Document:

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                                                                   EXHIBIT 10.16

                           THIRD AMENDED AND RESTATED
                          REGISTRATION RIGHTS AGREEMENT

         This Third Amended and Restated Registration Rights Agreement (this
"Agreement") is made and entered into effective as of December 19, 2002, by and
between Kos Pharmaceuticals, Inc., a Florida corporation (the "Company"), Kos
Holdings, Inc., a Florida corporation ("Holdings"), Kos Investments, Inc., a
Florida corporation ("Investments"), and Michael Jaharis, an individual residing
in New York, New York ("Jaharis") and effectively amends and restates the Second
Amended and Restated Registration Rights Agreement entered into by the Company,
Holdings and Investments dated as of December 21, 1999.

                                    RECITALS

         A.       Holdings has acquired 10,000,000 shares (the "Holdings
                  Shares") of the Company's common stock, par value $.01 per
                  share (the "Common Stock"), under the terms of an Assignment
                  and Assumption Agreement dated as of June 30, 1996 between the
                  Company and Holdings (the "Assignment Agreement"). Pursuant to
                  the Assignment Agreement, the Company has agreed to grant
                  Holdings certain registration rights in accordance with the
                  terms of this Agreement.

         B.       The Company has issued a Promissory Note dated July 1, 1996
                  (the "Investments Note"), to Investments for an aggregate
                  principal amount of $15,000,000, which has been converted to
                  shares of Common Stock (the "Investments Shares"). The Company
                  has granted Investments certain registration rights in
                  accordance with the terms of this Agreement.

         C.       The Company has issued a Promissory Note dated as of September
                  1, 1999 (the "Supplemental Credit Facility Note") to Jaharis
                  for an aggregate principal amount of $50,000,000, which is
                  convertible to shares of Common Stock (the "Convertible Note
                  Shares"), and which was amended by that certain Amendment
                  Agreement dated as of July 21, 2001, between Borrower and
                  Michael Jaharis and Mary Jaharis, pursuant to which the
                  Supplemental Credit Facility Note was replaced by two separate
                  notes, one note from Borrower to Michael Jaharis in the amount
                  of $25,000,000 and one note from Borrower to Mary Jaharis in
                  the amount of $25,000,000 (the "Mary Jaharis Note"), which was
                  further amended by that certain Amendment Agreement dated as
                  of December 17, 2001, between Borrower and Wilson Point
                  Holdings, LP, a Delaware limited partnership ("Wilson Point"),
                  pursuant to which the Mary Jaharis Note was replaced by a note
                  from Borrower to Wilson Point in the amount of $25,000,000.

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         D.       Under the terms of the Supplemental Credit Facility Note, the
                  Company has granted Jaharis certain registration rights in
                  accordance with the terms of this Agreement.

         E.       The Company has issued a Promissory Note dated as of December
                  21, 1999 (the "Standby Facility Note") to Jaharis for an
                  aggregate principal amount of $50,000,000, pursuant to which
                  the Company has issued a warrant of even date therewith to
                  Jaharis (the "Standby Facility Warrant Agreement") pursuant to
                  which Jaharis will be entitled to purchase 6,000,000 shares of
                  Common Stock (the "Standby Facility Warrant Shares"). Under
                  the terms of the Standby Facility Warrant Agreement, the
                  Company has granted Jaharis certain registration rights in
                  accordance with the terms of this Agreement.

         F.       The Company is issuing a promissory note of even date herewith
                  (the "Additional Standby Facility Note") to Jaharis for an
                  aggregate principal amount of $30,000,000. In connection with
                  the Additional Standby Facility Note, the Company is issuing a
                  warrant of even date herewith to Jaharis (the "Additional
                  Standby Facility Warrant Agreement") pursuant to which Jaharis
                  will be entitled to purchase 1,000,000 shares of Common Stock
                  (the "Additional Standby Facility Warrant Shares", and,
                  together with the Holdings Shares, the Investments Shares, the
                  Convertible Note Shares and the Standby Facility Warrant
                  Shares, the "Shares") (The Standby Facility Warrant Agreement
                  and the Additional Standby Facility Warrant Agreement are
                  hereinafter referred to as the "Warrant Agreements"). Under
                  the terms of the Additional Standby Facility Warrant
                  Agreement, the Company will grant Jaharis certain registration
                  rights in accordance with the terms of this Agreement.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:

         1. Definitions. The following terms shall have the meanings set forth
below:

                  a. "COMMISSION" means the Securities and Exchange Commission,
or any other Federal agency at the time administering the Federal securities
laws.

                  b. "CONVERSION" means Jaharis' right to convert indebtedness
owing under the Supplemental Credit Facility Note into the Convertible Note
Shares as provided in the Supplemental Credit Facility Loan Agreement and the
Supplemental Credit Facility Note.

                  c. "CUTBACK REGISTRATION" means any registration in connection
with an underwritten public offering in which the managing underwriter advises
the Company that marketing factors require a limitation of the number of the

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Company's securities to be underwritten in such public offering (including a
limitation to zero).

                  d. "1933 ACT" means the Securities Act of 1933, as amended, or
any similar 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.

                  e. "1934 ACT" means the Securities Exchange Act of 1934 or any
similar 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.

                  f. "REGISTRATION RIGHTS HOLDER" means either Holdings,
Investments, or Jaharis, individually (collectively referred to as the
"Registration Rights Holders").

                  g. "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 any registration statement on Form S-4 or
Form S-8, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation or entity).

                  h. "REGISTRATION EXPENSES" means the expenses described in
Section 4.

                  i. "REGISTRABLE SHARES" means all of the Shares, and any other
shares of Common Stock or other securities of the Company or any other issuer
issued or issuable in respect of such Shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, mergers, combinations or
similar events, if applicable); PROVIDED, HOWEVER, that the Shares which are
Registrable Shares shall cease to be Registrable Shares upon any sale or
transfer of such shares pursuant to a Registration Statement, Section 4(1) of
the 1933 Act, Rule 144 under the 1933 Act or otherwise, except that the Shares
which are Registrable Shares shall remain Registrable Shares notwithstanding any
transfer of the shares by Holdings or Investments to Jaharis or any of his
affiliates or by Jaharis or such affiliates to any member of Jaharis' immediate
family or to a trust established for the benefit of Jaharis or any family member
of Jaharis or to any corporation or other entity which is wholly owned by
Jaharis, such affiliates, such family members, or such trusts (Jaharis, such
affiliates, such family members such trusts and such entities referred to herein
collectively as "Permitted Transferees"). As a condition to effecting any
registration pursuant to this Agreement, the Company may require that Holdings,
Investments, Jaharis, or any Permitted Transferees, on whose behalf a
registration hereunder is being effected, execute an agreement further
acknowledging their obligations under Section 7 of this Agreement. All
references in this Agreement to the term "Holdings", "Investments" or "Jaharis"
shall be read to include any Permitted Transferee that owns or holds any
Registrable Shares.

                  j. "STANDBY FACILITY LOAN AGREEMENT" shall mean that certain
Revolving Credit and Loan Agreement dated as of December 21, 1999 between the

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Company and Jaharis providing for an extension of credit by Jaharis to the
Company in the principal amount of $50,000,000.

                  k. "SUPPLEMENTAL CREDIT FACILITY LOAN AGREEMENT" shall mean
that certain Revolving Credit and Loan Agreement dated as of September 1, 1999
between the Company and Jaharis providing for an extension of credit by Jaharis
to the Company in the principal amount of $50,000,000.

         2. Registration Rights.

                  a. REQUIRED REGISTRATIONS.

                           i. Subject to the other provisions of this Agreement,
Holdings, Investments, and Jaharis shall each have the right to require the
Company, upon demand, whether before or after any indebtedness evidenced by the
Investments Note or the Supplemental Credit Facility Note shall become
convertible into Common Stock of the Company, or whether before or after Jaharis
shall exercise any warrants pursuant to the Warrant Agreements, or whether
before or after Investments or Jaharis shall have become a holder of any Common
Stock issued upon conversion without registration under the 1933 Act, to effect
unlimited registrations with respect to the Registrable Shares (each such
registration being a " Required Registration"). To effect a Required
Registration, a Registration Rights Holder shall make a written request (a
"Request Notice") to the Company with respect to his or its Shares which shall
describe in detail the contemplated sale of Registerable Securities, including
the number of Registerable Securities to be registered. The Company shall be
entitled to include in any Required Registration shares of Common Stock to be
sold by holders of either Common Stock or rights to acquire Common Stock to whom
the Company has previously granted or in the future does grant any registration
rights and shares of Common Stock to be sold by the Company for its own account,
provided that such inclusion shall not limit the number of Registrable Shares
included in such Registration Statement.

                           ii. Each Registration Rights Holder may revoke its
Request Notice in the event of a Cutback Registration that would limit the total
number of Registrable Shares that can be sold pursuant to such Requested
Registration to a number that is less than 90% of the number of the Registrable
Shares specified to be sold in the Request Notice.

                           The Company shall, as soon as practicable, but in no
event more than 120 days after receipt of a Request Notice, file a Registration
Statement covering the Registrable Shares to be included in the registration
requested by such Request Notice and cause such Registration Statement to become
effective as soon as practicable thereafter.

                  b. Piggyback Registration.

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                           i. At any time and from time to time after the date
of this Agreement, whenever the Company proposes to file a Registration
Statement, the Company will prior to such filing give written notice to all
Registration Rights Holders of its intention to do so and, upon the written
request of any Registration Rights Holders given within fifteen (15) days after
the Company provides such notice, the Company shall use its good faith efforts
to cause all Registrable Shares of such Registration Rights Holder which the
Company has been requested by such Registration Rights Holder to register, to be
registered under the 1933 Act 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 Registration Rights Holder; provided that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2.b. without obligation to any Registration Rights
Holder.

                           ii. In connection with any registration under Section
2.b. involving an underwritten offering of the Company's securities, the Company
shall not be required to include any Registrable Shares of a Registration Rights
Holder in such underwriting unless such Registration Rights Holder accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
sole discretion of the underwriters, jeopardize the success of the offering by
the Company. If in the sole discretion of the managing underwriter or
underwriters the registration of all, or part of, the Registrable Shares which a
Registration Rights Holder has requested to be included would adversely affect
such public offering, then the Company shall be required to include in the
underwriting only that number of Registrable Shares, if any, which the managing
underwriter or underwriters believe may be sold without causing such adverse
effect. If the number of Registrable Shares to be included in the underwriting
in accordance with the foregoing is less than the total number of shares which
such Registration Rights Holder has requested to be included, then such
Registration Rights Holder shall participate in the underwriting pro rata based
upon such Registration Rights Holder's total ownership of Registrable Shares
compared to the total number of shares held by any other Registration Rights
Holder or other affiliates of the Company for which registration has been
requested whether or not such shares are the subject of separate agreements with
the Company concerning registration rights.

         3. REGISTRATION PROCEDURES. When the Company is required by the
provisions of this Agreement to effect the registration of any of the
Registrable Shares under the 1933 Act, the Company shall:

                  a. file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;

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                  b. as expeditiously as possible 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 keep
the Registration Statement effective until the earlier to occur of (i) such time
as all Registrable Shares included therein have been sold or (ii) the expiration
of two years;

                  c. as expeditiously as possible furnish to those Registration
Rights Holders whose Shares are being registered such reasonable numbers of
copies of the prospectus, including a preliminary prospectus and any amended or
supplemental prospectus, in conformity with the requirements of the 1933 Act,
and such other documents as such Registration Rights Holders may each reasonably
request in order to facilitate the public sale or other disposition of such
Registration Rights Holder's Registrable Shares; and

                  d. as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or Blue Sky laws of such states as the Registration Rights
Holders shall reasonably request, and do any and all other acts and things that
may be necessary or desirable to enable the Registration Rights Holders to
consummate the public sale or other disposition of the Registrable Shares owned
by the Registration Rights Holders in such jurisdiction; PROVIDED, HOWEVER, that
the Company shall not be required in connection with this Section 3 to qualify
as a foreign corporation in any jurisdiction nor register or qualify the
securities in any state which as a condition to such registration or
qualification would impose material restrictions or other material conditions on
the Company or any of its officers, directors or shareholders (including with
respect to any shares held by such persons or entities) unless such restrictions
or other conditions are approved by the party adversely affected.

                  If the Company advises a Registration Rights Holder that any
         preliminary or final prospectus is no longer in compliance with the
         requirements of the 1933 Act, or that at such time it is otherwise a
         violation of any applicable securities laws to offer or sell securities
         pursuant to a preliminary or final prospectus, such Registration Rights
         Holder shall immediately cease offering or selling the Registrable
         Securities and, if requested, return all old prospectus to the Company.
         Such Registration Rights Holder may recommence offers and sales of
         Registrable Securities upon receipt from the Company of an amended
         prospectus, if applicable, or receipt of ratification from the Company
         that the offer and sale of Registrable Securities may resume.

         4. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement. The term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and disbursements of counsel for

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the Company, 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 and selling commissions attributable to the Registrable
Shares and the fees and expenses of each Registration Rights Holder's own
counsel and accountants, which shall be borne by such Registration Rights
Holder.

         5. INFORMATION BY REGISTRATION RIGHTS HOLDERS. Each Registration Rights
Holder shall promptly furnish to the Company such information regarding such
Registration Rights Holder and the distribution proposed by such Registration
Rights Holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.

         6. "LOCK-UP" AGREEMENT. If requested by an underwriter in connection
with an underwritten offering of Common Stock or other securities of the
Company, each Registration Rights Holder shall agree not to sell or otherwise
transfer or dispose of any Registrable Shares or other securities of the Company
held by such Registration Rights Holder for a specified period of time before
and/or after the effective date of a Registration Statement, PROVIDED that the
same request shall have been made of other holders of the Company's Common Stock
or other securities (including affiliates of the Company) and such other holders
have complied with such request. Such agreement shall be in writing in a form
satisfactory to the Company and any such underwriter. The Company may impose
stop transfer instructions with respect to the Registrable Shares or other
securities subject to the foregoing restriction until the end of the lock-up
period.

         7. INDEMNIFICATION.

                  a. BY THE COMPANY. In the event of any registration of any of
the Registrable Shares under the 1933 Act pursuant to this Agreement, the
Company will indemnify and hold harmless the sellers of such Registrable Shares
against any losses, claims, damages or liabilities, joint or several, to which
such sellers may become subject under the 1933 Act, 1934 Act, state securities
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the 1933 Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Company will
reimburse such sellers for any legal or any other expenses reasonably incurred
by such sellers in connection with investigating and 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,
liability or expense arises out of or is based upon any untrue statement or
omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company by or on behalf of such
sellers, specifically for use in the preparation thereof, or as a result of the
failure of such sellers, or any agent of such sellers, to deliver any amendments
and supplements to any Registration Statement and the prospectus included in any

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such Registration Statement (provided such amended or supplemental prospectus
has been delivered to sellers or their agent).

                  b. BY SELLERS OF REGISTRABLE SHARES. In the event of any
registration of any of the Registrable Shares under the 1933 Act pursuant to
this Agreement, each seller of Registrable Shares, 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 1933 Act or the 1934 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 1933 Act, 1934 Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement of a material fact
contained in any Registration Statement under which such Registrable Shares were
registered under the 1933 Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and each seller of
Registrable Shares will reimburse the Company, each of its directors and
officers, each underwriter and each controlling person, severally and not
jointly, for any legal or other expenses reasonably incurred by the Company,
each director and officer, each underwriter and each controlling person in
connection with investigating and defending any such loss, claim, damage,
liability or action, if the statement or omission was made in reliance upon and
in conformity with information furnished to the Company by or on behalf of such
seller, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement.

                  c. CLAIMS. Each party entitled to indemnification under this
Section 7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (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 shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); 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 7. The Indemnified
Party may participate in such defense at such party's expense. No Indemnifying
Party, in the defense of any such claim or litigation, except with the consent
of the Indemnified Party, shall 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.

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         8. MERGERS, ETC.

         The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the proposed surviving corporation shall, prior to such
merger, consolidation or reorganization, 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 either Registration Rights Holder would be entitled to receive
in exchange for Registrable Shares under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 8 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if all Registration Rights Holders
and all other holders of Common Stock of the Company are entitled to receive in
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
register within 90 days of completion of the transaction for resale to the
public pursuant to the Securities Act.

         9. MISCELLANEOUS.

                  a. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Florida.

                  b. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.

                  c. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written instrument
signed by the Company, and each Registration Rights Holder affected by such
change. 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.

                  d. NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by United States
first-class certified or registered mail, return receipt requested, postage
prepaid, or delivered personally by hand or nationally recognized courier
addressed as follows:

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         If to Holdings:

                  c/o Steven J. Aronoff, P.C.,
                  475 Park Avenue South, 23rd Floor
                  New York, New York 10016

         If to Investments:

                  c/o Steven J. Aronoff, P.C.,
                  475 Park Avenue South, 23rd Floor
                  New York, New York 10016

         If to Jaharis:

                  Michael Jaharis
                  c/o Steven J. Aronoff, P.C.,
                  475 Park Avenue South, 23rd Floor
                  New York, New York 10016

         If to the Company:

                  Kos Pharmaceuticals, Inc.
                  1001 Brickell Bay Drive
                  Suite 2502
                  Miami, Florida 33131
                  Facsimile No.  (305) 577-4596
                  Attention: Adrian Adams, President

or at such other address as a party shall have furnished to the other party in
writing. All such notices and other written communications shall be effective on
the earlier of the date of mailing or delivery.

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

                  f. TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

                  g. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which together
shall constitute one instrument.

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

                                      COMPANY

                                      KOS PHARMACEUTICALS, INC.

                                      By:
                                         --------------------------------------
                                          Adrian Adams
                                          President

                                      KOS HOLDINGS, INC.

                                      By:
                                         --------------------------------------

                                      KOS INVESTMENTS, INC.

                                      By:
                                         --------------------------------------
                                         MICHAEL JAHARIS

                                       11<PAGE>
                                                                   EXHIBIT 10.19

                 $30,000,000 REVOLVING CREDIT AND LOAN AGREEMENT

                          DATED AS OF DECEMBER 19, 2002

         KOS PHARMACEUTICALS, INC., a Florida corporation (the "Borrower"), and
MICHAEL JAHARIS, an individual residing in New York, New York (the "Lender"),
agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.01. ADDITIONAL STANDBY FACILITY shall mean the $30,000,000.00
revolving credit facility made available by the Lender pursuant to the Note.

         SECTION 1.02. ACQUISITION TRANSACTION shall mean (i) a merger or
consolidation, or any similar transaction, of Borrower into or with another
corporation or other entity (other than into or with a Related Company), (ii) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 20% or more of the voting
power of Borrower; (iii) the sale of all or substantially all of the assets of
the Borrower, or (iv) any substantially similar transaction.

         SECTION 1.03. ADVANCES shall mean the advances made under the Note and
pursuant to this Agreement.

         SECTION 1.04. ATI shall mean Aeropharm Technology, Inc., a Delaware
corporation which is a wholly owned subsidiary of Borrower.

         SECTION 1.05. ATI AMENDED AND RESTATED STOCK PLEDGE AGREEMENT shall
mean the Amended and Restated Stock Pledge Agreement of even date herewith

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granted by ATI to Lender as collateral security for the ATI Second Amended and
Restated Subsidiary Guaranty.

         SECTION 1.06. ATI SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY shall
mean the Second Amended and Restated Guaranty of even date herewith granted by
ATI to Lender guaranteeing repayment of the Note, the Supplemental Credit
Facility Note and the Standby Facility Note.

         SECTION 1.07. ATI SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY
AGREEMENT shall mean the Second Amended and Restated Subsidiary Security
Agreement of even date herewith granted by ATI to Lender as collateral security
for the ATI Second Amended and Restated Subsidiary Guaranty.

         SECTION 1.08. BUSINESS DAY shall mean any day other than a Saturday,
Sunday or other day on which the Borrower's business is closed.

         SECTION 1.09. CLOSING DATE shall mean the date on which the closing for
this Loan is held.

         SECTION 1.10. COMMON STOCK shall mean the capital common stock of the
Borrower, consisting of 50,000,000 authorized shares $.01 par value.

         SECTION 1.11. COMPENSATION shall mean (i) any and all compensation,
including without limitation salaries, bonuses, commissions, fringe benefits,
deferred compensation, retirement benefit contributions and similar benefits,
paid to employees of the Borrower for services rendered, and (ii) any and all
compensation and payments, including without limitation payments reportable as

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income to recipients on the various types of IRS Forms 1099, paid to recipients
for services rendered.

         SECTION 1.12. CREDIT FACILITY shall mean the $30,000,000 revolving
credit facility made available by the Lender to the Borrower pursuant to that
certain promissory note by Borrower in favor of Lender dated as of July 1, 1998
and that certain Revolving Credit Facility and Loan Agreement between Borrower
and Lender dated as of July 1, 1998, as amended by the Standby Facility.

         SECTION 1.13. DEBT shall mean the debt of any Person at any date,
without duplication in calculating the amount thereof, arising from:

                  (i) all obligations of such Person for borrowed money;

                  (ii) all obligations of such Person evidenced by bonds (other
than performance bonds), debentures, notes or other similar instruments;

                  (iii) all trade credit and other obligations of such Person to
pay the deferred purchase price of property or services;

                  (iv) all obligations of such Person as lessee under capital
leases;

                  (v) all debt of others secured by a lien on any asset of such
Person, whether or not such debt is assumed by such Person; and

                  (vi) all debt of others guaranteed by such Person.

         SECTION 1.14. ENVIRONMENTAL COMPLAINT shall mean any complaint, order,
citation or notice of violation of Environmental Laws with regard to air
emissions, water discharges, surface contamination, noise emissions or any other

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environmental, health or safety matter affecting the Borrower or any of its real
properties.

         SECTION 1.15. ENVIRONMENTAL LAWS means and includes the comprehensive
Environmental Response, Conservation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Toxic Substances Control Act, as
amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any
other "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
Hazardous Materials, as now or at any time hereafter in effect.

         SECTION 1.16. ENVIRONMENTAL AND SAFETY REQUIREMENTS shall mean any and
all Environmental Laws and any other federal, state and local laws relating to
public health and safety, worker health and safety, and pollution or protection
of the environment, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of toxic or otherwise hazardous
materials, substances, or wastes into ambient air, surface water, groundwater,
subsurface soil or lands or otherwise relating to generation, the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of toxic or otherwise hazardous materials, substances or wastes.

         SECTION 1.17. EVENT OF DEFAULT shall mean an Event of Default under
Section 6.01.

                                       4
<PAGE>

         SECTION 1.18. EXCHANGE ACT shall mean the Securities Exchange Act of
1934, as amended from time to time.

         SECTION 1.19. HAZARDOUS DISCHARGE shall mean the happening of any event
involving the generation, use, spill, discharge or storage, disposal or cleanup
of any Hazardous Materials not in compliance with Environmental Laws.

         SECTION 1.20. HAZARDOUS MATERIAL shall mean any pollutant, contaminant,
toxic substance, hazardous waste, hazardous material, hazardous substance,
petroleum or petroleum product, asbestos, polychlorinated biphenyls, underground
storage tanks and the contents thereof including, without limitation, any such
materials defined in or regulated pursuant to the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response, Conservation
and Liability Act, as amended, the Federal Clean Water Act as amended, the Toxic
Substances Control Act, as amended, Chapter 51 of Title 49 of the United States
Code, as amended (49 U.S.C. ss.5101, et seq.), or any other Environmental Law,
whether existing as of the date hereof, previously enforced, or subsequently
enacted.

         SECTION 1.21. IEP shall mean IEP Pharmaceutical Devices, Inc., a
Florida corporation which is a wholly owned subsidiary of Borrower.

         SECTION 1.22. IEP AMENDED AND RESTATED SUBSIDIARY GUARANTY shall mean
the Amended and Restated Guaranty of even date herewith granted by IEP to Lender
guaranteeing repayment of the Note, the Supplemental Credit Facility Note and
the Standby Facility Note.

                                       5
<PAGE>

         SECTION 1.23. IEP AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT
shall mean the IEP Amended and Restated Subsidiary Security Agreement of even
date herewith granted by IEP to Lender as collateral security for the IEP
Amended and Restated Subsidiary Guaranty.

         SECTION 1.24. LOAN shall mean the loan made pursuant to Section 2.01
and the Note.

         SECTION 1.25. LOAN DOCUMENTS shall mean this Agreement, the Note, the
Third Amended and Restated Registration Rights Agreement, the Second Amended and
Restated Security Agreement, the Second Amended and Restated Patent Security
Agreement, the Second Amended and Restated Stock Pledge Agreement, the ATI
Second Amended and Restated Subsidiary Guaranty, the ATI Second Amended and
Restated Subsidiary Security Agreement, the ATI Amended and Restated Stock
Pledge Agreement the IEP Amended and Restated Subsidiary Guaranty, the IEP
Amended and Restated Subsidiary Security Agreement, the UCC-1 financing
statement(s) filed in connection with the security agreements, the Warrant, and
each and every other document executed or delivered in connection with the
closing of this transaction, each such document being referred to individually
as a "Loan Document".

         SECTION 1.26. MATURITY DATE shall mean June 30, 2008.

         SECTION 1.27. MERCK shall mean Merck KGaA, an entity organized under
German law and registered in the commercial registry of the local court of
Darmstadt under HRB 6164.

                                       6
<PAGE>

         SECTION 1.28. MERCK LETTER OF CREDIT shall mean the Irrevocable Standby
Letter of Credit, number SM200686W, issued by Wachovia Bank, National
Association to Merck, as required to be maintained by Borrower in favor of Merck
pursuant to the terms of the Merck License Agreement.
         SECTION 1.29. MERCK LICENSE AGREEMENT shall mean that certain
Distribution, Patent & Trademark License, Marketing and Supply Agreement dated
October 23, 2002, by and between Borrower and Merck.

         SECTION 1.30. NOTE shall mean the promissory note referred to in
Section 2.01, substantially in the form of EXHIBIT I attached hereto and made a
part hereof.

         SECTION 1.31. PERMISSIBLE EQUIPMENT FINANCING INDEBTEDNESS shall mean
Debt incurred for equipment financing in the ordinary course of business (i) in
an amount not in excess of $250,000.00 in the aggregate for any one transaction,
or (ii) for the lease or purchase of automobiles for use by employees. For the
purpose of defining a transaction, all equipment orders from the same vendor or
affiliated vendors made within a 30 day period for a group of similar or
interrelated items shall constitute one transaction.

         SECTION 1.32. PERMISSIBLE LETTER OF CREDIT INDEBTEDNESS shall mean Debt
incurred for the procurement of letters of credit (standby or documentary) in
the ordinary course of business in an amount not in excess of $18,000,000 in the
aggregate for all transactions at any one time, which amount shall be reduced

                                       7
<PAGE>

from time to time in the same amount as the Merck Letter of Credit is reduced
pursuant to the Merck License Agreement.

         SECTION 1.33. PERSON means any individual, joint venture, corporation,
company, limited liability company, voluntary association, partnership, limited
partnership, limited liability partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity.

         SECTION 1.34. RELATED COMPANY OR RELATED COMPANIES shall mean (i) any
direct or indirect subsidiary of Borrower; (ii) Kos Investments, Inc., a
Delaware corporation, and all successors thereto; and/or (iii) Kos Holdings,
Inc., a Delaware corporation, and all successors thereto.

         SECTION 1.35. RELATED PERSON OR RELATED PERSONS shall mean any
stockholder of Kos Investments, Inc., a Delaware corporation, existing as of the
date of this Agreement.

         SECTION 1.36. REQUEST NOTICE shall mean a notice requesting an Advance
pursuant to Section 2.02 below, which notice shall be in the form and substance
attached hereto as EXHIBIT III hereto.

         SECTION 1.37. SECOND AMENDED AND RESTATED PATENT SECURITY AGREEMENT
shall mean the Second Amended and Restated Patent, Trademark and License
Security Agreement of even date herewith granted by Borrower to Lender as
collateral security for the Note, the Supplemental Credit Facility Note and the
Standby Facility Note.

                                       8
<PAGE>

         SECTION 1.38. SECOND AMENDED AND RESTATED SECURITY AGREEMENT shall mean
the Second Amended and Restated Security Agreement of even date herewith granted
by Borrower to Lender as collateral security for the Note, the Supplemental
Credit Facility Note and the Standby Facility Note.

         SECTION 1.39. SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT shall
mean the Second Amended and Restated Stock Pledge Agreement of even date
herewith granted by the Borrower to Lender as collateral security for the Note,
the Supplemental Credit Facility Note and the Standby Facility Note.

         SECTION 1.40. SECURITIES ACT shall mean the Securities Act of 1933, as
amended from time to time.

         SECTION 1.41. STANDBY Facility shall mean the $50,000,000 revolving
credit facility made available by the Lender pursuant to the Standby Facility
Note and the Standby Facility Credit Agreement.

         SECTION 1.42. STANDBY FACILITY CREDIT AGREEMENT shall mean that certain
$50,000,000 Revolving Credit and Loan Agreement between Borrower and Lender
dated as of December 21, 1999.

         SECTION 1.43. STANDBY FACILITY NOTE shall mean that certain Promissory
Note by Borrower in favor of Lender dated as of December 21, 1999 in the
principal amount of $50,000,000.

         SECTION 1.44. SUBSIDIARIES shall mean ATI and IEP.

                                       9
<PAGE>

         SECTION 1.45. SUPPLEMENTAL CREDIT AGREEMENT shall mean that certain
$50,000,000 Revolving Credit and Loan Agreement between Borrower and Lender
dated as of September 1, 1999.

         SECTION 1.46. SUPPLEMENTAL CREDIT FACILITY shall mean the $50,000,000
revolving credit facility made available by the Lender pursuant to the
Supplemental Credit Facility Note and the Supplemental Credit Agreement, as
amended by the Supplemental Credit Facility Amendments.

         SECTION 1.47. SUPPLEMENTAL CREDIT FACILITY AMENDMENTS shall mean that
certain Amendment Agreement dated as of July 21, 2001, between Borrower and
Michael Jaharis and Mary Jaharis, pursuant to which the Supplemental Credit
Facility Note was replaced by two separate notes, one note from Borrower to
Michael Jaharis in the amount of $25,000,000 and one note from Borrower to Mary
Jaharis in the amount of $25,000,000 (the "Mary Jaharis Note"), and as further
amended by that certain Amendment Agreement dated as of December 17, 2001,
between Borrower and Wilson Point Holdings, LP, a Delaware limited partnership
("Wilson Point"), pursuant to which the Mary Jaharis Note was replaced by a note
from Borrower to Wilson Point in the amount of $25,000,000.

         SECTION 1.48. SUPPLEMENTAL CREDIT FACILITY NOTE shall mean that certain
Promissory Note by Borrower in favor of Lender dated as of September 1, 1999 in
the principal amount of $50,000,000.

         SECTION 1.49. TAKE-OVER ATTEMPT shall mean any of the following
occurrences:

                                       10
<PAGE>

                  (a) Any person (other than a Related Company or a Related
Person) shall have acquired beneficial ownership or the right to acquire
beneficial ownership of securities representing 20% or more of the aggregate
voting power of Borrower or any Related Company (the term "beneficial ownership"
for purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act, and the rules and regulations thereunder); or

                  (b) Any person shall have engaged in an Acquisition
Transaction.

         SECTION 1.50. TERMINATION DATE shall mean June 30, 2008.

         SECTION 1.51. THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
shall mean the Third Amended and Restated Registration Rights Agreement of even
date herewith entered into by Borrower in favor of Lender with respect to the
Common Stock to be issued upon exercise of warrants issued to Lender pursuant to
the Warrant or upon conversion of the Supplemental Credit Facility Note pursuant
to Article IV of the Supplemental Credit Agreement.
         SECTION 1.52. WARRANT shall mean that certain Non-Detachable Common
Stock Purchase Warrant to purchase one million shares of Common Stock on the
terms set forth in EXHIBIT II hereto.

                                   ARTICLE II
                                    THE LOAN

         SECTION 2.01. THE LOAN. The Lender agrees, on the terms and conditions
hereinafter set forth, to make a Loan to the Borrower in an amount not to exceed
Thirty Million Dollars ($30,000,000.00) on the terms and conditions set forth
herein and in the Note.

                                       11
<PAGE>

         SECTION 2.02. MAKING ADVANCES.

                  (a) Upon the terms and subject to the conditions herein set
forth, the Lender shall from time to time make Advances to the Borrower under
the Loan up to an aggregate principal amount at any one time outstanding not to
exceed an amount equal to the Additional Standby Facility. Any sums advanced
pursuant to this Section and subsequently repaid may be re-borrowed from time to
time, subject to the requirements of Section 2.02.

                  (b) Borrower may use loan proceeds for any business purpose of
Borrower.

                  (c) Nothing herein shall obligate the Lender to make any
Advance in excess of the maximum amount of the Additional Standby Facility, the
making of any or all Advances in excess of the maximum amount of the Additional
Standby Facility to be in the sole and absolute discretion of the Lender. If at
any time an excess shall exist for any reason other than as specifically
authorized by Lender, the Borrower shall repay to the Lender forthwith, without
notice or demand, such amount as shall be necessary to eliminate such excess.

                  (d) The Borrower shall give the Lender written or telegraphic
notice of its request for an Advance by submitting a Request Notice at least
three (3) Business Days prior to the requested date of the Advance. Each Request
Notice shall specify the date and the amount of the requested Advance. Each
Advance shall be in the minimum amount of $5,000.00 and in integral multiples of
$1,000.00. The Lender shall make each Advance in immediately available funds by

                                       12
<PAGE>

wire transfer to a deposit account designated by Borrower at its financial
institution, as soon as practicable, but in no event later than three (3)
Business Days following the receipt by Lender of a Request Notice.

                  (e) The Lender shall not be obligated to make Advances
aggregating in excess of $12,000,000 during any fiscal quarter of Borrower.

         SECTION 2.03. TERMINATION OF ADVANCES. Except as otherwise provided in
this Agreement, the provisions of Section 2.02 relating to the making of
Advances under the Note shall remain in effect until the Termination Date, and
shall be terminated at such time unless otherwise renewed or extended by the
Lender. Notwithstanding any such termination, and subject to Lender's right to
exercise its rights and remedies under the Loan Documents upon the occurrence of
an Event of Default or otherwise, all of the provisions of this Loan Agreement
shall remain in effect while any part of the Loan remains outstanding, such
termination affecting only those provisions relating to the making of Advances.
All obligations of the Borrower in respect of the Note shall become due and
payable on the Maturity Date, without notice or demand.

         SECTION 2.04. EXCESS ADVANCES. Any Advances made at any time during the
term of the Loan by the Lender to the Borrower in excess of the face amount of
the Note shall, while outstanding, be deemed part of the indebtedness of
Borrower owed to the Lender under the Note and shall be equally subject to all
of the terms and provisions of this Agreement and the Loan Documents. Any

                                       13
<PAGE>

reference in any Loan Documents to the indebtedness or amounts owed under this
Agreement and the Note is hereby deemed to include such excess Advances.

         SECTION 2.05. INCREASE IN LOAN AMOUNT. The amount of the Loan may be
increased from time to time by the execution and delivery of an amendment to
this Agreement setting forth the amount of such increase, duly executed by the
Lender and the Borrower, and the execution and delivery by the Borrower of a
note in substantially the form of EXHIBIT I attached hereto in the principal
amount of such increase. Upon execution and delivery of any such note, any
reference to the term "Loan Documents" herein or in any Loan Document shall be
deemed to include reference to such note.

         SECTION 2.06. PAYMENTS AND COMPUTATIONS. The Borrower shall make each
payment under any Loan Document not later than 3:00 p.m. (New York City time) on
the day when due in lawful money of the United States of America to the Lender
at its address referred to in Section 8.02 in immediately available funds. All
computations of interest under the Note shall be made by the Lender on the basis
of a 360-day year, for the actual number of days (including the first day but
excluding the last day) elapsed.

         SECTION 2.07. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder or under the Note shall be stated to be due on a day which is not
a Business Day, such payment may be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest.

                                       14
<PAGE>

         SECTION 2.08. TERMINATION OF Additional Standby FACILITY. The Lender's
obligation to make available to the Borrower the Additional Standby Facility and
to make Advances thereunder shall terminate, at the Lender's option, upon the
occurrence of any of the following events:

                  (i) termination of the availability of the Additional Standby
         Facility pursuant to Section 2.03; or

                  (ii) an Event of Default.

         SECTION 2.09. TERMINATION OF CREDIT FACILITY. The Credit Facility is
hereby terminated.

                                   ARTICLE III
                              CONDITIONS OF LENDING

         SECTION 3.01. CONDITIONS PRECEDENT TO CLOSING. The obligation of the
Lender to close the Loan and make any Advances hereunder at closing shall be
subject to the condition precedent that the Lender shall have received on or
before the Closing Date the following, each dated the Closing Date, in form and
substance satisfactory to the Lender:

                  (a) The Note, duly executed by the Borrower;

                  (b) The Third Amended and Restated Registration Rights
Agreement, duly executed by the Borrower;

                  (c) The Second Amended and Restated Security Agreement, duly
executed by the Borrower;

                  (d) The Second Amended and Restated Patent Security Agreement,
duly executed by the Borrower;

                                       15
<PAGE>

                  (e) The Second Amended and Restated Stock Pledge Agreement,
duly executed by the Borrower;

                  (f) The ATI Second Amended and Restated Subsidiary Guaranty,
duly executed by ATI;

                  (g) The ATI Second Amended and Restated Subsidiary Security
Agreement, duly executed by ATI;

                  (h) The ATI Amended and Restated Stock Pledge Agreement, duly
executed by ATI;

                  (i) The IEP Amended and Restated Subsidiary Guaranty, duly
executed by IEP;

                  (j) The IEP Amended and Restated Subsidiary Security
Agreement, duly executed by IEP;

                  (k) UCC-1 financing statements with respect to the security
interests granted to Lender by IEP under the Loan Documents for such locations
as the Lender may deem necessary to perfect the Lender's security interests,
duly executed by IEP;

                  (l) The Warrant, duly executed by the Borrower;

                  (m) A conditional assignment of Borrower's lease(s) of real
property, together with a written consent to such assignment from Borrower's
landlord(s) and a written waiver by such landlord(s) of certain rights of
landlord under its lease(s) in furtherance of the exercise by Lender of its
rights under the Amended and Restated Security Agreement, all in form and
substance satisfactory to Lender;

                                       16
<PAGE>

                  (n) A binder of an endorsement to Borrower's fire, hazard and
extended coverage insurance policy (with a long form endorsement) with respect
to the assets given as collateral pursuant to the Second Amended and Restated
Security Agreement showing the Lender as loss payee in form satisfactory to the
Lender and to Borrower's comprehensive liability policy (with a long form
endorsement) and Borrower's product liability policy (with a long form
endorsement) with respect to Borrower's business showing the Lender as an
additional insured under such policy;

                  (o) A binder of an endorsement to business interruption
coverage insurance policy (with a long form endorsement) with respect to
Borrower's business showing the Lender as loss payee in form satisfactory to the
Lender;

                  (p) A certified copy of the resolutions of the board of
directors of the Borrower approving this transaction in the form attached as
EXHIBIT IV;

                  (q) A certificate of the secretary or an assistant secretary
of the Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign each Loan Document to which it is a party and the
other documents to be delivered by it hereunder;

                  (r) Copies of consents of third parties necessary for the
consummation of this transaction;

                  (s) A favorable opinion of counsel for the Borrower, in
substantially the form of EXHIBIT V and as to such other matters as the Lender
may reasonably request; and

                                       17
<PAGE>

                  (t) Such other documents and information as the Lender may
reasonably request.

         SECTION 3.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of the
Lender to make any Advances under the Note is subject to the condition precedent
that the Lender shall have received at least three Business Days before the date
of such Advance, in form and substance satisfactory to the Lender:

                  (a) A Request Notice, the representations and warranties
contained within which shall be true and accurate as of the date of the Advance
being requested;

                   (b) The representations and warranties contained in Section
4.0l below shall be true and correct in all material respects on and as of the
date of such requested Advance as though made on and as of such date;

                   (c) As of the date of such requested Advance, no event shall
have occurred and be continuing, or would result from the Advance requested
thereby, which would constitute an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse, or both;

                   (d) As of the date of such requested Advance, there shall not
have occurred any material adverse change in the business or financial
operations or condition of the Borrower or in its management;

                   (e) As of the date of such requested Advance, all loan
proceeds available under the Supplemental Credit Facility shall have been
advanced to Borrower and shall remain outstanding, except to the extent that any

                                       18
<PAGE>

portion of the outstanding balance under the Supplemental Credit Facility is
converted into shares of Common Stock pursuant to the terms of the Supplemental
Credit Facility Note and the Supplemental Credit Facility Credit Agreement.

                   (f) As of the date of such requested Advance, there shall not
be any pending, or to the best of its knowledge, threatened action or proceeding
affecting the Borrower before any court, governmental agency or arbitrator which
is likely to have a materially adverse effect on the financial condition or
operations of the Borrower;

                   (g) The Borrower shall waive any claim or defense based upon
the occurrence of any action or inaction of Lender on or prior to the date of
such requested Advance which Borrower believes at such time may (i) be
actionable against Lender, or (ii) give rise to a defense to payment under the
Loan Agreement or the Note for any reason, including without limitation,
commission of a tort or violation of any contractual duty or duty implied at
law;

                  (h) As of the date of such requested Advance, the death of
Lender shall not have occurred;

                  (i) The Lender, together with Lender's spouse and children and
any entity of which Lender or Lender's spouse owns a majority interest, shall
continue to own directly and indirectly at least forty percent (40%) of the
outstanding shares of Common Stock of the Borrower; and

                  (j) Such approvals, opinions and documents as the Lender may
reasonably request.

                                       19
<PAGE>

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

         SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Except as
otherwise disclosed in a schedule or schedules attached hereto and made a part
hereof, the Borrower represents and warrants as follows:

                  (a) The Borrower is a corporation duly incorporated, validly
existing and its status is active under the laws of the State of Florida, has
the requisite power and authority to own its properties and assets and to carry
on its business as now conducted, and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
failure to so qualify would have a material adverse effect on the transaction
contemplated hereby.

                  (b) The authorized capital stock of the Borrower consists
exclusively of (A) 50,000,000 shares of Common Stock, par value $.01 per share,
of which 20,717,304 shares are issued and outstanding as of November 8, 2002,
and (B) 10,000,000 shares of preferred stock, par value $.01 per share, of which
no shares are issued and outstanding. All issued and outstanding shares of the
capital stock of the Borrower and of each of its subsidiaries have been fully
paid, were duly authorized and validly issued, are nonasesssable and have been
issued pursuant to an effective registration statement under the Securities Act
or an appropriate exemption from registration under the Securities Act and were
not issued in violation of the preemptive rights of any shareholder.

                  (c) The execution, delivery and performance by the Borrower of
this Agreement, the Note and each other Loan Document to which the Borrower is a

                                       20
<PAGE>

party have been duly authorized by all necessary corporate action and do not and
will not:

                           (i) require any consent or approval of the
         share-holders of the Borrower not already obtained;

                           (ii) contravene the Borrower's governing documents;

                           (iii) violate any provision of any law, rule,
         regulation (including, without limitation, Regulation X of the Board of
         Governors of the Federal Reserve System), order, writ, judgment,
         injunction, decree, determination or award presently in effect having
         applicability to the Borrower;

                           (iv) result in a breach of or constitute a default
         under any indenture or loan or credit agreement or any other agreement,
         lease or instrument to which the Borrower is a party or by which it or
         its properties may be bound or affected; or

                           (v) result in, or require, the creation or imposition
          of any mortgage, deed of trust, pledge, lien, security interest or
          other charge or encumbrance of any nature (other than arising under a
          Loan Document) upon or with respect to any of the properties now owned
          or hereafter acquired by the Borrower;

and the Borrower is not in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.

                                       21
<PAGE>

                  (d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of any
Loan Document to which it is or will be a party.

                  (e) This Agreement is, and each other Loan Document to which
the Borrower will be a party when delivered hereunder will be, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, and there has not occurred any action or
inaction of Lender which Borrower believes may (i) be actionable against Lender,
or (ii) give rise to a defense, to payment hereunder or under the Note, the
Supplemental Credit Facility Note or the Standby Facility Note for any reason,
including without limitation, commission of a tort or violation of any
contractual duty or duty implied at law.

                  (f) The consolidated balance sheet of the Borrower as of
December 31, 2001, and the related consolidated statements of operations,
shareholders' equity and cash flows for the fiscal year then ended, audited by
Arthur Andersen, LLP and the consolidated balance sheet of the Borrower as of
September 30, 2002, and the related consolidated statements of operations,
shareholders' equity and cash flows for the quarter then ended, copies of which
have been furnished to the Lender, fairly present the financial condition of the
Borrower as at such date and its results of operations for the year then ended

                                       22
<PAGE>

in accordance with generally accepted accounting principles, consistently
applied, and since December 31, 2001 and September 30, 2002, there has been no
material adverse change in such condition or operations.

                  (g) There is no pending, or to the best of its knowledge,
threatened action or proceeding affecting the Borrower before any court,
governmental agency or arbitrator which may materially adversely affect the
financial condition or operations of the Borrower.

                  (h) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of the Loan will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.

                  (i) There are no recorded and/or perfected mortgages, deeds of
trust, liens, security interests or, to the best of its knowledge, other charges
and encumbrances (including liens or the retained titles of conditional vendors)
of any nature whatsoever on any properties of the Borrower other than those
permitted under Section 5.02(a) hereof.

                  (j) The Borrower has filed all tax returns (federal, state and
local) required to be filed and has paid all taxes shown thereon to be due,
including interest and penalties, or provided adequate reserves for payment
thereof.

                  (k) ENVIRONMENTAL MATTERS.

                           (i) The Borrower has obtained all material permits,
          licenses and other authorizations required under Environmental and
          Safety Requirements, except for any licenses, permits or
          authorizations the failure to obtain which would not reasonably be

                                       23
<PAGE>

          expected to have a material adverse effect on the operations or
          financial condition of the Company.

                           (ii) The Borrower is in material compliance with all
          material terms and conditions of any required material permits,
          licenses, and authorizations and with all other material limitations,
          restrictions, conditions, standards, prohibitions, requirements,
          obligations, schedules and timetables contained in any Environmental
          and Safety Requirements or any notice or demand letters issued,
          entered, promulgated or approved thereunder, except where the failure
          to so comply would not reasonably be expected to have a material
          adverse effect on the operations or financial condition of Borrower.

                           (iii) The Borrower has not received any material
          written notice, demand, complaint, or order from any governmental
          authority or private party relating to material environmental
          impairments or liabilities with respect to the operation of its
          businesses or any of its real properties or advising the Borrower that
          it is potentially responsible for material response costs or
          remediation with respect to a release or threatened release of
          Hazardous Materials, any of which, if adversely resolved, would
          reasonably be expected to have a material adverse effect on the
          operations or financial condition of the Borrower.

                                       24
<PAGE>

                           (iv) None of the real property owned or leased by the
          Borrower is subject to a private or governmental lien arising under
          Environmental Laws.

                  (l) No information, exhibit or report furnished by the
Borrower to the Lender in connection with the negotiation of this Agreement or
any other Loan Document or any representations and warranties herein, to the
best of Borrower's knowledge, contains or contained any material misstatement of
fact or omitted to state a material fact necessary to make the statements
contained therein not misleading. Borrower acknowledges that the Lender is
relying upon these representations and warranties in making the loan
contemplated herein.
                                    ARTICLE V
                            COVENANTS OF THE BORROWER

         SECTION 5.01. AFFIRMATIVE COVENANTS. So long as the Note shall remain
unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:

                  (a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith.

                  (b) MAINTENANCE OF INSURANCE. Maintain insurance with
responsible and reputable insurance companies or associations in such amounts
and covering such risks as is usually carried by companies engaged in similar

                                       25
<PAGE>

businesses and owning similar properties in the same general areas in which the
Borrower operates.

                  (c) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve all
of its properties, necessary or useful in the proper conduct of its business, in
good working order and condition, ordinary wear and tear excepted.

                  (d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. 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 Borrower.

                  (e) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is necessary in
view of its business and operations or the ownership of its properties and in
which the failure to qualify would have a material adverse effect on Borrower's
business or prospects.

                  (f) ACCESS TO RECORDS. At any reasonable time and from time to
time, upon at least three days' oral or written notice (unless the Borrower is
in default, in which case no notice shall be necessary), permit the Lender or
any agents or representatives thereof during normal business hours to examine
and at Borrower's expense make copies of and abstracts from the records and
books of account of, and to visit the properties of, the Borrower and to discuss
the affairs, finances and accounts of the Borrower with any of its officers or
directors; provided, however, that prior to the occurrence of an Event of
Default no such actions by the Lender shall be taken in a manner that would
disrupt Borrower in the conduct of its business. Until such time as Lender
enforces its rights and exercises it remedies upon or after an Event of Default,
Lender shall keep confidential any information which it obtains in the course of

                                       26
<PAGE>

such examination and investigation and shall not disclose such information to
anyone other than agents, representatives and advisors of Lender, except that
this obligation to keep information confidential shall not apply to information
that (i) is already in Lender's possession, provided that such information is
not known by Lender to be subject to another confidentiality agreement with or
other obligation of secrecy to the Borrower or another party, (ii) becomes
generally available to the public other than as a result of a disclosure by
Lender or Lender's agents, representatives or advisors or (iii) becomes
available to Lender on a nonconfidential basis from a source other than the
Borrower or its advisors, provided that such source is not known by Lender to be
bound by a confidentiality agreement with or other obligation of secrecy to the
Borrower or another party.

                  (g) REPORTING REQUIREMENTS. Furnish to the Lender:

                           (i) as soon as available and in any event within
          forty-five (45) days after the end of each quarter of each fiscal year
          of the Borrower other than the fourth quarter, a consolidated balance
          sheet of the Borrower as of the end of such quarter and the related
          consolidated statements of operations and cash flows for the period
          commencing at the end of the previous fiscal year and ending with the
          end of such quarter, certified as to fairness of presentation,
          generally accepted accounting principles and consistency by the chief

                                       27
<PAGE>

          accounting officer of the Borrower, together with a certificate of
          such chief accounting officer stating that as of the date of such
          certificate there is no continuing Event of Default or event which,
          with notice or lapse of time or both, would constitute an Event of
          Default, or, if an Event of Default or such an event has occurred and
          is continuing, a statement as to the nature thereof and the action
          which the Borrower has taken or proposes to take with respect thereto;

                           (ii) as soon as available and in any event within
          ninety (90) days after the end of each fiscal year of the Borrower, a
          consolidated balance sheet of the Borrower as of the end of such
          fiscal year and the related consolidated statements of operations,
          shareholders' equity and cash flows for such fiscal year, certified
          without material qualification by the Company's independent public
          accountants acceptable to the Lender, which shall be one of the six
          largest national public accounting firms;

                           (iii) as soon as possible and in any event within
          five (5) days after the Borrower has knowledge of the occurrence of
          each Event of Default, continuing on the date of such statement, the
          statement of the chief accounting officer of the Borrower setting
          forth details of such Event of Default or event and the action which
          the Borrower has taken or proposes to take with respect thereto;

                                       28
<PAGE>

                           (iv) as soon as available, and in any event within
          five (5) days thereafter, notification of any proposed or pending
          change of executive officers of the Borrower (as defined in the rules
          and regulations of the Securities and Exchange Commission);

                           (v) promptly after the commencement thereof, notice
          of all actions, suits and proceedings before any court or governmental
          department, commission, board, bureau, agency or instrumentality,
          domestic or foreign, affecting the Borrower of the type described in
          Section 4.01(g) hereof;

                           (vi) promptly after the furnishing thereof, copies of
          any statement or report furnished to any financial institution or
          other lender pursuant to the terms of any loan or credit or similar
          agreement and not otherwise required to be furnished to the Lender
          pursuant to any other clause of this subsection (g);

                           (vii) as soon as available, and in any event within
          five (5) days thereafter, notification of (A) any bona fide proposal
          to Borrower or its shareholders, by public announcement or written
          communication that is or becomes the subject of public disclosure, to
          engage in an Acquisition Transaction, or (B) the commencement (as such
          term is defined in Rule 14d-2 under the Exchange Act) of, or the
          filing of a registration statement under the Securities Act with
          respect to, a tender offer or exchange offer to purchase any shares of
          Common Stock such that, upon consummation of such offer, such person
          would own or control securities representing 10% or more of the

                                       29
<PAGE>

          aggregate voting power of Borrower or any Related Company;

                           (viii) simultaneously therewith, a copy of any notice
          given by Borrower to Merck pursuant to Section 11.6(a) of the Merck
          License Agreement;

                          (ix) immediately upon the occurrence thereof, notice
         of the occurrence of a "Change of Control" or "Insolvency Event", as
         such terms are defined in the Merck License Agreement; and

                           (x) such other information respecting the condition
          or operations, financial or otherwise, of the Borrower as the Lender
          may from time to time reasonably request.

         SECTION 5.02. NEGATIVE COVENANTS. So long as the Note shall remain
unpaid, the Borrower will not, without the written consent of the Lender:

                  (a) LIENS, ETC. Create or suffer to exist any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign any right to receive income, in each case to
secure any Debt of any Person, except that the foregoing restrictions shall not
apply to mortgages, deeds of trust, pledges, liens, security interests or other
charges or encumbrances:

                           (i) existing as of the date hereof and listed in
         SCHEDULE A attached hereto and made a part hereof;

                                       30
<PAGE>

                           (ii) for taxes, assessments or governmental charges
          or levies on property of the Borrower if the same shall not at the
          time be delinquent or thereafter can be paid without penalty, or are
          being contested in good faith and by appropriate proceedings;

                           (iii) imposed by law, such as carriers, landlord's,
          warehousemen's and mechanics' liens and other similar liens arising in
          the ordinary course of business;

                           (iv) arising out of pledges or deposits under
          workmen's compensation laws, unemployment insurance, old age pensions,
          or other social security or retirement benefits, or similar
          legislation; or

                           (v) securing Permissible Equipment Financing
         Indebtedness or Permissible Letter of Credit Indebtedness.

                  (b) DEBT. Create or suffer to exist any Debt, except:

                           (i) Debt existing as of the date hereof and listed in
         SCHEDULE A attached hereto;

                           (ii) Debt under the Loan Documents;

                           (iii) Permissible Equipment Financing Indebtedness

                           (iv) Permissible Letter of Credit Indebtedness
         (including without limitation the Letter of Credit Agreement dated July
         17, 1998 with Wachovia Bank, formerly known as First Union National
         Bank, as amended by that certain First Amendment to Letter of Credit
         Agreement dated as of November 14, 2002, provided that the indebtedness

                                       31
<PAGE>

         thereunder shall at no time exceed the Permissible Letter of Credit
         Indebtedness amount); and

                           (v) Debt authorized under subsection 5.02(c).

                  (c) ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Assume, guarantee, endorse or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor or otherwise to assure the creditor against loss)
in connection with any Debt or indebtedness, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.

                  (d) LOANS AND INVESTMENTS. Lend or advance money, credit or
property to any Person or invest (by capital contribution or otherwise) in any
Person, or purchase or repurchase of the stock or indebtedness or all or a
substantial part of the assets or properties of any Person, or agree to do any
of the foregoing, except for:

                           (i) direct obligations of, or obligations the
         principal of and interest on which are unconditionally guaranteed by,
         the United States of America and which mature within one year from the
         date of acquisition thereof;

                           (ii) investments in commercial paper of any
         corporation with a maturity not in excess of thirty days from the date

                                       32
<PAGE>

         of acquisition thereof and rated P-1 or better by Moody's Investors
         services Inc., or A-1 or better by Standard & Poor's Corporation;

                           (iii) investments in certificates of deposit with a
          maturity not in excess of ninety days from the date of acquisition
          thereof, issued by any commercial bank organized and existing under
          the laws of the United States of America or under any state of the
          United States of America and having a combined capital and undivided
          surplus of not less than $100,000,000, provided, however, that
          certificates of deposit at any one bank shall at no time exceed ten
          percent (10%) of the undivided capital and surplus of such bank;

                           (iv) accounts receivable owing to the Borrower, if
          created or acquired in the ordinary course of business in connection
          with the sale by the Borrower of inventory and payable or
          dischargeable in accordance with customary trade terms; commission
          advances and other advances to officers and employees for travel and
          other business-related expenses, each in the ordinary course of
          business; and

                           (v) Loans and advances in each instance in an amount
          of not more than $10,000 and in the aggregate with respect to such
          loans and advances in an amount of not more than $100,000.

                  (e) MERGERS, ETC. Merge or consolidate with any Person in a
transaction after which the holders of voting shares of Borrower (or of any
class of voting shares of Borrower) immediately prior to such transaction fail

                                       33
<PAGE>

to own at least a majority of the voting shares of the surviving entity (or of
the shares of such class of voting shares of the surviving entity) following
such transaction.

                  (f) SALES, ETC. OF ASSETS. Sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions)
substantially all of its assets (whether now owned or hereafter acquired), or of
substantially all of the assets of any direct or indirect subsidiary of
Borrower, to an unaffiliated Person.

                  (g) CHANGE IN BOARD CONTROL. Enter into a transaction after
which the members of the board of directors of Borrower immediately prior to
such transaction fail to constitute at least a majority of the board of
directors of the surviving entity following such transaction.

                  (h) CHANGE IN NATURE OF BUSINESS. Make any material change in
the nature of the business of the Borrower, taken as a whole, as carried on at
the date hereof.

                  (i) PURCHASE OF SECURITIES. Purchase, acquire, redeem or
retire, or make any commitment to purchase, acquire, redeem or retire, any of
its capital stock, whether now or hereafter outstanding.

                  (j) ISSUANCE OF SECURITIES. Issue any stock or other
securities in addition to, in substitution for or in respect of its currently
outstanding capital stock, or raise capital or funds from the capital markets in
consideration for the present or future issuance of any form of securities of
the Borrower; provided however, that the foregoing shall not prohibit, restrict
or otherwise limit Borrower's ability to issue its securities (i) pursuant to
the exercise or conversion of currently outstanding options, warrants or
convertible securities, (ii) in connection with the compensation of its
officers, directors and/or employees or pursuant to any of Borrower's employee
benefit plans, including without limitation, the Kos Pharmaceuticals, Inc. 1996

                                       34
<PAGE>

Stock Option Plan, the Kos Pharmaceuticals, Inc. Employee Stock Purchase Plan,
and the Kos Pharmaceuticals, Inc. 401(k) Plan or (iii) to the extent such
securities are registered with the Securities and Exchange Commission for sale
under that certain Registration Statement on Form S-3 initially filed with the
Securities and Exchange Commission on August 31, 2001, as such Registration
Statement may be amended, supplemented or revised from time to time, including
any additional Registration Statement filed pursuant to Rule 462(b).

                  (k) PROHIBITED TRANSFERS. Transfer, in any manner, either
directly or indirectly, any cash, property, or other assets to any parent or any
of its affiliates or subsidiaries, other than sales made in the ordinary course
of business and for fair consideration on terms no less favorable than if such
sale had been an arms-length transaction between the Borrower and an
unaffiliated entity.

                  (l) CHARTER AMENDMENTS. Amend its articles or certificate of
incorporation without the prior written consent of Lender.

                  (m) MERCK LETTER OF CREDIT. Increase in amount, amend, extend
or renew the Merck Letter of Credit beyond the Termination Date (as defined in
the Merck Letter of Credit) or thereafter, and Borrower shall instruct Wachovia
Bank, National Association, to give any required notice under the Merck Letter

                                       35
<PAGE>

of Credit of non-renewal under the terms of the Merck Letter of Credit if
Lender's consent Is not granted.

                  (n) MERCK LICENSE AGREEMENT. Amend, renew or extend the Merck
License Agreement in any manner that would materially and adversely affect or
impair the interests of Jaharis under the Loan Documents.

                                   ARTICLE VI
                                EVENTS OF DEFAULT

         SECTION 6.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:

                  (a) The Borrower shall, unless the Lender otherwise consents
in writing, fail to pay any installment of principal of, or interest on, the
Note within ten (10) days after such payment is due; or

                  (b) Any representation or warranty made by the Borrower (or
any of its officers) under or in connection with any Loan Document or any other
document delivered in connection therewith shall prove to have been incorrect in
any material respect when made; or

                  (c) The Borrower shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document, or in any other
document delivered in connection therewith, on its part to be performed or
observed and, in the case of a term, covenant or agreement other than one
requiring payment of funds to Lender, any such failure shall remain unremedied
for thirty (30) days after written notice thereof shall have been given to such
Borrower by the Lender; provided, however, that if by the end of such thirty day

                                       36
<PAGE>

period the Borrower has substantially cured the applicable failure, and such
failure has not caused, and is not expected to immediately cause, a material
adverse effect on the Borrower or its subsidiaries, the Borrower shall have an
additional thirty (30) days to remedy the failure; or

                  (d) The Borrower shall:

                           (i) fail to pay any Debt of such Borrower to the
          Lender (excluding Debt evidenced by the Note), or any interest or
          premium thereon, when due (whether by scheduled maturity, required
          prepayment, acceleration, demand or otherwise) and such failure shall
          continue after the applicable grace period, if any, specified in the
          agreement or instrument relating to such Debt, or

                           (ii) fail to pay any other Debt in excess of
          $250,000.00 (excluding Debt owed to the Lender) of such Borrower, or
          any interest or premium thereon, when due (whether by scheduled
          maturity, required prepayment, acceleration, demand or otherwise) and
          such failure shall continue after the applicable grace period, if any,
          specified in the agreement or instrument relating to such Debt, or

                           (iii) fail to perform or observe any term, covenant
          or condition on its part to be performed or observed under any
          agreement or instrument relating to any Debt, when required to be
          performed or observed, and such failure shall continue after the
          applicable grace period, if any, specified in such agreement or
          instrument, if the effect of such failure to perform or observe is to
          accelerate (or, in the case of Debt owed to Lender, is to entitle

                                       37
<PAGE>

          Lender to accelerate) the maturity of such Debt; or any such Debt
          shall be declared to be due and payable, or required to be prepaid
          (other than by a regularly scheduled required prepayment) prior to the
          stated maturity thereof; or

                  (e) The Borrower shall admit in writing its inability to pay
its debts, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, or other similar official for it or for any
substantial part of its property, which proceeding is not dismissed within
thirty (30) days after being instituted; or the Borrower shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or

                  (f) A non-appealable final judgment or order for the payment
of money shall be rendered against the Borrower to the extent to which such
judgment or order exceeds $250,000.00 (or, in the case of insurance coverage for
such payment, exceeds such insurance payment by $250,000.00); or

                  (g) Any provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on the Borrower which is a
party thereto, or the Borrower shall so state in writing; or

                                       38
<PAGE>

                  (h) Any material adverse change in the financial condition or
business operations of the Borrower shall occur and be continuing; or

                  (i) The dissolution or liquidation of the Borrower; or

                  (j) The occurrence of an Acquisition Transaction; or

                  (k) A Take-Over Attempt.

         SECTION 6.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, the Lender may, at its option, either separately or cumulatively:

                  (a) declare the Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Note, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower;

                  (b) exercise any or all of its rights or remedies permitted by
applicable law of a secured party under the Second Amended and Restated Security
Agreement or the Second Amended and Restated Patent Security Agreement;

                  (c) if such Event of Default occurs prior to the Termination
Date, notify the Borrower in writing of the termination of the making of
Advances under Section 2.02, upon which notification the Borrower shall no
longer be entitled to Advances under the Note; and

                  (d) exercise any or all of its rights or remedies permitted by
applicable law in any capacity under the Loan Documents or applicable law.

                                       39
<PAGE>

                                   ARTICLE VII
              INDEMNIFICATION AND LIMITATION ON LIABILITY OF LENDER

         SECTION 7.01. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, and recording of the Loan Documents, and the other documents
to be delivered under the Loan Documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of legal counsel for the Lender and
fees and out-of-pocket expenses of Lender's advisors with respect thereto, and
all costs and expenses, if any, including, without limitation, the reasonable
fees and out-of-pocket expenses of legal counsel for the Lender, in connection
with the enforcement of the Loan Documents and the other documents to be
delivered under the Loan Documents, the filing or recording of financing
statements and other documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, insurance premiums or
encumbrances, or in defending or prosecuting any actions or proceedings arising
out of or related to this Agreement or any other Loan Document or any
obligations of Borrower to the Lender and the amount of all claims in connection
therewith. In addition, the Borrower shall pay any and all documentary or
similar taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of the Loan Documents and the
other documents to be delivered under the Loan Documents, in connection with the
making of Advances and in connection with the issuance of Common Stock pursuant
to the exercise of any Warrants and the registration of such stock under the
securities laws, and agrees to save the Lender harmless from and against any and

                                       40
<PAGE>

all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.

         SECTION 7.02. GENERAL INDEMNIFICATION. Except as otherwise provided in
the Third Amended and Restated Registration Rights Agreement, Borrower hereby
agrees to defend the Lender and its officers, directors, agents, employees, and
counsel from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, interests, judgments, costs and expenses incurred
by any of them, including without limitation reasonable attorneys fees and
disbursements, arising out of or in connection with the making, administration,
or enforcement of the Loan or the execution of this Agreement or any other Loan
Document, other than as such may be caused by Lender's or such other Person's
willful misconduct. All obligations provided for in this Section 8.02 shall
survive any termination of this Agreement and any other Loan Document.

         SECTION 7.03. ENVIRONMENTAL INDEMNIFICATION.

                  (a) Borrower hereby agrees to defend the Lender and its
officers, directors, agents, employees, and counsel from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, interests,
judgments, costs (including without limitation cleanup costs) and expenses
incurred by any of them, including without limitation reasonable attorneys fees
and disbursements, arising out of or in connection with (i) the presence on or
under or the escape, seepage, leakage, spillage, discharge, emission,
discharging or release from, any real property owned or leased by the Borrower

                                       41
<PAGE>

of any Hazardous Materials caused by, or within the control of, the Borrower or
claims asserted or arising under any Environmental Laws, which may require the
remediation of such Hazardous Materials by the Borrower or the Lender or any
successors or assigns thereof, or (ii) any representation or warranty by the
Borrower contained in Section 4.01(k) being false or untrue in any material
respect.

                  (b) If the Borrower receives any written notice of (i) a
Hazardous Discharge affecting the Borrower or its real properties or (ii) an
Environmental Complaint from any Person, including, without limitation, the
United States Environmental Protection Agency or any agency, department or
authority of the State of Florida, then the Borrower will give, within ten (10)
Business Days, oral and written notice of same to the Lender.

                  (c) Without limitation of its rights under this Agreement, the
Lender shall have the right, but not the obligation after providing written
notice to Borrower and a reasonable opportunity for Borrower to respond, to
enter onto any of Borrower's real properties or in the event Borrower fails to
act or respond, to take such other reasonable actions as it deems reasonably
necessary or advisable to cleanup, remove, resolve or minimize the impact of, or
otherwise comply with Environmental Laws, or participate in such actions, in
coordination with Borrower for so long as no Event of Default exists, with
respect to any such Hazardous Discharge or Environmental Complaint upon its
receipt of any formal written notice from any Person, including, without
limitation, the United States Environmental Protection Agency, asserting the
existence of any Hazardous Discharge or Environmental Complaint on or pertaining

                                       42
<PAGE>

to any of the Borrower's real properties which, if true, could reasonably be
expected to result in an order, suit or other action against the Borrower
affecting any part of its real properties by any governmental agency or
otherwise and which could reasonably be expected to have a material adverse
effect on Borrower's operations or financial condition. All reasonable costs and
expenses incurred by the Lender in the exercise of any such rights herein shall
be payable by the Borrower upon demand, together with interest thereon at a rate
equal to the interest rate payable under the Note.

                  (d) The indemnity obligations of the Borrower under this
Section 7.03 shall survive payment of the Note.

         SECTION 7.04. LIMITATION ON LIABILITY OF LENDER. The Borrower hereby
waives any claim or defense arising out of or in any way related to the Loan or
the Supplemental Credit Facility or the Standby Facility based upon the
occurrence of any action or inaction of Lender on or prior to the Closing Date
which Borrower believes may (i) be actionable against Lender, or (ii) give rise
to a defense to payment hereunder or under the Note, the Supplemental Credit
Facility Note or the Standby Facility Note for any reason, including without
limitation, commission of a tort or violation of any contractual duty or duty
implied at law. Lender shall not be responsible for any lost profits of Borrower
arising from any breach of contract, tort or any other wrong arising from the
establishment, administration or collection of the Loan.

                                       43
<PAGE>

         SECTION 7.05. (a) The Borrower hereby ratifies and confirms the
execution, delivery, validity and terms of all of the loan documents executed by
it pursuant to the Supplemental Credit Facility and the Standby Facility,
respectively (the "Prior Financing Documents"). The execution and delivery of
the Loan Documents (as defined in Section 1.27 above) and of the Supplemental
Credit Facility Amendments shall not in any manner impair or negatively affect
the security interests, pledges and collateral interests granted by Borrower to
Lender under the Prior Financing Documents or the collateral granted pursuant
thereto

                  (b) Article VI of the Supplemental Credit Agreement is hereby
amended by substituting Sections 5.01 and 5.02 of this Loan Agreement for
Sections 6.01 and 6.02 of the Supplemental Credit Agreement.

                  (c) Article V of the Standby Facility Credit Agreement is
hereby amended by substituting Sections 5.01 and 5.02 of this Loan Agreement for
Sections 5.01 and 5.02 of the Standby Facility Credit Agreement.

                  (d) Wherever in any loan document executed in connection with
either the Supplemental Credit Facility or the Standby Facility it is stated (i)
that the laws of the State of Connecticut are referenced as the governing law of
such document, or (ii) that the Borrower, ATI or IEP consents to the
jurisdiction of the State of Connecticut or waives any objections to venue or
FORUM NON CONVENIENS or waives personal service or any bond or surety or
security with respect to any proceeding involving the Lender, then in any such
instance the State of New York shall be substituted for the State of

                                       44
<PAGE>

Connecticut, and the Supplemental Credit Facility loan documents and the Standby
Facility loan documents are hereby so amended.

                                  ARTICLE VIII
                                  MISCELLANEOUS

         SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of any Loan Document, this Agreement or the Note, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

         SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed certified, return receipt requested, or telegraphed or delivered, if
to the Borrower, at its address at 1001 Brickell Bay Drive, 25th Floor, Miami,
FL 33131, Attention: President; if to the Lender, at its address at Michael
Jaharis, c/o Steven K. Aronoff, P.C., 475 Park Avenue South, 23rd Floor, New
York, New York 10016, with a copy to Steven K. Aronoff, Esq. at such address,
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties.

         SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any

                                       45
<PAGE>

right under any Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.

         SECTION 8.04. ACCOUNTING TERMS. Except as otherwise stated herein, all
accounting terms not specifically defined herein or in any schedule or exhibit
hereto shall be construed in accordance with generally accepted accounting
principles, applied on a consistent basis with those of the period ended
December 31, 1998, modified to reflect those changes in generally accepted
accounting principles as may be mutually accepted by Lender and Borrower for the
purposes of this Agreement.

         SECTION 8.05. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all indebtedness
at any time owing by the Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Note, irrespective of whether or not the
Lender shall have made any demand under this Agreement or the Note. The Lender
agrees promptly to notify the Borrower after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Lender may have.

                                       46
<PAGE>

         SECTION 8.06. BINDING EFFECT; GOVERNING LAW. This Agreement shall
become effective when it shall have been executed by the Borrower and the Lender
and shall be binding upon and inure to the benefit of the Borrower, the Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New
York.

         SECTION 8.07. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.

         SECTION 8.08. PARTIAL INVALIDITY. If any provision of this Agreement is
held to be invalid or unenforceable, such invalidity or unenforceability shall
not invalidate this Agreement as a whole but this Agreement shall be construed
as though it did not contain the particular provision or provisions held to be
invalid or unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by law.

         SECTION 8.09. CONFLICTS. In the event that any provision of this
Agreement conflicts with any of the Loan Documents delivered in connection with
the transaction contemplated herein, the terms of this Agreement shall control,
notwithstanding any such conflicts.

                                       47
<PAGE>

         SECTION 8.10. SURVIVAL. The representations and warranties contained
herein shall survive the execution of this Agreement by the parties herein.

         SECTION 8.11. WAIVER OF RIGHTS. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION. BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION,
APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS, NOW IN
FORCE OR WHICH MAY HEREAFTER BECOME LAW.

         SECTION 8.12. SUBMISSION TO JURISDICTION; WAIVER OF BOND. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK OR FLORIDA AND WAIVES ANY OBJECTION WHICH
THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS, TO THE
CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MAIL OR MESSENGER DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN
SECTION 8.02 ABOVE AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN

                                       48
<PAGE>

POSTED TO THE BORROWER'S ADDRESS. THE BORROWER WAIVES ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH, MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
LENDER. NOTHING CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF THE LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECTS THE RIGHT OF
THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR BORROWER'S
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

         SECTION 8.13. WAIVER OF JURY TRIAL. THE BORROWER WAIVES, TO THE EXTENT
PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY WHICH BORROWER MAY HAVE IN ANY
PROCEEDING BETWEEN LENDER AND BORROWER.

         SECTION 8.14. WAIVER OF PLAINTIFF'S RIGHT. THE BORROWER HEREBY AGREES
NOT TO COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER IN THE JURISDICTION OF
ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF FLORIDA UNLESS THE
LENDER EXPRESSLY CONSENTS THERETO IN WRITING.

                                       49
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above given.
                                                     KOS PHARMACEUTICALS, INC.

                                                     By:
                                                        -----------------------
                                                        Name:  Adrian Adams
                                                        Title: President

                                                     --------------------------
                                                     MICHAEL JAHARIS

                                       50
<PAGE>

STATE OF NEW YORK )
                  )  ss.:
COUNTY OF         )

         On the ______ day of December, 2002, before me came Adrian Adams, to me
known, who, being by me duly sworn, did depose and say that he resides at No.
_______________________________________________; that he is the President of Kos
Pharmaceuticals, Inc., the corporation described in and which executed, the
foregoing instrument; that the foregoing instrument was executed without
corporate seal by order of the Board of Directors of said corporation; that he
signed his name thereto by like order.

                                              ------------------------------
                                              Notary Public
                                              My commission expires:

STATE OF NEW YORK )
                  ) ss.:
COUNTY OF         )

         On the ____ day of December, 2002 before me came Michael Jaharis, to me
known to be the individual described in, and who executed the foregoing
instrument, and acknowledged that he executed the same.

                                              ------------------------------
                                              Notary Public
                                              My commission expires:

                                       51

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