<PAGE>
                                                                   EXHIBIT 10.10

THIS CONVERTIBLE SENIOR SECURED DEBENTURE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH DEBENTURE REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH DEBENTURE AND/OR COMMON STOCK MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

                              HALSEY DRUG CO., INC.
                              AMENDED AND RESTATED
                     5% CONVERTIBLE SENIOR SECURED DEBENTURE
                               DUE MARCH 31, 2006

$________________                                                      No. _____
December 20, 2002

         HALSEY DRUG CO., INC., a corporation organized under the laws of the
State of New York (the "Company"), for value received, hereby promises to pay
to_______________________ or its registered assigns (the "Payee" or "Holder")
upon due presentation and surrender of this Debenture, on March 31, 2006 (the
"Maturity Date"), the principal amount of _______________________($_______) and
accrued interest thereon as hereinafter provided.

         This Debenture was issued by the Company pursuant to a certain
Debenture and Warrant Purchase Agreement dated as of March 10, 1998 among the
Company and certain persons, including the Payee, as amended pursuant to that
certain Amendment to Debenture and Warrant Purchase Agreement dated as of
December __, 2002 among the Company and the other signatories thereto (together
with the Schedules and Exhibits thereto, the "Purchase Agreement") relating to
the purchase and sale of 5% Convertible Senior Secured Debentures maturing March
31, 2006 (the "Debentures") in the aggregate principal amount of $20,800,000.00
and pursuant to which Payee and others have exercised the right provided in the
Purchase Agreement to purchase additional Debentures for an aggregate purchase
price of $5,000,000.00. The holders of such Debentures are referred to
hereinafter as the "Holders." The Payee is entitled to the benefits of the
Purchase Agreement. Reference is made to the Purchase Agreement with respect to
certain additional rights of the Holder and obligations of the Company not set
forth herein. Capitalized terms used and not defined herein shall have the
meaning provided in the Purchase Agreement.

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                                    ARTICLE I

              PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT

                  1.1      Payment of the principal and accrued interest on this
Debenture shall be made in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts. Interest (computed on the basis of a 360-day year of twelve
30-day months) shall accrue on the unpaid portion of said principal amount from
time to time outstanding at the rate of five percent (5%) per annum (the "Stated
Interest Rate"), in like coin and currency, and shall be paid by the Company to
the Payee at three (3) month intervals on each January 1, April 1, July 1 and
October 1 during the term of this Debenture (commencing July 1, 1998) (each
being an "Interest Payment Date") and on the Maturity Date. Both principal
hereof and interest thereon are payable at the Holder's address as provided in
the Purchase Agreement or such other address as the Holder shall designate from
time to time by written notice to the Company. The Company will pay or cause to
be paid all sums becoming due hereon for principal and interest by check sent to
the Holder's address as provided in the Purchase Agreement or to such other
address as the Holder may designate for such purpose from time to time by
written notice to the Company, without any requirement for the presentation of
this Debenture or making any notation thereon, except that the Holder hereof
agrees that payment of the final amount due shall be made only upon surrender of
this Debenture to the Company for cancellation. Prior to any sale or other
disposition of this instrument, the Holder hereof agrees to endorse hereon the
amount of principal paid hereon and the last date to which interest has been
paid hereon and to notify the Company of the name and address of the transferee.

                  1.2      Notwithstanding anything to the contrary contained
herein, including, without limitation, Section 1.1 hereof, this Amended and
Restated 5% Convertible Senior Secured Debenture shall in no way terminate,
modify, or otherwise waive any irrevocable election executed by such Holder and
delivered to the Company providing for the Company's payment, and such Holder's
acceptance, of any and all interest payments due under this Debenture in the
form of like debentures of the Company in full satisfaction of the Company's
interest payment obligations hereunder.

                  1.3      In the event any payment of principal or interest or
both shall remain unpaid for a period of ten (10) days or more, a late charge
equivalent to five (5%) percent of each installment shall be charged. Interest
on the indebtedness evidenced by this Debenture after default or maturity
accelerated or otherwise shall be due and payable at the rate of seven (7%)
percent per annum, subject to the limitations of applicable law.

                  1.4      If this Debenture or any installment hereof becomes
due and payable on a Saturday, Sunday or public holiday under the laws of the
State of New York, the due date hereof shall be extended to the next succeeding
full business day and interest shall be payable at the rate of five (5%) percent
per annum during such extension. All payments received by the Holder shall be
applied first to the payment of all accrued interest payable hereunder.

                                   ARTICLE II

                                    SECURITY

                  2.1      The obligations of the Company under this Debenture
are secured pursuant to security interests on and collateral assignments of,
assets, tangible and intangible, of the Company granted by the Company to the
Payee pursuant to a security agreement dated as of March 10, 1998 and collateral
assignments referred to in the Purchase Agreement. In addition, each of Houba,
Inc. ("Houba"), Halsey

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Pharmaceuticals, Inc., Indiana Fine Chemicals Corporation and Cenci Powder
Products, Inc. ("CPP"), each a wholly-owned subsidiary of the Company, and H.R.
Cenci Laboratories, Inc. ("HR Cenci"), a 97% owned subsidiary of the Company
(collectively, the "Guarantors"), has executed in favor of the Holder a certain
Continuing Unconditional Guaranty, dated as of March 10, 1998, guaranteeing the
full and unconditional payment when due of the amounts payable by the Company to
the Holder pursuant to the terms of this Debenture (each a "Guaranty"). The
obligations of each Guarantor under its Guaranty are secured pursuant to
security interests on and collateral assignments of, assets, tangible and
intangible, of such Guarantor granted by the Guarantor to the Payee pursuant to
a security agreement dated March 10, 1998 and collateral assignments referred to
in the Purchase Agreement. The obligations of Houba under its Guaranty are also
secured pursuant to a Mortgage on real property located at 16235 State Road 17,
Culver, Indiana. The obligations of each of CPP and HR Cenci under their
Guaranties are also secured pursuant to a Mortgage on real property located at
152 North Broadway, Fresno, California. The rights of the Holders with respect
to the collateral described in the security agreements and collateral
assignments with the Company and the Guarantors as provided in the Purchase
Agreement are subject to the terms of the Subordination Agreement dated of even
date by and among the Company, Watson Pharmaceuticals, Inc., the Holders and the
other signatories thereto.

                                   ARTICLE III

                                   CONVERSION

                  3.1      Conversion at Option of Holder. At any time and from
time to time on and after as of March 10, 1998 (the "Initial Conversion Date")
until the earlier of (i) the Maturity Date or (ii) the conversion of the
Debenture in accordance with Section 3.2 hereof, this Debenture is convertible
in whole or in part at the Holder's option into shares of Common Stock of the
Company upon surrender of this Debenture, at the office of the Company,
accompanied by a written notice of conversion in form reasonably satisfactory to
the Company duly executed by the registered Holder or its duly authorized
attorney. "Common Stock" of the Company means common stock of the Company as it
exists on the date this Debenture is originally signed. This Debenture is
convertible on or after the Initial Conversion Date into shares of Common Stock
at a price per share of Common Stock equal to $1.404 per share (the "Conversion
Price"), as such conversion price may be adjusted as provided in Sections 3.5,
3.6 and 3.7 hereof (as so adjusted). Interest shall accrue to and including the
day prior to the date of conversion and shall be paid on the last day of the
month in which conversion rights hereunder are exercised. No fractional shares
or scrip representing fractional shares will be issued upon any conversion, but
an adjustment in cash will be made, in respect of any fraction of a share of
Common Stock which would otherwise be issuable upon the surrender of this
Debenture for conversion. The Conversion Price is subject to adjustment as
provided in Section 3.5 and Section 3.7 hereof. As soon as practicable following
conversion and upon the Holder's compliance with the conversion procedure
described in Section 3.3 hereof, the Company shall deliver a certificate for the
number of full shares of Common Stock issuable upon conversion and a check for
any fractional share and, in the event the Debenture is converted in part, a new
Debenture in the principal amount equal to the remaining principal balance of
this Debenture after giving effect to such partial conversion.

                  3.2      Conversion at Option of the Company. So long as an
Event of Default as provided in Section 12.1(a) of the Purchase Agreement
(concerning the Company's failure to pay principal and interest under the
Debentures) shall not have occurred and then be continuing, in the event that
either (a) following the second anniversary of March 10, 1998, the closing price
per share of the Company's Common Stock on the American Stock Exchange ("AMEX")
or the NASDAQ National Market ("NNM") exceeds $4.75 per share for each of twenty
(20) consecutive trading days or (b) following the third anniversary of March
10, 1998, the

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closing price per share of the Company's Common Stock on the AMEX or NNM exceeds
$7.125 per share for each of twenty (20) consecutive trading days, then at any
time thereafter until the earlier of (i) the Maturity Date, (ii) the conversion
of all of the outstanding Debentures in accordance with Section 3.1 hereof or
(iii) the date a Change of Control (as defined in the Purchase Agreement)
occurs, the Company may upon written notice to the Holders of all Debentures
(the "Mandatory Conversion Notice") require that all, but not less than all, of
the outstanding principal amount of the Debentures be converted into shares of
Common Stock at a price per share equal to the Conversion Price (as such
Conversion Price may be adjusted as provided in Sections 3.5 and 3.7 hereof).
The Mandatory Conversion Notice shall state (1) the date fixed for conversion
(the "Conversion Date") (which date shall not be prior to the date the Mandatory
Conversion Notice is given), (2) any disclosures required by law, (3) the
trading dates and closing prices of the Common Stock giving rise to the
Company's option to require conversion of the Debenture, (4) that the Debentures
shall cease to accrue interest after the day immediately preceding the
Conversion Date, (5) the place where the Debentures shall be delivered and (6)
any other instructions that Holders must follow in order to tender their
Debentures in exchange for certificates for Common Stock. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such conversion, except as to a Holder (x) to
whom notice was not mailed or (y) whose notice was defective. An affidavit of
the Secretary or an Assistant Secretary of the Company or an agent employed by
the Company that the Mandatory Conversion Notice has been mailed postage prepaid
to the last address of the Holder appearing on the Debenture registry books kept
by the Company shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. On and after the Conversion Date, except as provided in
the next two sentences, Holders of the Debentures shall have no further rights
except to receive, upon surrender of the Debentures, a certificate or
certificates for the number of shares of Common Stock as to which the Debenture
shall have been converted. Interest shall accrue to and including the day prior
to the Conversion Date and shall be paid on the last day of the month in which
the Conversion Date occurs. No fractional shares or scrip representing
fractional shares will be issued upon any conversion, but an adjustment in cash
will be made, in respect of any fraction of a share of Common Stock which would
otherwise be issuable upon the surrender of this Debenture for conversion.

                  3.3      Registration of Transfer; Conversion Procedure. The
Company shall maintain books for the transfer and registration of the
Debentures. Upon the transfer of any Debenture in accordance with the provisions
of the Purchase Agreement, the Holder shall complete, execute and deliver to the
Company the Assignment attached hereto as Attachment I. Upon receipt of a
properly completed and executed Assignment in the form attached as Attachment I,
the Company shall issue and register the Debenture in the names of the new
Holders. The Debentures 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 convert, from time to
time, any outstanding Debentures upon the books to be maintained by the Company
for such purpose upon surrender thereof for conversion properly endorsed and, in
the case of a conversion pursuant to Section 3.1 hereof, accompanied by a
properly completed and executed Conversion Notice attached hereto as Attachment
II. Subject to the terms of this Debenture, upon surrender of this Debenture the
Company shall issue and deliver with all reasonable dispatch to or upon the
written order of the Holder of such Debenture and in such name or names as such
Holder may designate, a certificate or certificates for the number of full
shares of Common Stock due to such Holder upon the conversion of this Debenture.
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 this
Debenture; provided, however, that if, at the date of surrender the transfer
books of the Common Stock 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, shall
not be closed at any one time for a period longer than twenty (20) days.

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                  3.4      Company to Provide Common Stock. The Company shall
reserve out of its authorized but unissued shares of Common Stock a sufficient
number of shares to permit the conversion of the Debentures in full. The shares
of Common Stock which may be issued upon the conversion of the Debentures shall
be fully paid and non-assessable and free of preemptive rights. The Company will
endeavor to comply with all securities laws regulating the offer and delivery of
the Shares upon conversion of the Debentures and will endeavor to list such
shares on each national securities exchange upon which the Common Stock is
listed.

                  3.5      Dividends; Reclassifications, etc.. In the event that
the Company shall, at any time prior to the earlier to occur of (a) the exercise
of conversion rights hereunder by the Holder and (b) the Maturity Date: (i)
declare or pay to the holders of the Common Stock a dividend payable in any kind
of shares of capital 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 entity; 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 conversion rights, the Holder
thereof 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 transfer, or such assets of the Company, which it would
have been entitled to receive had it exercised these conversion rights prior to
the happening of any of the foregoing events.

                  3.6      Notice to Holder. If, at any time while this
Debenture 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, shall
enter into an agreement to merge or consolidate with another corporation, shall
propose any capital reorganization or reclassification of the capital stock of
the Company, including any subdivision or combination of its outstanding shares
of Common Stock or there shall be contemplated a voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall cause
notice thereof to be mailed to the registered Holder of this Debenture at its
address appearing on the registration books of the Company, at least thirty (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 thirty (30) days prior to the effective date of the merger, consolidation,
reorganization, reclassification or dissolution.

                  3.7      Adjustments to Conversion Price. In order to prevent
dilution of the conversion right granted hereunder, the Conversion Price shall
be subject to adjustment from time to time in accordance with this Section 3.7.
Upon each adjustment of the Conversion Price pursuant to this Section 3.7, the
Holder shall thereafter be entitled to acquire upon conversion under Section 3.1
or Section 3.2, at the Applicable Conversion Price (as hereinafter defined), the
number of shares of Common Stock obtainable by multiplying the Conversion Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock acquirable immediately prior to such adjustment and dividing the product
thereof by the Applicable Conversion Price resulting from such adjustment.

                  The Conversion Price in effect at the time of the exercise of
conversion rights hereunder set forth in Section 3.1 shall be subject to
adjustment from time to time as follows:

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                           (a)      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 subsection (b) of this Section 3.7; or

                                    (ii)     shares issued, subdivided or
         combined in transactions described in Section 3.5 if and to the extent
         that the number of shares of Common Stock received upon conversion of
         this Debenture shall have been previously adjusted pursuant to Section
         3.5 as a result of such issuance, subdivision or combination of such
         securities;

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

                  (A)      the numerator shall be the sum of (x) the total
number of shares of Common Stock outstanding when the Applicable Conversion
Price became effective, plus (y) the number of shares of Common Stock which the
aggregate consideration received, as determined in accordance with subsection
3.7(c) for the issuance or sale of such additional Common Stock or Convertible
Securities deemed to be an issuance of Common Stock as provided in subsection
3.7(d), would purchase (including any consideration received by the Company upon
the issuance of any shares of Common Stock since the date the Applicable
Conversion Price became effective not previously included in any computation
resulting in an adjustment pursuant to this Section 3.7(a)) at the Fair Market
Value of the Common Stock; and

                  (B)      the denominator shall be the total number of shares
of Common Stock outstanding (or deemed to be outstanding as provided in
subsection 3.7(d) hereof) immediately after the issuance or sale of such
additional shares.

                  For purposes of this Section 3.7, "Fair Market Value" shall
mean the average of the closing price of the Common Stock for each of the twenty
(20) consecutive trading days prior to such issuance or sale on the principal
national securities exchange on which the Common Stock is traded, or if shares
of Common Stock are not listed on a national securities exchange during such
period, the closing price per share as reported by the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ") National Market System
if the shares are quoted on such system during such period, or the average of
the bid and asked prices of the Common Stock in the over-the-counter market at
the close of trading during such period if the shares are not traded on an
exchange or listed on the NASDAQ National Market System, or if the Common Stock
is not traded on a national securities exchange or in the over-the-counter
market, the fair market value of a share of Common Stock during such period as
determined in good faith by the Board of Directors.

                  If, however, the Applicable Conversion Price thus obtained
would result in the issuance of a lesser number of shares upon conversion than
would be issued at the initial Conversion Price specified in Section 3.1, as
appropriate, the Applicable Conversion Price shall be such initial Conversion
Price.

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                  Upon each adjustment of the Conversion Price pursuant to this
subsection (a), the total number of shares of Common Stock into which this
Debenture shall be convertible shall be such number of shares (calculated to the
nearest tenth) purchasable at the Applicable Conversion Price multiplied by a
fraction, the numerator of which shall be the Conversion Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Conversion Price in effect immediately after such adjustment.

                           (b)      Anything in this Section 3.7 to the contrary
notwithstanding, no adjustment in the Conversion 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
                  or approved by the Company's Board of Directors and approved
                  by the Company's shareholders, as may be amended from time to
                  time, or under any other bona fide employee benefit plan
                  hereafter adopted by the Company's Board of Directors; or

                  (ii)     the grant, issuance or exercise of any Convertible
                  Securities in connection with the hire or retention of any
                  officer, director or key employee of the Company, provided
                  such grant is approved by the Company's Board of Directors; or

                  (iii)    the issuance of any shares of Common Stock pursuant
                  to the grant or exercise of Convertible Securities outstanding
                  as of March 10, 1998 (exclusive of any subsequent amendments
                  thereto).

                           (c)      For the purpose of subsection 3.7(a), the
following provisions shall also be applied:

                  (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, compensation or other expenses paid
                  or incurred by the Company for any underwriting of, or
                  otherwise in connection with, the issuance or sale of such
                  shares.

                  (ii)     In the 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 options, 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
                  upon 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 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, accrued value to the date of such cancellation,
                  but not

                                       7
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                  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
                  compensation 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 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 paragraphs (i)
                  and (ii) 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 Conversion Price shall be required by reason
                  of the fixing of such record date.

                           (d)      For purposes of the adjustment provided for
in subsection 3.7(a) 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.

                           (e)      On the expiration, cancellation or
redemption of any Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be readjusted to such Conversion Price as would have
been obtained (a) had the adjustments made upon the issuance or sale of such
expired, canceled 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 on only the basis of the Conversion Price as readjusted
under this subsection 3.7(e) for all transactions (which would have affected
such adjusted Conversion Price) made after the issuance or sale of such
Convertible Securities.

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<PAGE>
                           (f)      Anything in this Section 3.7 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Conversion Price; provided, however, that any adjustments which by reason of
this subsection 3.7(f) are not required to be made shall be carried forward and
taken into account in making subsequent adjustments. All calculations under this
Section 3.7 shall be made to the nearest cent.

                           (g)      Upon any adjustment of any Conversion Price,
then and in each such case the Company shall promptly deliver a notice to the
registered Holder of this Debenture, which notice shall state the Conversion
Price resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.

                  3.8      Reorganization of the Company. If the Company is a
party to a merger or other transaction which reclassifies or changes its
outstanding Common Stock, upon consummation of such transaction this Debenture
shall automatically become convertible into the kind and amount of securities,
cash or other assets which the Holder of this Debenture would have owned
immediately after such transaction if the Holder had converted this Debenture at
the Conversion Price in effect immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the person
obligated to issue securities or deliver cash or other assets upon conversion of
this Debenture shall execute and deliver to the Holder a supplemental Debenture
so providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided in this Article III.
The successor Company shall mail to the Holder a notice describing the
supplemental Debenture.

                  If securities deliverable upon conversion of this Debenture,
as provided above, are themselves convertible into the securities of an
affiliate of a corporation formed, surviving or otherwise affected by the merger
or other transaction, that issuer shall join in the supplemental Debenture which
shall so provide. If this section applies, Section 3.5 does not apply.

                                   ARTICLE IV

                                  MISCELLANEOUS

                  4.1      Default. Upon the occurrence of any one or more of
the events of default specified or referred to in the Purchase Agreement or in
the other documents or instruments executed in connection therewith, all amounts
then remaining unpaid on this Debenture may be declared to be immediately due
and payable as provided in the Purchase Agreement.

                  4.2      Collection Costs. In the event that this Debenture
shall be placed in the hands of an attorney for collection by reason of any
event of default hereunder, the undersigned agrees to pay reasonable attorney's
fees and disbursements and other reasonable expenses incurred by the Holder in
connection with the collection of this Debenture.

                  4.3      Rights Cumulative. The rights, powers and remedies
given to the Payee under this Debenture shall be in addition to all rights,
powers and remedies given to it by virtue of the Purchase Agreement, any
document or instrument executed in connection therewith, or any statute or rule
of law.

                  4.4      No Waivers. Any forbearance, failure or delay by the
Payee in exercising any right, power or remedy under this Debenture, the
Purchase Agreement, any documents or instruments executed in connection
therewith or otherwise available to the Payee shall not be deemed to be a waiver
of such right,

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<PAGE>
power or remedy, nor shall any single or partial exercise of any right, power or
remedy preclude the further exercise thereof.

                  4.5      Amendments in Writing. Except as expressly provided
in the Purchase Agreement, no modification or waiver of any provision of this
Debenture or any documents or instruments executed in connection herewith shall
be effective unless it shall be in writing and signed by the Payee, and any such
modification or waiver shall apply only in the specific instance for which
given.

                  4.6      Governing Law. This Debenture and the rights and
obligations of the parties hereto, shall be governed, construed and interpreted
according to the laws of the State of New York, wherein it was negotiated and
executed, and the undersigned consents and agrees that the State and Federal
Courts which sit in the State of New York, County of New York shall have
exclusive jurisdiction of all controversies and disputes arising hereunder.

                  4.7      No Counterclaims. The undersigned waives the right to
interpose counterclaims or set-offs of any kind and description in any
litigation arising hereunder and waives the right in any litigation with the
Payee (whether or not arising out of or relating to this Debenture) to trial by
jury.

                  4.8      Successors. The term "Payee" and "Holder" as used
herein shall be deemed to include the Payee and its successors, endorsees and
assigns.

                  4.9      Certain Waivers. The Company hereby waives
presentment, demand for payment, protest, notice of protest and notice of
non-payment hereof.

                  4.10     Stamp Tax. The Company will pay any documentary stamp
taxes attributable to the initial issuance of the Common Stock issuable upon the
conversion of this Debenture; 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 the Common Stock in
a name other than that of the Holder in respect of which such Common Stock is
issued, and in such case the Company shall not be required to issue or deliver
any certificate for the Common Stock 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.

                  4.11     Mutilated, Lost, Stolen or Destroyed Debentures. In
case this Debenture shall be mutilated, lost, stolen or destroyed, the Company
shall issue and deliver in exchange and substitution for and upon cancellation
of the mutilated Debenture, or in lieu of and substitution for the Debenture,
mutilated, lost, stolen or destroyed, a new Debenture of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction and an indemnity,
if requested, also satisfactory to it.

                  4.12     Maintenance of Office. The Company covenants and
agrees that so long as this Debenture shall be outstanding, it will maintain an
office or agency in New York (or such other place as the Company may designate
in writing to the holder of this Debenture) where notices, presentations and
demands to or upon the Company in respect of this Debenture may be given or
made.

                  4.13     Amended and Restated Debenture. This Amended and
Restated 5% Convertible Senior Secured Debenture dated as of December ___, 2002
issued by the Company in favor of the Payee is issued in accordance with that
certain Amendment to Debenture and Warrant Purchase Agreement dated as December
__, 2002 between the Company and the Purchasers listed on the signature page
thereto (the

                                       10
<PAGE>
"Amendment") and amends and restates in their entirety, and is issued by the
Company in replacement of and substitution for, each of those certain 5%
Convertible Senior Secured Debenture instruments described on Schedule A,
attached hereto, issued by the Company to the Payee (collectively, the "Original
Debentures"). The Company and the Payee acknowledge and agree that upon the
execution delivery of this Amended and Restated 5% Convertible Senior Secured
Debenture due March 31, 2006, each of the Original Debentures shall be null and
void and of no further legal force or effect.

                                       11
<PAGE>
                  IN WITNESS WHEREOF, Halsey Drug Co., Inc. has caused this
Debenture to be signed by its Chief Executive Officer and to be dated the day
and year first above written.

ATTEST [SEAL]                             HALSEY DRUG CO., INC.

______________________________            By:___________________________________
                                                 Name: Michael Reicher
                                                 Title: Chief Executive Officer

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<PAGE>
                                  ATTACHMENT I

                                   Assignment

         For value received, the undersigned hereby assigns subject to the
provisions of Section of the Purchase Agreement, to ________ $_______________
principal amount of the Amended and Restated 5% Convertible Senior Secured
Debenture due March 31, 2006 evidenced hereby and hereby irrevocably
appoint ______________ attorney to transfer the Debenture on the books of the
within named corporation with full power of substitution in the premises.

Dated:

In the presence of:

________________________      _______________________

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<PAGE>
                                  ATTACHMENT II

                                CONVERSION NOTICE

                    TO:   HALSEY DRUG CO., INC.

         The undersigned holder of this Debenture hereby irrevocably exercises
the option to convert $ ______ principal amount of such Debenture (which may be
less than the stated principal amount thereof) into shares of Common Stock of
Halsey Drug Co., Inc., in accordance with the terms of such Debenture, and
directs that the shares of Common Stock issuable and deliverable upon such
conversion, together with a check (if applicable) in payment for any fractional
shares as provided in such Debenture, be issued and delivered to the undersigned
unless a different name has been indicated below. If shares of Common Stock are
to be issued in the name of a person other than the undersigned holder of such
Debenture, the undersigned will pay all transfer taxes payable with respect
thereto.

                             ___________________________________________________
                                      Name and address of Holder

                             ___________________________________________________
                                      Signature of Holder

         Principal amount of Debenture to be converted $________________________

         If shares are to be issued otherwise then to the holder:

___________________________
Name of Transferee
                                          Address of Transferee

                                          ______________________________________

                                          ______________________________________

                                          ______________________________________

                                          Social Security Number of Transferee

                                          ______________________________________

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