WARRANT
        TO PURCHASE

      COMMON
        STOCK, PAR VALUE $.01 PER SHARE

      


      OF

      


      HALSEY
        DRUG CO., INC.

       

    

    THIS
      WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE 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 WARRANT REASONABLY SATISFACTORY TO THE COMPANY
      THAT SUCH WARRANT 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.

    


    This
      certifies that, for value received, _________ or registered assigns
      (“Warrantholder”),
      is
      entitled to purchase from HALSEY
      DRUG CO., INC.
      (the
“Company”),
      subject to the provisions of this Warrant, at any time during the Exercise
      Period (as hereinafter defined) ________ shares of the Company's Common Stock,
      par value $.01 per share (“Warrant
      Shares”).
      The
      purchase price payable upon the exercise of this Warrant shall be $3.012 per
      Warrant Share. The purchase price and the number of Warrant Shares which the
      Warrantholder is entitled to purchase are subject to adjustment upon the
      occurrence of the contingencies set forth in this Warrant, and as adjusted
      from
      time to time, such purchase price is hereinafter referred to as the
“Warrant
      Price.”

    


    For
      purposes of this Warrant, the term “Exercise
      Period”
means
      the period commencing on the date of issuance of this Warrant and ending on
      the
      seventh anniversary of such date.

    


    This
      Warrant is subject to the following terms and conditions:

    


    1. Exercise
      of Warrant.

     

    (a) 
      This
      Warrant may be exercised in whole or in part but not for a fractional share.
      Upon delivery of this Warrant at the offices of the Company or at such other
      address as the Company may designate by notice in writing to the registered
      holder hereof with the Subscription Form annexed hereto duly executed,
      accompanied by payment of the Warrant Price for the number of Warrant Shares
      purchased (in cash, by certified, cashier's or other check acceptable to the
      Company, by Common Stock or other securities of the Company having a market
      value equal to the aggregate Warrant Price for the Warrant Shares to be
      purchased, or any combination of the foregoing), the registered holder of this
      Warrant shall be entitled to receive a certificate or certificates for the
      Warrant Shares so purchased. Such certificate or certificates shall be promptly
      delivered to the Warrantholder. Upon any partial exercise of this Warrant,
      the
      Company shall execute and deliver a new Warrant of like tenor for the balance
      of
      the Warrant Shares purchasable hereunder. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (b) In
      lieu
      of exercising this Warrant pursuant to Section
      1(a),
      the
      holder may elect to receive shares of Common Stock equal to the value of this
      Warrant determined in the manner described below (or any portion thereof
      remaining unexercised) upon delivery of this Warrant at the offices of the
      Company or at such other address as the Company may designate by notice in
      writing to the registered holder hereof with the Notice of Cashless Exercise
      Form annexed hereto duly executed. In such event the Company shall issue to
      the
      holder a number of shares of the Company's Common Stock computed using the
      following formula:

    


    X
      =
Y
      (A-B)

    A

    


    Where
      X =
      the number of shares of Common Stock to be issued to the holder.

    


    Y = the
      number of shares of Common Stock purchasable under this Warrant (at the date
      of
      such calculation).

    


    A = the
      Market Value of the Company's Common Stock on the business day immediately
      preceding the day on which the Notice of Cashless Exercise is received by the
      Company.

    


    B = Warrant
      Price (as adjusted to the date of such calculation). 

    


    (c) The
      Warrant Shares deliverable hereunder shall, upon issuance, be fully paid and
      non-assessable and the Company agrees that at all times during the term of
      this
      Warrant it shall cause to be reserved for issuance such number of shares of
      its
      Common Stock as shall be required for issuance and delivery upon exercise of
      this Warrant.


    (d) For
      purposes of Section
      1(b)
      of this
      Warrant, the Market Value of a share of Common Stock on any date shall be equal
      to (A) the closing sale price per share as published by a national securities
      exchange on which shares of Common Stock are traded (an “Exchange”) on such date
      or, if there is no sale of Common Stock on such date, the average of the bid
      and
      asked prices on such Exchange at the close of trading on such date or,
      (B) if shares of Common Stock are not listed on an Exchange on such date,
      the closing price per share as published on the National Association of
      Securities Dealers Automatic Quotation System (“NASDAQ”)
      National Market System if the shares are quoted on such system on such date,
      or
      (C) the average of the bid and asked prices in the over-the-counter market
      at
      the close of trading on such date if the shares are not traded on an Exchange
      or
      listed on the NASDAQ National Market System, or (D) if the security is not
      traded on an Exchange or in the over-the-counter market, the fair market value
      of a share of Common Stock on such date as determined in good faith by the
      Board
      of Directors. If the holder disagrees with the determination of the Market
      Value
      of any securities of the Common Stock determined by the Board of Directors
      under
Section
      1(d)(i)(D)
      the
      Market Value shall be determined by an independent appraiser acceptable to
      the
      Company and the holder. If they cannot agree on such an appraiser, then each
      of
      the Company and the holder shall select an independent appraiser, such two
      appraisers shall select a third independent appraiser and Market Value shall
      be
      the median of the appraisals made by such appraisers. If there is one appraiser,
      the cost of the appraisal shall be shared equally between the Company and the
      holder. If there are three appraisers, each of the Company and the holder shall
      pay for its own appraiser and shall share equally the cost of the third
      appraiser.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    2. Transfer
      or Assignment of Warrant.

    


    (a)
      Any
      assignment or transfer of this Warrant shall be made by surrender of this
      Warrant at the offices of the Company or at such other address as the Company
      may designate in writing to the registered holder hereof with the Assignment
      Form annexed hereto duly executed and accompanied by payment of any requisite
      transfer taxes, and the Company shall, without charge, execute and deliver
      a new
      Warrant of like tenor in the name of the assignee for the portion so assigned
      in
      case of only a partial assignment, with a new Warrant of like tenor to the
      assignor for the balance of the Warrant Shares purchasable.

    


    (b) Prior
      to
      any assignment or transfer of this Warrant, the holder thereof shall deliver
      an
      opinion of counsel to the Company to the effect that the proposed transfer
      may
      be effected without registration under the Securities Act of 1933, as amended
      (the “Securities
      Act”)
      and
      any applicable state securities laws. Each Warrant issued upon or in connection
      with such transfer shall bear the restrictive legend set forth on the front
      of
      this Warrant unless, in the opinion of the Company's counsel, such legend is
      no
      longer required to insure compliance with the Securities Act.

    


    3. Adjustments
      to Warrant Price and Warrant Shares -- Anti-Dilution Provisions.
      In
      order to prevent dilution of the exercise right granted hereunder, the Warrant
      Price shall be subject to adjustment from time to time in accordance with this
      Section
      3.
      Upon
      each adjustment of the Warrant Price pursuant to this Section
      3,
      the
      holder shall thereafter be entitled to acquire upon exercise of this Warrant,
      at
      the Applicable Warrant Price (as hereinafter defined), the number of shares
      of
      Common Stock obtainable by multiplying the Warrant 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 Warrant Price resulting from such adjustment.


    The
      Warrant Price in effect at the time of the exercise of this Warrant shall be
      subject to adjustment from time to time as follows:

    


    (a)
      In
      the event that the Company shall at any time: (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 this Warrant, 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 rights prior to the happening of any of the
      foregoing events.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (b) 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
      to
      be issued upon conversion of the Note to be issued in connection with the
      $2,500,000 Bridge Loan Agreement by and among the Company and the Galen Entities
      (as such term is defined therein) dated the same date herewith;

    


    (ii) shares
      issued in a transaction described in subsection 3(c); or

    


    (iii) shares
      issued, subdivided or combined in transactions described in subsection 3(a)
      if
      and to the extent that the number of shares of Common Stock receivable upon
      exercise of this Warrant shall have been previously adjusted pursuant to
      subsection 3(a) 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 Warrant Price in effect immediately
      prior
      to such issuance or sale (the “Applicable
      Warrant 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, the Applicable Warrant
      Price shall, simultaneously with such issuance or sale, be adjusted, so that
      such Applicable Warrant Price shall equal a price determined by multiplying
      the
      Applicable Warrant Price by a fraction, the numerator of which shall
      be:

     

    (A) the
      sum
      of (x) the total number of shares of Common Stock outstanding when the
      Applicable Warrant Price became effective, plus (y) the number of shares of
      Common Stock which the aggregate consideration received, as determined in
      accordance with subsection 3(d) 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(e), would purchase (including any consideration
      received by the Company upon the issuance of any shares of Common Stock since
      the date the Applicable Warrant Price became effective not previously included
      in any computation resulting in an adjustment pursuant to this subsection 3(b))
      at the Fair Market Value of the Common Stock; and the denominator of which
      shall
      be

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (B) the
      total
      number of shares of Common Stock outstanding (or deemed to be outstanding as
      provided in subsection 3(e) hereof) immediately after the issuance or sale
      of
      such additional shares.

    


    For
      purposes of this Section 3, “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 an Exchange
      or
      if shares of Common Stock are not listed on an Exchange during such period,
      the
      closing price per share as reported by 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 an 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 Warrant Price thus obtained would result in the issuance
      of a lesser number of shares upon conversion than would be issued at the initial
      Warrant Price, the Applicable Warrant Price shall be such initial Warrant
      Price.

    


    Upon
      each
      adjustment of the Warrant Price pursuant to this subsection 3(b), the total
      number of shares of Common Stock for which this Warrant shall be exercisable
      shall be such number of shares (calculated to the nearest tenth) purchasable
      at
      the Applicable Warrant Price multiplied by a fraction, the numerator of which
      shall be the Warrant Price in effect immediately prior to such adjustment and
      the denominator of which shall be the exercise price in effect immediately
      after
      such adjustment.   

    


    (c) Anything
      in this Section
      3
      to the
      contrary notwithstanding, no adjustment in the Warrant 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 the date hereof (exclusive of any subsequent
      amendments thereto).

    


    (d) For
      the
      purpose of subsection 3(b), 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 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 exchange 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.

    


    (e) For
      purposes of the adjustment provided for in subsection 3(b) 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.

    


    (f) On
      the
      expiration, cancellation or redemption of any Convertible Securities, the
      Warrant Price then in effect hereunder shall forthwith be readjusted to such
      Warrant 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 Warrant Price
      as readjusted under this subsection 3(f) for all transactions (which would
      have
      affected such adjusted Warrant Price) made after the issuance or sale of such
      Convertible Securities.

    


    (g) Anything
      in this Section
      3
      to the
      contrary notwithstanding, no adjustment in the Warrant Price shall be required
      unless such adjustment would require an increase or decrease of at least 1%
      in
      such Warrant Price; provided,
      however,
      that
      any adjustments which by reason of this subsection 3(g) are not required to
      be
      made shall be carried forward and taken into account in making subsequent
      adjustments. All calculations under this Section
      3
      shall be
      made to the nearest cent.


    (h) If,
      at
      any time while this Warrant is outstanding, the Company shall pay any dividend
      payable in cash or in Common Stock, shall offer to the holders of its Common
      Stock for subscription or purchase by them any shares of stock of any class
      or
      any other rights, 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 Warrant 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. Upon any adjustment of any Warrant Price, then and in each such
      case the Company shall promptly deliver a notice to the registered holder of
      this Warrant, which notice shall state the Warrant Price resulting from such
      adjustment, setting forth in reasonable detail the method of calculation and
      the
      facts upon which such calculation is based.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (i)
      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
      Warrant shall automatically become exercisable for the kind and amount of
      securities, cash or other assets which the holder of this Warrant would have
      owned immediately after such transaction if the holder had converted this
      Warrant at the Warrant 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
      exercise of this Warrant shall execute and deliver to the holder a supplemental
      Warrant so providing and further providing for adjustments which shall be as
      nearly equivalent as may be practical to the adjustments provided in this
Section
      3.
      The
      successor company shall mail to the holder a notice describing the supplemental
      Warrant.

    


    If
      securities deliverable upon exercise of this Warrant, as provided above, are
      themselves convertible into or exercisable for 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 Warrant which shall
      so
      provide. If this subsection 3(i) applies, subsection 3(a) does not
      apply.

    


    4. Charges,
      Taxes and Expenses.
      The
      issuance of certificates for Warrant Shares upon any exercise of this Warrant
      shall be made without charge to the holder of this Warrant for any tax or other
      expense in respect to the issuance of such certificates, all of which taxes
      and
      expenses shall be paid by the Company, and such certificates shall be issued
      only in the name of the holder of this Warrant.

    


    5. Miscellaneous.

    


    (a) The
      terms
      of this Warrant shall be binding upon and shall inure to the benefit of any
      successors or assigns of the Company and of the holder or holders hereof and
      of
      the shares of Common Stock issued or issuable upon the exercise
      hereof.

    


    (b) No
      holder
      of this Warrant, as such, shall be entitled to vote or receive dividends or
      be
      deemed to be a stockholder of the Company for any purpose, nor shall anything
      contained in this Warrant be construed to confer upon the holder of this
      Warrant, as such, any rights of a stockholder of the Company or any right to
      vote, give or withhold consent to any corporate action, receive notice of
      meetings, receive dividends or subscription rights, or otherwise.

    


    (c) Receipt
      of this Warrant by the holder hereof shall constitute acceptance of an agreement
      to the foregoing terms and conditions.


    (d) The
      Warrant and the performance of the parties hereunder shall be construed and
      interpreted in accordance with the laws of the State of New York wherein it
      was
      negotiated and executed and the parties hereunder consent and agree that the
      State and Federal Courts which sit in the State of New York and the County
      of
      New York shall have exclusive jurisdiction with respect to all controversies
      and
      disputes arising hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (e) The
      shares issuable upon exercise of this Warrant are entitled to the benefits
      of
      the registration rights provisions of Section
      11
      of the
      Debenture and Warrant Purchase Agreement dated March 10, 1998 between the
      Company, the Warrantholder and the other signatories thereto (the "Purchase
      Agreement").

    


    (f) This
      Warrant is subject to certain other provisions contained in the Purchase
      Agreement. Shares issued upon exercise of this Warrant shall contain a legend
      substantially to the same effect as the legend set forth on the first page
      of
      this Warrant.

    


    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be signed by its duly authorized officer
      and
      its corporate seal to be affixed hereto.

    


    Dated:
      ________________, 2001

    


    
      	 	 	 
	 (SEAL)	HALSEY
              DRUG CO., INC.
	 
 	 
 	 
 
	 	BY: 
              	
            
	 	
              
Name: Peter
              A. Clemens
	 	Title: Chief
              Financial Officer




    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      SUBSCRIPTION
        FORM


      


      (TO
        BE EXECUTED
        BY
        THE REGISTERED
        HOLDER
        IF
          HE DESIRES
          TO EXERCISE
          THE WARRANT)

        


      

    

    To: HALSEY
      DRUG CO., INC.


    


    The
      undersigned hereby exercises the right to purchase _________ shares of Common
      Stock, par value $.01 per share, covered by the attached Warrant in accordance
      with the terms and conditions thereof, and herewith makes payment of the Warrant
      Price for such shares in full.

    
      	 	 	 
	 
 	 
 	 
 
	
            	
            	
            
	 	
              
                

              

              SIGNATURE

               

               

            
	 	
              
                

              

              ADDRESS

               

               

              
                
                  

                

              

            
	
              DATED:

            	 


       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

    

    NOTICE
      OF EXERCISE OF COMMON STOCK WARRANT

    PURSUANT
      TO NET ISSUE (“CASHLESS”) EXERCISE PROVISIONS

    


    [
      Date ]


    

      
        	
                Halsey
                  Drug Co., Inc.

              	 	
                Aggregate
                  Price of 

              	
                $_______________________________________

              
	
                a
                  New York corporation

              	
                of
                  Warrant

              	 
	
                695
                  No. Perryville Road

              	
                Aggregate
                  Price Being

              	 
	
                Crimson
                  Bldg. 2

                Rockford,
                  Illinois 61107

              	 	
                Exercised:

              	
                $_______________________________________

              
	
                Attention:
                   

              	 	 
	 	 	
                Warrant
                  Price (per
                  share):

              	
                $_______________________________________

              
	 	 	 	 
	 	 	
                Market
                  Value (per share):

              	
                $_______________________________________

              
	 	 	 	 
	 	 	
                Number
                  of Shares of Common Stock under this Warrant:

              	
                 _______________________________________

              
	 	 	 	 
	 	 	
                Number
                  of Shares of Common Stock to be Issued Under this Notice:

              	
                 _______________________________________

              


      

    

    

      CASHLESS
        EXERCISE



    Gentlemen:

     

    The
      undersigned, the registered holder of the Warrant to Purchase Common Stock
      delivered herewith (“Warrant”),
      hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
      of the Common Stock of HALSEY
      DRUG CO., INC.,
      a New
      York corporation, as provided below. Capitalized terms used herein, unless
      otherwise defined herein, shall have the meanings given in the Warrant. The
      portion of the Aggregate Price (as hereinafter defined) to be applied toward
      the
      purchase of Common Stock pursuant to this Notice of Exercise is
      $_______,
      thereby
      leaving a remainder Aggregate Price (if any) equal to $_______.
      Such
      exercise shall be pursuant to the net issue exercise provisions of Section
      1(b)
      of the
      Warrant; therefore, the holder makes no payment with this Notice of Exercise.
      The number of shares to be issued pursuant to this exercise shall be determined
      by reference to the formula in Section
      1(b)
      of the
      Warrant which requires the use of the Market Value (as defined in Section
      1(d)
      of the
      Warrant) of the Company's Common Stock on the business day immediately preceding
      the day on which this Notice is received by the Company. To the extent the
      foregoing exercise is for less than the full Aggregate Price of the Warrant,
      the
      remainder of the Warrant representing a number of Shares equal to the quotient
      obtained by dividing the remainder of the Aggregate Price by the Warrant Price
      (and otherwise of like form, tenor and effect) may be exercised under
Section
      1(a)
      of the
      Warrant. For purposes of this Notice the term “Aggregate
      Price”
means
      the product obtained by multiplying the number of shares of Common Stock for
      which the Warrant is exercisable times the Warrant Price. 

     

    
      	 	 	 
	
            	
            	
            
	 	
              
                

              

              SIGNATURE

               

               

            
	
              DATE:__________________

            	
              
                

              

              ADDRESS

              
                 

              

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ASSIGNMENT

    


    (To
      be Executed by the Registered Holder

    if
      he Desires to Transfer the Warrant)

    


    FOR
      VALUE RECEIVED,
      the
      undersigned hereby sells, assigns and transfers unto_________
      the
      right to purchase shares of Common Stock of HALSEY
      DRUG CO., INC.,
      evidenced by the within Warrant, and does hereby irrevocably constitute and
      appoint Attorney to transfer the said Warrant on the books of the Company,
      with
      full power of substitution.

     

    
      	 	 	 
	
            	
            	
            
	 	
              
                

              

              SIGNATURE

               

               

            
	 	
              
                

              

              ADDRESS

              
                 

              

            
	
              DATED:

               

            	 


    

     

    
      IN
        THE
        PRESENCE
        OF: