<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, D.C. 20549

                              --------------------

                                   FORM 10-Q/A
                                 Amendment No. 1




(MARK ONE)

 X            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----    EXCHANGE ACT OF 1934.

        For the quarterly period ended June 30, 1996

                                            OR

___     TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
        SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________to________________________

                         COMMISSION FILE NUMBER 1-10113

                             HALSEY DRUG CO., INC.
                             ---------------------
             (Exact name of registrant as specified in its charter)

           New York                                       11-0853640
- --------------------------------------------------------------------------------
    (State or other Jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)


1827 Pacific Street
Brooklyn, New York                                        11233
- --------------------------------------------------------------------------------
(Address of Principal executive officer)                  (Zip Code)

 (718) 467-7500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 50 days.

YES    X        NO
    -----        ------

As of August 12, 1996, the registrant had 9,588,353 shares of Common Stock,
$.01 par value, outstanding.



<PAGE>


                           PART II.  OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

     The Annual Meeting (the "Meeting") of the shareholders of the Company was
held on June 4, 1996.  The 7,176,432 share of common stock (the "Common Stock")
present at the Meeting out of a total of 8,541,358 shares outstanding and
entitled to vote acted as follows with respect to the following proposals:

     a.   Approved, by a vote of 7,092,820 shares for (and 103,612 shares
     withheld from) Rosendo Ferran, 7,093,656 shares for (and 102,776 shares
     withheld from) Leonard H. Weiss, 7,093,006 shares for (and 103,426 shares
     withheld from) Joseph F. Limongelli, 7,112,533 shares for (and 83,899
     shares withheld from) R.H. Francis, 7,112,050 shares for (and 84,382 shares
     withheld from) Alan J. Smith and 7,112,220 shares for (and 84,212 shares
     withheld from) William J. Skelly, the election of the foregoing individuals
     as directors of the Company, to serve for terms expiring at the 1997 annual
     meeting of shareholders; and

     b.   Ratified, by a vote of 7,115,492 shares for, 65,813 shares against and
     15,127 shares abstained, the selection of Grant Thornton LLP as the
     Company's independent certified public accountants for 1996.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

     a.   Exhibits - See Exhibit Index.




                                        1

<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:     August 23, 1996

                              HALSEY DRUG CO., INC.



                              By:    /s/ Rosendo Ferran
                                 ---------------------------
                                   Rosendo Ferran
                                   President and Chief
                                   Executive Officer

                              By:    /s/ Robert J. Mellage
                                 ---------------------------
                                   Robert J. Mellage
                                   Corporate Controller



                                        2

<PAGE>



                                  EXHIBIT INDEX


EXHIBIT
NUMBER                             DESCRIPTION
- -------                            -----------
4.1                 Form of Redeemable Common Stock Purchase Warrant.

10.1                Letter Agreement, dated as of August 6, 1996, among Halsey
                    Drug Co., Inc., The Chase Manhattan Bank, The Bank of New
                    York and Israel Discount Bank of New York.


                                        3








<PAGE>

                         EXHIBIT 4.1

VOID AFTER 5:00 P.M., EASTERN STANDARD TIME ON AUGUST 6, 2001.

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF
(COLLECTIVELY THE "SECURITIES") HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HALSEY DRUG
CO., INC. THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.


                              HALSEY DRUG CO., INC.

              REDEEMABLE COMMON STOCK PURCHASE WARRANT CERTIFICATE
                               TO PURCHASE ______
                             SHARES OF COMMON STOCK



Certificate  No. W-_

     This Warrant Certificate certifies that _______________________________,
[SS# __________] [having an office at] [residing at ], or registered assigns, is
the registered Holder (the "Holder") of _____ Redeemable Common Stock Purchase
Warrants (the "Warrants") to purchase shares of the common stock, $.01 par value
(the "Common Stock") of Halsey Drug Co., Inc., a New York corporation (the
"Company").

     The Warrants represented by this Warrant Certificate were issued as a
component of a Unit offered by the Company pursuant to a certain Private
Placement Memorandum dated July
 24, 1996, as amended by Supplement dated August
1, 1996 (collectively, the "Private Placement Memorandum").  In addition to
Warrants to purchase 461 shares of Common Stock, each Unit consists of a
Convertible Subordinated Debenture of the Company in the principal amount of
$10,000 (the "Debentures").

     THIS WARRANT IS REDEEMABLE AT THE OPTION OF THE COMPANY UNDER CERTAIN
CIRCUMSTANCES.  SEE SECTION 11.



<PAGE>


     1.   EXERCISE OF WARRANT.

          (A)  Each Warrant enables the Holder, subject to the provisions of
this Warrant Certificate to purchase from the Company at any time and from time
to time commencing on the date of issuance (the "Initial Exercise Date") through
and including 5:00 p.m., Eastern Standard Time on August 6, 2001 (the
"Expiration Date") one (1) fully paid and non-assessable share of Common Stock
("Shares") upon due presentation and surrender of this Warrant Certificate
accompanied by payment of the purchase price of $3.25 per Share (the "Exercise
Price").  Payment shall be made in lawful money of the United States of America
by certified check payable to the Company at its principal office at 1827
Pacific Street, Brooklyn, New York  11233.  As hereinafter provided, the
Exercise Price and number of Shares purchasable upon the exercise of the
Warrants are subject to modification or adjustment upon the happening of certain
events.

          (B)  This Warrant Certificate is exercisable at any time on or after
the Initial Exercise Date in whole or in part by the Holder in person or by
attorney duly authorized in writing at the principal office of the Company.

     2.   EXCHANGE, FRACTIONAL SHARES, TRANSFER.

          (A)  Upon surrender to the Company, this Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates evidencing a
like aggregate number of Warrants.  If this Warrant Certificate shall be
exercised in part, the Holder shall be entitled to receive upon surrender hereof
another Warrant Certificate or Warrant Certificates evidencing the number of
Warrants not exercised;

          (B)  Anything herein to the contrary notwithstanding, in no event
shall the Company be obligated to issue Warrant Certificates evidencing other
than a whole number of Warrants or issue certificates evidencing other than a
whole number of Shares upon the exercise of this Warrant Certificate; PROVIDED,
HOWEVER, that the Company shall pay with respect to any such fraction of a Share
an amount of cash based upon the current public market value (or book value, if
there shall be no public market value) for Shares purchasable upon exercise
hereof, as determined in accordance with subparagraph (A) of Section 11 hereof;

          (C)  The Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner hereof
for all purposes whatsoever; and

          (D)  This Warrant Certificate may not be transferred except in
compliance with the provisions of the Act or applicable state securities laws
and in accordance with the provisions of Section 12 hereof.



                                       -2-

<PAGE>


     3.   RIGHTS OF A HOLDER.  No Holder shall be deemed to be the Holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose nor shall anything contained
herein be construed to confer upon the Holder any of the rights of a shareholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof or to give or withhold
consent to any corporate action (whether upon any reorganization, issuance of
stock, reclassification or conversion of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings or to receive dividends or subscription rights or otherwise until a
Warrant shall have been exercised and the Common Stock purchasable upon the
exercise thereof shall have become issuable.

     4.   REGISTRATION OF TRANSFER.  The Company shall maintain books for the
transfer and registration of Warrants.  Upon the transfer of any Warrants in
accordance with the provisions of Section 2(D) hereof (a "Permitted Transfer"),
the Company shall issue and register the Warrants in the names of the new
Holder.  The Warrants shall be signed manually by the Chairman, Chief Executive
Officer, President or any Vice President and the Secretary or Assistant
Secretary of the Company.  The Company shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Company for such
purpose upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer.  Upon any Permitted Transfer, a new
Warrant Certificate shall be issued to the transferee and the surrendered
Warrants shall be cancelled by the Company.  Warrants may be exchanged at the
option of the Holder, when surrendered at the office of the Company, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Shares.
Subject to the terms of this Warrant Certificate, upon such surrender and
payment of the purchase price at any time after the Initial Exercise Date, the
Company shall issue and deliver with all reasonable dispatch to or upon the
written order of the Holder of such Warrants and in such name or names as such
Holder may designate, a certificate or certificates for the number of full
Shares so purchased upon the exercise of such Warrants.  Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become the Holder of record of such
Shares as of the date of the surrender of such Warrants and payment of the
purchase price; PROVIDED, HOWEVER, that if, at the date of surrender and
payment, the transfer books of the Company shall be closed, the certificates for
the Shares shall be issuable as of the date on which such books shall be opened
and until such date the Company shall be under no duty to deliver any
certificate for such Shares; PROVIDED, FURTHER, HOWEVER, that such transfer
books, unless otherwise required by law or by applicable rule of any national
securities exchange or interdealer quotation system, shall not be closed at any
one time for a period longer than 20 days.  The rights of purchase represented
by the Warrants shall be exercisable, at the election of the Holders, either as
an entirety or from time to time for only part of the Shares at any time on or
after the Initial Exercise Date.


                                       -3-

<PAGE>


     5.   STAMP TAX.  The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Shares issuable upon the exercise of
the Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Shares in a name other than that of
the Holder in respect of which such Shares are issued, and in such case the
Company shall not be required to issue or deliver any certificate for Shares or
any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid.

     6.   DESTROYED, LOST, STOLEN OR MUTILATED CERTIFICATES.  In case this
Warrant Certificate shall be destroyed, lost, stolen or mutilated, the Company
may, in its discretion, issue and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate of like tenor representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of such
destruction, loss, theft or mutilation and an indemnity, if requested, also
satisfactory to it.

     7.   RESERVED SHARES.  The Company warrants that there have been reserved,
and covenants that at all times in the future it shall keep reserved, out of the
authorized and unissued Common Stock, a number of Shares sufficient to provide
for the exercise of the rights of purchase represented by this Warrant
Certificate.  The Company agrees that all Shares issuable upon exercise of the
Warrants shall be, at the time of delivery of the certificates for such Shares,
validly issued and outstanding, fully paid and non-assessable and that the
issuance of such Shares will not give rise to preemptive rights in favor of
existing stockholders.

     8.   ANTI-DILUTION PROVISIONS.

          (A)  DIVIDENDS; RECLASSIFICATIONS, ETC.  In the event that the Company
shall, at any time prior to the exercise of this Warrant:  (i) declare or pay to
the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or in shares of any class or classes; or (iii) transfer its property as
an entirety or substantially as an entirety to any other company; or (iv) make
any distribution of its assets to holders of its Common Stock as a liquidation
or partial liquidation dividend or by way of return of capital; then, upon the
subsequent exercise of this Warrant, the Holder shall receive, in addition to or
in substitution for the shares of Common Stock to which it would otherwise be
entitled upon such exercise, such additional shares of stock or scrip of the
Company, or such reclassified shares of stock of the Company, or such shares of
the securities or property of the Company resulting from such transfer, or such
assets of the Company, which it would have been entitled to receive had it
exercised this Warrant prior to the happening of any of the foregoing events.


                                       -4-


<PAGE>

          (B)  NOTICE OF CERTAIN TRANSACTIONS.  If, at any time while this
Warrant is outstanding, the Company shall pay any dividend payable in cash or in
Common Stock, shall offer to the holders of its Common Stock for subscription or
purchase by them any shares of stock of any class or any other rights, or shall
enter into an agreement to merge or consolidate with another corporation, the
Company shall cause notice thereof to be mailed to the registered holder of this
Warrant at its address appearing on the registration books of the Company, at
least 30 days prior to the record date as of which holders of Common Stock shall
participate in such dividend, distribution or subscription or other rights or at
least 30 days prior to the effective date of the merger or consolidation.
Failure to give notice as required by this Section, or any defect therein, shall
not affect the legality or validity of any dividend, distribution or
subscription or other right.

          (C)  ADJUSTMENTS TO EXERCISE PRICE.  If at any time after the date of
issuance hereof the Company shall grant or issue any shares of Common Stock, or
grant or issue any rights or options for the purchase of, or stock or other
securities convertible into, Common Stock (such convertible stock or securities
being herein collectively referred to as "Convertible Securities") other than:

       (i)     shares issued in a transaction described in subparagraph (D) of
     this Paragraph 8; or

      (ii)     shares issued, subdivided or combined in transactions described
     in subparagraph (A) of this Paragraph 8 if and to the extent that an
     adjustment to the Exercise Price shall have been previously made pursuant
     to subparagraph (A) of this Paragraph 8 as a result of such issuance,
     subdivision or combination of such securities;

for a consideration per share which is less than the lower of (i) the Exercise
Price OR (ii) the Fair Market Value (as hereinafter defined) of the Common
Stock, then the Exercise Price in effect immediately prior to such issuance or
sale (the "Applicable Exercise Price") shall, and thereafter upon each issuance
or sale, the Applicable Exercise Price shall, simultaneously with such issuance
or sale, be adjusted, so that such Applicable Exercise Price shall equal a price
determined by multiplying the Applicable Exercise Price by a fraction, the
numerator of which shall be:

          (a)  the sum of (x) the total number of shares of Common Stock
     outstanding immediately prior to such issuance plus (y) the number of
     shares of Common Stock which the aggregate consideration received, as
     determined in accordance with subparagraph (E) below for the issuance or
     sale of such additional Common Stock or Convertible Securities deemed to be
     an issuance of Common Stock as provided in subparagraph (F) below, would
     purchase (including any consideration received by the Company upon the
     issuance of any shares of Common Stock or Convertible Securities since the
     date the Applicable Exercise Price became effective not previously included
     in any computation resulting in an adjustment pursuant to this subparagraph
     (C)) at the higher of (i) the Applicable Exercise


                                       -5-

<PAGE>


     Price or (ii) the Fair Market Value of the Common Stock; and the
     denominator of which shall be

          (b)  the total number of shares of Common Stock outstanding (or deemed
     to be outstanding as provided in subparagraph (E)) immediately after the
     issuance or sale of such additional shares.



          For purposes of this Subsection (C), "Fair Market Value shall mean
the average of the closing price of the Common Stock as listed and reported on
the American Stock Exchange or in the NASDAQ National Market or Small-Cap Market
System for each of the twenty (20)  consecutive trading days prior to such
issuance or sale.

If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Exercise Price specified in Paragraph 1, the Applicable Exercise
Price shall be such initial Exercise Price.

     Upon each adjustment of the Exercise Price pursuant to this Subsection (C)
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be such number of shares (calculated to the nearest tenth)
purchasable at the Applicable Exercise Price multiplied by a fraction, the
numerator of which shall be Exercise Price in effect immediately prior to such
adjustment and the denominator of which shall be the Exercise Price in effect
immediately after such adjustment.

          (D)  EXCLUSIONS.  Anything in this Paragraph 8 to contrary
notwithstanding, no adjustment in the Exercise Price shall be made in connection
with:

          (i)  the grant, issuance or exercise of any Convertible Securities
     pursuant to the Company's qualified or non-qualified Employee Stock Option
     Plans or any other BONA FIDE employee benefit plan or incentive arrangement
     adopted by the Company's Board of Directors, as may be amended from time to
     time; or

          (ii) the issuance of any shares of Common Stock pursuant to the grant
     or exercise of Convertible Securities outstanding as of the date hereof
     including, without limitation, the exercise of any Warrant issued in the
     same placement of securities in which this Warrant was issued by the
     Company, whether or not outstanding on the issuance date hereof.

          (E)  CALCULATION OF CONSIDERATION.  For the purpose of subparagraph
(C) above, the following provisions shall also be applied:


                                       -6-

<PAGE>


       (i)     In case of the issuance or sale of additional shares of Common
     Stock for cash, the consideration received by the Company therefor shall be
     deemed to be the amount of cash received by the Company for such shares,
     before deducting therefrom any commissions, compensations or other expenses
     paid or incurred by the Company for any underwriting or placement of, or
     otherwise in connection with the issuance or sale of such shares.

      (ii)     In case of the issuance of Convertible Securities, the
     consideration received by the Company therefor shall be deemed to be the
     amount of cash, if any, received by the Company for the issuance of such
     rights or Convertible Securities, plus the minimum amounts of cash and fair
     value of other consideration, if any, payable to the Company upon the
     exercise of such rights or options or payable to the Company on conversion
     of such Convertible Securities.

     (iii)     In the case of the issuance of shares of Common Stock or
     Convertible Securities for a consideration in whole or in part, other than
     cash, the consideration other than cash shall be deemed to be the fair
     market value thereof as reasonably determined in good faith by the Board of
     Directors of the Company (irrespective of the accounting treatment
     thereof); PROVIDED, HOWEVER, that if such consideration consists of the
     cancellation of debt issued by the Company, the consideration shall be
     deemed to be the amount the Company received upon issuance of such debt
     (gross proceeds) plus accrued interest and, in the case of original issue
     discount or zero coupon indebtedness, accredited value to the date of such
     cancellation, but not including any premium or discount at which the debt
     may then be trading or which might otherwise be appropriate for such class
     of debt.

      (iv)     In case of the issuance of additional shares of Common Stock upon
     the conversion or exchange of any obligations (other than Convertible
     Securities), the amount of the consideration received by the Company for
     such Common Stock shall be deemed to be the consideration received by the
     Company for such obligations or shares so converted or exchanged, before
     deducting from such consideration so received by the Company any expenses
     or commissions or compensations incurred or paid by the Company for any
     underwriting of, or otherwise in connection with, the issuance or sale of
     such obligations or shares, plus any consideration received by the Company
     in connection with such conversion or exchange other than a payment in
     adjustment of interest and dividends.  If obligations or shares of the same
     class or series of a class as the obligations or shares so converted or
     exchanged have been originally issued for different amounts of
     consideration, then the amount of consideration received by the Company
     upon the original issuance of each of the obligations or shares so
     converted or exchanged shall be deemed to be the average amount of the
     consideration received by the Company upon the original issuance of all
     such obligations or shares.  The amount of consideration


                                       -7-

<PAGE>


     received by the Company upon the original issuance of the obligations or
     shares so converted or exchanged and the amount of the consideration, if
     any, other than such obligations or shares, received by the Company upon
     such conversion or exchange shall be determined in the same manner as
     provided in subparagraphs (E)(i) and (E)(iii) above with respect to the
     consideration received by the Company in case of the issuance of additional
     shares of Common Stock or Convertible Securities.

       (v)     In the case of the issuance of additional shares of Common Stock
     as a dividend, the aggregate number of shares of Common Stock issued in
     payment of such dividend shall be deemed to have been issued at the close
     of business on the record date fixed for the determination of stockholders
     entitled to such dividend and shall be deemed to have been issued without
     consideration; PROVIDED, HOWEVER, that if the Company, after fixing such
     record date, shall legally abandon its plan to so issue Common Stock as a
     dividend, no adjustment of the Applicable Exercise Price shall be required
     by reason of the fixing of such record date.

          (F)  DEEMED ISSUANCES OF COMMON STOCK.  For purposes of the
adjustments provided for in subparagraph (C) above, if at any time, the Company
shall issue any Convertible Securities, the Company shall be deemed to have
issued at the time of the issuance of such Convertible Securities the maximum
number of shares of Common Stock issuable upon conversion of the total amount of
such Convertible Securities.

          (G)  READJUSTMENTS OF EXERCISE PRICE.  On the expiration, cancellation
or redemption of any Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be readjusted to such Exercise Price as would have
been obtained (a) had the adjustments made upon the issuance or sale of such
expired, cancelled or redeemed Convertible Securities been made upon the basis
of the issuance of only the number of shares of Common Stock theretofore
actually delivered upon the exercise or conversion of such Convertible
Securities (and the total consideration received therefor) and (b) had all
subsequent adjustments been made only on the basis of the Exercise Price as
readjusted under this subparagraph (G) for all transactions (which would have
affected such adjusted Exercise Price) made after the issuance or sale of such
Convertible Securities.

          (H)  CARRY FORWARDS.  Anything in this Paragraph 8 to the contrary
notwithstanding, no adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Exercise Price; PROVIDED, HOWEVER, that any adjustments which by reason of this
subparagraph (H) are not required to be made shall be carried forward and taken
into account in making subsequent adjustments.  All calculations under this
Paragraph 8 shall be made to the nearest cent or to the nearest tenth of a
share, as the case may be.


                                       -8-

<PAGE>


          (I)  NOTICE OF ADJUSTMENTS.  Upon any adjustment of the Exercise
Price, then and in each such case the Company shall promptly deliver a notice to
the registered Holder of this Warrant, which notice shall state the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of Shares purchasable at such price upon the exercise hereof, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.

     9.   CONSOLIDATION OR MERGER.  The Company covenants and agrees that it
will not merge or consolidate with or into or sell or otherwise transfer all or
substantially all of its assets to any other corporation or entity unless at the
time of or prior to such transaction such other corporation or other entity
shall expressly assume all of the liabilities and obligations of the Company
under this Warrant and (without limiting the generality of the foregoing) shall
expressly agree that the Holder of this Warrant shall thereafter have the right
(subject to subsequent adjustment as nearly equivalent as practicable to the
adjustments provided for in Paragraph 8 of this Warrant) to receive upon the
exercise of this Warrant the number and kind of shares of stock and other
securities and property receivable upon such transaction by a Holder of the
number and kind of shares which would have been receivable upon the exercise of
this Warrant immediately prior to such transaction.

     10.  REGISTRATION RIGHTS UNDER THE SECURITIES ACT OF 1933.

          A.  ISSUANCE OF STOCK REGISTERED UNDER THE ACT BY THE COMPANY UPON
EXERCISE.  Not later than 45 days from the date of this Warrant, the Company
will file a registration statement under the Act with respect to the number of
shares of Common Stock issuable upon the exercise of this Warrant (the
"Registrable Securities") in order to provide for the issuance by the Company of
Common Stock upon exercise of this Warrant which has been registered under the
Act, and shall use its best efforts to cause such registration statement to
become and remain effective until such time as all of the Warrants shall have
been exercised and the Common Stock issuable thereunder has been issued by the
Company.

          B.   SUPPLEMENTAL REGISTRATION RIGHTS.   In the event the Company is
precluded by the U.S. Securities and Exchange Commission (the "Commission") from
registering under the Act the Registrable Securities for issuance upon exercise
of this Warrant or if the Holder shall have exercised this Warrant prior to the
effectiveness of the registration statement described in Subsection A above, the
Holder shall have the following registration rights:

               PIGGYBACK REGISTRATION RIGHTS.  If (i) any 51% Holder (as defined
in Section 10.F hereof) shall give notice to the Company at any time to the
effect that such holder desires to have the Company registered under the Act any
common stock issuable upon conversion of the Debentures, or (ii) the Company
proposes to file a registration statement covering any securities of the
Company, for its own account or for the account of others, the Company shall
advise the


                                       -9-

<PAGE>


Holder or its transferee, whether the Holder holds the Warrant or has converted
the Warrant and holds the Common Stock underlying the Warrant, by written notice
at least four weeks prior to the filing of any registration statement under the
Act, and will, until the Expiration Date, upon the request of the Holder,
register under the Act all or any portion of the Registrable Securities and
cause such registration statement to become and remain effective as provided in
Subsection C hereof.

          C.   REGISTRATION COVENANTS OF THE COMPANY.  (a)  In the event that
any Registrable Securities are to be registered pursuant to Subsections A or B
of this Article 10, the Company covenants and agrees that the Company will use
its best efforts to effect the registration and cooperate in the sale of the
Registrable Securities to be registered and will as expeditiously as possible:

               (i)  prepare and file with the Commission a registration
statement with respect to the Registrable Securities (as well as any necessary
amendments or supplements thereto)(a "Registration Statement") which
Registration Statement (A) will state that the holders of Registrable Securities
covered thereby may sell such Registrable Securities under such Registration
Statement or pursuant to Rule 144 (or any similar rule then in effect), (B) when
it becomes effective, and when any post-effective amendment thereof and
supplement thereto is filed, the Registration Statement, as then amended or
supplemented, will comply in all material respects with the applicable
provisions of the Act and the rules and regulations thereunder and, except for
information provided in writing by the Holder for inclusion in the Registration
Statement for which the Company does not represent or warrant as to its
accuracy, will not contain an untrue statement or a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading;

               (ii) furnish to the Holders copies of such Registration Statement
and any amendments or supplements thereto and any prospectus forming a part
thereof prior to filing, which documents will be subject to the review of
counsel for the Holders;

               (iii) use its best efforts to cause such Registration Statement
to become effective;

               (iv) notify the Holders, promptly after the Company shall receive
notice thereof, of the time when said Registration Statement becomes effective
or when any amendment or supplement to any prospectus forming a part of said
Registration Statement has been filed;

               (v)  notify the Holders promptly of any request by the Commission
for the amending or supplementing of such Registration Statement or prospectus
or for additional information;


                                      -10-

<PAGE>


               (vi) advise the Holders after the Company shall receive notice or
obtain knowledge thereof of the issuance of any order by the Commission
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its reasonable best efforts to prevent the issuance of any stop
order or to obtain its withdrawal promptly if such stop order should be issued;

               (vii)     prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus forming a part
thereof as may be necessary to keep such Registration Statement effective (a) in
the case of a Registration Statement filed and declared effective pursuant to
Subsection A hereof, until such time as all Holders of the Warrants shall have
exercised the Warrants, or (b) in the case of a Registration Statement filed and
declared effective pursuant to Subsection B hereof, until such time as the
Holders pursuant to such Registration Statement have disposed of all such
Registrable Securities but in no event exceeding five (5) years from the date of
effectiveness;

               (viii) furnish to each Holder such number of copies of such
Registration Statement, each amendment and supplement thereto, the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as that Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Holder;

               (ix) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as determined by the Holders and do any and all other acts and
things which may be reasonably necessary or advisable to enable the Holders to
consummate the disposition in such jurisdictions of the Registrable Securities
(provided that the Company will not be required to:  (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify; (B) subject itself to taxation in any such jurisdiction; or (C) consent
to general service of process in any such jurisdiction);

               (x)  notify the Holders at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any event
as a result of which such Registration Statement contains an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and, at the
request of the Holder, prepare a supplement or amendment to such Registration
Statement so that such Registration Statement will not contain, to the Company's
knowledge, an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;

               (xi) cause all Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;


                                      -11-

<PAGE>


               (xii)     provide a transfer agent for all such Registrable
Securities not later than the effective date of such Registration Statement;

               (xiii)    enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
participating Holders or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of the Registrable Securities;

               (xiv)     make available for inspection by the Holder of such
Registrable Securities, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
professional retained by any such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
Inspectors in connection with such Registration Statement; and

               (xv) use its reasonable best efforts to cause the Registrable
Securities covered by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Holders to consummate the disposition of such Registrable
Securities.

          (b)  The Holder covenants and agrees to reasonably cooperate in the
preparation of the Registration Statement by providing such information as the
Company shall reasonably need from the Holder to include the Registrable
Securities in the Registration Statement.

          D. EXPENSES.  All expenses in connection with preparing and filing any
Registration Statement including, without limitation, costs of complying with
federal and state securities laws and regulations, attorney's and accounting
fees of the Company, attorney's fees for one (1) counsel to the Holders,
printing expenses and federal and state filing fees shall be borne in full by
the Company, except that the underwriting commissions and expenses attributable
to the Registrable Securities so registered shall be borne by such Holders.

          E.  INDEMNIFICATION.  Each Holder of Registrable Securities exercising
the rights under Subsections A or B hereof will indemnify the Company, and each
person who controls the Company within the meaning of Section 15 of the Act,
from and against any and all losses, claims, damages, expenses and liabilities
caused by any untrue statement or statement contained in any registration
statement or statement contained in a prospectus furnished under the Act or
caused by omission to state a material fact therein necessary to make the
statements therein not misleading, insofar as such losses, claims, damages,
expenses and liabilities are caused by such untrue statement or omission based
upon information furnished in writing to the Company by any


                                      -12-

<PAGE>


such Holder expressly for use in any registration statement or prospectus and
will reimburse each such indemnified person, as incurred, for any legal or other
expenses reasonably incurred by them in investigating, defending or preparing to
defend any such loss, claim, damage, liability, action or proceeding.  In
addition, each Holder will execute and deliver all such documents and
undertakings as the Company may reasonably deem necessary or desirable for
purposes of compliance with applicable federal and state securities laws.  This
indemnity agreement is in addition to any liability which the Holder may
otherwise have.  The Company's obligations as set forth in Subsections A, B and
C with respect to each Holder are contingent on such Holder's satisfaction of
his or its obligations set forth in this Subsection E.

          The Company agrees to indemnify and hold harmless the Holders (and
each person, if any, who controls the Holders within the meaning of the Act)
from and against any loss, claim, damage or liability, joint or several, to
which they may become subject (under the Act or otherwise) insofar as such loss,
claim, damage or liability (or action or proceeding in respect thereof) arises
out of, or is based upon, (A) any untrue statement or alleged untrue statement
of a material fact contained (x) in the Registration Statement, any preliminary
prospectus, if used prior to the effective date of the Registration Statement,
or any final prospectus, or any amendment thereof or supplement thereto, or (y)
in any blue sky application or other document executed by the Company, or based
upon written information furnished by the Company, filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (as such application, document or information being
hereinafter called a "Blue Sky Application"), or (B) the omission or alleged
omission to state in the Registration  Statement, any preliminary prospectus, if
used prior to the effective date of the Registration Statement, or any final
prospectus, or any amendment thereof or supplement thereto, or in any Blue Sky
Application, of a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and will reimburse each such indemnified person, as
incurred, for any legal or other expenses reasonably incurred by them in
investigating, defending or preparing to defend any such loss, claim, damage,
liability, action or proceeding; PROVIDED, HOWEVER, that the Company shall not
be liable in any such case to the extent, but only to the extent, that such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or an alleged untrue statement or omission or alleged omission made in
such Registration Statement or in any Blue Sky Application in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such Holder specifically for use in preparation of the Registration Statement
or any such preliminary prospectus or the final prospectus or any such amendment
thereof or supplement thereto, or any Blue Sky Application (including
information concerning the manner in which the Holders intend to effect sales of
the Registrable Securities).  This indemnity agreement is in addition to any
liability which the Company may otherwise have.

          F.  The term "51% Holder" as used in this Section 10 shall mean the
Holders of at least 51% of the shares of common stock into which the Debentures
comprising a portion of


                                      -13-

<PAGE>


the Units offered pursuant to the Private Placement Memorandum are convertible
(considered in the aggregate) and shall included any owner or combination of
owners of Debentures in any combination if the holdings of the aggregate amount
of: (i) the common stock held by him or among them as a result of the conversion
of the Debentures, plus (ii) the common stock which he or they would be holding
if the Debentures owned by him or among them were converted, would constitute
51% or more of the common stock into which the Debentures were originally
convertible.  The Company's agreement with respect to the registration of the
common stock in this Section 10 shall survive the exercise and surrender of this
Warrant and upon exercise in full, the Company shall deliver to the Holder an
agreement evidencing the Company's obligations under this Section 10.

     11.  REDEMPTION.

          (A)  This Warrant Certificate may be redeemed by the Company at any
time commencing one (1) year from issuance, on not less than thirty (30) days'
notice, at a redemption price of $.01 per Warrant, provided the market price of
the Common Stock receivable upon exercise of such Warrant shall exceed $3.25 per
share (the "Target Price"), subject to adjustment as set forth in Subsection (D)
below.  Market price for the purpose of this Section 11 shall mean as applicable
(i) the closing sale price, for twenty (20) consecutive trading days (during
which the Shares are registered pursuant to the Securities Act), of the Common
Stock following the one (1) year anniversary of issuance of this Warrant, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System; or (ii) the last reported sale price, for twenty (20)
consecutive trading days (during which the Shares are registered pursuant to the
Securities Act), following the one (1) year anniversary of issuance of this
Warrant, on the primary exchange on which the Common Stock is traded, if the
Common Stock is traded on a national securities exchange; or (iii) the closing
bid price, for twenty (20) consecutive trading days (during which the Shares are
registered pursuant to the Act) following the one (1) year anniversary of
issuance of this Warrant, in the over-the-counter market as reported by the
National Quotation Bureau or similar information provider.

          (B)  The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid and (iv) that the
right to exercise the Warrant shall terminate at 5:00 P.M. (Eastern Standard
Time) on the business day immediately preceding the date fixed for redemption.
The date fixed for the redemption of the Warrants shall be the "Redemption
Date."  No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceedings for such redemption except
as to a Holder (a) to whom notice was not mailed or (b) whose notice was
defective.  An affidavit of the Secretary or an Assistant Secretary of the
Company or an agent employed by the Company that notice of redemption has been
mailed postage prepaid to the last address of the Holder appearing on the
Warrant Certificate registry books kept by the Company shall, in the absence of
fraud, be prima facie evidence of the facts


                                      -14-

<PAGE>


stated therein.  Any right to exercise a Warrant shall terminate at 5:00 P.M.
(Eastern Standard Time) on the business day immediately preceding the Redemption
Date.  On and after the Redemption Date, Holders of the Warrants shall have no
further rights except to receive, upon surrender of the Warrant, the redemption
price.

          (C)  From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Holder thereof of one or more
Warrants to be redeemed, deliver or cause to be delivered to or upon the written
order of such Holder a sum in cash equal to the redemption price of each such
Warrant.  From and after the date fixed for redemption and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all the Warrants
called for redemption, such Warrants shall expire and become void and all rights
hereunder, except the right to receive payment of the redemption price, shall
cease.

          (D)  If the shares of the Company's Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted by the ratio which the total number of
shares of Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock to be outstanding immediately after such
event.

          (E)  If less than all of the Warrants are called for redemption by the
Company, the particular Warrants to be redeemed shall be redeemed PRO-RATA in
accordance with the Warrants then outstanding.  If there shall be drawn for
redemption less than all of the Warrants represented by this Warrant
Certificate, the Company shall execute and deliver, upon surrender of this
Warrant Certificate, without charge to the Holder, a new Warrant Certificate
representing the unredeemed balance of the Warrant represented by this Warrant
Certificate.

     12.  TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.

          (A)  The Holder of this Warrant Certificate, each transferee hereof
and any Holder and transferee of any Shares, by his acceptance thereof, agrees
that (a) no public distribution of Warrants or Shares will be made in violation
of the Act, and (b) during such period as the delivery of a prospectus with
respect to Warrants or Shares may be required by the Act, no public distribution
of Warrants or Shares will be made in a manner or on terms different from those
set forth in, or without delivery of, a prospectus then meeting the requirements
of Section 10 of the Act and in compliance with applicable state securities
laws.  The Holder of this Warrant Certificate and each transferee hereof further
agrees that if any distribution of any of the Warrants or Shares is proposed to
be made by them otherwise than by delivery of a prospectus meeting the
requirements of Section 10 of the Act, such action shall be taken only after
submission to the Company of an opinion of counsel, reasonably satisfactory in
form and substance to the Company's counsel, to the effect that the proposed
distribution will not be in violation of the Act


                                      -15-

<PAGE>


or of applicable state law.  Furthermore, it shall be a condition to the
transfer of the Warrants that any transferee thereof deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions
contained in this Warrant Certificate.

          (B)  This Warrant or the Shares or any other security issued or
issuable upon exercise of this Warrant may not be sold or otherwise disposed of
except as follows:

               (1)  To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Warrant or Shares
may legally be transferred without registration and without the delivery of a
current prospectus under the Act with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions of this
subsection (B)(1) with respect to any resale or other disposition of such
securities which agreement shall be satisfactory in form and substance to the
Company and its counsel; provided that the foregoing shall not apply to any such
Warrant, Shares or other security as to which such Holder shall have received an
opinion letter from counsel to the Company as to the exemption thereof from the
registration under the Act pursuant to Rule 144 under the Act; or

               (2)  To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.

          (C)  Each certificate for Shares issued upon exercise of this Warrant
shall bear a legend relating to the non-registered status of such Shares under
the Act, unless at the time of exercise of this Warrant such Shares are subject
to a currently effective registration statement under the Act.

     13.  MISCELLANEOUS.

          (A)  LAW TO GOVERN.  This Warrant shall be governed by and construed
in accordance with the substantive laws of the State of New York, without giving
effect to conflict of laws principles.

          (B)  ENTIRE AGREEMENT.  This Warrant Certificate constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions whether express or
implied, oral or written.  Neither this Warrant Certificate nor any portion or
provision hereof may be changed, waived or amended orally or in any manner other
than by an agreement in writing signed by the Holder and the Company.

          (C)  NOTICES.  Except as otherwise provided in this Warrant
Certificate, all notices, requests, demands and other communications required or
permitted under this Warrant


                                      -16-

<PAGE>


Certificate or by law shall be in writing and shall be deemed to have been duly
given, made and received only when delivered against receipt or when deposited
in the United States mails, certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

               Company:  Halsey Drug Co., Inc.
                         1827 Pacific Street
                         Brooklyn, New York  11233
                         ATTN:  PRESIDENT

               Holder:   At the address shown for the
                         Holder in the registration
                         book maintained by the
                         Company.

          (D)  SEVERABILITY.  If any provision of this Warrant Certificate is
prohibited by or is unlawful or unenforceable under any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction be in effect to the
extent of such prohibition without invalidating the remaining provisions hereof;
PROVIDED, HOWEVER, that any such prohibition in any jurisdiction shall not
invalidate such provision in any other jurisdiction; and PROVIDED, FURTHER that
where the provisions of any such applicable law may be waived, that they hereby
are waived by the Company and the Holder to the full extent permitted by law and
to the end that this Warrant instrument shall be deemed to be a valid and
binding agreement in accordance with its terms.

          IN WITNESS WHEREOF, Halsey Drug Co., Inc. has caused this Warrant
Certificate to be signed by its duly authorized officers as of the 6th day of
August, 1996.



                                   HALSEY DRUG CO., INC.



                                   By:
                                       --------------------------------------
                                       Rosendo Ferran, PRESIDENT

Attest:



- ---------------------------------


[CORPORATE SEAL]



                                      -17-

<PAGE>


                                  PURCHASE FORM





To:  Halsey Drug Co., Inc.
                     , 19
                         ---



     The undersigned hereby irrevocably elects to exercise the attached Warrant
Certificate, Certificate No. W-_______, to the extent of _________ Shares of
Common Stock, $.01 par value per share of Halsey Drug Co., Inc., and hereby
makes payment of $________ in payment of the aggregate exercise price thereof.




                   INSTRUCTIONS FOR REGISTRATION OF SECURITIES



Name:
     -----------------------------------------------------------
     (Please typewrite or print in block letters)


Address:
          -------------------------------------------------------

          -------------------------------------------------------



                              ----------------------------------


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



                                      -18-




<PAGE>


                                             EXHIBIT 10.1

                        AMENDMENT SIX TO CREDIT AGREEMENT

          This Amendment Six is dated as of August __, 1996 and is made by and
among Halsey Drug Co., Inc., a New York corporation (the "Borrower"), The Chase
Manhattan Bank, as successor in interest to The Chase Manhattan Bank (National
Association) ("Chase"), Israel Discount Bank of New York ("IDB"), The Bank of
New York ("BNY," and together with Chase and IDB, the "Banks") and The Chase
Manhattan Bank, as successor in interest to The Chase Manhattan Bank (National
Association), in its capacity as agent for the Banks (in such capacity, the
"Agent").

          WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of December 22, 1992;

          WHEREAS, such Credit Agreement was amended by Amendment One
("Amendment One") dated as of June 4, 1993, executed by each of the Borrower,
the Banks and the Agent, further amended by Amendment Two ("Amendment Two")
dated as of January 12, 1994, further amended by Amendment Three ("Amendment
Three") dated as of May 12, 1994, further amended by Amendment Four ("Amendment
Four") dated as of July 21, 1994, further amended by Amendment Five ("Amendment
Five") dated as of March 21, 1995 and further amended by a letter agreement (the
"November 16, 1995 Letter Agreement") dated November 16, 1995
 (such Credit
Agreement, as so amended, the "Credit Agreement"); and

          WHEREAS, the Borrower has requested the Banks and the Agent to further
amend the Credit Agreement as provided herein in order to, INTER ALIA,
facilitate its ability to comply with the terms and conditions thereof and the
Banks have consented to do so on the terms and subject to the conditions set
forth herein and in the other Restructuring Documents;

          NOW, THEREFORE, in consideration of the premises and under the
authority of Section 5-1103 of the New York General Obligations Law, the
Borrower, the Banks and the Agent agree as follows:


          1.  DEFINED TERMS.  Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Credit Agreement.


          2.  AMENDMENT.  Effective as of the later of (i) the date hereof and
(ii) the satisfaction of all conditions specified in Section 3 hereof, the
Credit Agreement is hereby amended as follows:


                                       -1-

<PAGE>


              2.1  The terms "this Agreement," "hereunder" and similar
references in the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended by Amendment One, Amendment Two, Amendment Three, Amendment
Four, Amendment Five, the November 16, 1995 Letter Agreement and further amended
hereby.

              2.2  Section 1.1 of the Credit Agreement is amended by changing
the definitions of "EXPIRATION DATE," and "RESTRUCTURING DOCUMENTS" to read, in
their entirety, as follows:

              "EXPIRATION DATE" means the earlier of (i) December 31, 1996 and
(ii) the date upon which the Commitments are terminated or reduced in amount to
zero; PROVIDED that if all liabilities are declared due and payable upon an
Event of Default pursuant to the provisions of Part 11, the Expiration Date
shall be the date such liabilities are declared due and payable.

              "RESTRUCTURING DOCUMENTS" means Amendment Two, Amendment Three,
Amendment Four, Amendment Five, the November 16, 1995 Letter Agreement,
Amendment Six, the Warrants, the Warrant Amendments, the Registration Rights
Agreements, the New Warrants, the Second Warrant Amendments and any documents
delivered or entered into pursuant to or in connection with Amendment Two,
Amendment Three, Amendment Four, Amendment Five, the November 16, 1995 Letter
Agreement, Amendment Six, the Warrants, the Warrant Amendments, the Registration
Rights Agreements, the New Warrants or the Second Warrant Amendments, in each
case as such agreements or documents may be amended or replaced from time to
time.

              2.3  Section 1.1 of the Credit Agreement is further amended by
adding the following definitions at the appropriate places in the alphabetical
order:

              "AMENDMENT SIX" means Amendment Six to Credit Agreement among the
Borrower, Chase, IDB, BNY and the Agent dated as of August __, 1996 amending the
terms of this Agreement.

              "AMENDMENT SIX EFFECTIVE DATE" means the later of (i) the date as
of which Amendment Six was executed and (ii) date of the satisfaction of all
conditions to effectiveness specified in Section 3 of Amendment Six.

              "NOVEMBER 16, 1995 LETTER AGREEMENT" means the letter agreement
dated November 16, 1995 among the Borrower, the Banks and the Agent.

              2.4  Section 2.3 of the Credit Agreement is amended by adding the
following sentences at the end thereof:

                   2.3                  On the Expiration Date the
     Borrower shall also pay to the


                                       -2-

<PAGE>


     Agent, for the account of the Banks, a commitment fee at the rate of  1%
     per annum, such commitment fee to accrue daily from and including September
     1, 1995 to but excluding the date upon which all of the Loans are repaid in
     full, on the amount of the total Commitments (the total Commitments being
     the outstanding principal balance of the Loans) for each day during such
     period.

              2.5  Section 2.4 of the Credit Agreement is amended by adding the
following sentence at the end thereof

                   2.4 AGENCY FEES.  On the Expiration Date the Borrower shall 
     also pay to the Agent for its account an agency fee of $2,500 per month 
     (or portion thereof) for the period from September 1, 1995 through July 31,
     1996 and $4,000 per month (or portion thereof) from August 1, 1996 through 
     date upon which all of the Loans are repaid in full.

              2.6  Section 2.5.2 of the Credit Agreement is amended to read, in
its entirety, as follows:


                   2.5.2  On the Expiration Date, the Borrower shall pay to the
Agent for the account of each Bank a fee equal to 3% of the total Commitments
(the total Commitments being the principal balance of the Loans) of all of the
Banks as of August 31, 1995, minus any portion of such fee that was previously
paid in connection with the November 16, 1995 Letter Agreement, to be paid to
the Banks pro rata in accordance with their Pro Rata Commitment on August 31,
1995.

              2.7  The financial covenants in Part 9 of the Credit Agreement
are hereby amended and will be reflected in a subsequent amendment to the Credit
Agreement as the parties hereto shall agree in good faith.

              2.8  Part 10 of the Credit Agreement is amended by adding the
following after Section 10.11:

                   10.12  The Borrower shall not, and shall not permit any
     of its Subsidiaries or any joint venture to which it or any of its
     Subsidiaries is a party (regardless of whether or not such joint
     venture is itself a Subsidiary of the Borrower) to, amend, modify or
     waive, or consent to any amendment, modification, or waiver of, either
     orally or in writing, any provision of any security, instrument,
     agreement or other document governing any obligation of the Borrower,
     any Subsidiary of the Borrower or any joint venture to which the
     Borrower or any Subsidiary of the Borrower is a party (regardless of
     whether or not such joint venture is itself a Subsidiary of the
     Borrower), in respect of any


                                       -3-

<PAGE>


     Indebtedness, including, without limitation, any provision of the
     convertible subordinated debentures issued by the Borrower regarding the
     conversion of such debentures or the terms of subordination of payment of
     such debentures, nor shall the Borrower enter into or incur, or permit any
     of its Subsidiaries or any joint venture to which it or any of its
     Subsidiaries is a party (regardless of whether or not such joint venture is
     itself a Subsidiary of the Borrower) to enter into or incur, obligations
     with respect to Indebtedness for borrowed money or in respect of bonds,
     notes, debentures or other such instruments, other than those obligations
     in existence on the Amendment Six Effective Date or arising under documents
     delivered to the Agent and the Banks in connection with Section 3.5 of
     Amendment Six; in each case without the prior written consent of the
     Controlling Banks.

                   10.13  The Borrower shall not, and shall not permit any
     of its Subsidiaries or any joint venture to which it or any of its
     Subsidiaries is a party (regardless of whether or not such joint
     venture is itself a Subsidiary of the Borrower) to, make any payments
     with respect to any obligation of the Borrower, any Subsidiary of the
     Borrower or any joint venture to which the Borrower or any Subsidiary
     of the Borrower is a party (regardless of whether or not such joint
     venture is itself a Subsidiary of the Borrower) with respect to any
     Indebtedness, the payment of which is in any manner subordinated to
     the payment of the Obligations, including, without limitation, the
     convertible subordinated debentures issued by the Borrower, without
     the prior written consent of the Controlling Banks, other than (x)
     mandatory payments of interest made in accordance with the
     subordination provisions applicable to such obligations and (y) in the
     case of the Borrower's convertible subordinated debentures and any
     other obligations that may, by their terms, be converted into equity
     other than at the option of the holder thereof, the minimum mandatory
     interest payments required to be paid prior to the earliest date upon
     which such obligation may be converted into equity other than at the
     option of the holder thereof.


              2.9  Section 11.5 of the Credit Agreement is amended to read, in
its entirety, as follows:

                   11.5  Borrower shall default in the performance of (a)
     any of the covenants contained in Section 8.13, 10.12 or 10.13 or (b)
     any other covenant, condition, or provision hereof or of any other
     Loan Document and, solely in the case of (b), such default shall not
     be remedied within a period of fifteen (15) days after written notice
     thereof to the Borrower from any Bank.


                                       -4-

<PAGE>


              2.10  Part 13 of the Credit Agreement is amended by amending
Section 13.4.1 to read, in its entirety, as follows:

                   13.4.1  The Borrower agrees to pay or reimburse each
     Bank for paying: (a) all reasonable costs and expenses of each Bank
     (excluding fees and disbursements of each Bank's legal counsel except
     as provided in clauses (b), (c) and (f) below) in connection with the
     preparation, execution and delivery of, the making of Loans under, and
     the enforcement and/or collection of, this Agreement, the Notes, the
     Loan Documents, Amendment One, Amendment Two, Amendment Three,
     Amendment Four, Amendment Five, the November 16, 1995 Letter
     Agreement, Amendment Six, the Warrants, the Warrant Amendments, the
     New Warrants, the Second Warrant Amendments, the Registration Rights
     Agreements or any other document referred to herein; (b) the
     reasonable fees, charges, costs and expenses, if any, of Nixon,
     Hargrave, Devans & Doyle, special counsel to the Banks, in connection
     with the preparation, execution and delivery of this Agreement, the
     Notes, the Loan Documents, Amendment One and other related or
     ancillary documents; (c) the reasonable fees, charges, costs and
     expenses of Howard, Darby & Levin, special counsel to the Banks, and
     of counsel to each of the Banks (whether outside counsel or counsel
     who are employees of the Agent or any of the Banks, PROVIDED, HOWEVER,
     the Borrower shall not be obligated to pay fees of counsel who are
     employees of the Agent or any of the Banks in connection with and
     involved in negotiating, drafting, reviewing or preparing of Amendment
     Five or Amendment Six) in connection with the negotiation,
     preparation, execution and delivery of the Loan Documents, Amendment
     Two, Amendment Three, Amendment Four, Amendment Five, the November 16,
     1995 Letter Agreement, Amendment Six and the other Restructuring
     Documents; (d) all transfer, stamp, documentary or other similar
     taxes, assessments or charges levied by any governmental or revenue
     authority in respect of this Agreement, the Notes, the Loan Documents
     or any other documents related to any of the foregoing; (e) all costs,
     expenses, taxes, assessments and other charges incurred in connection
     with any filing, registration, recording or perfection of any Lien
     contemplated by this Agreement, the Notes, the Loan Documents or any
     other documents related to any of the foregoing; and (f) any and all
     reasonable and necessary expenses paid or incurred by each Bank
     (including, without limitation, reasonable attorneys' fees, charges,
     costs and expenses of Howard, Darby & Levin, special counsel to the
     Banks, and of counsel to each of the Banks, whether outside counsel or
     counsel who are employees of the Agent or any of the Banks), if any,
     in connection with the enforcement or collection of this Agreement,
     the Notes, the Loan Documents, the Restructuring Documents or any
     guaranty or collateral security for Indebtedness under the Notes
     arising after the occurrence of any event, condition or act which with
     notice or lapse of time or both would constitute an Event of Default,
     unless such occurrence is cured by Borrower within any


                                       -5-

<PAGE>


     applicable grace period or such reimbursement is not required by the terms
     of such consent or waiver granted by Bank in respect of such occurrence.
     The obligations of Borrower under this Section 13.4.1 shall survive the
     payment of the Notes.


          3.  CONDITIONS TO EFFECTIVENESS.  This Amendment Six shall not become
effective except upon the fulfillment of each of the conditions set forth in
Sections 3.1 through 3.9 inclusive and the Agent and the Banks shall have
additionally received all the documents and payments described below, each
document being in form and substance reasonably satisfactory to the Bank and
their counsel.

              3.1  RECEIPT OF COUNTERPARTS.  The Agent and the Banks shall have
received signed counterparts of this Amendment Six from the Borrower and each of
the Banks.

              3.2  INTEREST AND PRINCIPAL PAYMENTS.  The Agent shall have
received (in immediately available funds) for the ratable benefit of the Banks:
(a) all interest payments due or scheduled to fall due on or before the first
Business Day of August, 1996 (PROVIDED, HOWEVER, that if the interest payment
scheduled to fall due on the first Business Day of August, 1996 is made prior to
such date, it shall be held in the escrow described in clause (b) below and paid
by the Agent to the Banks on the first Business Day of August, 1996), (b) an
amount equal to the interest payments that will be due and payable on the first
Business Day of September, 1996 and the first Business Day of October, 1996
(assuming no further reduction of the Commitments after the effective date of
Amendment Six), such amount (together with any amount required to be placed in
escrow in respect of the August 1, 1996 interest payment) to be placed in escrow
with the Agent for the benefit of the Banks and to be paid (without any further
authorization from the Borrower) by the Agent to the Banks to satisfy any
obligation of the Borrower to pay interest under the Credit Agreement and (c) a
payment of not less than $200,000, to be applied to reduce the outstanding
principal balance of the Loans.

              3.3  FEES AND EXPENSES.  The Agent and the Banks shall have
received evidence that the Borrower has paid all amounts required to be paid in
accordance with Section 13.4.1, including, without limitation, all legal fees
and expenses of counsel to Banks in respect of which invoices have been issued
on or before the effective date of Amendment Six.

              3.4  SOURCES AND USES STATEMENTS.  The Agent and the Banks shall
have received statements showing the sources and uses of the proceeds of (a) the
offering made pursuant to the Private Placement Memorandum dated June 29, 1995,
(b) the offering made pursuant to the Private Placement Memorandum dated
November 20, 1995 and (c) any other offering presently contemplated by the
Borrower.

              3.5  OTHER DEBT INSTRUMENTS.  The Agent and the Banks shall have
received


                                       -6-

<PAGE>


certified copies of the securities, instruments, agreements and other documents
governing all debt obligations (other than the Obligations owed to the Banks
under the Credit Agreement) of the Borrower, each Subsidiary of the Borrower and
each joint venture to which the Borrower or any Subsidiary of the Borrower is a
party (regardless of whether or not such joint venture is itself a Subsidiary of
the Borrower), including, without limitation, obligations that are or may be
convertible into equity of the Borrower and any new debt obligations the
Borrower or any Subsidiary intends to incur, together with a certificate of the
Chief Executive Officer of the Borrower stating that (a) such copies are true
and correct copies, (b) such copies represent all of the instruments, documents
and agreements relating to debt obligations to which the Borrower, any
Subsidiary of the Borrower or any joint venture to which the Borrower or any
Subsidiary of the Borrower is a party (regardless of whether or not such joint
venture is itself a Subsidiary of the Borrower)is a party or by which any of its
assets is bound, (c) neither the Borrower nor any Subsidiary nor or any joint
venture to which the Borrower or any Subsidiary of the Borrower is a party
(regardless of whether or not such joint venture is itself a Subsidiary of the
Borrower) has issued, or is a party to, any securities, instruments, agreements
or other documents evidencing or relating to obligations to pay money other than
those included in such copies and (d) such instruments, agreements and documents
are in full force and effect and have not been modified, amended or waived in
any manner, except as disclosed explicitly in writings, copies of which are
included therewith; and all such securities, instruments, agreements and other
documents, shall be in form and substance acceptable to the Agent and the Banks
in their sole and absolute discretion (including, without limitation, with
respect to provisions governing convertibililty and subordination).

              3.6  RESOLUTIONS.  The Agent and the Banks shall have received
certified copies of the resolutions of the Board of Directors of the Borrower,
Houba, Inc., Blue Cross Products, Inc., Halsey Pharmaceuticals, Inc. and The
Medi-Gum Corporation authorizing and consenting to Amendment Six of the Credit
Agreement and the effects upon any Security Documents to which each of the
above-mentioned corporations is a party.

              3.7  SHAREHOLDER CONSENT.  The Agent and the Banks shall have
received certified copies of consents of the Shareholders of Houba, Inc., Blue
Cross Products, Inc., Halsey Pharmaceuticals, Inc. and The Medi-Gum Corporation
approving and ratifying the consent of each such corporation to Amendment Six of
the Credit Agreement and the effect upon any Security Documents to which each of
the above-mentioned corporations is a party.

              3.8  OPINION OF COUNSEL.  The Agent and the Banks shall have
received an opinion of counsel to the Borrower in respect of this Amendment Six
in substantially the form of Exhibit A annexed hereto.

              3.9  OTHER DOCUMENTS.  The Borrower and each Subsidiary that is a
party to any Loan Document shall have executed and delivered to the Agent any
instruments or documents needed or, in the determination of the Agent and the
Banks, advisable, to effectuate


                                       -7-

<PAGE>


the provisions of the Loan Documents (including prior amendments thereto)
including, without limitation, all Uniform Commercial Code financing statements
needed or advisable to evidence the perfection of the Liens granted under the
Security Documents.


          4.  REPRESENTATIONS AND WARRANTIES.  The Borrower represents and
warrants, with respect to itself and its subsidiaries, to the Agent and each
Bank, as of the date hereof, that:

              4.1  The Borrower is indebted to the Banks, and the outstanding
principal amount of the Loans is $3,394,574.79 as of the date of execution of
this Amendment Six, and interest is continuing to accrue on unpaid principal,
together with other fees, costs, and expenses incurred and to be incurred by the
Banks;

              4.2  The Loan Documents are in full force and effect, were duly
executed by the parties hereto, constitute legal, valid and binding agreements
and obligations of the parties thereto, are enforceable in accordance with their
respective terms against the parties thereto and are hereby reaffirmed and
ratified, as modified by this Amendment Six;

              4.3  This Amendment Six has been duly executed by the Borrower
and constitutes a legal, valid and binding agreement and obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.

              4.4  The Borrower has, to the best of its knowledge, no defense,
counterclaim, offset, cross-claim, claim or demand of any kind or nature
whatsoever which can be asserted to reduce or eliminate all or any part of its
liability to repay the Loans, which (immediately prior to the effectiveness
hereof) are in default and remains due, owing and unpaid and in any event all
defenses, counterclaims, offsets, cross-claims, claims and demands are released
under Section 5.1;

              4.5  The security interests and Liens granted to the Agent for
the benefit of the Banks in the Collateral are valid, in existence, attached,
duly perfected and not subject to any pending dispute or direct or indirect
challenge or attack or, to the knowledge of the Borrower, any threatened dispute
or direct or indirect challenge or attack by any party other than the Borrower,
and the grant of such security interests and Liens to the Agent for the benefit
of the Banks is hereby reaffirmed; and

              4.6  Nothing but full and complete performance of all the
Obligations under the Loan Documents and payment of the Loans in full shall
satisfy and discharge the Borrower's liability to the Banks under the Loan
Documents.


          5.  RELEASE AND INDEMNIFICATION.



                                       -8-

<PAGE>


              5.1  The Borrower on behalf of itself and its successors and
assigns, hereby forever and irrevocably releases the Agent and each Bank, and
their respective officers, directors, representatives, agents, attorneys,
employees, affiliates, subsidiaries, successors and assigns, from any and all
claims, demands, suits, cross-claims, causes of action, assertions, liabilities,
debts, defenses, counterclaims or offsets of any kind or nature whatsoever
existing on the date hereof, whether known or unknown, pertaining to, connected
with or arising out of the Credit Agreement, Amendment One, Amendment Two,
Amendment Three, Amendment Four, Amendment Five, the November 16, 1995 Letter
Agreement, this Amendment Six, the transactions described in the Credit
Agreement, Amendment One, Amendment Two, Amendment Three, Amendment Four,
Amendment Five, the November 16, 1995 Letter Agreement and/or this Amendment
Six, the Loan Documents, or any document, instrument or agreement entered into
in connection therewith or herewith or referred to therein or herein or any
other obligation of the Borrower to the Agent or any Bank or any of their
respective affiliates (collectively, "Claims").  The parties acknowledge that
Section 5.1 does not and shall not apply to Claims that arise after the date
hereof.

              5.2  The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Agent, the Banks, each of their Affiliates and each of the
respective officers, directors, employees, agents, attorneys and consultants
(collectively called the "Indemnitees") of the Agent, the Banks and their
Affiliates from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), imposed
on, incurred by, or asserted against such Indemnitees, whether direct, indirect,
or consequential and whether based on any federal or state laws or other
statutory regulations, including, without limitation, securities and commercial
laws and regulations, under common law or at equity, or on contract or
otherwise, including any liability and costs under federal, state or local
environmental, health or safety laws, regulations, or common law principles,
arising from or in connection with any Claims.

              5.3  The Borrower acknowledges that it has been advised by
counsel with respect to this Agreement and the release and indemnity contained
herein.


          6.  EFFECT ON LOAN DOCUMENTS.

              6.1  Except as expressly amended above, the terms and conditions
of the Credit Agreement and the other Loan Documents shall remain in full force
and in effect and are hereby ratified and confirmed.  Although counsel for the
Agent has prepared the Credit Agreement and this Amendment Six, the Borrower
waives any right to require that any ambiguity or question about the terms
thereof or hereof be construed against the Agent or the


                                       -9-

<PAGE>


Banks.

              6.2  Except as expressly provided in this Amendment Six, nothing
contained herein shall constitute a waiver, release or modification of any of
the Agent's or the Banks' rights and remedies under, or any of the terms and
conditions of, the Loan Documents.  The Agent and the Banks expressly reserve
all of their rights and remedies under the Loan Documents.  Upon the
satisfaction of the conditions to effectiveness set forth in Section 3 this
Amendment Six, including, without limitation, the making of all payments
referred to therein, the Agent and the Banks waive any and all Defaults and
Events of Default under the Credit Agreement on or prior to the Amendment Six
Effective Date, PROVIDED, HOWEVER, nothing contained herein shall be deemed to
constitute a waiver of any Default or Event of Default under the Credit
Agreement (as amended by this Amendment Six), which Default or Event of Default
is in existence after the Amendment Six Effective Date.


          7.  GOVERNING LAW.  THIS AMENDMENT SIX SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ANY CONFLICTS-OF-LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.


          8.  WAIVER OF JURY TRIAL.  THE PARTIES HERETO HEREBY WAIVE ANY RIGHT
TO A JURY TRIAL FOR ANY CONTROVERSY ARISING OUT OF OR PERTAINING TO THIS
AMENDMENT SIX, THE LOAN DOCUMENTS, THE RESTRUCTURING DOCUMENTS OR ANY
TRANSACTION DESCRIBED HEREIN OR THEREIN.


          9.  HEADINGS.  Section headings in this Amendment Six are included
herein for convenience of reference only and shall not constitute a part of this
Amendment Six for any other purpose.


                                      -10-

<PAGE>


          10.  EXECUTION IN COUNTERPARTS.  This Amendment Six may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.  Execution and delivery of this Amendment Six by facsimile
shall be as effective as physical delivery of a manually executed counterpart.



                              HALSEY DRUG CO., INC.


                              By:  _________________________
                                   Name:
                                   Title:



                              THE CHASE MANHATTAN BANK,
                                as successor in interest to
                              THE CHASE MANHATTAN BANK, N.A.


                              By: __________________________
                                  Name:
                                  Title:



                              THE BANK OF NEW YORK


                              By: __________________________
                                  Name:
                                  Title:




                                      -11-

<PAGE>



                              ISRAEL DISCOUNT BANK OF NEW YORK


                              By:  _________________________
                                   Name:
                                   Title:


                              By:  _________________________
                                   Name:
                                   Title:



                              THE CHASE MANHATTAN BANK
                                as successor in interest to
                                THE CHASE MANHATTAN BANK, N.A.,
                                as Agent


                              By:  _________________________
                                   Name:
                                   Title:


                                      -12-