agreement]

                                        2

<PAGE>

                                    EXHIBIT A

                  Names and Addresses of Preferred Stockholder

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

Union Springs, LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Union Springs II LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Union Springs III LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Union Springs V, LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Union Springs VII, LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Blue Chip IV Limited Partnership
Attn: John McIlwraith
1100 Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202

<PAGE>

Blue Chip Capital Fund II Limited Partnership
Attn: John McIlwraith
1100 Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202

<PAGE>

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

Blue Chip Capital Fund III Limited Partnership
Attn: John McIlwraith
100 Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202

Blue Chip/Union Springs, LLC
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

Miami Valley Venture Fund L.P.
Attn: John McIlwraith
1100 Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202

Roger D. Griggs
Xanodyne Pharmaceuticals, Inc.
Attn: Thomas P. Jennings
7300 Turfway Road, Suite 300
Florence, KY 41042

MPM BioVentures III, L.P.
200 Clarendon Street, 54th Floor
Boston, MA 02116

MPM BioVentures III-QP, L.P.
200 Clarendon Street, 54th Floor
Boston, MA 02116

MPM BioVentures III GmbH & Co.
Beteiligungs KG
200 Clarendon Street, 54th Floor
Boston, MA 02116

MPM BioVentures III Parallel Fund, L.P.
200 Clarendon Street, 54th Floor
Boston, MA 02116

<PAGE>

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

MPM Asset Management Investors 2005 BVIII LLC
200 Clarendon Street, 54th Floor
Boston, MA 02116

      with a copy to:

      James T. Barrett, Esq.
      Edwards Angell Palmer & Dodge LLP
      111 Huntington Avenue
      Boston, MA 02199-7613

Apax Europe VI - A, L.P.
c/o Apax Europe VI GP Co. Ltd.
PO Box 431
13-15 Victoria Road
St. Peter Port
Guernsey
Channel Islands GY1 3ZD

Apax Europe VI - 1, L.P.
c/o Apax Europe VI GP Co. Ltd.
PO Box 431
13-15 Victoria Road
St. Peter Port
Guernsey
Channel Islands GY1 3ZD

Apax Excelsior VI, L.P.
445 Park Avenue, 11th Floor
New York, NY 10022

Apax Excelsior VI-A C.V.
445 Park Avenue, 11th Floor
New York, NY 10022

Apax Excelsior VI-B C.V.
445 Park Avenue, 11th Floor
New York, NY 10022

<PAGE>

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

Patricof Private Investment Club III, L.P.
445 Park Avenue, 11th Floor
New York, NY 10022

Perseus-Soros Biopharmaceutical Fund, LP
888 Seventh Avenue, 29th Floor
New York, New York 10106

AIG PEP III Direct, L.P.
c/o AIG Global Investment Group
70 Pine Street, 28th Floor
New York, NY 10270

AIG PEP IV Co-Investment, L.P.
c/o AIG Global Investment Group
70 Pine Street, 28th Floor
New York, NY 10270

AIG Horizon Partners Fund, L.P.
c/o AIG Global Investment Group
70 Pine Street, 28th Floor
New York, NY 10270

AIG Horizon Side-By-Side Fund, L.P.
c/o AIG Global Investment Group
70 Pine Street, 28th Floor
New York, NY 10270

AIG Private Equity (Bermuda) Ltd.
Attn. Jocelyn Troake
29, Richmond Road
Pembroke, HM 08
Bermuda

<PAGE>

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

      with a copy to:

      AIG Private Equity Ltd.
      Attn. Conradin Schneider
      Baarerstr. 8
      6300 Zug
      Switzerland

AIG Co-Investment Fund, L.P.
c/o AIG Global Investment Group
70 Pine Street, 28th Floor
New York, NY 10270

Healthcare Ventures VI, L.P.
Attn: James Cavanaugh
44 Nassau Street
Princeton, NJ 08542

      with a copy to:

      Christopher S. Miller, Esq.
      Pepper Hamilton LLP
      400 Berwyn Park
      899 Cassatt Road
      Berwyn, PA 19312-1183

Essex Woodlands Health Ventures Fund V, L.P.
Attn: James Currie
190 South LaSalle Street, Suite 2800
Chicago, IL 60603

Essex Woodlands Health Ventures Fund IV, L.P.
Attn: James L. Currie
190 South LaSalle Street, Suite 2800
Chicago, IL 60603

<PAGE>

NAME AND ADDRESS OF PREFERRED STOCKHOLDERS

Coleman Swenson Hoffman Booth IV, L.P.
Attn: Larry H. Coleman
237 Second Avenue South
Franklin, TN 37064

Parexel International Corporation
Attn: Brett Davis
195 West Street
Waltham, MA 02451

                                    Exhibit B

Name and Address of Preferred Stockholders

Silver Point Capital Fund, LP
Two Greenwich Plaza, 1st Floor
Greenwich, Connecticut 06830
Attention: Ryan Vetsch

Silver Point Capital Offshore Fund, Ltd.
Two Greenwich Plaza, 1st Floor
Greenwich, Connecticut 06830
Attention: Ryan Vetsch

SPCP Group III LLC
Two Greenwich Plaza, 1st Floor
Greenwich, Connecticut 06830
Attention: Ryan Vetsch

Blue Ridge Investments, LLC
c/o Bank of America Securities
214 North Tryon Street
NC1-027-14-01
Charlotte, NC 28255
Attention: Joe Haverkamp
<PAGE>

                               AMENDMENT NO. 1 TO

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

         This Amendment No. 1 (the "Amendment") to the Amended and Restated
Investor Rights Agreement, dated as of June 20, 2007 (the "Agreement"), by and
among Xanodyne Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
and the Preferred Stockholders and Warrantholders identified therein, is entered
into as of November 8, 2007, by and among the Company and the Preferred
Stockholders and the Warrantholders. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Agreement.

         WHEREAS, the Company and holders of at least sixty-eight percent (68%)
of the Registrable Securities desire to amend the Agreement to increase the
number of shares of Common Stock allocated for issuance to employees or
directors of, or consultants to, the Company or any of its subsidiaries,
pursuant to a plan, agreement or arrangement approved by the Board, for which
the Major Stockholders shall not have participation rights pursuant to Section
3.1 of the Agreement;

         NOW THEREFORE, the Company and the Stockholders hereby agree as
follows:

         1.       Section 3.1(h)(vi) of the Agreement shall be amended by
deleting the number "15,204,427" and inserting in place thereof the number
"41,204,427."

         2.       Except as modified hereby, the Company and the Preferred
Stockholders and the Warrantholders agree that the Agreement shall remain in
full force and effect in accordance with its terms.

         3.       This Amendment may be executed and delivered by facsimile
signature and in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

                  [Remainder of page intentionally left blank]

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      COMPANY:

                                      XANODYNE PHARMACEUTICALS, INC.

                                      By:    /s/ Stephen A. Stamp
                                             -----------------------------------
                                      Name:  Stephen A. Stamp
                                             -----------------------------------
                                      Title: Chief Financial Officer
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      UNION SPRINGS, L.L.C.

                                      By: Griggs Family L.L.C., Manager

                                      By: /s/ Roger D. Griggs
                                         ---------------------------------------
                                             Roger D. Griggs, Authorized Member

                                      UNION SPRINGS II LLC

                                      By: Griggs Family L.L.C., Manager

                                      By: /s/ Roger D. Griggs
                                         ---------------------------------------
                                         Roger D. Griggs, Authorized Member

                                      UNION SPRINGS III LLC

                                      By: Griggs Family L.L.C., Manager

                                      By: /s/ Roger D. Griggs
                                         ---------------------------------------
                                         Roger D. Griggs, Authorized Member

                                      UNION SPRINGS V LLC

                                      By: Griggs Family L.L.C., Manager

                                      By: /s/ Roger D. Griggs
                                         ---------------------------------------
                                         Roger D. Griggs, Authorized Member

                                      UNION SPRINGS VII LLC

                                      By: Griggs Family L.L.C., Manager

                                      By: /s/ Roger D. Griggs
                                         ---------------------------------------
                                         Roger D. Griggs, Authorized Member

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      /s/ Roger D. Griggs
                                      ------------------------------------------
                                      Roger D. Griggs

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      BLUE CHIP IV LIMITED PARTNERSHIP

                                      By:    Blue Chip Venture Company, Ltd.,
                                             General Partner

                                      By:    /s/ John C. McIlwraith
                                         ---------------------------------------
                                      Name:  John C. McIlwraith
                                           -------------------------------------
                                      Title: Managing Director
                                            ------------------------------------

                                      BLUE CHIP CAPITAL FUND II LIMITED
                                      PARTNERSHIP

                                      By:    Blue Chip Venture Company, Ltd.,
                                             General Partner

                                      By:    /s/ John C. McIlwraith
                                         ---------------------------------------
                                      Name:  John C. McIlwraith
                                           -------------------------------------
                                      Title: Managing Director
                                            ------------------------------------

                                      BLUE CHIP CAPITAL FUND III LIMITED
                                      PARTNERSHIP

                                      By:    Blue Chip Venture Company, Ltd.,
                                             General Partner

                                      By:    /s/ John C. McIlwraith
                                         ---------------------------------------
                                      Name:  John C. McIlwraith
                                           -------------------------------------
                                      Title: Managing Director
                                            ------------------------------------

                                      BLUE CHIP/UNION SPRINGS, LLC

                                      By:    Blue Chip Venture Company, Ltd.,
                                             Manager

                                      By:   /s/ John C. McIlwraith
                                         ---------------------------------------
                                      Name: John C. McIlwraith
                                           -------------------------------------
                                      Title: Manager
                                            ------------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      MIAMI VALLEY VENTURE FUND L.P.

                                      By:    Blue Chip Venture Company of
                                             Dayton, Ltd.,
                                             Special Limited Partner

                                      By:   /s/ John C. McIlwraith
                                         ---------------------------------------
                                      Name: John C. McIlwraith
                                           -------------------------------------
                                      Title: Manager
                                            ------------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      ESSEX WOODLANDS HEALTH VENTURES
                                      FUND IV, L.P.

                                      By:    Essex Woodlands Health Ventures IV,
                                             L.L.C., its General Partner

                                      By:    /s/ James L. Currie
                                             -----------------------------------
                                      Name:  James L. Currie
                                             -----------------------------------
                                      Title: Managing Director
                                             -----------------------------------

                                      ESSEX WOODLANDS HEALTH VENTURES
                                      FUND V, L.P.

                                      By:    Essex Woodlands Health Ventures V,
                                             L.L.C., its General Partner

                                      By:    /s/ James L. Currie
                                             -----------------------------------
                                      Name:  James L. Currie
                                             -----------------------------------
                                      Title: Managing Director
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      COLEMAN SWENSON HOFFMAN BOOTH IV, L.P.

                                      By:    CSHB Ventures IV L.P., its General
                                             Partner

                                      By:     /s/ Larry H. Coleman
                                             -----------------------------------
                                      Name:   Larry H. Coleman
                                             -----------------------------------
                                      Title:  Managing General Partner
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      HEALTH CARE VENTURES VI, L.P.

                                      By:    Health Care Partners VI, L.P., its
                                             general partner

                                      By:    /s/ James H. Cavanaugh
                                             -----------------------------------
                                      Name:  James H. Cavanaugh
                                             -----------------------------------
                                      Title: Managing Director
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      PAREXEL INTERNATIONAL CORPORATION

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      MPM BIOVENTURES III, L.P.

                                      By:    MPM BioVentures III GP, L.P., its
                                             General Partner
                                      By:    MPM BioVentures III LLC, its
                                             General Partner

                                      By: /s/ Ansbert Gadicke
                                         ---------------------------------------
                                      Name: Ansbert Gadicke
                                           -------------------------------------
                                      Title: Series A Member
                                            ------------------------------------

                                      MPM BIOVENTURES III-QP, L.P.

                                      By:    MPM BioVentures III GP, L.P., its
                                             General Partner
                                      By:    MPM BioVentures III LLC, its
                                             General Partner

                                      By: /s/ Ansbert Gadicke
                                         ---------------------------------------
                                      Name: Ansbert Gadicke
                                           -------------------------------------
                                      Title: Series A Member
                                            ------------------------------------

                                      MPM BIOVENTURES III PARALLEL FUND, L.P.

                                      By:    MPM BioVentures III GP, L.P., its
                                             General Partner
                                      By:    MPM BioVentures III LLC, its
                                             General Partner

                                      By: /s/ Ansbert Gadicke
                                         ---------------------------------------
                                      Name: Ansbert Gadicke
                                           -------------------------------------
                                      Title: Series A Member
                                            ------------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      MPM BIOVENTURES III GMBH & CO.
                                      BETEILIGUNGS KG

                                      By:    MPM BioVentures III GP, L.P., in
                                             its capacity as the Managing
                                             Limited Partner
                                      By:    MPM BioVentures III LLC, its
                                             General Partner

                                      By:    /s/ Ansbert Gadicke
                                         ---------------------------------------
                                      Name:  Ansbert Gadicke
                                           -------------------------------------
                                      Title: Series A Member
                                            ------------------------------------

                                      MPM ASSET MANAGEMENT INVESTORS 2005 BVIII
                                      LLC

                                      By:    /s/ Ansbert Gadicke
                                         ---------------------------------------
                                      Name:  Ansbert Gadicke
                                           -------------------------------------
                                      Title: Manager
                                            ------------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      APAX EUROPE VI -- A, L.P.

                                      By:    Apax Partners Europe Managers
                                             Limited, its Manager

                                      By:    /s/ Ian Jones
                                             -----------------------------------
                                      Name:  Ian Jones
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

                                      By:    /s/ Adrian Beecroft
                                             -----------------------------------
                                      Name:  Adrian Beecroft
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

                                      APAX EUROPE VI -- 1, L.P.

                                      By:    Apax Partners Europe Managers
                                             Limited, its Manager

                                      By:    /s/ Ian Jones
                                             -----------------------------------
                                      Name:  Ian Jones
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

                                      By:    /s/ Adrian Beecroft
                                             -----------------------------------
                                      Name:  Adrian Beecroft
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

                                       APAX WW NOMINEES LIMITED

                                      By:    /s/ Ian Jones
                                             -----------------------------------
                                      Name:  Ian Jones
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

                                      By:    /s/ Adrian Beecroft
                                             -----------------------------------
                                      Name:  Adrian Beecroft
                                             -----------------------------------
                                      Title: Director
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      APAX EXCELSIOR VI, L.P.
                                      APAX EXCELSIOR VI-A C.V.
                                      APAX EXCELSIOR VI-B C.V.
                                      PATRICOF PRIVATE INVESTMENT CLUB III, L.P.

                                      By:    Apax Excelsior VI Partners, L.P.,
                                             their General Partner
                                      By:    Apax Managers, Inc., its General
                                             Partner

                                      By:     /s/ Jay Schoenfarber
                                             -----------------------------------
                                      Name:   Jay Schoenfarber
                                             -----------------------------------
                                      Title:  Attorney-in-Fact
                                             -----------------------------------

                                      PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP

                                      By:     /s/ Jay Schoenfarber
                                             -----------------------------------
                                      Name:   Jay Schoenfarber
                                             -----------------------------------
                                      Title:  Attorney-in-Fact
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      AIG PEP III DIRECT, L.P.

                                      By:    AIG Global Investment Corp., its
                                             investment adviser

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

                                      AIG PEP IV CO-INVESTMENT, L.P.

                                      By:    AIG PEP IV Co-Investment GP, L.P.,
                                             its general partner
                                      By:    AIG PEP IV Co-Investment GP, LLC,
                                             its general partner
                                      By:    AIG Global Investment Corp., its
                                             managing member

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

                                      AIG HORIZON PARTNERS FUND, L.P.

                                      By:    AIG Horizon Partners GP, L.P., its
                                             general partner
                                      By:    AIG Horizon Partners, LLC, its
                                             general partner
                                      By:    AIG Global Investment Corp., its
                                             general partner

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      AIG HORIZON SIDE-BY-SIDE FUND, L.P.

                                      By:    AIG Horizon SBS GP, L.P., its
                                             general partner
                                      By:    AIG Horizon Partners, LLC, its
                                             general partner
                                      By:    AIG Global Investment Corp., its
                                             managing member

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

                                      AIG CO-INVESTMENT FUND, L.P.

                                      By:    AIG Co-Investment General Partner,
                                             L.P., its general partner
                                      By:    AIG Direct Investments, LLC, its
                                             general partner
                                      By:    AIG Global Investment Corp., its
                                             managing member

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      AIG PRIVATE EQUITY (BERMUDA) LTD.

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      PREFERRED STOCKHOLDERS:

                                      JOHNSON & JOHNSON DEVELOPMENT CORPORATION

                                      By:    /s/ Stacey Davis
                                             -----------------------------------
                                      Name:  Stacey Davis
                                             -----------------------------------
                                      Title: Sr. Director Portfolio Investments
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      WARRANTHOLDERS:

                                      SILVER POINT CAPITAL FUND, LP

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

                                      SILVER POINT CAPITAL OFFSHORE FUND, LTD.

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

                                      SPCP GROUP III LLC

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Amended and Restated Investor Rights Agreement as of the date first
written above.

                                      WARRANTHOLDERS:

                                      BLUE RIDGE INVESTMENTS, L.L.C.

                                      By:
                                             -----------------------------------
                                      Name:
                                             -----------------------------------
                                      Title:
                                             -----------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]