<PAGE>   1
                                                                   Exhibit 10.75

                   LEASE TERMINATION AND SETTLEMENT AGREEMENT


         THIS LEASE TERMINATION AND SETTLEMENT AGREEMENT (this "Agreement") is
made as of March 21, 2000, by and between MILTON J. ACKERMAN, SUE ACKERMAN, LEE
HINDERSTEIN, THELMA HINDERSTEIN and MARILYN WEISS, individuals doing business as
MILTON J. ACKERMAN, ET AL. and ATLANTIC PROPERTY COMPANIES, each a [New York]
general partnership (collectively "Landlord"), and HALSEY DRUG CO., INC., a New
York corporation ("Tenant").

                              W I T N E S S E T H :

         WHEREAS, Landlord and Tenant are parties to certain agreements
described on Exhibit A annexed hereto (which agreements are hereinafter
collectively referred to as the "Lease"), pursuant to which Landlord leased to
Tenant and tenant occupied certain premises located in Brooklyn, New York, as
further described in the Lease (the "Premises"); and

         WHEREAS, Landlord and Tenant have agreed to terminate the Lease and
settle all disputes, claims and obligations between Landlord and Tenant, and
Tenant has agreed to surrender the Premises, all upon the terms and conditions
contained in this Agreement;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which is hereby acknowledged by each of the parties hereto,
Landlord and Tenant agree as follows:

         1. Simultaneous with the execution of this Agreement, Tenant has paid
to Landlord the sum of $215,860.00, representing all rent and other charges
payable by Tenant to Landlord under the Lease through and including March 31,
2000, receipt of which is hereby acknowledged by Landlord.

         2. Tenant has advised Landlord that Tenant is currently negotiating a
transaction with an unrelated third party which, among other things, would
provide funds sufficient for Tenant to satisfy its obligations under this
Agreement (the "Third Party Transaction"). Landlord understands that there is no
assurance that Tenant will consummate a Third Party Transaction acceptable to it
on or before April 18, 2000. Tenant may rescind its obligations under this
Agreement by delivering written notice to that effect to Landlord at any time
after April 18, 2000, if it shall not have consummated a Third Party Transaction
acceptable to it in its sole discretion on or before the date on which Tenant
delivers its termination notice to Landlord. Landlord may rescind its
obligations under this Agreement by delivering to Tenant written notice to that
effect at any time after April 18, 2000 if Tenant shall not have paid the
amounts specified in Paragraph 3 below on or before April 18, 2000.

         3. On the earlier to occur of April 18, 2000 and the second business
day immediately following the closing and funding of the Third Party
Transaction, Tenant shall pay the following amounts in immediately available
funds by wire transfer:

            (a)             To Landlord, in accordance with the wire transfer
<PAGE>   2
                  instructions set forth on Exhibit B, the sum of $488,250.00,
                  representing the fair value for the use and occupancy of the
                  Premises by Tenant for the period April 1, 2000 through and
                  including August 31, 2000, in lieu of any and all rent and
                  other amounts payable by Tenant under the Lease.

         (b)             To Landlord, in accordance with the wire transfer
                  instructions set forth on Exhibit B, the sum of $1,150,000.00
                  in consideration of the termination of the Lease prior to its
                  stated expiration date and the agreements of the parties
                  contained in this Agreement.

         (c)             To St. John & Wayne, L.L.C. ("Tenant's Counsel"), in
                  accordance with the wire transfer instructions set forth on
                  Exhibit C annexed hereto, the sum of $390,600.00, which amount
                  shall (i) constitute the "Liquidated Amount" described in
                  Paragraph 5, and (ii) be held in escrow by Tenant's Counsel in
                  accordance with the provisions of Paragraph 5 of this
                  Agreement.

         (d)             To Graubard, Mollen & Miller ("Landlord's Counsel"), in
                  accordance with the wire transfer instructions set forth on
                  Exhibit D annexed hereto, the sum of $200,000.00(provided,
                  however, Landlord acknowledges that it is currently holding as
                  a security deposit under the Lease the sum of $81,373 which
                  amount shall be credited against Tenant's payment obligation
                  under this Paragraph 3(d), leaving a balance payable by Tenant
                  under this Paragraph 3(d) of $118,627), which amount shall
                  constitute the (i) "Restoration Amount" described in Paragraph
                  6, and (ii) be held in escrow by Landlord's Counsel in
                  accordance with the provisions of Paragraph 6 of this
                  Agreement.

         4. The term of the Lease shall expire and the obligations of Landlord
and Tenant under the Lease shall terminate at 11:59 p.m. on the date (the
"Termination Date") which is the later to occur of (a) August 31, 2000 and (b)
the Surrender Date (hereinafter defined). The "Surrender Date" shall be the date
on which Tenant has (i) removed its trade fixtures, equipment and other personal
property of Tenant located in the Premises, except for those items described on
Schedule H hereto (ii) provided notice to Landlord that Tenant has ceased all
business operations at and vacated the Premises, and (iii) delivered to the
Landlord all keys to the Premises in its possession. Time is of the essence for
the Surrender Date to occur on or before March 31, 2001. Simultaneous with the
execution of this Agreement, Tenant has executed and delivered to the Landlord's
Counsel a written Stipulation consenting to the entry of a final judgment of
possession with respect to the Premises and a warrant of eviction in the form of
Exhibit G annexed hereto, which shall be held in escrow by Landlord's Counsel
and shall not be released from escrow and presented to the court for entry until
after March 31, 2001 as long as Tenant complies with the provisions of Paragraph
3 hereof. If Tenant fails to comply with the provisions of Paragraph 3 and
Landlord or Tenant has rescinded its obligations under this Agreement in
accordance with Paragraph 2 hereof, the Stipulation, this Agreement and the
other documents needed to implement this Agreement shall be null and void and of
no force or effect.
<PAGE>   3
         5. (a) If the Surrender Date shall occur on or (i) after September 1,
2000, Landlord shall be entitled to receive the Liquidated Amount and all
interest earned thereon, or (ii) before August 31, 2000, Tenant shall be
entitled to receive the Liquidated Amount and all interest earned thereon. The
parties agree that the Liquidated Amount represents the (i) consideration for
Landlord's granting to Tenant the right to remain in possession of the Premises
after August 31, 2000, and (ii) fair value for the use and occupancy of the
Premises by Tenant for any period of time from and after September 1, 2000
through and including the Surrender Date, in lieu of any and all rent or other
charges payable by Tenant under the Lease.

            (b) The Liquidated Amount shall be deposited in an interest bearing
attorney trust account by Tenant's Counsel, which account shall be reasonably
acceptable to Landlord and Tenant.

            (c) If Landlord shall claim that the Surrender Date occurred on or
after September 1, 2000, it shall provide written notice thereof to Tenant, with
a copy to Tenant's Counsel and Landlord's Counsel, specifying in reasonable
detail the facts on which such claim is based. In the event that Tenant does not
dispute such claim within three (3) business days after receipt of Landlord's
notice, Tenant's Counsel shall on the fourth (4th) business day after receipt of
Landlord's notice promptly deliver to Landlord the Liquidated Amount and all
interest earned thereon. In the event, however, that Tenant shall elect to
dispute such claim, it shall be required, within three (3) business days after
receipt of Landlord's notice hereunder, to provide written notice thereof to
Landlord, with a copy to Tenant's Counsel and Landlord's Counsel, specifying in
reasonable detail the facts on which any such dispute is based. In the event of
any such dispute, Landlord and Tenant agree that such dispute shall be settled
by arbitration in accordance with the provisions of Paragraph 7 of this
Agreement. Tenant's Counsel shall retain the Liquidated Amount until its receipt
of a certified copy of any such final and non-appealable arbitration decision or
award or joint written notice from Landlord and Tenant stating the dispute has
been settled and specifying the manner in which the Liquidated Amount is to be
disbursed, at which time it shall promptly deliver to Landlord or Tenant, as the
case may be, the Liquidated Amount and all interest earned thereon.

            (d) If Tenant shall claim that the Surrender Date occurred on or
before August 31, 2000, it shall provide written notice thereof to Landlord,
with a copy to Tenant's Counsel and Landlord's Counsel. In the event that
Landlord does not dispute such claim within three (3) business days after
receipt of Tenant's notice, Tenant's Counsel shall on the fourth (4th) day after
receipt of Tenant's notice promptly deliver to Tenant the Liquidated Amount and
all interest earned thereon. In the event, however, that Landlord shall dispute
such claim it shall be required, within three (3) business days after receipt of
Tenant's notice, to provide written notice thereof to Tenant, with a copy to
Tenant's Counsel and Landlord's Counsel, specifying in reasonable detail the
facts on which any such dispute is based. In the event of any such dispute,
Landlord and Tenant agree that such dispute shall be settled by final and
non-appealable arbitration in accordance with the provisions of Paragraph 7 of
this Agreement. Tenant's Counsel shall retain the Liquidated Amount until its
receipt of a certified copy of any such arbitration decision or award or joint
written notice from Landlord and Tenant stating the dispute has been settled and
specifying the manner in which the Liquidated Amount is to be disbursed, at
which time it shall promptly deliver to Landlord or Tenant, as the case may be,
the Liquidated Amount and all
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interest earned thereon.

            (e) Landlord and Tenant agree that Tenant's Counsel shall not be
liable for any error or judgment or for any mistake of fact, law for anything
which it may do or refrain from doing in connection herewith, except its own
gross negligence or willful misconduct. Landlord and Tenant agree to indemnify,
hold harmless and defend Tenant's Counsel from any loss, damage, claim,
liability, judgment, expense (including attorney's fees and disbursements) or
other charge incurred or sustained by it by reason of any act or omission
performed or omitted hereunder, but this indemnity shall not be applicable to
any loss, liability, damage, claim, judgment, expense or other charge resulting
from the gross negligence or willful misconduct of Tenant's Counsel. Tenant's
Counsel shall have the right to rely conclusively upon the notices delivered
hereunder, and shall be under no obligation to ascertain the authenticity of
such notices, nor to determine the factual accuracy thereof. Tenant's Counsel is
acting as a stakeholder only with respect to the Liquidated Amount. If there is
any dispute as to whether Tenant's Counsel is obligated to deliver the
Liquidated Amount and/or to whom it should be delivered, Tenant's Counsel shall
not make any delivery, but in such event Tenant's Counsel shall hold the
Liquidated Amount until receipt by Tenant's Counsel of an authorization in
writing signed by all parties having an interest in such dispute directing the
disposition of same, or in the absence of such authorization Tenant's Counsel
shall hold the Liquidated Amount until the final determination of the rights of
the parties in an appropriate proceeding. If such written authorization is not
given, or proceedings for such determination are not begun within a reasonable
period of time and diligently continued, Tenant's Counsel shall have the right,
at any time thereafter, to commence an action or proceeding, at the sole cost of
expense of Landlord and Tenant, in the nature of interpleader in any court
having jurisdiction thereof, and to deposit the Liquidated Amount with such
court, and thereupon be discharged from any and all further liability hereunder.
Landlord acknowledges that Tenant's Counsel is a law firm which represents
Tenant and Tenant's Counsel shall be entitled to represent Tenant in any and all
matters arising, directly or indirectly, out of the Lease and this Agreement and
the transactions contemplated hereby, including, without limitation, the
disposition of the Liquidated Amount. Landlord waives any conflicts of interest
or appearance of impropriety, if any, that may be occasioned by Tenant's
Counsel's role as a stakeholder, witness or party in any proceedings involving
the parties. Notwithstanding anything in this Paragraph 5(e) to the contrary,
Landlord shall not be liable to Tenant's Counsel for the payment of any
attorneys' fees or disbursements which are attributable to Tenant's Counsel's
representation of Tenant.

         6. (a) The Restoration Amount shall be deposited in an interest bearing
trust account by Landlord's Counsel, which account shall be reasonably
acceptable to Landlord and Tenant.

            (b) On the Surrender Date, Tenant shall surrender the Premises to
Landlord in its then "as is" condition, and, notwithstanding anything to the
contrary contained in the Lease, except to the extent as specifically provided
in Paragraph 6(c) of this Agreement, Tenant shall not be required to perform any
maintenance, repair, alteration, improvement, replacement or restoration to the
Premises. In consideration of any maintenance, repair, alteration, improvement,
restoration or removal obligation of Tenant under the Lease and any unpaid
water, sewer or utility charges allocable to the Premises through and including
the Surrender Date for which Tenant was obligated under the Lease, including,
without limitation, under Articles 3, 4, 22 and 29 of the Lease (collectively,
the "Tenant Obligations"), Tenant has deposited the Restoration
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Amount. The parties agree that the Restoration Amount shall be payable to
Landlord if and to the extent that Landlord, on or before the period expiring
one hundred and fifty (150) days after the Surrender Date (the "Outside Date"),
shall incur any costs in respect of the Tenant Obligations. The parties agree
that the Tenant shall have no liability in respect of any or all of the Tenant
Obligations other than the Restoration Amount as provided in Paragraph 3(d)
above and Landlord's recovery of any amounts claims, damages, fees, costs or for
such Tenant Obligations are expressly limited to the Restoration Amount.

            (c) Notwithstanding the foregoing, prior to the Surrender Date
(i) Tenant shall perform normal and customary maintenance and repair services
and pay all water, sewer and utility bills relating to the Premises; provided,
however, that Tenant shall not be obligated to maintain, repair or replace any
part or portion of the Premises, including, without limitation, the HVAC
systems, where the cost of such maintenance or repair shall exceed $25,000, in
the aggregate for all such maintenance, repair or replacement items (based on
a good faith estimate received by Tenant), and (ii) Tenant shall exercise
reasonable care in the removal of its equipment, fixtures and other personal
property from the Premises. Each of the Tenant and the Landlord hereby
acknowledge and agree that any breach by Tenant of the terms and provisions of
this Paragraph 6(c) shall not be deemed to constitute or otherwise result in a
default or breach by Tenant of this Agreement or the Lease and Landlord's sole
remedy for a breach by Tenant of its obligations under this Paragraph 6(c)
shall be a claim against the Restoration Amount and any insurance maintained
by Tenant for the Premises where the Landlord is named as an insured under
such insurance.

            (d) Within thirty (30) days after the Outside Date, Landlord shall
provide notice to Tenant, with a copy to Landlord's Counsel and Tenant's
Counsel, describing in reasonable detail the work performed and the costs
incurred by Landlord on or before the Outside Date in respect of Tenant
Obligations for which Landlord claims it is entitled to reimbursement under
Paragraph 6(b) (the "Restoration Claim"). If Tenant does not dispute the
Restoration Claim in whole or in part, within ten (10) days after receipt by
Landlord's Counsel of the Restoration Claim notice, Landlord's Counsel shall on
the eleventh (11th) day after receipt of such notice promptly deliver to
Landlord such portion of the Restoration Amount equal to the amount of the
Restoration Claim. In the event, however, that Tenant shall elect to dispute the
Restoration Claim, in whole or in part, it shall be required, within ten (10)
days after receipt of the Restoration Claim notice from Landlord, to provide
notice thereof to Landlord, with a copy to Landlord's Counsel and Tenant's
Counsel. In the event of any such dispute or contest, Landlord and Tenant hereby
agree that any such dispute shall be settled by arbitration in accordance with
the provisions of Paragraph 7 of this Agreement. Landlord's Counsel shall
disburse the portion, if any, of the Restoration Amount equal to any Restoration
Claim which is not disputed by Tenant and shall retain the portion of the
Restoration Amount covered by any such dispute until its receipt of a certified
copy of any final and non-appealable arbitration decision or award or joint
written notice from Landlord and Tenant stating the dispute has been settled and
specifying the manner in which the Restoration Amount is to be disbursed, at
which time it shall promptly deliver to the appropriate party or parties a check
or checks in the amount of any such judgment or award.

            (e) On the date which is thirty (30) days after the Outside Date,
Landlord's Counsel shall deliver to Tenant the balance of the Restoration Amount
(plus accrued interest),
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reduced by any amounts due to Landlord pursuant to the terms of this Paragraph 6
and any amounts which are the subject of an Unresolved Claim. The term
"Unresolved Claim" shall mean any claim which may be made against the
Restoration Amount in accordance with this Paragraph 6, until such time as such
claim has been paid in full or otherwise fully settled, compromised or adjusted
by the parties and Landlord's Counsel, and the amount of any such Unresolved
Claim shall remain with Landlord's Counsel until so settled or adjusted and then
paid to the party to whom such funds are to be paid pursuant to such agreement,
settlement, compromise or adjustment.

            (f) Landlord and Tenant agree that Landlord's Counsel shall not be
liable for any error or judgment or for any mistake of fact, law for anything
which it may do or refrain from doing in connection herewith, except its own
gross negligence or willful misconduct. Landlord and Tenant agree to indemnify,
hold harmless and defend Landlord's Counsel from any loss, damage, claim,
liability, judgment, expense (including attorney's fees and disbursements) or
other charge incurred or sustained by it by reason of any act or omission
performed or omitted hereunder, but this indemnity shall not be applicable to
any loss, liability, damage, claim, judgment, expense or other charge resulting
from the gross negligence or willful misconduct of Landlord's Counsel.
Landlord's Counsel shall have the right to rely conclusively upon the notices
delivered hereunder, and shall be under no obligation to ascertain the
authenticity of such notices, nor to determine the factual accuracy thereof.
Landlord's Counsel is acting as a stakeholder only with respect to the
Restoration Amount. If there is any dispute as to whether Landlord's Counsel is
obligated to deliver the Restoration Amount and/or to whom it should be
delivered, Landlord's Counsel shall not make any delivery, but in such event
Landlord's Counsel shall hold the Restoration Amount until receipt by Landlord's
Counsel of an authorization in writing signed by all parties having an interest
in such dispute directing the disposition of same, or in the absence of such
authorization Landlord's Counsel shall hold the Restoration Amount until the
final determination of the rights of the parties in an appropriate proceeding.
If such written authorization is not given, or proceedings for such
determination are not begun within a reasonable period of time and diligently
continued, Landlord's Counsel shall have the right, at any time thereafter, to
commence an action or proceeding, at the sole cost of expense of Landlord and
Tenant, in the nature of interpleader in any court having jurisdiction thereof,
and to deposit the Restoration Amount with such court, and thereupon be
discharged from any and all further liability hereunder. Tenant acknowledges
that Landlord's Counsel is a law firm which represents Landlord and Landlord's
Counsel shall be entitled to represent Landlord in any and all matters arising,
directly or indirectly, out of the Lease and this Agreement and the transactions
contemplated hereby, including, without limitation, the disposition of the
Restoration Amount. Tenant waives all conflicts of interest or appearance of
impropriety, if any, that may be occasioned by Landlord's Counsel's role as
stakeholder, witness or party in any proceedings involving the parties.
Notwithstanding anything in this Paragraph 6(f) to the contrary, Tenant shall
not be liable to Landlord's Counsel for the payment of any attorneys' fees or
disbursements which are attributable to Landlord's Counsel's representation of
Landlord.

         7. (a) In the event that any contest or dispute set forth in Paragraphs
5 or 6 of this Agreement is to be resolved by arbitration, the party invoking
the arbitration procedure (the "First Party") shall give written notice (the
"Arbitration Notice") to the other party (the "Second Party"), and shall in such
Arbitration Notice appoint an arbitrator on its behalf. Within ten (10) days
after its receipt of such Arbitration Notice, the Second Party by notice to the
First Party
<PAGE>   7
shall appoint an arbitrator on its behalf; and if the second arbitrator shall
not be so appointed with such ten (10) days, the First Party shall appoint the
second arbitrator. The two arbitrators appointed pursuant to the above shall try
to appoint a third independent arbitrator. If, within fourteen (14) days after
the appointment of the second arbitrator they have not agreed upon the
appointment of a third independent arbitrator, then either party may apply to
the American Arbitration Association ("AAA") for the appointment of such third
independent arbitrator and the other party shall not raise any questions as to
the AAA's full power and jurisdiction to entertain the application and make the
appointment. Each arbitrator shall have at least ten (10) years' experience in a
calling pertaining to the type of matter in dispute. The date on which the third
independent arbitrator is appointed is referred to as the "Appointment Date".
Discovery shall be permitted, including, without limitation, the production of
documents, identification of witnesses and experts and depositions.

            (b) As soon as practicable after the Appointment Date, the matter
in dispute shall be arbitrated by the parties in accordance with the commercial
rules then in force of the AAA; provided, however, that each party shall be
entitled to discovery proceedings in accordance with the rules of New York
Civil Practice Law and Rules, and the failure of any party to so submit to such
discovery upon the request of the other shall provide the basis for termination
of arbitration procedure and the filing of a law suit in the Supreme Court of
the State of New York, County of Kings. The resolution of the dispute shall be
determined by the majority of the three arbitrators, shall constitute an
"award" within the meaning of the applicable rules of the AAA and applicable
law, and judgment may be entered thereon in any court of competent jurisdiction.

            (c) Landlord and Tenant hereby submit to the in personam
jurisdiction of the AAA in the State of New York and agree that any process in
any arbitration proceeding hereunder may be personally served upon Landlord or
Tenant within or outside the State of New York. The arbitration shall be
conducted at a location in New York City mutually acceptable to Landlord and
Tenant.

            (d) Each party shall pay its own fees and expenses relating to the
arbitration (including, without limitation, the fees and expenses of its
counsel, its arbitrator and any experts or witnesses retained by it). Each party
shall pay one-half (1/2) of the fees and expenses of the third independent
arbitrator and of the AAA.

         8. Simultaneous with the payment by Tenant of the amounts described in
Paragraph 3 of this Agreement, (a) Landlord shall execute and deliver to Tenant
a release in the form of Exhibit E annexed hereto ("Landlord's Release"), and
(b) Tenant shall execute and deliver to Landlord a release in the form of
Exhibit F annexed hereto ("Tenant's Release").

         9. Notwithstanding anything to the contrary contained herein or in the
Tenant's Release, Landlord shall defend, hold harmless and indemnify Tenant from
and against any and all third party claims, causes of actions, proceedings and
demands based on, relating to, arising out of or in connection with the Premises
(the "Claims"), except to the extent such Claims are in the nature of those
expressly excluded from the Landlord's Release. Nothing contained herein or in
the Landlord's Release is intended, and shall not be deemed, to constitute a
waiver or modification by Tenant of, or Tenant's release of Landlord from, any
claim for indemnification,
<PAGE>   8
contribution or similar claims, rights, interests, remedies Tenant may possess
against the Landlord relating to, arising from, pertaining to, directly or
indirectly, any federal, state or local law, rule, ordinance or regulation
governing environmental claims, conditions or obligations impacting or otherwise
affecting the Premises.

         10. Tenant shall maintain in effect through and including the Surrender
Date such third-party insurance coverage as Tenant is required to maintain under
the Lease. Tenant agrees that if such insurance does not afford coverage on an
"occurrence" basis, Tenant shall, on or before the Surrender Date, purchase a
"tail" policy, naming Landlord as an additional insured thereon, which "tail"
policy shall provide coverage for claims made for a period of not less than
three (3) years after the Surrender Date.

         11. Landlord and Tenant warrant and represent to each other as follows:

            (a) All consents or approvals required for the execution of this
         Agreement and the performance of the obligations of the parties
         hereunder, if any, have been obtained.

            (b) The Lease, the Term Sheet dated March 16, 2000 and this
         Agreement, are the only agreements in existence with respect to the
         demise and lease of the Premises by Landlord to Tenant and the use and
         occupancy of the Premises by Tenant.

            (c) Neither party has dealt with any real estate broker or similar
         agent in connection with the negotiation or execution of this
         Agreement.


            (d) Each party has the full power and authority to enter into this
         Agreement and perform its obligations hereunder, subject to the
         provisions of this Agreement, and the individuals executing this
         Agreement on behalf of each party have the full power and authority to
         bind such party.

         12. This Agreement and the covenants and conditions contained in this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Agreement sets forth the
entire agreement and understanding between the parties with respect to the
subject matter of this Agreement and supersedes all other prior agreements and
understandings of the parties. This Agreement may not be terminated, modified or
otherwise changed, except pursuant to a written agreement signed by Landlord and
Tenant.

         13. All notices and other communications under this Agreement must be
in writing and will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that copy is mailed by certified mail, return
receipt requested, or (c) received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):

         If to Landlord:

                  Marilyn Weiss
                  1100 Park Avenue
<PAGE>   9

            New York, New York 10028
            Facsimile No.:  (212) 534-4181

      If to Landlord's Counsel:

            Graubard, Mollen & Miller
            600 Third Avenue
            New York, New York  10016
            Attention:  Michael A. Salberg, Esq.
            Facsimile No.:  (212)818-8881

      If to Tenant:

            Halsey Drug Co., Inc.
            695 Perryville Road
            Crimson Bldg. 2
            Rockford, Illinois 61107
            Attention:  Peter A. Clemens
            Facsimile No.: (815)399-9710

      If to Tenant's Counsel:

            St. John & Wayne, L.L.C.
            Two Penn Plaza East
            Newark, New Jersey  07105
            Attention:  John P. Reilly, Esq.
            Facsimile No.: (973)491-3555

      A copy of any notice given to Landlord shall also be given to Landlord's
Counsel, and a copy of any notice given to Tenant shall also be given to
Tenant's Counsel. Notice is given by an attorney for a party shall be deemed to
be notice given by such party.

      14. This Agreement shall be governed by and construed under the laws of
the State of New York (except as provided in Paragraphs 5, 6 and 7 of this
Agreement) and all disputes, law suits and other controversies shall be
instituted exclusively in the courts of the State of New York.

      15. Landlord warrants and represents to Tenant that the individuals
executing this Agreement on behalf of Landlord have a full power and authority
to execute this Agreement on behalf of Landlord and to bind all parties
comprising the Landlord.
<PAGE>   10
      IN WITNESS WHEREOF, this Agreement was executed as of the date set forth
above.

                                                LANDLORD:

      WITNESS:                                  MILTON J. ACKERMAN, ET AL

      By: /s/ Michael A. Solberg                By: /s/ Milton J. Ackerman
          ----------------------                    ----------------------
      Name: Michael A. Solberg                  Name: Milton J. Ackerman
                                                Title: General Partner


      WITNESS:                                  ATLANTIC PROPERTIES COMPANY

      By: /s/ Michael A. Solberg                By: /s/ Milton J. Ackerman
          ----------------------                    ----------------------
      Name: Michael A. Solberg                  Name:  Milton J. Ackerman
                                                Title:  General Partner

      ATTEST:                                   HALSEY DRUG CO., INC.

      By: /s/ Carol Whitney                     By: /s/ Peter A. Clemens
      Name: Carol Whitney                       Name: Peter A. Clemens
      Title: Vice President, Administration     Title: Vice President and Chief
                                                       Financial Officer
<PAGE>   11
                                    EXHIBIT A


      (1) The Modification, Consolidation & Extension Agreement (the
"Modification Agreement"), dated October 31, 1994, by and among Milton J.
Ackerman, Sue Ackerman, Lee Hinderstein, Thelma Hinderstein and Marilyn Weiss,
individuals doing business as Milton J. Ackerman, et al. and Atlantic Properties
Company, collectively as landlord, and Tenant, as tenant, as amended by First
Amendment to Modification, Consolidation and Extension Agreement, dated August
1, 1996, between Milton J. Ackerman, Sue Ackerman, Lee Hinderstein, Thelma
Hinderstein and Marilyn Weiss, individuals doing business as Atlantic Properties
Company, and Tenant, and Second Amendment to Modification, Consolidation and
Extension Agreement, dated March 10, 1998, between Milton J. Ackerman, Sue
Ackerman, Lee Hinderstein, Thelma Hinderstein and Marilyn Weiss, individuals
doing business as Atlantic Properties Company, and Tenant, and to all of the
leases and agreements incorporated therein and/or modified, consolidated and
extended thereby (including, without limitation, the March 1985 Lease, the
February 1988 Lease, the February 1989 Lease, the August 1989 Lease and the
January 1990 Lease described below), and

      (2) The Agreement of Lease (the "Additional Lease"), dated October 31,
1994, by and among Milton J. Ackerman, Sue Ackerman, Lee Hinderstein, Thelma
Hinderstein and Marilyn Weiss, individuals doing business as Milton J. Ackerman,
et al. and Atlantic Properties Company, collectively as landlord, and Tenant, as
tenant.

            Leases included in Modification Agreement

            1. Lease (the "March 1985 Lease") dated March 26, 1985 between
Milton J. Ackerman, Thelma Hinderstein and Marilyn Weiss, Landlord and Halsey
Drug Co., Inc., Tenant as to the premises known as 1827-1829 Pacific Street,
1830 Atlantic Avenue, 1842 Atlantic Avenue, 1825 Pacific Street, 1828 Atlantic
Avenue and 1824 Atlantic Avenue, Brooklyn, NY (collectively designated as
Parcels A through F in said Lease) and between Milton J. Ackerman, Sue Ackerman,
Lee Hinderstein, Thelma Hinderstein and Marilyn Weiss, Landlord and Halsey Drug
Co., Inc., Tenant as to premises known as 1787 Dean Street and Block 1343 Lots
37, 38 and 29, Brooklyn, NY (collectively designated as Parcels G and H in said
Lease).

            2. Lease (the "February 1988 Lease") dated as of February 19, 1988
between Milton J. Ackerman, Sue Ackerman, Lee Hinderstein, Thelma Hinderstein
and Marilyn Weiss, Landlord and Halsey Drug Co., Inc., Tenant for premises known
as 1775 Dean Street, Brooklyn, NY.

            3. Lease (the "February 1989 Lease") dated as of February 17, 1989
between Milton J. Ackerman, Thelma Hinderstein and Marilyn Weiss D/B/A Milton J.
Ackerman, et al, Landlord and Halsey Drug Co., Inc., Tenant for approximately
7,500 square feet of space in a portion of the premises known as 1823 Pacific
Street, Brooklyn, NY.

            4. Lease (the "August 1989 Lease") dated as of August, 1989 between
Milton
<PAGE>   12
J. Ackerman, Sue Ackerman, Lee Hinderstein, Thelma Hinderstein and Marilyn Weiss
D/B/A Milton J. Ackerman, et al, Landlord and Halsey Drug Co., Inc., Tenant for
premises known as 1769-1773 Dean Street, Brooklyn, NY.

            5. Lease (the "January 1990 Lease") dated as of January 1, 1990
between Milton J. Ackerman, Thelma Hinderstein and Marilyn Weiss D/B/A Atlantic
Properties Company, Landlord and Halsey Drug Co., Inc., Tenant for premises
known as 1838 Atlantic Avenue, Brooklyn, NY.