Document:

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                                                                    EXHIBIT 10.4

                   AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (this "AMENDMENT") made this
27th day of May, 2004 by and between HALSEY DRUG CO., INC., a New York
corporation (the "CORPORATION"), with offices at 616 N. North Court, Suite 120,
Palatine, Illinois 60067 and ANDREW D. REDDICK, residing at 297 North Cote
Circle, Exton, Pennsylvania 19341 (the "EMPLOYEE").

                                 R E C I T A L S

      A.    The Corporation and the Employee executed an employment agreement
            dated as of August 26, 2003 (the " EMPLOYMENT AGREEMENT").

      B.    Pursuant to Section 5(b) of the Employment Agreement, the
            Corporation committed to issue to the Employee a stock option
            exercisable for up to 5,500,000 shares of the Corporation's common
            stock, $.01 par value per share (the "ORIGINAL OPTION COMMITMENT").

      C.    The Corporation and the Employee now desire to amend the Employment
            Agreement as provided herein.

      NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, the parties agree as follows:

      1. Section 5(b) of the Employment Agreement is hereby deleted in its
entirety and the following is inserted in its place:

            "(b) Stock Options. The Company hereby agrees to issue and deliver a
            stock option grant to the Employee to purchase 8,750,000 shares of
            the Corporation's common stock, $.01 par value per share (the
            "OPTION") at an exercise price of $0.13 per share. The shares
            subject to the Option shall vest and be exercisable as follows: (i)
            2,750,000 Option shares on June 30, 2004; and (ii) the balance at
            the rate of 250,000 Option shares on the last day of each calendar
            month (the first monthly vesting period to be satisfied on July 31,
            2004) until fully vested. The Option shall have a ten (10) year
            term, subject to earlier termination as set forth in Section 7, upon
            the termination of the Employee's employment with the Corporation
            and shall be evidenced by the Non-Qualified Stock Option Agreement
            in the form of Exhibit A hereto. The Employee and the Corporation
            agree that the Option will be issued pursuant to the Corporation's
            1998 Stock Option Plan, as amended as described below, and the
            Option shares shall be promptly and duly registered under a

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            registration statement on Form S-8 filed with the Securities and
            Exchange Commission. The Employee will also be eligible in the
            future to receive annual option or stock grants based on performance
            or on achievement of milestones as determined by the Board of
            Directors or the Compensation Committee.

                  Notwithstanding the foregoing and anything to the contrary
            contained in this Amendment, the Employee hereby agrees that the
            grant of the Option and the issuance of the Option shares are
            contingent upon approval by the shareholders of the Corporation at
            the next meeting of shareholders of amendments to the Corporation's
            1998 Stock Option Plan (i) to increase the number of shares
            available for grants of options and stock under the 1998 Stock
            Option Plan, (ii) to permit the grant of non-qualified stock options
            (including the Option) having an exercise price per share less than
            the fair market value of the common stock of the Corporation on the
            date of issuance, and (iii) to provide for a limit of 8,750,000
            option awards that may be granted to one individual in any calendar
            year. The Corporation hereby agrees to recommend such matter to the
            shareholders and to use its commercially reasonable best efforts to
            hold such meeting as soon as reasonably practicable, but in any
            event by October 31, 2004. Following receipt of such shareholder
            approval, the Corporation shall promptly (i) confirm in writing that
            the contingency described in this paragraph has been satisfied and
            the Option is effective, (ii) issue a replacement Option Agreement,
            omitting Section 6 thereof relating to such contingency, and (iii)
            confirm in writing that the Option shares have been duly registered
            in accordance with this Section 5(b)."

      2. The Corporation and the Employee agree that effective as of the date of
this Amendment, the Original Option Commitment shall terminate and be of no
further legal force or effect.

      3. Section 6 of the Employment Agreement is hereby deleted in its entirety
and the following is inserted in its place:

            "6. Vacation. The Employee shall be entitled to four (4) weeks of
            vacation during each year of the Term, to be taken at a time or
            times mutually agreed upon by the Employee and the Corporation. The
            Employee may carry over to the following year any unused vacation
            from the immediately preceding year; provided, however, that not
            more than four (4) weeks of such vacation time may be carried over
            to the year immediately following the year in which such vacation
            was to be taken, unless otherwise required by applicable law.
            Without limiting the foregoing, the Corporation agrees that Employee
            may carry over all of his unused 2003 vacation time into 2004."

      4. Section 7.5(vi) of the Employment Agreement is hereby deleted in its
entirety and the following is inserted in its place:

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            "(vi) the failure of the shareholders of the Corporation, by
            October 31, 2004, to approve those amendments to the Corporation's
            1998 Stock Option Plan described in Section 5(b) above or, after
            such approval, the failure by the Corporation to comply with the
            other provisions of Section 5(b);"

      5. Notwithstanding anything to the contrary contained in the Employment
Agreement or the Option, the Employee agrees that the Corporation's sale of
substantially all of its assets used in the operation of its former Congers, New
York facilities does not constitute a "Change of Control" as such term is
defined in the Employment Agreement.

      6. The Corporation shall reimburse the Employee for the reasonable legal
fees and expenses incurred by the Employee for review and negotiation of this
Amendment on or before thirty (30) days following the date of execution of this
Amendment.

      7. Except as expressly amended by this Amendment, the Employment Agreement
remains in full force and effect. Capitalized terms used herein shall have the
same meaning as in the Employment Agreement unless otherwise defined herein.
This Amendment shall be governed and construed and enforced in accordance with
the local laws of the State of New York applicable to agreements made and to be
performed entirely in New York.

      8. This Amendment may be executed in one or more facsimile or original
counterparts, each of which shall be deemed an original, but all of which taken
together will constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

ATTEST:                                        HALSEY DRUG CO., INC.

___________________                            By: /s/ Peter A. Clemens
                                                   -----------------------------
                                                   Peter A. Clemens,
                                                   Senior Vice President and
                                                   Chief Financial Officer

WITNESS:                                       EMPLOYEE

                                               By: /s/ Andrew D. Reddick
__________________                                 -----------------------------
                                                   Andrew D. Reddick<PAGE>

                                                                    EXHIBIT 10.5

                    SEPARATION AGREEMENT AND GENERAL RELEASE

      THIS SEPARATION AGREEMENT AND GENERAL RELEASE ("Agreement") is between
MICHAEL K. REICHER ("EMPLOYEE") and HALSEY DRUG CO., INC., a corporation
("EMPLOYER").

      SECTION A: PARTIES' UNDERSTANDINGS

      EMPLOYEE has been employed by EMPLOYER in the capacity of Chief Executive
Officer and Chairman; and

      EMPLOYEE and EMPLOYER have engaged in discussions resulting in EMPLOYEE's
termination from employment with EMPLOYER; and

      EMPLOYEE and EMPLOYER wish to resolve any and all issues arising from
EMPLOYEE's employment and/or separation from employment with EMPLOYER.

      SECTION B: PARTIES' AGREEMENTS

      In consideration of the above and the promises set forth in this
Agreement, the parties agree as follows:

      1.    EMPLOYMENT TERMINATION. EMPLOYER and EMPLOYEE acknowledge that
            EMPLOYEE's employment as Chief Executive Officer and Chairman has
            been terminated by Employer without cause effective as of June 16,
            2003 (the "Termination Date").

      2.    RESIGNATION FROM BOARD. Simultaneous with the execution of this
            Agreement by EMPLOYEE and EMPLOYER (the "Effective Date"), EMPLOYEE
            shall execute and deliver to EMPLOYER his resignation from the Board
            of the Directors of EMPLOYER and all subsidiaries and affiliates
            thereof, which Resignation shall be in the form of Exhibit A
            attached hereto.

      3.    CONSIDERATION. EMPLOYER, in recognition of and in consideration for
            EMPLOYEE's release of claims (as set forth in paragraph 9 of this
            Agreement) and covenant not to sue (as set forth in subparagraph 14
            of this Agreement), agrees to provide the following to EMPLOYEE:

            a.    TERMINATION PAYMENT: In full satisfaction of Paragraph 8.6 of
                  the Employment Agreement executed by and between EMPLOYER and
                  EMPLOYEE as of March 10, 1998, as amended by the First
                  Amendment to Employment Agreement executed by and between the
                  parties as of May 24, 2000 ("Employment Agreement"), EMPLOYER
                  shall pay to EMPLOYEE the sum of Four Hundred Thousand Dollars
                  and 00/100 Dollars ($400,000.00) (the "Severance Payment").
                  The Severance Payment shall be payable in equal quarterly
                  payments of Fifty Thousand and 00/100 Dollars ($50,000), plus
                  interest at six percent (6%) per annum, commencing October 16,
                  2003 and quarterly thereafter. Interest shall

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                  accrue on the Severance Payment from July 16, 2003. EMPLOYER
                  agrees that EMPLOYEE may assign to a third party the Severance
                  Payment and shall acknowledge and honor any such assignment,
                  provided EMPLOYER is provided prior written notice of any such
                  assignment. The obligation shall be evidenced by a promissory
                  note in the form of Exhibit B hereto.

                  In addition, EMPLOYER shall issue to EMPLOYEE warrants to
                  purchase one hundred fifty thousand (150,000) shares of common
                  stock of the EMPLOYER at 34 cents ($0.34) per share. The
                  warrant will be in the form of Exhibit C hereto.

            b.    INSURANCE BENEFITS/PERQUISITES:

                  i.    For the period commencing on the Termination Date and
                        for the next 24 months, EMPLOYER shall continue
                        EMPLOYEE's medical insurance coverage at its full and
                        complete expense. EMPLOYEE shall thereafter be allowed
                        to continue his health insurance benefits at his full
                        and complete expense to the extent allowed by the
                        involved benefit plan and/or applicable federal law
                        (i.e. COBRA).

                  ii.   EMPLOYER shall remain obligated to pay all other
                        benefits due EMPLOYEE under the terms of his Employment
                        Agreement with EMPLOYER, including the automobile
                        reimbursement provided for in Paragraph 5(i) of the
                        Employment Agreement, for a period of 24 months after
                        the Termination Date.

            c.    OPTIONS:

                  EXISTING STOCK OPTIONS: The parties agree that Exhibit D
                  hereto describes all stock option agreements and rights to
                  acquire shares of EMPLOYER's capital stock granted by EMPLOYER
                  to EMPLOYEE in existence as of the date hereof. EMPLOYER and
                  EMPLOYEE agree that all of the Stock Option Agreements shall
                  remain in full force and effect and be exercisable in
                  accordance with their respective terms, including as provided
                  for in the Employment Agreement, and that this Agreement shall
                  not modify or otherwise extend the term or time period
                  provided for exercise of the Stock Option Agreements.

            d.    VACATION: EMPLOYER agrees to pay EMPLOYEE on September 16,
                  2003 $7,692.30 in a lump sum representing the salary
                  equivalent of 10 vacation days, which represents all accrued
                  vacation earned and unused by him during calendar year 2003.

            e.    UNEMPLOYMENT COMPENSATION: EMPLOYER agrees that it shall not
                  contest on the basis of a "voluntary quit" EMPLOYEE's
                  application for unemployment insurance benefits.

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            EMPLOYEE agrees that he has received payment from EMPLOYER of all
            wages, vacation and other benefits to which he was entitled by
            virtue of his past employment. EMPLOYEE also agrees that the
            benefits to be provided as set forth in sub-paragraphs (a), (b), (c)
            and (d) above are benefits of value to which he, as an employee or
            former employee of EMPLOYER, would not ordinarily be entitled.

      4.    TERMINATION OF EMPLOYER OBLIGATIONS UNDER EMPLOYMENT AGREEMENT AND
            OTHER AGREEMENTS. EMPLOYEE acknowledges and agrees that except for
            (i) EMPLOYER's obligations under this Agreement, and (ii) EMPLOYERS
            obligations the EMPLOYEE under those outstanding 5% Convertible
            Senior Secured Debentures due March 31, 2006 as of the date hereof
            (collectively, the "Debentures"), EMPLOYER has no further
            obligations under any agreements with EMPLOYEE, whether oral or in
            writing, including, without limitation, the Employment Agreement,
            the Stock Option Agreements or any other agreement, arrangement or
            understanding. The termination of EMPLOYER's obligations under the
            Employment Agreement shall not terminate, modify, impair or
            otherwise alter EMPLOYEE's obligations under Section 9 of the
            Employment Agreement which shall survive the execution of this
            Agreement as provided therein and in Section 13 of this Agreement.

      5.    STATEMENTS. EMPLOYEE and EMPLOYER agree that following the Effective
            Date neither party shall, directly or indirectly, either verbally or
            in writing, make any disparaging statements to third parties
            (including, but not limited to, persons, corporations or any other
            person or entity) , whether or not intended to damage the integrity
            or reputation of EMPLOYEE or EMPLOYER, its subsidiaries or
            affiliates or any of their respective officers, directors,
            shareholders, debentureholders, employees, representatives, agents,
            successors and assigns.

      6.    FUTURE EMPLOYMENT. It is acknowledged by the parties that EMPLOYER
            shall be under no obligation to reinstate or reemploy EMPLOYEE and
            EMPLOYEE agrees that he shall not apply for, request or otherwise
            seek reemployment with EMPLOYER.

      7.    ATTORNEY CONSULTATION. EMPLOYEE acknowledges that (i) he has had
            ample time and opportunity to review and analyze all the terms and
            provisions of this Agreement, including the Exhibits hereto, (ii) he
            fully understands the import of all of the terms and provisions of
            this Agreement, (iii) he is not relying upon any statements or
            representations (whether expressed or implied) of the EMPLOYER's
            agents or attorneys, and will not raise or seek to raise any defense
            against the enforcement of this Agreement based on any such
            statements or representations, (iv) he has not been fraudulently
            induced to enter into this Agreement, and (v) he has been advised of
            his right to be represented by counsel in the negotiation of this
            Agreement. EMPLOYER agrees that it will reimburse EMPLOYEE for
            attorneys' fees not to exceed $6,000 incurred by EMPLOYEE in
            connection with this Agreement.

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      8.    OPPORTUNITY TO REVIEW AND RESCIND. EMPLOYEE and EMPLOYER acknowledge
            that this Agreement was presented to EMPLOYEE for review and
            consideration and for purposes of consulting with an attorney and
            that EMPLOYEE was allowed a period of not fewer than twenty-one (21)
            days from the date of presentation of this document to consider its
            terms. EMPLOYEE's decision not to sign this Agreement shall result
            in this document having no force or effect and in such case EMPLOYEE
            shall not be entitled to any of the rights or benefits hereof.

            In the event that EMPLOYEE signs this Agreement, EMPLOYEE shall have
            seven (7) days from the date of signing in which to revoke this
            Agreement and this Agreement shall not become effective or
            enforceable until the expiration of that seven (7) day period. In
            the event that EMPLOYEE wishes to revoke this Agreement during that
            seven (7) day period, EMPLOYEE agrees that he shall provide written
            notice of revocation by United States Mail, postage prepaid,
            addressed to the following:

                              Halsey Drug Co., Inc.
                            c/o Chairman of the Board
                            695 North Perryville Road
                               Rockford, IL 61107

            In order to be effective, such notice must be mailed to EMPLOYER's
            designated representative on or before the final day of the seven
            (7) day revocation period.

      9.    RELEASE OF CLAIMS. EMPLOYEE understands and agrees that he would not
            receive some of the benefits specified in Section 3 of this
            Agreement, except for EMPLOYEE's execution of this Agreement and
            that the fulfillment of promises contained herein and the benefits
            provided in Section 3 hereof are in full settlement and satisfaction
            for the full release and discharge of all actions, claims,
            grievances, complaints, administrative claims and demands whatsoever
            that EMPLOYEE had or now has against the EMPLOYER, its subsidiaries
            and affiliates and all of their respective agents, directors,
            employees, officers, shareholders, debentureholders, attorneys,
            partners, contractors, consultants, successors and assigns
            (collectively, the "Releasees") and EMPLOYEE does hereby release,
            acquit, satisfy and forever discharge the EMPLOYER and all Releasees
            and their successors and assigns from all manner of actions, causes
            of actions, suits, debts, sums of money, agreements, damages,
            judgments, and claims and demands whatsoever, known and unknown,
            absolute or contingent, in law or equity, that EMPLOYEE ever had or
            now has, against EMPLOYER, the Releasees and their successors and
            assigns, including, but not limited to, any claims under the
            Employment Agreement and the Stock Option Agreements, and any claims
            of unused vacation time, severance pay, wrongful discharge, or
            claims of discrimination on the basis of age, race, sex, color,
            national origin, handicap or disability, religion, ancestry, marital
            status and status upon discharge from the military service. Included
            within the provisions of this Agreement, and without limitation,
            EMPLOYEE acknowledges and waives any and all claims against the

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            EMPLOYER and Releasees under the following laws, as amended to the
            date hereof:

            a.    Rehabilitation Act of 1973;

            b.    Employee Retirement Income Security Act;

            c.    Civil Rights Act of 1964, including Title VII thereof;

            d.    Americans with Disabilities Act;

            e.    42 United States Code, Sections 1981, 1983 and/or 1985;

            f.    Illinois Wage Payment and Collection Act;

            g.    Illinois Personnel Record Review Act;

            h.    Older Workers' Benefit Protection Act;

            i.    Civil Rights Act of 1991;

            j.    Consolidated Omnibus Budget Reconciliation Act of 1985, as
                  amended;

            k.    Illinois Minimum Wage Law;

            l.    Fair Labor Standards Act;

            m.    Family and Medical Leave Act of 1993;

            n.    Illinois Workers' Compensation Act;

            o.    Age Discrimination in Employment Act;

            p.    Illinois Human Rights Act;

            q.    New York Law on Human Rights; and

            r.    New York City Law on Human Rights.

            EMPLOYEE also waives and releases the Released Parties from all
            claims based upon statutes or laws other than those listed above,
            from any and all claims based upon contract or tort theories
            (including, but not limited to, claims of breach of contract,
            wrongful and/or retaliatory discharge, defamation, misrepresentation
            and/or intentional or negligent infliction of emotional distress)
            and from any and all claims of whatever type or origin, whether
            known or unknown, arising from or in connection with EMPLOYEE's
            employment or separation from employment with EMPLOYER up through
            and including the Effective Date.

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            If this Agreement is signed by EMPLOYEE, the release and waiver set
            forth above is made on his own behalf and on behalf of his heirs,
            administrators, successors, agents and legal representatives.

      10.   EMPLOYEE REPRESENTATIONS. EMPLOYEE further represents, acknowledges
            and agrees that: (i) this Agreement supercedes any and all other
            agreements, and any other matter either oral or in writing between
            EMPLOYER and EMPLOYEE; (ii) all discussion, negotiations, proposals,
            correspondence and/or agreements by and between the parties have not
            been revealed by EMPLOYEE to any third-party other than counsel; and
            (iii) no suit, action, claims or agency proceedings of any kind has
            been filed by EMPLOYEE or his agent or designated representative
            concerning or arising out of EMPLOYEE's employment with the
            EMPLOYER, the Employment Agreement, the Stock Option Agreements or
            otherwise relating to the subject matter of this Agreement, and that
            EMPLOYEE will not do so at any time hereinafter based upon the
            dealings with EMPLOYER and EMPLOYEE up to the date of this
            Agreement.

      11.   CONFIDENTIAL TERMS. EMPLOYEE and EMPLOYER acknowledge that they will
            keep confidential the terms of this Agreement and the disposition of
            this matter (except in connection with financial or tax reporting,
            seeking legal advice, pursuant to legal process or legal action to
            enforce the terms of this Agreement or as otherwise required by law)
            and will not disclose to or discuss with any third party or
            publicize the terms of this Agreement other than to state that the
            matter has been resolved to the mutual satisfaction of the parties;
            provided, however, that notwithstanding the foregoing, EMPLOYER may
            disclose the terms of this Agreement to the extent necessary to
            comply with its reporting obligations under United States Securities
            Laws and the regulations promulgated thereunder and the rules and
            regulations of any exchange or over-the-counter market on which
            EMPLOYER's shares may be listed or admitted for trading. Provided
            further, however, that any prohibited disclosure, discussion or
            publication of the terms of this Agreement will not affect the
            validity of the release and covenant not to sue established through
            this Agreement.

      12.   NO ADMISSION. EMPLOYEE and EMPLOYER agree that this Agreement and
            any obligations under this document do not constitute an admission
            by EMPLOYEE, EMPLOYER or any Releasee of any violation of any
            federal, State or local statute, law, rule or regulation, or of any
            liability under contract and/or tort theories.

      13.   SURVIVAL OF EMPLOYEE'S OBLIGATIONS UNDER SECTION 9 OF THE EMPLOYMENT
            AGREEMENT.

            A.    Notwithstanding anything to the contrary contained in this
                  Agreement, except as otherwise provided in Paragraph B of this
                  Section 13, EMPLOYEE's obligations under Section 9 of the
                  Employment Agreement shall survive and continue to be binding
                  on EMPLOYEE in accordance with the terms thereof, including
                  Section 9.1, Secrecy, Section 9.2, Return

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                  of Memoranda, Section 9.4, Injunctive Relief, 9.5, Expenses of
                  Enforcement of Covenants, and Section 9.6, Non-Solicitation.

            B.    Notwithstanding the provisions of Section 9.3 of the
                  Employment Agreement, the parties hereby agree that EMPLOYEE
                  shall not at any time prior to April 30, 2005 own, manage,
                  operate, be a director or an officer, or a consultant to any
                  business, firm, corporation, partnership, limited liability
                  company or other entity which is conducting any business in
                  the pharmaceutical industry and which operates a Competing
                  Business in the United States. For purposes of this Section
                  13, a "Competing Business" shall mean a business which at the
                  Effective Date or at any time though April 30, 2005, is
                  engaged (i) in the API production of opiate based products or
                  (ii) in the research, development and/or commercialization of
                  any pharmaceutical product involving any anti-abuse platform
                  developed or in development while EMPLOYEE was employed by
                  EMPLOYER. Notwithstanding the term of the restrictions
                  provided in this Section 13, EMPLOYEE acknowledges and
                  confirms his secrecy obligations under Section 9.1 of the
                  Employment Agreement, which secrecy obligations will continue
                  to survive the execution of this Agreement in accordance with
                  subparagraph A above.

                  If any provisions of this Section 13, or any part thereof, it
                  is held to be unenforceable because of the duration of such
                  provision, the area covered thereby or the type of conduct
                  restricted therein, the parties agreed that the court making
                  such determination shall have the power to modify the
                  duration, geographic area and/or other terms of such
                  provisions, and as so modified, said provision shall then be
                  enforceable. In the event that the courts of any one or more
                  jurisdictions shall hold such provisions wholly or partially
                  unenforceable by reason of the scope thereof or otherwise, it
                  is the intention of the parties hereto that such determination
                  not bar or in any way affect EMPLOYER's right to relief
                  provided for herein in the court of any other jurisdictions as
                  to breaches or threatened breaches of such provisions in such
                  other jurisdictions, the above provisions as they relate to
                  each jurisdiction being, for this purposes, severable into
                  diverse and independent covenants.

      14.   COVENANT NOT TO SUE.

      A.    EMPLOYEE on the one part and EMPLOYER and Releasees on the other
            part, agree not to sue, institute or cause to be instituted any
            lawsuit or claim in any federal, State or local court or agency
            against each other arising from or attributable in any way or manner
            to EMPLOYEE's employment or separation from employment with EMPLOYER
            except with respect to the enforcement of this Agreement or any
            Debentures executed by EMPLOYER in favor of EMPLOYEE. This Agreement
            may be pleaded as a complete bar to the enforcement of any claim
            which EMPLOYEE on the one part and EMPLOYER and Releasees on the
            other

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            part may have against each other. If any party violates the release
            or covenant contained herein, the prevailing party shall be entitled
            to collect from him reasonable attorneys' fees in connection with
            the enforcement of this Agreement.

      B.    If any provision of this Agreement or the application thereof is
            found to be invalid or unenforceable, such invalidity or
            unenforceability shall not affect any other provision of this
            Agreement which can be given effect without the invalid or
            unenforceable provision. In the event that the release provisions of
            this Agreement are found by a Court and/or agency of competent
            jurisdiction to be invalid or unenforceable, EMPLOYEE agrees that he
            shall return to EMPLOYER all of the Severance Payment and the
            Severance Option and the value of the other benefits provided him
            pursuant to the provisions of paragraph 3 above.

      C.    Neither this Agreement nor any term hereof may be orally changed,
            waived, discharged or terminated. On the contrary, this Agreement
            may only be changed, waived, discharged or terminated by means of a
            written agreement signed by each of the parties.

      15.   DEBENTURES UNAFFECTED. Notwithstanding any provision herein to the
            contrary, any and all Debentures in existence as of the Effective
            Date, executed by EMPLOYER in favor of EMPLOYEE, shall remain in
            full force and effect following the Effective Date.

      16.   RETURN OF EMPLOYER PROPERTY. Simultaneous with the execution of this
            Agreement, EMPLOYEE shall return all confidential information and
            EMPLOYER's property in his possession to the EMPLOYER, including any
            EMPLOYER credit cards (if applicable). EMPLOYER agrees that EMPLOYEE
            may retain his laptop computer and that all other property of
            EMPLOYER has previously been returned by EMPLOYEE.

      17.   GOVERNING LAW. Except as provided in the promissory note attached
            hereto as Exhibit B, the terms of this Agreement shall be
            interpreted under the laws of the State of New York. Each of the
            parties hereto hereby irrevocably and unconditionally submits, to
            the non-exclusive jurisdiction of any New York State court or United
            States Federal court sitting in New York City, and any appellant
            court from any thereof, in any action or proceeding arising out of
            or relating to this Agreement, or for recognition or enforcement of
            any judgment, and each of the parties hereto unconditionally agrees
            that all claims in respect of any such action or proceeding may be
            heard and determined in any such New York State court or, to the
            fullest extent permitted by law, in such United States Federal
            court. Each of the parties hereto agree that a final judgment in any
            such action or proceeding shall be conclusive and may be enforced in
            any other jurisdictions by suit on the right that any party may
            otherwise have to bring any action or proceeding relating to this
            Agreement in the courts of any other jurisdiction. Each of the
            parties hereto further and unconditionally waive, to the fullest
            extent as it

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            may legally and effectively do so, any objection that it may now or
            hereafter have to the laying of venue of any suit, action or
            proceeding arising out of or in relation to this Agreement in any
            such New York State or United State Federal court sitting in New
            York City. Each of the parties hereto hereby waives, to the fullest
            extent permitted by law, the defense of any inconvenient forum to
            the maintenance of such action or proceeding in any such court.

      18.   INTERPRETATION. This AGREEMENT is a result of negotiations between
            the parties, none of whom have acted under any duress or compulsion,
            whether legal, economic or otherwise. Accordingly, the parties
            hereby waive the application of any rule or law that otherwise would
            be applicable in connection with the construction of this AGREEMENT
            that ambiguous or conflicting terms or provisions should be
            construed against the party who (or whose attorney) prepared the
            executed AGREEMENT or any earlier draft of the same. The section
            titles and other headings contained in this Agreement are for
            reference only and shall not affect in any way the meaning or
            interpretation of this Agreement.

      19.   PLAIN LANGUAGE. EMPLOYEE and EMPLOYER acknowledge that each of them
            has read this Agreement, that each of them fully understands the
            meaning of the Agreement, that the Agreement is written in a manner
            calculated to be understood by EMPLOYEE, that they have had the
            opportunity to confer with their attorneys regarding the terms and
            meanings of the Agreement, that no representation has been made to
            either of them by the other party except as set forth herein, and
            that each of them KNOWINGLY and VOLUNTARILY enters into this
            Agreement and agrees to comply with its terms.

      20.   COUNTERPARTS. This Agreement may be executed in one or more
            counterparts, each of which shall be an original, but all of which
            taken together shall constitute one and the same instrument.

                                               /s/ Michael K. Reicher
                                               ---------------------------------
                                               MICHAEL K. REICHER

      I, MICHAEL K. REICHER, knowingly and voluntarily enter into and agree to
the terms of the above "Separation Agreement and General Release" this 18th day
of September, 2003. I acknowledge that before signing this Agreement I was given
a twenty-one (21) day period in which to consider this document and I was
informed of my right to consult with an attorney. I further acknowledge that I
have been informed of my right to revoke this Agreement within seven (7) days of
my signing of this Agreement.

                                               /s/ Michael K. Reicher
                                               ---------------------------------
                                               MICHAEL K. REICHER

                                       9
<PAGE>

SUBSCRIBED AND SWORN BEFORE
ME ON THIS 18th DAY OF SEPTEMBER
SEPTEMBER, 2003.

_________________________________
NOTARY PUBLIC

                                   HALSEY DRUG CO., INC.,
                                   a New York corporation

                                   By: /s/ Peter Clemens
                                       -----------------------------
                                   Name:  Peter Clemens
                                   Title: Vice President and Chief Financial
                                          Officer
                                   Date:  September 18, 2003

                                       10

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