Document:

EX-10.1 FORM OF CHANGE IN CONTROL SEVERANCE AGMT.

 

EXHIBIT 10.1

     [FORM OF] CHANGE IN CONTROL SEVERANCE AGREEMENT (this
“Agreement”) dated as of [•], between Kos Pharmaceuticals, Inc., a
Florida corporation (the “Company”), and [NAME] (the
“Executive”).

          WHEREAS the Executive is a skilled and dedicated employee of the Company who has important
management responsibilities and talents that benefit the Company;

          WHEREAS the Board of Directors of the Company (the “Board”) considers it essential to
the best interests of the Company and its shareholders to assure that the Company and its
subsidiaries will have the continued dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined below); and

          WHEREAS the Board believes that it is imperative to diminish the distraction of the Executive
by virtue of the uncertainties and risks created by the circumstances surrounding a Change in
Control and to ensure the Executive’s full attention to the Company and its subsidiaries during
such a period of uncertainty;

          NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as follows:

          SECTION 1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:

     (a) “280G Gross-Up Payment” shall have the meaning set forth in Section 5(a).

     (b) “Accounting Firm” shall have the meaning set forth in Section 5(b).

     (c) “Accrued Rights” shall have the meaning set forth in Section 4(a)(v).

     (d) “Affiliate(s)” means, with respect to any specified Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with such specified Person.

     (e) “Annual Base Salary” shall mean the Executive’s annual rate of base salary in
effect immediately prior to the Termination Date.

     (f) “Annual Bonus” means 110% of the average of the regular annual cash bonuses
(excluding special or one-time bonuses) actually paid to the Executive in

 

 

each of the two full years prior to the year in which the Termination Date occurs,
provided that, in the event that the Executive has not been employed for a sufficient
period of time to have been eligible for two such bonuses (whether or not any bonus was actually
paid), “Annual Bonus” shall be calculated on the basis of the average of the regular annual cash
bonuses (excluding special or one-time bonuses) actually paid to other officers of similar position
in each of the two full years prior to the year in which the Termination Date occurs.

          (g) “Cause” means the occurrence of any one of the following:

          (i) the Executive is convicted of, or pleads guilty or nolo contendere to,
(A) a misdemeanor that involves moral turpitude or that involves misappropriation of the
assets of the Company or a Subsidiary or (B) a felony;

          (ii) the Executive commits one or more acts or omissions constituting fraud or other
willful misconduct that have a materially detrimental effect on the Company;

          (iii) the Executive continually and willfully fails, for at least 14 days following
written notice from the Company, to perform substantially the Executive’s employment duties
(other than as a result of incapacity due to physical or mental illness or after delivery
by the Executive of a Notice of Termination for Good Reason); or

          (iv) the Executive commits a violation of any of the Company’s policies (including
the Company’s Code of Business Conduct and Ethics, as in effect from time to time) that is
materially detrimental to the best interests of the Company.

          (h) “Change in Control” means any corporation or other entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other than the Controlling
Shareholders becomes the beneficial owner, directly or indirectly, of all of the outstanding shares
of common stock of the Company.

          (i) “Change in Control Date” means the date on which a Change in Control occurs (if
any).

          (j) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated thereunder.

          (k) “Controlling Shareholders” means, collectively, the group of shareholders set
forth in the Schedule 13D filed with the Securities and Exchange Commission on September 12, 2006,
consisting of Michael Jaharis, Mary Jaharis, Wilson Point Holdings, LP, Cubs Management, LLC, Kos
Investments, Inc., Kos Holdings, Inc., Kathryn Jaharis, Steven Jaharis and Jaharis Holdings, Inc,
LLC.

          (l) “Disability” shall have the meaning set forth in Section 4(b)(ii).

          (m) “Effective Date” shall have the meaning set forth in Section 2.

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          (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time, or any successor statute thereto.

          (o) “Excise Tax” means the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such tax.

          (p) “Good Reason” means, without the Executive’s express written consent, the
occurrence of any one or more of the following:

               (i) any reduction in the authority, duties, titles or responsibilities held by the Executive
immediately prior to the Change in Control Date or any assignment to the Executive of duties or
responsibilities that are inconsistent with the Executive’s status, offices, titles and reporting
relationships as in effect immediately prior to the Change in Control Date, but excluding for this
purpose a reduction or assignment that is remedied by the Company within 30 business days after
receipt of notice thereof given by the Executive;

               (ii) any reduction in the annual base salary, annual bonus, annual incentive opportunity,
long term incentive opportunity or other compensation or benefits of the Executive as in effect
immediately prior to the Change in Control Date, other than a reduction that is remedied by the
Company within 30 business days after receipt of notice thereof given by the Executive;

               (iii) any change of the Executive’s principal place of employment to a location more than 50
miles from the Executive’s principal place of employment immediately prior to the Change in Control
Date (other than a change that is remedied within 30 business days after receipt of notice thereof
given by the Executive);

               (iv) any failure of the Company to pay the Executive any compensation when due (other than a
failure that is remedied within 30 business days after receipt of written notice thereof given by
the Executive);

               (v) delivery by the Company or any Subsidiary of a written notice to the Executive of the
intent to terminate the Executive’s employment for any reason, other than Cause or Disability, in
each case in accordance with this Agreement, regardless of whether such termination is intended to
become effective during or after the Protection Period; or

               (vi) any failure by the Company to comply with and satisfy the requirements of Section 10(c)
(other than a failure that is remedied within 30 business days after receipt of written notice
thereof given by the Executive).

               The Executive’s right to terminate employment for Good Reason shall not be affected by the
Executive’s incapacity due to physical or mental illness. A termination of employment by the
Executive for Good Reason for purposes of this Agreement shall be effectuated by giving the Company
written notice (“Notice of Termination for Good Reason”) of the termination setting forth
in reasonable detail the specific conduct of the Company that constitutes Good Reason and the
specific provisions of this Agreement on

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which the Executive relied. Unless the parties agree otherwise, a termination of employment
by the Executive for Good Reason shall be effective on the 30th day following the date when the
Notice of Termination for Good Reason is given, unless the Company elects to treat such termination
as effective as of an earlier date; provided, however, that so long as an event
that constitutes Good Reason occurs during the Protection Period, for purposes of the payments,
benefits and other entitlements set forth herein, the termination of the Executive’s employment
pursuant thereto shall be deemed to occur during the Protection Period. If the Executive continues
to provide services to the Company after one of the events giving rise to Good Reason has occurred,
the Executive shall not be deemed to have consented to such event or to have waived the Executive’s
right to terminate his or her employment for Good Reason in connection with such event. In all
cases, the Executive shall give the Company five days written notice after the occurrence of any
event that constitutes Good Reason.

          (q) “Notice of Termination for Good Reason” shall have the meaning set forth in
Section 1(p).

          (r) “Payment” means any payment, benefit or distribution (or combination thereof) by
the Company, any of its Affiliates or any trust established by the Company or its Affiliates, to or
for the benefit of the Executive, whether paid, payable, distributed, distributable or provided
pursuant to this Agreement or otherwise, including any payment, benefit or other right that
constitutes a “parachute payment” within the meaning of Section 280G of the Code.

          (s) “Person” means a “person” (as such term is used in Section 13(d) of the Exchange
Act.

          (t) “Protection Period” means the period commencing on the Change in Control Date and
ending on the first anniversary thereof.

          (u) “Qualifying Termination” means any termination of the Executive’s employment (i)
by the Company, other than for Cause, death or Disability, that is effective (or with respect to
which the Executive is given written notice) during the Protection Period or (ii) by the Executive
for Good Reason during the Protection Period.

          (v) “Section 409A Tax” shall have the meaning set forth in Section 6.

          (w) “Subsidiary” means any entity in which the Company, directly or indirectly,
possesses 50% or more of the total combined voting power of all classes of its stock.

          (x) “Successor” shall have the meaning set forth in Section 10(c).

          (y) “Termination Date” means the date (if any) on which the termination of the
Executive’s employment, in accordance with the terms of this Agreement, is effective.

          (z) “Underpayment” shall have the meaning set forth in Section 5(b).

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          SECTION 2. Effectiveness and Term. This Agreement shall become effective as of the
date hereof (the “Effective Date”) and shall remain in effect until the second anniversary
of the Effective Date. Notwithstanding the foregoing, in the event of a Change in Control during
the term of this Agreement, this Agreement shall not thereafter terminate, and the term hereof
shall be extended, until the Company and its Subsidiaries have performed all their obligations
hereunder with no future performance being possible; provided, however, that this
Agreement shall only be effective with respect to the first Change in Control that occurs during
the term of this Agreement.

          SECTION 3. Impact of a Change in Control on Equity Compensation Awards. Effective as
of any Change in Control Date during the term of this Agreement, notwithstanding any provision to
the contrary in any of the Company’s equity-based, equity-related or other long-term incentive
compensation plans, practices, policies and programs (including the Company’s 1996 Stock Option
Plan and 2006 Incentive Plan) or any award agreements thereunder, (a) all outstanding stock
options, stock appreciation rights, restricted shares and similar rights and awards then held by
the Executive that are unexercisable or otherwise unvested shall automatically become fully vested
and immediately exercisable, as the case may be, (b) all outstanding equity-based, equity-related
and other long-term incentive awards then held by the Executive that are subject to
performance-based vesting criteria shall automatically become fully vested and earned at a deemed
performance level equal to the maximum performance level with respect to such awards and (c) all
other outstanding equity-based, equity-related and long-term incentive awards, to the extent not
covered by the foregoing clause (a) or (b), then held by the Executive that are unvested or subject
to restrictions or forfeiture shall automatically become fully vested and all restrictions and
forfeiture provisions related thereto shall lapse.

          SECTION 4. Termination of Employment. (a) Qualifying Termination. Subject
to Section 4(a)(vi), in the event of a Qualifying Termination, the Executive shall be entitled to
the following payments and benefits:

               (i) Severance Pay. The Company shall pay the Executive an amount equal to [MULTIPLE]
(the “Multiple”) times the sum of (A) the Executive’s Annual Base Salary (without regard to
any reduction giving rise to Good Reason) and (B) the Executive’s Annual Bonus, in a lump-sum
payment payable on the tenth business day after the date the release described in Section 4(a)(vi)
becomes effective and irrevocable (the “Release Effective Date”); provided,
however, that such amount shall be paid in lieu of, and the Executive hereby waives the
right to receive, any other cash severance payment relating to salary or bonus continuation, or any
other severance payments or benefits, the Executive is otherwise eligible to receive upon
termination of employment under any severance plan, practice, policy or program of the Company or
any Subsidiary or under any agreement between the Company and the Executive.

               (ii) Prorated Annual Bonus. The Company shall pay the Executive an amount equal to
the product of (A) the Executive’s target annual bonus for the year in which the Termination Date
occurs (assuming all individual and business criteria are met at target levels) and (B) a fraction,
the numerator of which is the number of days in the

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current fiscal year through the Termination Date, and the denominator of which is 365, in a
lump-sum payment on the tenth business day after the Release Effective Date.

               (iii) Continued Welfare Benefits. The Company shall continue to provide for a number
of years equal to the Multiple health, welfare and fringe benefits to the Executive and the
Executive’s spouse and dependents (in each case, provided in an applicable plan) at least equal to
the levels of benefits provided by the Company and its Subsidiaries immediately prior to the Change
in Control Date. Nothing in this Section 4(a)(iii) shall operate to reduce, or be construed as
reducing, the Executive’s group health plan continuation rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, in any manner.

               (iv) Outplacement Counseling. The Company shall make available to the Executive
executive level outplacement services, provided that the cost of such services shall not
exceed $50,000.

               (v) Accrued Rights. The Executive shall be entitled to (A) payments of any unpaid
annual base salary or other amount earned or accrued through the Termination Date and for
reimbursement of any unreimbursed business expenses incurred through the Termination Date, (B) the
full amount of Executive’s annual bonus for the fiscal year immediately prior to the fiscal year in
which the Termination Date occurs in the event that the annual bonus for such prior fiscal year has
not been paid to the Executive by the Termination Date, and (C) any vested payments or benefits
explicitly set forth in any other written agreements or benefit plans in which the Executive
participates (except for other severance payments and benefits waived under Section 4(a)(i)) (the
rights to such payments, the “Accrued Rights”).

               (vi) Release of Claims. Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be obligated to make any payments or provide any benefits described
in this Section 4(a), other than payments or benefits in respect of the Accrued Rights, unless and
until such time as the Executive has executed and delivered a Separation Agreement and Release
substantially in the form of Exhibit A hereto, which may be modified to comply with applicable laws
to the extent necessary to obtain a general release of claims, except that no such modification may
affect the Executive’s rights to any payments or benefits under this Agreement or impose any
additional restriction or limitation on the activities of the Executive following termination of
employment beyond the general release of claims, and such release has become effective and
irrevocable in accordance with its terms.

          (b) Non-Qualifying Termination. (i) In the event of any termination of
Executive’s employment other than a Qualifying Termination (including a termination of employment
as a result of death or Disability), the Executive shall not be entitled to any additional payments
or benefits from the Company under this Section 4, other than payments or benefits with respect to
the Accrued Rights.

               (ii) For purposes of this Agreement, the Executive shall be deemed to have a
“Disability” in the event of the Executive’s absence for a period of 180

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consecutive business days as a result of incapacity due to a physical or mental condition,
illness or injury which is determined to be total and permanent by a physician mutually acceptable
to the Company and the Executive or the Executive’s legal representative (such acceptance not to be
unreasonably withheld) after such physician has completed an examination of the Executive. The
Executive agrees to make himself available for such examination upon the reasonable request of the
Company, and the Company shall be responsible for the cost of such examination.

          SECTION 5. Certain Additional Payments by the Company.
(a) Notwithstanding anything in this Agreement to the contrary and except as set forth below,
in the event it shall be determined that any Payment that is paid or payable to or for the benefit
of the Executive during the term of this Agreement would be subject to the Excise Tax, the
Executive shall be entitled to receive an additional payment (a “280G Gross-Up Payment”) in
an amount such that, after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including any income and employment taxes and Excise Taxes
imposed upon the 280G Gross-Up Payment, the Executive retains an amount of the 280G Gross-Up
Payment equal to the Excise Tax imposed upon such Payments. The Company’s obligation to make 280G
Gross-Up Payments under this Section 5 shall not be conditioned upon the Executive’s termination of
employment and shall survive and apply after the Executive’s termination of employment. At the
time of any Payment during the period of this Agreement’s effectiveness, the Company shall provide
the Executive a written description of the application of the Excise Tax (if any) to such Payment.

          (b) Subject to the provisions of Section 5(c), all determinations required to be made under
this Section 5, including whether and when a 280G Gross-Up Payment is required, the amount of such
280G Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall
be made in accordance with the terms of this Section 5 by a nationally recognized certified public
accounting firm that shall be designated by the Company (other than the Company’s regular auditor)
(the “Accounting Firm”). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment or such earlier time as is requested by the
Company. For purposes of determining the amount of any 280G Gross-Up Payment, the Executive shall
be deemed to pay Federal income tax at the highest marginal rate applicable to individuals in the
calendar year in which any such 280G Gross-Up Payment is to be made and deemed to pay state and
local income taxes at the highest marginal rates applicable to individuals in the jurisdictions in
which the Executive is subject to tax in the calendar year in which any such 280G Gross-Up Payment
is to be made, net of the maximum reduction in Federal income taxes that can be obtained from
deduction of state and local taxes, taking into account limitations applicable to individuals
subject to Federal income tax at the highest marginal rate. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any 280G Gross-Up Payment, as determined
pursuant to this Section 5, shall be paid by the Company to the Executive within five business days
of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be

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binding upon the Company and the Executive. As a result of the uncertainty in the application
of the Excise Tax, at the time of the initial determination by the Accounting Firm hereunder, it is
possible that the amount of the 280G Gross-Up Payment determined by the Accounting Firm to be due
to the Executive, consistent with the calculations required to be made hereunder, will be lower
than the amount actually due, including any interest and penalties (an “Underpayment”). In
the event the Company exhausts its remedies pursuant to Section 5(c) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be paid by the Company to the
Executive within five business days of the receipt of the Accounting Firm’s determination.

          (c) The Executive shall notify the Company in writing of any written claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of a 280G Gross-Up
Payment. Such notification shall be given as soon as practicable, but no later than ten business
days after the Executive is informed in writing of such claim. Failure to give timely notice shall
not prejudice the Executive’s right to 280G Gross-Up Payments and rights of indemnity under this
Section 5. The Executive shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the expiration of such
period that the Company desires to contest such claim, the Executive shall (i) give the Company any
information reasonably requested by the Company relating to such claim, (ii) take such action in
connection with contesting such claim as the Company shall reasonably request in writing from time
to time, including accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iii) cooperate with the Company in good faith in order
effectively to contest such claim and (iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional income taxes, interest and penalties)
incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on
an after-tax basis, for any Excise Tax or income tax (including interest or penalties) imposed as a
result of such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 5(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the applicable taxing authority
in respect of such claim and may, at its sole discretion, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company shall determine;
provided, however, that (A) if the Company directs the Executive to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties)

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imposed with respect to such advance or with respect to any imputed income in connection with
such advance and (B) if such contest results in any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due, such extension must be limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect
to which the 280G Gross-Up Payment would be payable hereunder, and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.

          (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(c), the Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 5(c)) promptly
pay to the Company the amount of such refund received (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the expiration of the
30-day period after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of 280G Gross-Up Payment required to be paid.

          SECTION 6. Section 409A. It is the intention of the Company and the Executive that
the provisions of this Agreement comply with Section 409A of the Code, and all provisions of this
Agreement shall be construed and interpreted in a manner consistent with Section 409A of the Code.
To the extent necessary to avoid imposition of any additional tax or interest penalties under
Section 409A (such tax and interest penalties, a “Section 409A Tax”), notwithstanding the
timing of payment provided in any other Section of this Agreement, the timing of any payment,
distribution or benefit pursuant to this Agreement shall be subject to a six-month delay in a
manner consistent with Section 409A(a)(2)(B)(i) of the Code, provided that (a) the
Executive shall be credited with interest in respect of such payment, distribution or benefit
during such six-month period at the rate set forth in Section 12 and (b) if the Executive dies
during such six-month period, any such delayed payments shall not be further delayed, and shall be
immediately payable to the Executive’s devisee, legatee or other designee or, should there be no
such designee, to the Executive’s estate in accordance with the applicable provisions of this
Agreement. From and after the Effective Date and for the remainder of the term of this Agreement,
(i) the Company shall administer and operate this Agreement in compliance with Section 409A of the
Code and any rules, regulations or other guidance promulgated thereunder as in effect from time to
time and (ii) in the event that the Company determines that any provision of this Agreement or any
such plan or arrangement does not comply with Section 409A of the Code or any such rules,
regulations or guidance and that the Executive may become subject to a Section 409A Tax, the
Company and the Executive shall negotiate in good faith to amend or modify such provision to avoid
the application of such Section 409A Tax, provided that such amendment or modification
shall not (and the Executive shall not be obligated to consent

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to any such amendment or modification that would) reduce the economic value to the Executive
of such provision.

          SECTION 7. No Mitigation or Offset; Enforcement of this Agreement. (a) The Company’s
obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or
other claim, right or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions of this Agreement
and, except as otherwise expressly provided for in this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.

          (b) The Company shall reimburse, upon the Executive’s demand, any and all reasonable legal
fees and expenses that the Executive may incur in good faith as a result of any contest, dispute or
proceeding (regardless of whether formal legal proceedings are ever commenced and regardless of the
outcome thereof and including all stages of any contest, dispute or proceeding) by the Company
against the Executive (or, in the event that the Executive is the prevailing party, by the
Executive against the Company), with respect to the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof (including as a
result of any contest regarding the amount of any payment owed pursuant to this Agreement), and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any tax (including
Excise Tax) imposed on the Executive as a result of payment by the Company of such legal fees and
expenses.

          SECTION 8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s Accrued Rights.

          SECTION 9. Withholding. The Company may deduct and withhold from any amounts payable
under this Agreement such Federal, state, local, foreign or other taxes as are required to be
withheld pursuant to any applicable law or regulation.

          SECTION 10. Assignment. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution, and any assignment in violation of
this Agreement shall be void.

          (b) Notwithstanding the foregoing Section 10(a), this Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable to him or her
hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or
other designee or, should there be no such designee, to the Executive’s estate.

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          (c) The Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or assets of the Company (a
“Successor”) to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no such succession had taken
place. As used in this Agreement and the Separation Agreement and Release, (i) the term “Company”
shall mean the Company as hereinbefore defined and any Successor and any permitted assignee to
which this Agreement is assigned and (ii) the term “Board” shall mean the Board as hereinbefore
defined and the board of directors or equivalent governing body of any Successor and any permitted
assignee to which this Agreement is assigned.

          SECTION 11. Dispute Resolution. (a) Except as otherwise specifically provided
herein, the Executive and the Company each hereby irrevocably submit to the exclusive jurisdiction
of any state court located within the State of New Jersey over any dispute arising out of or
relating to this Agreement. Except as otherwise specifically provided in this Agreement, the
parties undertake not to commence any suit, action or proceeding arising out of or relating to this
Agreement in a forum other than a forum described in this Section 11(a); provided,
however, that nothing herein shall preclude the Company or the Executive from bringing any
suit, action or proceeding in any other court for the purposes of enforcing the provisions of this
Section 11 or enforcing any judgment obtained by the Company or the Executive.

          (b) The agreement of the parties to the forum described in Section 11(a) is independent of
the law that may be applied in any suit, action or proceeding and the parties agree to such forum
even if such forum may under applicable law choose to apply non-forum law. The parties hereby
waive, to the fullest extent permitted by applicable law, any objection that they now or hereafter
have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding
brought in an applicable court described in Section 11(a), and the parties agree that they shall
not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from
any such court. The parties agree that, to the fullest extent permitted by applicable law, a final
and non-appealable judgment in any suit, action or proceeding brought in any applicable court
described in Section 11(a) shall be conclusive and binding upon the parties and may be enforced in
any other jurisdiction.

          (c) The parties hereto irrevocably consent to the service of any and all process in any suit,
action or proceeding arising out of or relating to this Agreement by the mailing of copies of such
process to such party at such party’s address specified in Section 18.

          (d) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereto (i) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such party would not, in
the event of any suit, action or proceeding, seek to enforce the foregoing waiver and (ii)
acknowledges that it and the other parties hereto

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have been induced to enter into this Agreement by, among other things, the mutual waiver and
certifications in this Section 11(d).

          SECTION 12. Default in Payment. Any payment not made within ten business days after
it is due in accordance with this Agreement shall thereafter bear interest, compounded annually, at
the prime rate in effect from time to time at Citibank, N.A., or any successor thereto.

          SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN THE STATE OF
NEW JERSEY, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL
RESPECTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO ITS PRINCIPLES
OF CONFLICTS OF LAW.

          SECTION 14. Amendment; No Waiver. No provision of this Agreement may be amended,
modified, waived or discharged except by a written document signed by the Executive and a duly
authorized officer of the Company; provided that, prior to the Change in Control Date, this
Agreement may be amended or modified, without the Executive’s consent, through a resolution duly
adopted by the Board. The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such
party of the right thereafter to insist upon strict adherence to that term or any other term of
this Agreement. No failure or delay by either party in exercising any right or power hereunder
will operate as a waiver thereof, nor will any single or partial exercise of any such right or
power, or any abandonment of any steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No agreements or
representations, oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party, which are not set forth expressly in this Agreement.

          SECTION 15. Severability. If any term or provision of this Agreement is invalid,
illegal or incapable of being enforced by any applicable law or public policy, all other conditions
and provisions of this Agreement shall nonetheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon any such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

          SECTION 16. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations or warranties,
whether oral or written, by any officer, employee or representative of any party hereto, and any
prior agreement of the parties hereto in

12

 

respect of the subject matter contained herein is hereby terminated and canceled. None of the
parties shall be liable or bound to any other party in any manner by any representations and
warranties or covenants relating to such subject matter except as specifically set forth herein.

          SECTION 17. Survival. The rights and obligations of the parties under the provisions
of this Agreement, including Sections 4, 5, 6, 7, 10, 11 and 12, shall survive and remain binding
and enforceable, notwithstanding the expiration of the Protection Period or the term of this
Agreement, the termination of the Executive’s employment with the Company for any reason or any
settlement of the financial rights and obligations arising from the Executive’s employment
hereunder, to the extent necessary to preserve the intended benefits of such provisions.

          SECTION 18. Notices. All notices or other communications required or permitted by
this Agreement will be made in writing and all such notices or communications will be deemed to
have been duly given when delivered or (unless otherwise specified) mailed by United States
certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

	 	 	 
	If to the Company:

	 	Kos Pharmaceuticals, Inc.
	 

	 	1 Cedar Brook Drive
	 

	 	Cranbury, NJ 08512-3618
	 
	 	 
	 

	 	Attention: Executive Vice President, General Counsel and Corporate Secretary
	 
	 	 
	 

	 	Fax: 609-495-0907
	 
	 	 
	If to the Executive:

	 	At the address for the Executive most recently on file with the Company

or to such other address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

          SECTION 19. Headings and References. The headings of this Agreement are inserted for
convenience only and neither constitute a part of this Agreement nor affect in any way the meaning
or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.

          SECTION 20. Counterparts. This Agreement may be executed in one or more counterparts
(including via facsimile), each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

          SECTION 21. Interpretation. For purposes of this Agreement, the words “include” and
“including”, and variations thereof, shall not be deemed to be terms of limitation but rather shall
be deemed to be followed by the words “without limitation”.

13

 

     The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean
the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”.

14

 

IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written
above.

	 	 	 	 	 
	 	KOS PHARMACEUTICALS, INC.,

 	 
	 	By: /s/
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	[EXECUTIVE],

 	 
	 	By: /s/
 	 
	 	Name:  	 	 
	 	Title:  	 	 

15

 

	 	 	 	 	 

EXHIBIT A

SEPARATION AGREEMENT AND RELEASE

     I. Release. For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the undersigned, with the intention of binding himself/herself, his/her
heirs, executors, administrators and assigns, does hereby release and forever discharge Kos
Pharmaceuticals, Inc., a Florida corporation , [to be amended, if necessary, to add or identify any
additional or other entity that may be the Executive’s employer at the time of the Qualifying
Termination set forth in Section 4 of that certain Change in Control Severance Agreement between
the Executive and Company] (the “Company”), and its or their parents, subsidiaries, affiliates,
predecessors, successors, and/or assigns, past, present, and future, together with its and their
officers, directors, executives, agents, employees, and employee benefits plans (and the trustees,
administrators, fiduciaries and insurers of such plans), past, present, and future (collectively,
the “Released Parties”), from any and all claims, actions, causes of action, demands, rights,
damages, debts, accounts, suits, expenses, attorneys’ fees and liabilities of whatever kind or
nature in law, equity, or otherwise, whether now known or unknown (collectively, the
“Claims”), which the undersigned now has, owns or holds, or has at any time heretofore had,
owned or held against any Released Party, from the beginning of time to the date of the Executive’s
execution of this Separation Agreement and Release, including, without limitation, any Claims
arising out of or in any way connected with the undersigned’s employment relationship with the
Company, its subsidiaries, predecessors or affiliated entities, or the termination thereof, under
any Federal, state or local statute, rule, or regulation, or principle of common, tort or contract
law, including but not limited to, the Family and Medical Leave Act of 1993, as
amended (the “FMLA”), 29 U.S.C. §§ 2601 et seq., Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.,
the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621
et seq., the Americans with Disabilities Act of 1990, as amended,
42 U.S.C. §§ 12101 et seq., the Worker Adjustment and Retraining Notification Act
of 1988, as amended, 29 U.S.C. §§ 2101 et seq., the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et
seq., and all other Federal, state, or local statutes, regulations or laws (including but
not limited to the New Jersey Conscientious Employee Protection Act, if applicable);
provided, however, that nothing herein shall release the Company of its obligations
under that certain Change in Control Severance Agreement (the “Agreement”) between the
undersigned and the Company (including the Accrued Rights (as defined therein)). Except as set
forth in Section II below, the undersigned understands that, as a result of executing this
Separation Agreement and Release, he/she will not have the right to assert that the Company or any
other Released Party unlawfully terminated his/her employment or violated any of his/her rights in
connection with his/her employment or otherwise.

     The undersigned affirms that he/she is not presently party to any Claim, complaint or action
against any Released Party in any forum or form and that he/she

 

 

knows of no facts which may lead to any Claim, complaint or action being filed against any
Released Party in any forum by the undersigned or by any agency, group, etc. The undersigned
further affirms that he/she has been paid and/or has received all leave (paid or unpaid),
compensation, wages, bonuses, commissions, and/or benefits to which he/she may be entitled and that
no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due
to him/her from the Company and its subsidiaries, except as specifically provided in this
Separation Agreement and Release. The undersigned furthermore affirms that he/she has no known
workplace injuries or occupational diseases and has been provided and/or has not been denied any
leave requested under the FMLA. If any agency or court assumes jurisdiction of any such Claim,
complaint or action against any Released Party on behalf of the undersigned, the undersigned hereby
waives any right to individual monetary or other relief.

     The undersigned further declares and represents that he/she has carefully read and fully
understands the terms of this Separation Agreement and Release and that, through this document,
he/she is hereby advised to consult with an attorney prior to executing this Separation Agreement
and Release, that he/she may take up to and including 21 days from receipt of this Separation
Agreement and Release, to consider whether to sign this Separation Agreement and Release, that
he/she may revoke this Separation Agreement and Release within seven calendar days after signing it
by delivering to the Company written notification of revocation (and that this Separation Agreement
and Release shall not become effective or enforceable until the expiration of such revocation
period), and that he/she knowingly and voluntarily, of his/her own free will, without any duress,
being fully informed and after due deliberate action, accepts the terms of and signs the same as
his own free act.

     II. Protected Rights. The Company and the undersigned agree that nothing in this
Separation Agreement and Release is intended to or shall be construed to affect, limit or otherwise
interfere with any non-waivable right of the undersigned under any Federal, state or local law,
including the right to file a charge or participate in an investigation or proceeding conducted by
the Equal Employment Opportunity Commission (“EEOC”) or to exercise any other right that
cannot be waived under applicable law. The undersigned is releasing, however, his/her right to any
monetary recovery or relief should the EEOC or any other agency pursue Claims on his/her behalf.
Further, should the EEOC or any other agency obtain monetary relief on his/her behalf, the
undersigned assigns to the Company all rights to such relief.

     III. Nonsolicitation/Non-Interference with Business Relationships. The undersigned
further agrees that during the period of years equal to the Multiple (as defined in the Agreement)
commencing on the date of his/her termination of employment with the Company or its subsidiaries,
he/she will not, directly or indirectly, (i) solicit or recruit any person who is at such time, or
who at any time during the six-month period prior to such solicitation or recruitment had been, an
employee of, or exclusive consultant then under contract with, the Company or its subsidiaries,
without the Company’s prior written consent; (ii) solicit or encourage any employee of the Company
or its subsidiaries to leave the employment of the Company or its subsidiaries; (iii) intentionally
interfere with the relationship of the Company or any of its subsidiaries with any employee of, or

2

 

exclusive consultant then under contract with, the Company or any such subsidiary; or (iv)
intentionally interfere with, disrupt or attempt to disrupt any past, present or prospective
relationship, contractual or otherwise, between the Company or any of its subsidiaries, on the one
hand, and any of their respective customers or suppliers, on the other hand.

     IV. Equitable Remedies. The undersigned acknowledges that a violation by the
undersigned of any of the covenants contained in Section III may cause irreparable damage to the
Company and its subsidiaries in an amount that would be material but not readily ascertainable, and
that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the
undersigned agrees that, notwithstanding any provision of this Separation Agreement and Release to
the contrary, the Company may be entitled (without the necessity of showing economic loss or other
actual damage) to injunctive relief (including temporary restraining orders, preliminary
injunctions and/or permanent injunctions) in any court of competent jurisdiction for any actual or
threatened breach of any of the covenants set forth in Section III in addition to any other legal
or equitable remedies it may have.

     V. Third-Party Litigation. The undersigned agrees to be available to the Company and
its affiliates on a reasonable basis in connection with any pending or threatened claims, charges
or litigation in which the Company or any of its affiliates is now or may become involved, or any
other claims or demands made against or upon the Company or any of its affiliates, regardless of
whether or not the undersigned is a named defendant in any particular case.

     VI. Return of Property. The undersigned shall return to the Company on or before [10
DAYS AFTER TERMINATION DATE], all property of the Company in the undersigned’s possession or
subject to the undersigned’s control, including without limitation any laptop computers, keys,
credit cards, cellular telephones and files. The undersigned shall not alter any of the Company’s
records or computer files in any way after [TERMINATION DATE].

     VII. Confidential Information. The undersigned acknowledges that Confidential
Information (as defined below) is a valuable asset of the Company and that unauthorized disclosure
or utilization thereof could be detrimental to the Company. The undersigned, therefore, shall not,
after the term of employment with the Company, disclose in any way or to any extent, to any person
or organization other than the Company, or utilize for the benefit or profit of the undersigned or
any other person or organization other than the Company, any Confidential Information, except (a)
as may be authorized in writing in advance by the Company; (b) is publicly available or becomes
publicly available other than through a breach of this document by the undersigned or, based on the
undersigned’s knowledge, the breach of this document by others; and (c) upon prior notification to
the Company, the undersigned may be required by law to disclose. “Confidential Information” means
information disclosed — whether orally or in writing — to the undersigned, or otherwise known to
the undersigned as a direct or indirect result of his or her employment by the Company, concerning
(i) the Company’s products, patent applications, research activities, formulations, processes,
protocols,

3

 

procedures, other intellectual properties, machines, services, and all matters having to do
with the business or operations of the Company, including, but not limited to, all information of
any type related to research, product development, manufacturing, quality matters, purchasing,
finance, data processing, engineering, facilities, marketing, merchandising and selling, personnel,
organization matters, policy matters, legal and other corporate affairs and (ii) information of any
type about any third party with which the Company is in technical or commercial cooperation,
acquired by the undersigned, directly or indirectly, in connection with his or her employment by
the Company. Included in the foregoing definition by way of illustration, but not limitation, are
such items as research projects, findings or reports, business plans and projections, formulae,
processes, methods of manufacture, computer programs, sales, costs, pricing data, regulatory
matters, operating procedures, information about employees and personnel practices, and lists of
investigators, consultants, suppliers and customers. The undersigned agrees not to remove any
Confidential Information from the Company, not to request that others do so on the undersigned’s
behalf and to return any Confidential Information currently in the undersigned’s possession to the
Company.

     VIII. Severability. If any term or provision of this Separation Agreement and Release
is invalid, illegal or incapable of being enforced by any applicable law or public policy, all
other conditions and provisions of this Separation Agreement and Release shall nonetheless remain
in full force and effect so long as the economic and legal substance of the transactions
contemplated by this Separation Agreement and Release is not affected in any manner materially
adverse to any party.

     IX. GOVERNING LAW. THIS SEPARATION AGREEMENT AND RELEASE SHALL BE DEEMED TO BE MADE
IN THE STATE OF NEW JERSEY, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS
AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD
TO ITS PRINCIPLES OF CONFLICTS OF LAW.

     Effective on the eighth calendar day following the date set forth below.

	 	 	 	 	 
	 	KOS PHARMACEUTICALS, INC.,

 	 
	 	By: /s/
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	EMPLOYEE,

 	 
	 	By: /s/
 	 
	 	[NAME] 	 
	 	 	 
	 

Date Signed:_________________________

4EX-10.2 CHANGE IN CONTROL AGREEMENT

 

EXHIBIT 10.2

     CHANGE IN CONTROL AGREEMENT (this “Agreement”) dated as
of November 6, 2006, between Kos Pharmaceuticals, Inc., a Florida
corporation (the “Company”), and Michael Jaharis.

          WHEREAS the Board of Directors of the Company (the “Board”) considers it essential to
the best interests of the Company and its shareholders to assure that the Company and its
subsidiaries will have the continued dedication of Mr. Jaharis, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined below);

          NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as follows:

          SECTION 1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:

          (a) “280G Gross-Up Payment” shall have the meaning set forth in Section 5(a).

          (b) “Accounting Firm” shall have the meaning set forth in Section 5(b).

          (c) “Affiliate(s)” means, with respect to any specified Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with such specified Person.

          (d) “Change in Control” means any corporation or other entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other than the Controlling
Shareholders becomes the beneficial owner, directly or indirectly, of all of the outstanding shares
of common stock of the Company.

          (e) “Change in Control Date” means the date on which a Change in Control occurs (if
any).

          (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated thereunder.

          (g) “Controlling Shareholders” means, collectively, the group of shareholders set
forth in the Schedule 13D filed with the Securities and Exchange Commission on September 12, 2006,
consisting of Michael Jaharis, Mary Jaharis, Wilson Point Holdings, LP, Cubs Management, LLC, Kos
Investments, Inc., Kos Holdings, Inc., Kathryn Jaharis, Steven Jaharis and Jaharis Holdings, Inc,
LLC.

          (h) “Effective Date” shall have the meaning set forth in Section 2.

 

 

          (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time, or any successor statute thereto.

          (j) “Excise Tax” means the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such tax.

          (k) “Payment” means any payment, benefit or distribution (or combination thereof) by
the Company, any of its Affiliates or any trust established by the Company or its Affiliates, to or
for the benefit of Mr. Jaharis, whether paid, payable, distributed, distributable or provided
pursuant to this Agreement or otherwise, including any payment, benefit or other right that
constitutes a “parachute payment” within the meaning of Section 280G of the Code.

          (l) “Person” means a “person” (as such term is used in Section 13(d) of the Exchange
Act).

          (m) “Protection Period” means the period commencing on the Change in Control Date and
ending on the first anniversary thereof.

          (n) “Section 409A Tax” shall have the meaning set forth in Section 5.

          (o) “Subsidiary” means any entity in which the Company, directly or indirectly,
possesses 50% or more of the total combined voting power of all classes of its stock.

          (p) “Successor” shall have the meaning set forth in Section 9(c).

          (q) “Underpayment” shall have the meaning set forth in Section 4(b).

          SECTION 2. Effectiveness and Term. This Agreement shall become effective as of the
date hereof (“Effective Date”) and shall remain in effect until the second anniversary of
the Effective Date. Notwithstanding the foregoing, in the event of a Change in Control during the
term of this Agreement, this Agreement shall not thereafter terminate, and the term hereof shall be
extended, until the Company and its Subsidiaries have performed all their obligations hereunder
with no future performance being possible; provided, however, that this Agreement
shall only be effective with respect to the first Change in Control that occurs during the term of
this Agreement.

          SECTION 3. Benefits. In the event of a Change in Control, Mr. Jaharis shall be
entitled to the following benefits:

          (a) Continued Welfare Benefits. The Company shall continue to provide health and
welfare benefits to Mr. Jaharis and Mr. Jaharis’s spouse and dependents (in each case, provided in
an applicable plan) for a period of three years following the Change in Control Date, at least
equal to the levels of benefits provided by the Company and its Subsidiaries immediately prior to
the Change in Control Date. Nothing in this Section 3(a) shall operate to reduce, or be construed
as reducing, Mr. Jaharis’s group

2

 

health plan continuation rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, in any manner.

          (b) Fringe Benefits. The Company shall provide to Mr. Jaharis at the Company’s sole
expense (i) use of his current office, (ii) secretarial support, (iii) car service and driver, and
(iv) a cellular phone, in each case for a period of three years following the Change in Control
Date and on a basis no less favorable than that provided immediately prior to the Change in Control
Date.

          SECTION 4. Certain Additional Payments by the Company.

          (a) Notwithstanding anything in this Agreement to the contrary and except as set forth below,
in the event it shall be determined that any Payment that is paid or payable to or for the benefit
of Mr. Jaharis during the term of this Agreement would be subject to the Excise Tax, Mr. Jaharis
shall be entitled to receive an additional payment (a “280G Gross-Up Payment”) in an amount
such that, after payment by Mr. Jaharis of all taxes (and any interest or penalties imposed with
respect to such taxes), including any income and employment taxes and Excise Taxes imposed upon the
280G Gross-Up Payment, Mr. Jaharis retains an amount of the 280G Gross-Up Payment equal to the
Excise Tax imposed upon such Payments. At the time of any Payment during the period of this
Agreement’s effectiveness, the Company shall provide Mr. Jaharis a written description of the
application of the Excise Tax (if any) to such Payment.

          (b) Subject to the provisions of Section 4(c), all determinations required to be made under
this Section 4, including whether and when a 280G Gross-Up Payment is required, the amount of such
280G Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall
be made in accordance with the terms of this Section 4 by a nationally recognized certified public
accounting firm that shall be designated by the Company (other than the Company’s regular auditor)
(the “Accounting Firm”). The Accounting Firm shall provide detailed supporting
calculations both to the Company and Mr. Jaharis within 15 business days of the receipt of notice
from Mr. Jaharis that there has been a Payment or such earlier time as is requested by the Company.
For purposes of determining the amount of any 280G Gross-Up Payment, Mr. Jaharis shall be deemed
to pay Federal income tax at the highest marginal rate applicable to individuals in the calendar
year in which any such 280G Gross-Up Payment is to be made and deemed to pay state and local income
taxes at the highest marginal rates applicable to individuals in the state or locality of Mr.
Jaharis’s residence in the calendar year in which any such 280G Gross-Up Payment is to be made, net
of the maximum reduction in Federal income taxes that can be obtained from deduction of state and
local taxes, taking into account limitations applicable to individuals subject to Federal income
tax at the highest marginal rate. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any 280G Gross-Up Payment, as determined pursuant to this Section 4, shall
be paid by the Company to Mr. Jaharis within five business days of the receipt of the Accounting
Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Mr.
Jaharis, it shall so indicate to Mr. Jaharis in writing. Any determination by the Accounting Firm
shall be binding upon the Company and Mr. Jaharis. As a result of the uncertainty in the
application of the Excise Tax, at the time of the initial determination by the Accounting Firm
hereunder, it is possible that the amount

3

 

of the 280G Gross-Up Payment determined by the Accounting Firm to be due to Mr. Jaharis,
consistent with the calculations required to be made hereunder, will be lower than the amount
actually due, including any interest and penalties (an “Underpayment”). In the event the
Company exhausts its remedies pursuant to Section 4(c) and Mr. Jaharis thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be paid by the Company to Mr.
Jaharis within five business days of the receipt of the Accounting Firm’s determination.

          (c) Mr. Jaharis shall notify the Company in writing of any written claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of a 280G Gross-Up
Payment. Such notification shall be given as soon as practicable, but no later than ten business
days after Mr. Jaharis is informed in writing of such claim. Failure to give timely notice shall
not prejudice Mr. Jaharis’s right to 280G Gross-Up Payments and rights of indemnity under this
Section 4. Mr. Jaharis shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. Mr. Jaharis shall not pay such claim prior to the expiration
of the 30-day period following the date on which Mr. Jaharis gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to such claim is
due). If the Company notifies Mr. Jaharis in writing prior to the expiration of such period that
the Company desires to contest such claim, Mr. Jaharis shall (i) give the Company any information
reasonably requested by the Company relating to such claim, (ii) take such action in connection
with contesting such claim as the Company shall reasonably request in writing from time to time,
including accepting legal representation with respect to such claim by an attorney reasonably
selected by the Company, (iii) cooperate with the Company in good faith in order effectively to
contest such claim and (iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional income taxes, interest and penalties) incurred in connection
with such contest, and shall indemnify and hold Mr. Jaharis harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest or penalties) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4(c), the Company shall control all proceedings taken in connection with such
contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in respect of such claim
and may, at its sole discretion, either direct Mr. Jaharis to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Mr. Jaharis agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall determine; provided,
however, that (A) if the Company directs Mr. Jaharis to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to Mr. Jaharis, on an interest-free
basis, and shall indemnify and hold Mr. Jaharis harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties) imposed with respect to such advance or with
respect to any imputed income in connection with such advance and (B) if such contest results in
any extension of the statute of limitations relating to payment of taxes for the taxable year of
Mr. Jaharis with respect to which such contested amount is claimed to be due, such

4

 

extension must be limited solely to such contested amount. Furthermore, the Company’s control
of the contest shall be limited to issues with respect to which the 280G Gross-Up Payment would be
payable hereunder, and Mr. Jaharis shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by Mr. Jaharis of an amount advanced by the Company pursuant to
Section 4(c), Mr. Jaharis becomes entitled to receive any refund with respect to such claim, Mr.
Jaharis shall (subject to the Company’s complying with the requirements of Section 4(c)) promptly
pay to the Company the amount of such refund received (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Mr. Jaharis of an amount
advanced by the Company pursuant to Section 4(c), a determination is made that Mr. Jaharis shall
not be entitled to any refund with respect to such claim and the Company does not notify Mr.
Jaharis in writing of its intent to contest such denial of refund prior to the expiration of the
30-day period after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of 280G Gross-Up Payment required to be paid.

          SECTION 5. Section 409A. It is the intention of the Company and Mr. Jaharis that the
provisions of this Agreement comply with Section 409A of the Code, and all provisions of this
Agreement shall be construed and interpreted in a manner consistent with Section 409A of the Code.
To the extent necessary to avoid imposition of any additional tax or interest penalties under
Section 409A (such tax and interest penalties, a “Section 409A Tax”), notwithstanding the
timing of payment provided in any other Section of this Agreement, the timing of any payment,
distribution or benefit pursuant to this Agreement shall be subject to a six-month delay in a
manner consistent with Section 409A(a)(2)(B)(i) of the Code, provided that (a) Mr. Jaharis
shall be credited with interest in respect of such payment, distribution or benefit during such
six-month period at the rate set forth in Section 11 and (b) if Mr. Jaharis dies during such
six-month period, any such delayed payments shall not be further delayed, and shall be immediately
payable to Mr. Jaharis’s devisee, legatee or other designee or, should there be no such designee,
to Mr. Jaharis’s estate in accordance with the applicable provisions of this Agreement. From and
after the Effective Date and for the remainder of the term of this Agreement, (i) the Company shall
administer and operate this Agreement in compliance with Section 409A of the Code and any rules,
regulations or other guidance promulgated thereunder as in effect from time to time and (ii) in the
event that the Company determines that any provision of this Agreement or any such plan or
arrangement does not comply with Section 409A of the Code or any such rules, regulations or
guidance and that Mr. Jaharis may become subject to a Section 409A Tax, the Company and Mr. Jaharis
shall negotiate in good faith to amend or modify such provision to avoid the application of such
Section 409A Tax, provided that such amendment or modification shall not (and Mr. Jaharis
shall not be obligated to consent to any such amendment or modification that would) reduce the
economic value to Mr. Jaharis of such provision.

          SECTION 6. No Mitigation or Offset; Enforcement of this Agreement.

          (a) The Company’s obligation to make the payments provided for in this Agreement and

5

 

otherwise to perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the Company may have
against Mr. Jaharis or others. In no event shall Mr. Jaharis be obligated to take any action by
way of mitigation of the amounts payable to Mr. Jaharis under any of the provisions of this
Agreement.

          (b) The Company shall reimburse, upon Mr. Jaharis’s demand, any and all reasonable legal fees
and expenses that Mr. Jaharis may incur in good faith as a result of any contest, dispute or
proceeding (regardless of whether formal legal proceedings are ever commenced and regardless of the
outcome thereof and including all stages of any contest, dispute or proceeding) by the Company
against Mr. Jaharis (or, in the event that Mr. Jaharis is the prevailing party, by Mr. Jaharis
against the Company), with respect to the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including as a result of any
contest regarding the amount of any payment owed pursuant to this Agreement), and shall indemnify
and hold Mr. Jaharis harmless, on an after-tax basis, for any tax (including Excise Tax) imposed on
Mr. Jaharis as a result of payment by the Company of such legal fees and expenses.

          SECTION 7. Non-Exclusivity of Rights. Except as specifically provided in Section
3(a), nothing in this Agreement shall prevent or limit Mr. Jaharis’s continuing or future
participation in any plan, practice, policy or program provided by the Company or a Subsidiary for
which Mr. Jaharis may qualify, nor shall anything in this Agreement limit or otherwise affect any
rights of Mr. Jaharis may have under any contract or agreement with the Company or a Subsidiary.
Vested benefits and other amounts that Mr. Jaharis is otherwise entitled to receive under any
incentive compensation (including any equity award agreement), deferred compensation, retirement,
pension or other plan, practice, policy or program of, or any contract or agreement with, the
Company or a Subsidiary shall be payable in accordance with the terms of each such plan, practice,
policy, program, contract or agreement, as the case may be, except as explicitly modified by this
Agreement.

          SECTION 8. Withholding. The Company may deduct and withhold from any amounts payable
under this Agreement such Federal, state, local, foreign or other taxes as are required to be
withheld pursuant to any applicable law or regulation.

          SECTION 9. Assignment. (a) This Agreement is personal to Mr. Jaharis and, without
the prior written consent of the Company, shall not be assignable by Mr. Jaharis otherwise than by
will or the laws of descent and distribution, and any assignment in violation of this Agreement
shall be void.

          (b) Notwithstanding the foregoing Section 9(a), this Agreement and all rights of Mr. Jaharis
hereunder shall inure to the benefit of, and be enforceable by, Mr. Jaharis’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
If Mr. Jaharis should die while any amounts would still be payable to him or her hereunder if he
or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of

6

 

this Agreement to Mr. Jaharis’s devisee, legatee or other designee or, should there be no such
designee, to Mr. Jaharis’s estate.

          (c) The Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or assets of the Company (a
“Successor”) to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no such succession had taken
place. As used in this Agreement, (i) the term “Company” shall mean the Company as hereinbefore
defined and any Successor and any permitted assignee to which this Agreement is assigned and (ii)
the term “Board” shall mean the Board as hereinbefore defined and the board of directors or
equivalent governing body of any Successor and any permitted assignee to which this Agreement is
assigned.

          SECTION 10. Dispute Resolution. (a) Except as otherwise specifically provided
herein, Mr. Jaharis and the Company each hereby irrevocably submit to the exclusive jurisdiction of
any state court located within the State of New Jersey over any dispute arising out of or relating
to this Agreement. Except as otherwise specifically provided in this Agreement, the parties
undertake not to commence any suit, action or proceeding arising out of or relating to this
Agreement in a forum other than a forum described in this Section 10(a); provided,
however, that nothing herein shall preclude the Company or Mr. Jaharis from bringing any
suit, action or proceeding in any other court for the purposes of enforcing the provisions of this
Section 10 or enforcing any judgment obtained by the Company or Mr. Jaharis.

          (b) The agreement of the parties to the forum described in Section 10(a) is independent of
the law that may be applied in any suit, action or proceeding and the parties agree to such forum
even if such forum may under applicable law choose to apply non-forum law. The parties hereby
waive, to the fullest extent permitted by applicable law, any objection that they now or hereafter
have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding
brought in an applicable court described in Section 10(a), and the parties agree that they shall
not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from
any such court. The parties agree that, to the fullest extent permitted by applicable law, a final
and non-appealable judgment in any suit, action or proceeding brought in any applicable court
described in Section 10(a) shall be conclusive and binding upon the parties and may be enforced in
any other jurisdiction.

          (c) The parties hereto irrevocably consent to the service of any and all process in any suit,
action or proceeding arising out of or relating to this Agreement by the mailing of copies of such
process to such party at such party’s address specified in Section 17.

          (d) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereto (i) certifies that no representative, agent or
attorney of any other party has represented, expressly or

7

 

otherwise, that such party would not, in the event of any suit, action or proceeding, seek to
enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement by, among other things, the mutual waiver and certifications
in this Section 10(d).

          SECTION 11. Default in Payment. Any payment not made within ten business days after
it is due in accordance with this Agreement shall thereafter bear interest, compounded annually, at
the prime rate in effect from time to time at Citibank, N.A., or any successor thereto.

          SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN THE STATE OF
NEW JERSEY, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL
RESPECTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO ITS PRINCIPLES
OF CONFLICTS OF LAW.

          SECTION 13. Amendment; No Waiver. No provision of this Agreement may be amended,
modified, waived or discharged except by a written document signed by Mr. Jaharis and a duly
authorized officer of the Company; provided that, prior to the Change in Control Date, this
Agreement may be amended or modified, without Mr. Jaharis’s consent, through a resolution duly
adopted by the Board. The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such
party of the right thereafter to insist upon strict adherence to that term or any other term of
this Agreement. No failure or delay by either party in exercising any right or power hereunder
will operate as a waiver thereof, nor will any single or partial exercise of any such right or
power, or any abandonment of any steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No agreements or
representations, oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party, which are not set forth expressly in this Agreement.

          SECTION 14. Severability. If any term or provision of this Agreement is invalid,
illegal or incapable of being enforced by any applicable law or public policy, all other conditions
and provisions of this Agreement shall nonetheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon any such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

          SECTION 15. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications,

8

 

representations or warranties, whether oral or written, by any officer, employee or
representative of any party hereto, and any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled. None of the parties shall be
liable or bound to any other party in any manner by any representations and warranties or covenants
relating to such subject matter except as specifically set forth herein.

          SECTION 16. Survival. The rights and obligations of the parties under the provisions
of this Agreement, including Sections 3, 4, 5, 6, 9, 10 and 11, shall survive and remain binding
and enforceable, notwithstanding the expiration of the Protection Period or the term of this
Agreement, to the extent necessary to preserve the intended benefits of such provisions.

          SECTION 17. Notices. All notices or other communications required or permitted by
this Agreement will be made in writing and all such notices or communications will be deemed to
have been duly given when delivered or (unless otherwise specified) mailed by United States
certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

	 	 	 
	If to the Company:

	 	Kos Pharmaceuticals, Inc.
	 

	 	1 Cedar Brook Drive
	 

	 	Cranbury, NJ 08512-3618
	 
	 	 
	 

	 	Attention: Executive Vice President, General Counsel and Corporate Secretary
	 
	 	 
	 

	 	Fax: 609-495-0907
	 
	 	 
	If to Mr. Jaharis:

	 	At the address for Mr. Jaharis most recently on file with the Company

          or to such other address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

          SECTION 18. Headings and References. The headings of this Agreement are inserted for
convenience only and neither constitute a part of this Agreement nor affect in any way the meaning
or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.

          SECTION 19. Counterparts. This Agreement may be executed in one or more counterparts
(including via facsimile), each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

          SECTION 20. Interpretation. For purposes of this Agreement, the words “include” and
“including”, and variations thereof, shall not be deemed to be terms of limitation but rather shall
be deemed to be followed by the words “without limitation”.

9

 

The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean
the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”.

10

 

     IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first
written above.

	 	 	 	 	 
	 	KOS PHARMACEUTICALS, INC.,

 	 
	 	By: /s/
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	MICHAEL JAHARIS,

 	 
	 	By: /s/
 	 
	 	Name:  	Michael Jaharis 	 
	 	Title:  	Chairman Emeritus 	 
	 

11

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