<PAGE>
                                                                   EXHIBIT 10.17

                       WARRANT RECAPITALIZATION AGREEMENT

This WARRANT RECAPITALIZATION AGREEMENT is dated as of December 20, 2002,
between Halsey Drug Co., Inc., a New York corporation (the "Company"), and the
Investors listed on the signature page of this Agreement (the "Investors").

                             W I T N E S S E T H :

WHEREAS, the Company desires to recapitalize (the "Recapitalization") 8,104,336
of the outstanding Warrants ("Warrants") to purchase one share of the Company's
common stock, par value $.01 per share (the "Common Stock") into an aggregate of
5,938,520 shares of the Company's Common Stock and the Investors have agreed to
participate in the Recapitalization on the terms and subject to the conditions
set forth herein;

WHEREAS, the Company is a party to a certain Debenture Purchase Agreement dated
of even date herewith with the Purchasers listed on the signature pages thereto
providing for the Company's issuance of 5% convertible senior secured debentures
due March 21, 2006 in the principal amount of up to $35 million (the "Purchase
Agreement") and it is a condition to the completion of the transactions
contemplated in the Purchase Agreement that the Recapitalization shall be
completed in accordance with the terms of this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1.    RECAPITALIZATION OF WARRANTS

(a)      Subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Company contained herein, each Investor
agrees to tender to the Company on the Closing Date specified in Section 2
hereof, the number of Warrants set forth opposite such Investor's name on
Schedule 1 hereto to be recapitalized for, and the Company agrees to issue
and/or deliver to the Investor on the Closing Date, the number of shares of
Common Stock in certificate form as set forth opposite such Investor's name on
Schedule 1 hereto.

(b)      Each of the Company and the Investors agrees that for purposes of
calculating the number of shares of Common Stock issuable to the Investors for
the Warrants described in Schedule 1 hereto, the definition of "Fair Market
Value" as provided in Section 3(b) of each of the Warrants described on Schedule
1 is hereby amended and restated to provide as follows:

"Fair Market Value"

         shall mean the average of the closing bid and asked prices of the
         Common Stock in the over-the-counter market at the close of trading
         for each of the ten (10) consecutive trading days through and
         including December 4, 2002.
<PAGE>
(c)      The Company intends to treat the Recapitalization as a reorganization
within the meaning of Section 368(a)(1) of the U.S. Internal Revenue Code of
1986, as amended.

SECTION 2.    THE CLOSING

(a)      Subject to the terms and conditions hereof, the closing of the
Recapitalization (the "Closing") will take place at the offices of St. John &
Wayne, L.L.C., Two Penn Plaza East, Newark, New Jersey 07105 at 10:00 a.m. local
time on the earliest practicable date following satisfaction or waiver of the
conditions set forth in Section 6 hereof and concurrent with the closing of the
transactions contemplated in the Purchase Agreement. Such time and date are
herein referred to as the "Closing Date".

(b)      Subject to the terms and conditions hereof, on the Closing Date (i)
the Company will deliver to each Investor a certificate registered in such
Investor's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of shares of Common Stock set forth opposite such
Investor's name on Schedule 1 hereto, and (ii) the Investor will deliver to the
Company certificates evidencing the number of Warrants set forth opposite such
Investor's name on Schedule 1 hereto.

SECTION 3.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investors as follows as of the date
hereof and as of the Closing Date:

3.1      Corporate Power and Authority.

The Company is duly organized, validly existing and in good standing under the
laws of the State of New York. The Company has all requisite corporate power and
authority to enter into and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and (assuming due authorization, execution and delivery by each
Investor) constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms subject to (a)
applicable bankruptcy, insolvency, fraudulent conveyance and other similar laws,
and (b) general principles of equity, including equitable defenses and limits as
to the availability of equitable remedies, whether such principles are
considered in a proceeding at law or in equity.

3.2      Capitalization of the Company.

As of the date of this Agreement, the Company's authorized capital stock
consists solely of 80,000,000 shares of Common Stock, of which 15,065,240 shares
are outstanding and 66,037,354 shares are reserved for issuance upon conversion
of outstanding convertible debentures, common stock purchase warrants and stock
options. All of the issued and outstanding shares of capital stock of the
Company (i) have been duly authorized and validly

                                       2
<PAGE>
issued, (ii) are fully paid and non-assessable and (iii) have been offered,
issued, sold and delivered by the Company in compliance with applicable Federal
and state securities laws.

3.3      Conflicts; Consents and Approvals.

The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement do not and will not (a) violate,
conflict with, or result in a breach of any provision of, or constitute a
default under, the Company's Certificate of Incorporation, as amended, or
By-laws; (b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice or
lapse of time or both, would become a default) under, or entitle any party to
terminate, accelerate, modify or cause a default under, or result in the
creation of any encumbrance or lien upon any of the properties or assets of the
Company under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, undertaking, agreement,
lease or other instrument or obligation to which the Company is a party; (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company; or (d) other than required filings with the
Securities and Exchange Commission (the "Commission") or with state securities
regulators pursuant to state securities or "blue sky" laws, require any action
or consent or approval of, or review by, or registration or material filing by
the Company with, any third party or any local, state or federal court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority, except, with respect to
clauses (b), (c) and (d), as would not have a material adverse effect on the
Company.

3.4      Board Recommendation.

In accordance with the applicable provisions of the New York Business
Corporation Law and the Company's Certificate of Incorporation, as amended, and
By-laws, the Board of Directors of the Company, at a meeting duly called and
held, at which a quorum was present throughout, upon the recommendation of an
independent committee of the Board of Directors, has adopted a resolution
proposing and declaring the advisability of this Agreement and the transactions
contemplated hereby.

3.5      Litigation.

As of the date immediately preceding the date hereof, to the Company's
knowledge, there are no actions, suits or proceedings pending against the
Company (or any of its properties, rights or franchises), at law or in equity,
or before any federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other governmental authority or any arbitrator
or arbitration tribunal, that would be reasonably expected to, individually or
in the aggregate, prevent, materially impair or materially delay the
consummation of the transactions contemplated hereby.

3.6      Other Information.

Since December 31, 2001, except as disclosed on Schedule 2 hereto or in the
Company's quarterly reports on Form 10-Q for the quarter and nine months ended
September 30, 2002, (a)

                                       3
<PAGE>
the business of the Company has been conducted in the ordinary course, and (b)
there have been no material adverse changes in the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company. There are no material liabilities of the
Company which would be required to be provided for in a consolidated balance
sheet of the Company prepared in accordance with United States generally
accepted accounting principles consistently applied, other than liabilities
provided for in the historical financial statements included in the Company's
filings with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act.").

3.7      SEC Reports.

The Company has filed all proxy statements, reports and other documents required
to be filed by it under the Exchange Act. The Company has furnished each
Investor with copies of (a) its Annual Report on Form 10-K for the fiscal year
ended December 31, 2001, (b) its Quarterly Report on Form 10-Q for the quarter
and nine months ended September 30, 2002, and (c) its Proxy Statement dated May
7, 2001 (collectively, the "SEC Reports"). Each SEC Report was in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective dates or as subsequently supplemented or
amended, contained any untrue statement of a material fact or omitted 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 were made, not
misleading.

SECTION 4.    REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor, on a several and not joint basis, represents and warrants to the
Company as follows as of the date hereof and as of the Closing Date:

4.1      Corporate Power and Authority.

The Investor has all requisite power, authority and legal right to execute,
deliver, enter into, consummate the transactions contemplated by and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Investor have been duly authorized by all required
corporate and other actions. The Investor has duly executed and delivered this
Agreement and this Agreement constitutes the legal, valid and binding
obligations of the Investor enforceable against the Investor in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to the rights of creditors
generally from time to time in effect, to general principles of equity,
including without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding in equity or at
law.

4.2      Investment Intent.

The Investor is acquiring the Common Stock to be delivered in the
Recapitalization for its own account for investment and not with a view to, or
for resale in connection with, any distribution thereof in violation of
applicable securities laws; provided, however, that the Investor may

                                       4
<PAGE>
transfer record and/or beneficial ownership of the Common Stock to one or more
affiliates, officers or employees of affiliates so long as the transfer is made
in compliance with the Securities Act of 1933, as amended (the "Securities
Act"), and applicable state laws. The Investor understands that none of the
Common Stock to be received in the Recapitalization has been registered under
the Securities Act. If the Investor should in the future decide to dispose of
any of its Common Stock, it is understood that it may do so only in compliance
with the Securities Act, applicable securities laws and this Agreement. The
Investor is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.

4.3      Access.

The Investor has had access to such financial and other information, and has
been afforded the opportunity to ask such questions of representatives of the
Company, including the Chairman and the Chief Financial Officer, and receive
answers with respect thereto, as the Investor deems necessary in connection with
its decision to participate in the Recapitalization.

4.4      Investor Qualification.

(a)      The Investor owns the Warrants set forth opposite the Investor's name
in Schedule 1 hereto.

(b)      The Investor (alone or with the aid of its investment advisors) has
such knowledge and experience in financial and business matters that the
Investor is capable of evaluating the merits and risks of its investment in the
Common Stock.

(c)      The Investor is able to bear the economic risk of an investment in the
Common Stock and has the ability to hold the Common Stock to be acquired by such
Investor indefinitely and the ability to suffer a complete loss of such
investment.

(d)      The Investor is familiar with the type of investment which the Common
Stock constitutes and has reviewed the investment in the Common Stock subscribed
herein with tax and legal counsel and investment representatives to the extent
deemed advisable. The Investor believes that the Common Stock and the amount of
such Investor's investment are consistent with such Investor's overall
investment program and financial position.

(e)      All information the Investor has supplied to the Company is true and
accurate.

(f)      The Investor will immediately notify the Company if any of the
representations and warranties made herein become untrue.

SECTION 5.    TRANSFER OF SECURITIES

5.1      Restrictions.

Each Investor agrees that it will not sell or otherwise dispose of any Common
Stock, unless such Common Stock shall have been registered under the Securities
Act and, to the extent required,

                                       5
<PAGE>
under any applicable state securities laws, or pursuant to an applicable
exemption from such registration requirements. The Company may endorse on all
certificates evidencing the Common Stock a legend stating or referring to such
transfer restrictions and require, as a condition to transfer, from such
Investor and any proposed transferee of such Investor, such certifications,
legal opinions or other information as the Company may reasonably require to
confirm that such transfer is being made in compliance with, pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act or any state securities laws; provided,
however, that no such legend shall be endorsed on any such certificates which,
when issued, are no longer subject to the restrictions of this Section 5.

SECTION 6.    CONDITIONS PRECEDENT

6.1      Conditions to Each Party's Obligation.

The respective obligation of each party to effect the Recapitalization shall be
subject to the condition that no statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other governmental
entity or other legal restraint or prohibition preventing the consummation of
the Recapitalization shall be in effect; provided, however, that each of the
parties shall have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.

6.2      Conditions to the Company's Obligation.

The obligation of the Company to effect the Recapitalization shall be subject to
the satisfaction at or prior to the Closing Date of the following additional
conditions (any of which may be waived by the Company): (a) Each of the
Investors shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed at or prior to the Closing
Date, and (b) each of the representations and warranties of each of the
Investors contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date (other
than to the extent that any such representation and warranty, by its terms, is
expressly limited to a specific date, in which case such representation and
warranty shall be true and correct in all material respects as of such date).

6.3      Conditions to the Investors' Obligations.

The obligation of the Investors to effect the Recapitalization shall be subject
to the satisfaction at or prior to the Closing Date of the following additional
conditions (any of which may be waived by such Investor): (a) The Company shall
have performed in all material respects each of its agreements contained in this
Agreement required to be performed at or prior to the Closing Date, and (b) each
of the representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if made on and as of such date (other than to the extent that any such
representation and warranty, by its terms, is expressly limited to a specific
date, in which case such representation and warranty shall be true and correct
in all material respects as of such date).

                                       6
<PAGE>
SECTION 7.    INDEMNIFICATION

(a)      The representations, warranties, covenants and agreements of the
Company and the Investors contained in this Agreement or in any document or
certificate delivered pursuant hereto or thereto or in connection herewith shall
survive, and shall continue in effect following, the execution and delivery of
this Agreement and the Closing for a period of two (2) years from the date of
this Agreement.

(b)      The Company agrees to indemnify and hold the Investors harmless from
and against any loss, damage, liability or expense (including amounts paid in
settlement and reasonable attorneys' fees and expenses) to the Investors
resulting from any breach of the representations, warranties, covenants or
agreements of the Company contained in this Agreement or any other document or
certificate delivered by the Company pursuant hereto or thereto or in connection
herewith or therewith; provided, however, that the Company shall not be required
to indemnify the Investors for any diminution in the value of the Common Stock.

SECTION 8.    MISCELLANEOUS

8.1      Governing Law.

This Agreement and the rights of the parties hereunder shall be governed in all
respects by the laws of the State of New York wherein the terms of this
Agreement were negotiated, excluding to the greatest extent permitted by law any
rule of law that would cause the application of the laws of any jurisdiction
other than the State of New York.

8.2      Specific Performance.

The transactions contemplated by this Agreement are unique. Accordingly, each of
the parties acknowledges and agrees that, in addition to all other remedies to
which it may be entitled, each of the parties hereto is entitled to a decree of
a specific performance and injunctive and other equitable relief.

8.3      Amendments and Waiver.

The terms and provisions of this Agreement may be amended, waived, modified or
terminated only with the written consent of (1) the Company, and (2) the holders
of two-thirds of the outstanding Warrants; provided, however, that no such
amendment, waiver, modification or termination shall change this Section 8.4
without the written consent of all of the Investors then holding Warrants.

8.4      Successors and Assigns.

Except as otherwise expressly provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon and enforceable by and against, the
parties hereto and their respective successors, assigns, heirs, executors and
administrators. No party may assign any of its rights

                                       7
<PAGE>
hereunder without the prior written consent of the other parties; provided,
however, that any Investor may assign any of its rights under this Agreement to
any affiliate of such Investor.

8.5      Entire Agreement.

This Agreement (including the Schedules hereto) and the other documents
delivered pursuant hereto and simultaneously herewith constitute the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof and thereof.

8.6      Notices, etc.

All notices, demands or other communications given hereunder shall be in writing
and shall be sufficiently given if transmitted by facsimile or delivered either
personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, return receipt requested, addressed
as follows:

                  (a)      if to the Company:

                           Halsey Drug Co., Inc.
                           695 N. Perryville Road
                           Rockford, Illinois
                           Attention: Mr. Michael Reicher
                           Chief Executive Officer
                           Facsimile: (815) 399-9710

                  (b)     if to an Investor, to the address set forth on the
                          signature pages hereto, or to such other address with
                          respect to any party hereto as such party may from
                          time to time notify (as provided above) the other
                          parties hereto. Any such notice, demand or
                          communication shall be deemed to have been given (i)
                          on the date of delivery, if delivered personally, (ii)
                          on the date of facsimile transmission, receipt
                          confirmed, (iii) one business day after delivery to a
                          nationally recognized overnight courier service, if
                          marked for next day delivery or (iv) five business
                          days after the date of mailing, if mailed. Copies of
                          any notice, demand or communication given to the
                          Company, shall be delivered to St. John & Wayne,
                          L.L.C., Two Penn Plaza East, Newark, New Jersey
                          07105-2249 Attn.: John P. Reilly, Esq., or such other
                          address as may be directed.

8.7      Delays or Omissions.

No delay or omission to exercise any right, power or remedy accruing to any
party to this Agreement upon any breach or default of any other party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an
acquiescence, therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or

                                       8
<PAGE>
any waiver on the part of any holder of any provisions or conditions of this
Agreement must be, made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.

8.8      Independence of Covenants and Representations and Warranties.

All covenants hereunder shall be given independent effect so that if a certain
action or condition constitutes a default under a certain covenant, the fact
that such action or condition is permitted by another covenant shall not affect
the occurrence of such default. In addition, all representations and warranties
hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder.

8.9      Rights and Obligations; Severability.

Unless otherwise expressly provided herein, each Investor's rights and
obligations hereunder are several rights and obligations, not rights and
obligations jointly held with any other person. 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.

8.10     Expenses.

All costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be the responsibility of and
shall be paid by the party incurring such fees and expenses, whether or not the
transactions contemplated by this Agreement are consummated.

8.11     Jurisdiction.

         (a)      Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or United States Federal court sitting
in New York City, and any appellate court from any thereof, in any action or
proceeding arising our of or relating to this Agreement or for recognition or
enforcement of any judgment, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the fullest extent permitted by law, in such United States Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any other jurisdiction.

         (b)      Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or in relation to this Agreement in

                                       9
<PAGE>
any such New York State or United States Federal court sitting in New York City.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

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

8.13     Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

8.14     Waiver of Jury Trial.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY
PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

                                       10
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

HALSEY DRUG CO., INC.

By:____________________
Name: _________________
Title: ________________

INVESTORS

<TABLE>
<S>                                          <C>
ORACLE STRATEGIC PARTNERS, L.P.              DANIEL HILL
By: Oracle Strategic Capital L.L.C.,         6725 Lynch Avenue
General Partner                              Riverbank, CA 95367
200 Greenwich Avenue
3rd Floor
Greenwich, CT 06830

_______________________________________      ___________________________________
By:  Joel Liffmann
Its: Authorized Agent

ALAN SMITH                                   PATRICK COYNE
21 Bedlow Avenue                             800 Merion Square Road
Newport, Rhode Island 02840                  Gladwyne, PA 19035

_______________________________________      ___________________________________

MICHAEL WEISBROT                             SUSAN WEISBROT
1136 Rock Creek Road                         1136 Rock Creek Road
Gladwyne, Pennsylvania 19035                 Gladwyne, Pennsylvania 19035

_______________________________________      ___________________________________

GREG WOOD                                    DENNIS ADAMS
c/o D.R. International                       120 Kynlyn Road
7474 No. Figueroa Street                     Radnor, Pennsylvania 19312
Los Angeles, California 90041

_______________________________________      ___________________________________
</TABLE>

                                       11
<PAGE>
<TABLE>
<S>                                          <C>
BERNARD SELZ                                 ROBERT W. BAIRD & CO., INC., TTEE
c/o Furman Selz                              FBO Michael K. Reicher IRA
230 Park Avenue                              c/o Halsey Drug Co., Inc.
New York, New York 10069                     695 North Perryville Rd.
                                             Crimson Building #2
                                             Rockford, Ill. 61107

_______________________________________      ___________________________________
                                             By:  Michael K. Reicher
                                             Its: Trustee

CONNIE REICHER TRUST                         PETER CLEMENS
c/o Halsey Drug Co., Inc.                    c/o Halsey Drug Co., Inc.
695 North Perryville Rd.                     695 North Perryville Rd.
Crimson Building #2                          Crimson Building #2
Rockford, Ill. 61107                         Rockford, Ill. 61107

_______________________________________      ___________________________________
By:  Connie Reicher
Its: Trustee

KENNETH GIMBEL                               STEFANIE HEITMEYER
2455 Montgomery Avenue                       C/o Halsey Drug Co., Inc.
Highland Park, Ill. 60035                    695 North Perryville Rd.
                                             Crimson Building #2
                                             Rockford, Ill. 61107

_______________________________________      ___________________________________

VARSHA H. SHAH                               HEMANT K. SHAH
29 Chrissy Drive                             29 Chrissy Drive
Warren, New Jersey 07059                     Warren, New Jersey 07059

_______________________________________      ___________________________________

VARSHA H. SHAH AS CUSTODIAN                  VARSHA H. SHAH AS CUSTODIAN
FOR SACHIN H. SHAH                           FOR SUMEET H. SHAH
29 Chrissy Drive                             29 Chrissy Drive
Warren, New Jersey 07059                     Warren, New Jersey 07059

_______________________________________      ___________________________________
By:  Varshah H. Shah                         By:  Varshah H. Shah
Its: Custodian                               Its: Custodian
</TABLE>

                                       12
<PAGE>
<TABLE>
<S>                                          <C>
MICHAEL RAINISCH                             ILENE RAINISCH
c/o Alvin Rainisch                           c/o Alvin Rainisch
315 Devon Place                              315 Devon Place
Morganville, New Jersey 07751                Morganville, New Jersey 07751

_______________________________________      ___________________________________

ROBERT W. BAIRD & CO., INC., TTEE            ROBERT W. BAIRD & CO., INC., TTEE
FBO Michael K. Reicher IRA                   FBO Connie Reicher IRA
c/o Halsey Drug Co., Inc.                    c/o Halsey Drug Co., Inc.
695 North Perryville Rd.                     695 North Perryville Rd.
Crimson Building #2                          Crimson Building #2
Rockford, Illinois 61107                     Rockford, Illinois 61107

_______________________________________      ___________________________________
By:  Robert W. Baird                         By:  Robert W. Baird
Its: Trustee                                 Its: Trustee

MICHAEL REICHER TRUST
c/o Halsey Drug Co., Inc.
695 North Perryville Rd.
Crimson Building #2
Rockford, Illinois 61107

_______________________________________
By:  Michael K. Reicher
Its: Trustee
</TABLE>

                                       13
<PAGE>
                                   SCHEDULE 1

                                INVESTOR WARRANTS

                                       14